1

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 2001
                                                     REGISTRATION NO. 333-
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                               JOHNSON & JOHNSON
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                                                                            
               NEW JERSEY                                  2834                                  22-1024240
    (STATE OR OTHER JURISDICTION OF            (PRIMARY STANDARD INDUSTRIAL                   (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)            CLASSIFICATION CODE NUMBER)                  IDENTIFICATION NO.)


                          ONE JOHNSON & JOHNSON PLAZA
                        NEW BRUNSWICK, NEW JERSEY 08933
                           TELEPHONE: (732) 524-0400
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
                           STEVEN M. ROSENBERG, ESQ.
                             JAMES J. BERGIN, ESQ.
                               JOHNSON & JOHNSON
                          ONE JOHNSON & JOHNSON PLAZA
                        NEW BRUNSWICK, NEW JERSEY 08933
                           TELEPHONE: (732) 524-0400
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------
                                   COPIES TO:


                                                          
               ROBERT I. TOWNSEND, III, ESQ.                                    STEPHEN W. CARR, P.C.
                  CRAVATH, SWAINE & MOORE                                       PAUL D. SCHWARTZ, P.C.
                      WORLDWIDE PLAZA                                            GOODWIN PROCTER LLP
                     825 EIGHTH AVENUE                                             53 STATE STREET
                     NEW YORK, NY 10019                                            BOSTON, MA 02109
                 TELEPHONE: (212) 474-1000                                    TELEPHONE: (617) 570-1000


                            ------------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the split-off and merger.
    If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.  [ ]
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ] --------
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ] --------

                        CALCULATION OF REGISTRATION FEE



---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                         PROPOSED             PROPOSED
                                                                          MAXIMUM              MAXIMUM
           TITLE OF EACH CLASS OF                   AMOUNT TO         OFFERING PRICE          AGGREGATE            AMOUNT OF
       SECURITIES TO BE REGISTERED(1)             BE REGISTERED          PER UNIT          OFFERING PRICE      REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Common Stock, par value $1.00 per share......     25,105,088(2)             N/A           $1,420,454,702(3)        $355,114
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(1) This Registration Statement relates to securities of the registrant issuable
    to holders of common stock, par value $.001 per share ("Inverness common
    stock"), of Inverness Medical Technology, Inc., a Delaware corporation
    ("Inverness"), in the proposed merger of Sunrise Acquisition Corp., a
    Delaware corporation and a wholly-owned subsidiary of the registrant, with
    and into Inverness.
(2) Based on the maximum number of shares to be issued in connection with the
    merger, an integral part of which is the split-off of Innovations (as
    defined below), calculated as the product of (a) 38,240,805, the aggregate
    number of shares of Inverness common stock outstanding on August 6, 2001
    (other than shares owned by Inverness, Sunrise Acquisition Corp. or the
    registrant) or issuable pursuant to the exercise of outstanding options,
    warrants or other rights prior to the date the merger is expected to be
    completed and (b) an assumed exchange ratio of 0.6565 shares of the
    registrant's common stock for each share of Inverness common stock. In the
    split-off, common stock of Inverness Medical Innovations, Inc., a Delaware
    corporation and a majority-owned subsidiary of Inverness ("Innovations"),
    also will be exchanged for each share of Inverness common stock. The shares
    of Innovations common stock are being registered on a separate Registration
    Statement on Form S-4 under CIK No. 0001145460 (the "Innovations S-4").
(3) Estimated solely for the purpose of calculating the registration fee
    required by Section 6(b) of the Securities Act, and calculated pursuant to
    Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
    Securities Act, the proposed maximum aggregate offering price of the
    registrant's common stock was calculated based upon the market value of
    shares of Inverness common stock (the securities to be cancelled in the
    merger) in accordance with Rule 457(c) under the Securities Act as follows:
    (a) $37.145, the average of the high and low prices per share of Inverness
    common stock on August 6, 2001, as reported on the American Stock Exchange,
    multiplied by (b) 38,240,805, the aggregate number of shares of Inverness
    common stock outstanding as of August 6, 2001 or issuable pursuant to the
    exercise of outstanding options, warrants or other rights prior to the date
    the merger is expected to be completed. The fee relates to the transactions
    described herein, including the merger and the split-off in respect of which
    Innovations is filing the Innovations Form S-4.
                            ------------------------
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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   2

                       INVERNESS MEDICAL TECHNOLOGY, INC.

                           51 SAWYER ROAD, SUITE 200
                             WALTHAM, MA 02453-3448

                                                                        --, 2001

Dear Fellow Stockholder:

     You are cordially invited to attend the special meeting of stockholders of
Inverness Medical Technology, Inc., to be held on --, --, 2001, at --, local
time, at the offices of Goodwin Procter LLP, 53 State Street, Boston,
Massachusetts 02109.

     At the special meeting, we will ask you to vote on a proposal to adopt an
agreement and plan of split-off and merger pursuant to which Johnson & Johnson
will acquire our diabetes care products business and we will simultaneously
distribute, or split-off, our women's health, nutritional supplements and
clinical diagnostics businesses. The transaction will occur in the following
steps:

     - Inverness will restructure its operations so that its women's health,
       nutritional supplements and clinical diagnostics businesses are held by
       Inverness Medical Innovations, Inc., a majority-owned subsidiary of
       Inverness and

     - Inverness will merge with and become a wholly-owned subsidiary of Johnson
       & Johnson and Innovations will be split-off as a separate company. As
       part of the split-off and merger, shares of Johnson & Johnson common
       stock, together with shares of Innovations common stock, will be issued
       to our stockholders.

     The split-off and merger will occur simultaneously and each will occur only
if the other occurs. After completion of the transaction, Inverness will be a
wholly-owned subsidiary of Johnson & Johnson and Innovations will be an
independent, publicly-owned company owned primarily by our stockholders.

     If the split-off and merger agreement is adopted and the transaction is
subsequently completed, you will receive the following for each share of
Inverness common stock you own:

     - a fraction of a share of Johnson & Johnson common stock, based upon an
       exchange ratio that will be calculated by dividing $35.00 by the average
       of the volume weighted averages of the trading prices of Johnson &
       Johnson common stock for the 20 consecutive trading days ending with the
       third trading day immediately preceding the date on which the split-off
       and merger are completed and

     - 0.20 of a share of Innovations common stock.

     You will receive cash for any fractional share of Johnson & Johnson common
stock or any fractional share of Innovations common stock you would be entitled
to receive in the split-off and merger.

     Johnson & Johnson common stock is traded on the New York Stock Exchange
under the trading symbol "JNJ," and on --, 2001 its closing price was $-- per
share. Innovations has applied for its shares to be approved for listing on the
American Stock Exchange under the trading symbol "--." There is currently no
public trading market for the shares of Innovations common stock.

     The Inverness board of directors has carefully reviewed and considered the
terms and conditions of the proposed split-off and merger and the other
transactions contemplated by the split-off and merger agreement. The Inverness
board of directors has determined that the terms of the split-off and merger
agreement are advisable and in the best interests of Inverness and its
stockholders. THE INVERNESS BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
SPLIT-OFF AND MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE ADOPTION OF THE SPLIT-OFF AND MERGER AGREEMENT.

     At the special meeting, we will also ask you to vote on a proposal to
approve the Innovations 2001 stock option and incentive plan and a proposal to
approve the Innovations executive bonus plan. We refer
   3

to these plans collectively as the Innovations incentive plans. The completion
of the split-off and merger is not conditioned on approval of the Innovations
incentive plans, but the effectiveness of these plans is conditioned on
completion of the split-off and merger. THE INVERNESS BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE INNOVATIONS
INCENTIVE PLANS.

     Your vote is important. We cannot complete the split-off and merger unless
the split-off and merger agreement is adopted by the affirmative vote of the
holders of a majority of the shares of Inverness common stock outstanding and
entitled to vote at the special meeting. Failure to vote in person or by proxy
will have the same effect as a vote against the adoption of the split-off and
merger agreement. Only stockholders who owned shares of Inverness common stock
at the close of business on --, 2001 will be entitled to vote at the special
meeting.

     Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. Therefore, after reading this proxy
statement/prospectus, please complete, sign, date and return the enclosed proxy
card promptly. You may also vote by telephone, or electronically over the
Internet, by following the instructions on your proxy card.

     This proxy statement/prospectus describes the proposed split-off and merger
and the split-off and merger agreement, as well as the Innovations incentive
plans, and provides specific information concerning the special meeting. Please
review this document carefully. YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS RELATING TO THE SPLIT-OFF AND MERGER" ON PAGE 12 OF THIS PROXY
STATEMENT/PROSPECTUS AND "RISK FACTORS -- RISKS RELATED TO THE SPLIT-OFF" AND
"RISK FACTORS -- RISKS RELATED TO OUR BUSINESS" ON PAGES X-6 AND X-9 OF THE
INNOVATIONS PROSPECTUS PORTION OF THIS PROXY STATEMENT/PROSPECTUS BEFORE VOTING.

     Thank you for your cooperation, and we look forward to seeing you at the
meeting.

                                          Cordially,

                                          Ron Zwanziger
                                          Chairman, Chief Executive Officer and
                                          President

     This proxy statement/prospectus serves as a prospectus of Johnson & Johnson
relating to the shares of Johnson & Johnson common stock to be issued by Johnson
& Johnson to Inverness stockholders in the merger and a prospectus of
Innovations relating to the shares of Innovations common stock to be issued by
Innovations to Inverness stockholders in the split-off. The Innovations
prospectus begins on page X-i of this proxy statement/prospectus and is a part
of this proxy/statement prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE SPLIT-OFF AND MERGER DESCRIBED IN THIS
PROXY STATEMENT/PROSPECTUS OR THE JOHNSON & JOHNSON COMMON STOCK OR INNOVATIONS
COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE SPLIT-OFF AND MERGER, OR
DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

               This proxy statement/prospectus is dated --, 2001,
   and is first being mailed to Inverness stockholders on or about --, 2001.
   4

                      REFERENCES TO ADDITIONAL INFORMATION

     This proxy statement/prospectus incorporates important business and
financial information about Johnson & Johnson and Inverness from documents that
are not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses and telephone numbers:


                                    
JOHNSON & JOHNSON                      INVERNESS MEDICAL TECHNOLOGY, INC.
One Johnson & Johnson Plaza            51 Sawyer Road, Suite 200
New Brunswick, NJ 08933                Waltham, MA 02453
Attention: Investor Relations          Attention: Investor Relations
Telephone: (732) 524-6491              Telephone: (781) 647-3900


     If you would like to request documents, please do so by --, 2001 in order
to receive them before the special meeting.

             See "Where You Can Find More Information" on page 96.
   5

                       INVERNESS MEDICAL TECHNOLOGY, INC.

                           51 SAWYER ROAD, SUITE 200
                       WALTHAM, MASSACHUSETTS 02453-3448

                                    --, 2001

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

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

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


       
DATE:     --, 2001
TIME:     --, local time
PLACE:    Goodwin Procter LLP
          53 State Street
          Boston, Massachusetts 02109
PURPOSE:


     1. To consider and vote upon a proposal to adopt the agreement and plan of
split-off and merger among Johnson & Johnson, Sunrise Acquisition Corp., a
wholly-owned subsidiary of Johnson & Johnson, and Inverness Medical Technology,
Inc. In the split-off and merger:

     - Inverness will merge with Sunrise Acquisition Corp. and become a
       wholly-owned subsidiary of Johnson & Johnson

     - Inverness Medical Innovations, Inc., a majority-owned subsidiary of
       Inverness which will operate the women's health, nutritional supplements
       and clinical diagnostics businesses of Inverness, will be split-off from
       Inverness and

     - shares of Johnson & Johnson common stock, together with shares of
       Innovations common stock, will be issued to the stockholders of
       Inverness.

     You should carefully review the split-off and merger agreement, a copy of
which is attached as Annex 1 to this proxy statement/prospectus.

     2. To consider and vote upon a proposal to approve the Innovations 2001
stock option and incentive plan.

     3. To consider and vote upon a proposal to approve the Innovations
executive bonus plan.

     We will transact no other business at the special meeting except such
business as may be properly brought before the special meeting or any
adjournment or postponement of it by the Inverness board of directors.

     Only stockholders who owned shares of Inverness common stock at the close
of business on --, 2001, the record date for the special meeting, are entitled
to notice of, and to vote at, the special meeting and any adjournments or
postponements of the special meeting.

     We cannot complete the split-off and merger unless the split-off and merger
agreement is adopted by the affirmative vote of the holders of a majority of the
shares of Inverness common stock outstanding and entitled to vote at the special
meeting. Holders of Inverness common stock have no appraisal rights under
Delaware law in connection with the split-off and merger. The accompanying proxy
statement/prospectus describes the proposed split-off and merger and the other
transactions contemplated by the split-off and merger agreement and provides
additional information about the parties involved. It also describes the
Innovations incentive plans. Please give this information your careful
attention.

     THE INVERNESS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE ADOPTION OF THE SPLIT-OFF AND MERGER AGREEMENT AND "FOR" THE APPROVAL OF THE
INNOVATIONS INCENTIVE PLANS.
   6

     Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. Therefore, after reading the
accompanying proxy statement/prospectus, please complete, sign, date and return
the enclosed proxy card promptly in the enclosed postage-paid return envelope.
You may also vote by telephone, or electronically over the Internet, by
following the instructions on your proxy card. You may revoke the proxy at any
time prior to its exercise in the manner described in the accompanying proxy
statement/prospectus. Any stockholder present at the special meeting, including
any adjournments or postponements of the special meeting, may revoke such
stockholder's proxy and vote personally on the split-off and merger agreement
and the other matters to be considered at the special meeting. Executed proxies
with no instructions indicated thereon will be voted "FOR" the adoption of the
split-off and merger agreement and "FOR" the approval of the Innovations
incentive plans.

     PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME. IF THE SPLIT-OFF
AND MERGER ARE COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER
OF YOUR STOCK CERTIFICATES.

                                          Kenneth D. Legg, Ph.D.
                                          Secretary

--, 2001
   7

                               TABLE OF CONTENTS



                                                              PAGE
                                                              ----
                                                           
QUESTIONS AND ANSWERS ABOUT THE SPLIT-OFF AND MERGER........     1

SUMMARY.....................................................     2
  General...................................................     2
  The Special Meeting.......................................     4
  The Split-off and Merger..................................     5
  The Companies.............................................     7
  Market Prices and Dividend Information....................     7
  Comparative Per Share Information.........................     9
  Selected Historical Consolidated Financial Data of Johnson
     & Johnson..............................................    10
  Selected Historical Consolidated Financial Data of
     Inverness Medical Technology, Inc. ....................    11
RISK FACTORS RELATING TO THE SPLIT-OFF AND MERGER...........    12
THE SPECIAL MEETING.........................................    14
  Date, Time and Place......................................    14
  Purpose of the Special Meeting............................    14
  Recommendation of the Inverness Board of Directors........    14
  Record Date; Shares Entitled to Vote; Quorum..............    14
  Vote Required.............................................    14
  Shares Owned by Inverness Directors, Executive Officers
     and Affiliates.........................................    15
  Voting of Proxies.........................................    15
  Revocability of Proxies...................................    15
  Solicitation of Proxies...................................    15
THE COMPANIES...............................................    17
  Johnson & Johnson.........................................    17
  Inverness.................................................    17
  Innovations...............................................    17
THE SPLIT-OFF AND MERGER AND RELATED TRANSACTIONS...........    19
  Background to the Split-off and Merger and Related
     Transactions...........................................    19
  Reasons for the Split-off and Merger and Related
     Transactions...........................................    22
  Opinions of ABN AMRO Incorporated and UBS Warburg LLC.....    24
  Interests of Inverness Directors and Executive Officers in
     the Split-off and Merger and Related Transactions......    36
  Pre-Merger Restructuring Transactions.....................    39
  Accounting Treatment of the Merger........................    40
  Form of the Merger........................................    40
  Merger and Split-off Consideration........................    40
  Ownership of Johnson & Johnson and Innovations Following
     the Split-off and Merger...............................    40
  Conversion of Shares; Procedures for Exchange of
     Certificates; Fractional Shares........................    41
  Effective Time of the Merger..............................    42
  Post-Closing Arrangements Between Johnson & Johnson,
     Inverness and Innovations..............................    42


                                        i
   8



                                                              PAGE
                                                              ----
                                                           
  Stock Exchange Listing of Johnson & Johnson and
     Innovations Common Stock...............................    42
  Delisting and Deregistration of Inverness Common Stock....    42
  Material United States Federal Income Tax Consequences of
     the Split-off and Merger...............................    42
  Regulatory Matters........................................    44
  Appraisal Rights..........................................    45
  Litigation................................................    45
  Inverness Employee Benefits Matters.......................    46
  Effect on Options and Warrants Relating to Inverness
     Common Stock...........................................    47
  Resale of Johnson & Johnson Common Stock..................    48
  Resale of Innovations Common Stock........................    48
PRE-MERGER RESTRUCTURING TRANSACTION........................    49
  General...................................................    49
  The Restructuring and Transfer of Assets..................    49
  Assumption of Liabilities.................................    49
  Ancillary Agreements......................................    50
  Employee Matters..........................................    50
  Conversion of Options and Warrants........................    51
  Conditions................................................    53
  Mutual Release............................................    53
  Termination...............................................    53
THE SPLIT-OFF AND MERGER AGREEMENT..........................    54
  Conditions to the Completion of the Merger................    54
  No Solicitation...........................................    57
  Termination of the Split-off and Merger Agreement.........    59
  Fees and Expenses.........................................    60
  Conduct of Business Pending the Split-off and Merger......    60
  Representations and Warranties............................    63
  Certificate of Incorporation and By-laws of the Surviving
     Corporation............................................    65
  Amendment.................................................    65
  Extension; Waiver.........................................    65
THE STOCK OPTION AGREEMENT..................................    66
  General...................................................    66
  Exercise of the Option....................................    66
  Adjustments Upon Changes in Capitalization................    66
  Cash Payments for the Option..............................    67
  Limitation on Total Profit................................    67
  Registration Rights and Listing...........................    67
  Assignability; Transfer Restrictions......................    67
  Effect of Stock Option Agreement..........................    68


                                        ii
   9



                                                              PAGE
                                                              ----
                                                           
POST-CLOSING ARRANGEMENTS...................................    69
  The Tax Allocation Agreement..............................    69
  The Post-Closing Covenants Agreement......................    70
  The License Agreement.....................................    73
COMPARATIVE STOCK PRICES AND DIVIDENDS......................    76
DESCRIPTION OF JOHNSON & JOHNSON CAPITAL STOCK..............    77
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF JOHNSON &
  JOHNSON AND INVERNESS.....................................    78
  Capitalization............................................    78
  Number, Election, Vacancy and Removal of Directors........    78
  Amendments to Charter Documents...........................    79
  Amendments to By-laws.....................................    80
  Action by Written Consent.................................    80
  Notice of Stockholder Actions.............................    81
  Special Stockholder Meetings..............................    82
  Stockholder Inspection Rights; Stockholder Lists..........    82
  Limitation of Personal Liability and Indemnification of
     Directors and Officers.................................    82
  Dividends.................................................    84
  Conversion................................................    84
  Voting Rights; Required Vote for Authorization of Certain
     Actions................................................    84
OTHER PROPOSALS.............................................    88
  Approval of the Inverness Medical Innovations, Inc. 2001
     Stock Option and Incentive Plan........................    88
  Approval of the Inverness Medical Innovations, Inc.
     Executive Bonus Plan...................................    93
LEGAL MATTERS...............................................    94
EXPERTS.....................................................    95
OTHER MATTERS...............................................    95
FUTURE STOCKHOLDER PROPOSALS................................    95
WHERE YOU CAN FIND MORE INFORMATION.........................    96
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...........    99
INVERNESS MEDICAL INNOVATIONS, INC. PROSPECTUS COVER........   X-i
PROSPECTUS SUMMARY..........................................   X-1
RISK FACTORS................................................   X-6
SPECIAL STATEMENT REGARDING FORWARD-LOOKING STATEMENTS......  X-18
THE RESTRUCTURING AND THE SPLIT-OFF.........................  X-19
POST-CLOSING ARRANGEMENTS...................................  X-24
CAPITALIZATION..............................................  X-31
DIVIDEND POLICY.............................................  X-32
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INVERNESS
  MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES................  X-33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS.................................  X-36


                                       iii
   10



                                                              PAGE
                                                              ----
                                                           
BUSINESS....................................................  X-49
MANAGEMENT..................................................  X-59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............  X-68
PRINCIPAL STOCKHOLDERS......................................  X-69
DESCRIPTION OF INNOVATIONS CAPITAL STOCK....................  X-71
MATERIAL DIFFERENCES IN THE RIGHTS OF OUR STOCKHOLDERS AND
  INVERNESS STOCKHOLDERS....................................  X-75
SHARES ELIGIBLE FOR FUTURE SALE.............................  X-76
MATERIAL TAX CONSEQUENCES...................................  X-77
LEGAL MATTERS...............................................  X-80
EXPERTS.....................................................  X-80
ABOUT THIS PROSPECTUS AND WHERE YOU MAY FIND MORE
  INFORMATION...............................................  X-80
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  COMBINED FINANCIAL STATEMENTS.............................  XF-i
ANNEXES
  Annex 1 -- Agreement and Plan of Split-off and Merger
  Annex 2 -- Stock Option Agreement
  Annex 3 -- Form of Restructuring Agreement
  Annex 4 -- Form of Tax Allocation Agreement
  Annex 5 -- Form of Post-Closing Covenants Agreement
  Annex 6 -- Form of License Agreement
  Annex 7 -- Opinion of ABN AMRO Incorporated
  Annex 8 -- Opinion of UBS Warburg LLC
  Annex 9 -- Inverness Medical Innovations, Inc. 2001 Stock
     Option and Incentive Plan


                                        iv
   11

              QUESTIONS AND ANSWERS ABOUT THE SPLIT-OFF AND MERGER

Q:  WHAT WILL HAPPEN TO INVERNESS AS A RESULT OF THE SPLIT-OFF AND MERGER?

A: If the split-off and merger are completed, Inverness' women's health,
   nutritional supplements and clinical diagnostics businesses will be held by
   Innovations, a newly formed publicly traded company to be owned primarily by
   Inverness stockholders, while Inverness, which will consist primarily of its
   diabetes care products business, will merge with and become a wholly-owned
   subsidiary of Johnson & Johnson.

Q:  WHAT DO I NEED TO DO NOW?

A:  After carefully reading and considering the information contained in this
    proxy statement/prospectus, please complete, sign and date your proxy and
    return it in the enclosed postage-paid return envelope as soon as possible,
    so that your shares may be represented at the special meeting. You may also
    vote by telephone, or electronically over the Internet, by following the
    instructions on your proxy card. If you sign and send in your proxy and do
    not indicate how you want to vote, we will count your proxy as a vote in
    favor of the adoption of the split-off and merger agreement. Because the
    required vote of Inverness stockholders is based upon the number of
    outstanding shares of Inverness common stock, rather than upon the shares
    actually voted, the failure by the holder of any such shares to submit a
    proxy or to vote in person at the special meeting, including abstentions and
    broker non-votes, will have the same effect as a vote against the adoption
    of the split-off and merger agreement.

    The special meeting will take place on --, 2001, at -- a.m., local time, at
    the offices of Goodwin Procter LLP, 53 State Street, Boston, Massachusetts
    02109. You may attend the special meeting and vote your shares in person,
    rather than completing, signing, dating and returning your proxy.

Q:  CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?

A: Yes. You can change your vote at any time before your proxy is voted at the
   special meeting. You can do this in one of three ways. First, you can send a
   written notice stating that you would like to revoke your proxy. Second, you
   can complete and submit a new proxy bearing a later date. If you choose
   either of these two methods, you must submit your notice of revocation or
   your new proxy to Inverness at 51 Sawyer Road, Suite 200, Waltham, MA 02453,
   Attention: Secretary. You can also submit your new proxy by telephone or
   electronically over the Internet. Third, you can attend the special meeting
   and vote in person. Attendance at the special meeting will not in and of
   itself constitute revocation of a proxy.

Q:  IF MY INVERNESS SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY
    BROKER VOTE MY SHARES FOR ME?

A: Your broker will vote your Inverness shares only if you provide instructions
   on how to vote. You should follow the directions provided by your broker
   regarding how to instruct your broker to vote your shares. Without
   instructions, your shares will not be voted, which will have the effect of a
   vote against the adoption of the split-off and merger agreement.

Q:  SHOULD I SEND IN MY STOCK CERTIFICATES NOW?

A:  No. After the split-off and merger are completed, you will receive a
    transmittal form with instructions for the surrender of Inverness common
    stock certificates. Please do not send in your stock certificates with your
    proxy.

Q:  WHEN DO YOU EXPECT THE SPLIT-OFF AND MERGER TO BE COMPLETED?

A:  We are working to complete the split-off and merger as quickly as possible.
    If approved by Inverness stockholders and if we receive the necessary
    regulatory approvals, we expect to complete the split-off and merger during
    the fourth quarter of 2001.

Q:  WHO CAN HELP ANSWER MY QUESTIONS?

A:  If you have any questions about the split-off and merger or if you need
    additional copies of this proxy statement/prospectus or the enclosed proxy
    card, you should contact:

    Inverness Medical Technology, Inc.
    51 Sawyer Road, Suite 200
    Waltham, MA 02453
    Attention: Investor Relations
    Telephone: (781) 647-3900

                                        1
   12

                                    SUMMARY

     This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. To understand the split-off and merger fully and for a more complete
description of the legal terms of the split-off and merger, you should carefully
read this entire proxy statement/prospectus and the other documents to which we
refer you, including in particular the copies of the split-off and merger
agreement, the stock option agreement, the restructuring agreement, the tax
allocation agreement, the post-closing covenants agreement, the license
agreement and the opinions of ABN AMRO Incorporated and UBS Warburg LLC that are
attached as annexes to this proxy statement/prospectus. See also "Where You Can
Find More Information" on page 96. We have included page references
parenthetically to direct you to a more complete description of the topics
presented in this summary.

                                    GENERAL

WHAT INVERNESS STOCKHOLDERS WILL RECEIVE IN THE SPLIT-OFF AND MERGER (PAGE 40)

     In the split-off and merger, each share of Inverness common stock will be
converted into the right to receive: (1) 0.20 of a share of Innovations common
stock and (2) a fraction of a share of Johnson & Johnson common stock based on
an exchange ratio intended to value that fractional share at $35.00. The exact
amount of Johnson & Johnson common stock to be exchanged for each share of
Inverness common stock, referred to as the exchange ratio, will be determined by
dividing $35.00 by the average of the volume weighted averages of the trading
prices of Johnson & Johnson common stock on the New York Stock Exchange for each
of the 20 consecutive trading days ending with the third trading day immediately
preceding the date on which the split-off and merger are completed.

     Inverness stockholders will receive cash for any fractional shares of
Johnson & Johnson common stock and Innovations common stock they would otherwise
receive in the split-off and merger. The amount of cash for any fractional
shares that each Inverness stockholder will receive will be calculated by
multiplying the fractional share interest to which he or she is entitled by, in
the case of Johnson & Johnson common stock, the closing price of Johnson &
Johnson common stock on the date on which the split-off and merger are completed
as reported on the New York Stock Exchange Composite Transactions Tape, and, in
the case of Innovations common stock, the closing price of Innovations common
stock as reported on the American Stock Exchange, on the first full trading day
following the date on which the split-off and merger are completed.

     On --, 2001, the last practicable trading day before the date of this proxy
statement/prospectus, Johnson & Johnson common stock closed at $-- per share. If
this were the average of the volume weighted averages of the trading prices of
Johnson & Johnson common stock during the 20 trading day valuation period, each
share of Inverness common stock would be exchanged for -- shares of Johnson &
Johnson common stock. This means that an Inverness stockholder who owns 100
shares of Inverness common stock would be entitled to receive 20 shares of
Innovations common stock and -- shares of Johnson & Johnson common stock. Since
cash will be paid instead of fractional shares of Johnson & Johnson common
stock, that Inverness stockholder would receive 20 shares of Innovations common
stock, -- shares of Johnson & Johnson common stock and a check in an amount
equal to the fractional share multiplied by the closing price of Johnson &
Johnson common stock on the date on which the split-off and merger are
completed. The market value of Johnson & Johnson common stock on the day the
split-off and merger are completed may be different than the average of the
volume weighted averages of the trading prices of Johnson & Johnson common stock
during the 20 trading day valuation period. As a result, the market value of the
shares of Johnson & Johnson common stock that you receive in the split-off and
merger may be more or less than the value attributed to your shares of Inverness
common stock in calculating the number of shares of Johnson & Johnson common
stock to which you are entitled.

                                        2
   13

OWNERSHIP OF JOHNSON & JOHNSON AND INNOVATIONS FOLLOWING THE SPLIT-OFF AND
MERGER (PAGE 40)

     Based on the number of outstanding shares of Inverness common stock and the
closing price of Johnson & Johnson common stock, each as of the record date, we
anticipate that Inverness stockholders will receive approximately -- shares of
Johnson & Johnson common stock in the merger. Based on that number and on the
number of outstanding shares of Johnson & Johnson common stock on the record
date, Inverness stockholders will own approximately --% of the outstanding
shares of Johnson & Johnson common stock immediately following the completion of
the split-off and merger.

     Based on the number of outstanding shares of Inverness common stock on the
record date, we anticipate that Inverness stockholders will receive
approximately -- shares of Innovations common stock in the split-off.
Immediately following the completion of the split-off and merger, Inverness
stockholders and members of Innovations' management will own 100% of the
outstanding shares of Innovations common stock. For a more detailed description
of the capitalization of Innovations following completion of the split-off and
merger, see "Capitalization" beginning on page X-31 of the Innovations
prospectus portion of this proxy statement/prospectus.

APPRAISAL RIGHTS (PAGE 45)

     Under Delaware law, Inverness stockholders will not have appraisal rights
in connection with the split-off and merger.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SPLIT-OFF AND
MERGER (PAGE 42)

     Based on an opinion letter provided to Inverness by its counsel, Goodwin
Procter LLP, we believe that the split-off and the merger will be two separate
transactions for federal income tax purposes. Based on that opinion letter, we
also believe that it is more likely than not that the split-off will qualify, as
to Inverness stockholders, as a transaction described in Section 355 of the
Internal Revenue Code. Assuming the split-off qualifies as a transaction
described in Section 355, holders of Inverness common stock will not recognize
gain or loss for federal income tax purposes when shares of their Inverness
common stock are redeemed in exchange for Innovations common stock in the
split-off, except for cash received instead of fractional shares of Innovations
common stock. If the split-off is not tax-free under Section 355, then the
split-off will be treated as a redemption of a portion of each stockholder's
Inverness common stock, and will be taxable, generally as capital gain, to the
extent that the fair market value of the Innovations common stock received
exceeds the stockholder's basis in such redeemed Inverness common stock.
Regardless of whether or not the split-off qualifies under Section 355, the
split-off will be taxable to Inverness.

     Further, based on the opinion letter from Goodwin Procter LLP, we believe
that the merger will be treated as a reorganization under Section 368 of the
Internal Revenue Code. Assuming the merger qualifies as a reorganization under
Section 368, holders of Inverness common stock will not recognize gain or loss
for federal income tax purposes when shares of their Inverness common stock are
exchanged for shares of Johnson & Johnson common stock in the merger, except for
cash received instead of fractional shares of Johnson & Johnson common stock.

     TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE SPLIT-OFF
AND MERGER TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD
CONSULT YOUR OWN TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES
OF THE SPLIT-OFF AND MERGER TO YOU.

RECOMMENDATION OF THE INVERNESS BOARD OF DIRECTORS (PAGE 24)

     The Inverness board of directors believes that the split-off and merger and
the other transactions contemplated by the split-off and merger agreement are
advisable and in the best interests of Inverness and its stockholders and
unanimously recommends that the stockholders vote "FOR" the adoption of the
split-off and merger agreement.

     To review the background of and reasons for the split-off and merger, as
well as certain risks related to the split-off and merger, see "The Split-off
and Merger and Related Transactions" on page 19 and "Risk Factors Relating to
the Split-off and Merger" on page 12.
                                        3
   14

OPINIONS OF ABN AMRO INCORPORATED AND UBS WARBURG LLC (PAGE 24)

     In connection with the split-off and merger, the Inverness board of
directors received the separate opinions of ABN AMRO Incorporated and UBS
Warburg LLC as to the fairness, from a financial point of view, of the aggregate
consideration to be received by the holders of Inverness common stock in the
split-off and merger. THE OPINIONS DO NOT ADDRESS THE MERITS OF THE UNDERLYING
DECISION BY INVERNESS TO ENGAGE IN THE SPLIT-OFF AND MERGER AND DO NOT
CONSTITUTE A RECOMMENDATION TO ANY INVERNESS STOCKHOLDER AS TO HOW TO VOTE ON
THE PROPOSAL TO ADOPT THE SPLIT-OFF AND MERGER AGREEMENT. The full text of the
written opinions of ABN AMRO and UBS Warburg, each dated May 23, 2001, which set
forth the assumptions made, matters considered and limitations on the review
undertaken, are attached as Annexes 7 and 8, respectively. You are encouraged to
read each opinion carefully in its entirety.

INTERESTS OF INVERNESS DIRECTORS AND EXECUTIVE OFFICERS IN THE SPLIT-OFF AND
MERGER AND RELATED TRANSACTIONS (PAGE 36)

     In considering the recommendation of the Inverness board of directors that
Inverness stockholders vote in favor of the adoption of the split-off and merger
agreement, Inverness stockholders should be aware that the members of the
Inverness board of directors and Inverness' executive officers have personal
interests in the split-off and merger and the related transactions that are or
may be different from, or in addition to, the interests of other Inverness
stockholders. These interests include accelerated vesting and continued
exercisability of certain stock option rights, the continuance of rights to
indemnification and exculpation from liabilities for certain acts or omissions
and, for several executive officers, benefits under consulting and
noncompetition agreements. For executive officers of Inverness that will become
executive officers of Innovations, these interests also include benefits under
the Innovations incentive plans. For a more complete description, see "The
Split-off and Merger and Related Transactions -- Interests of Inverness
Directors and Executive Officers in the Split-off and Merger and Related
Transactions."

MATERIAL DIFFERENCES BETWEEN RIGHTS OF COMMON STOCKHOLDERS OF INVERNESS AND
JOHNSON & JOHNSON AND INNOVATIONS (PAGES 78 AND X-75)

     Inverness stockholders, whose rights are currently governed by the
Inverness certificate of incorporation, the Inverness by-laws and Delaware law,
will, upon completion of the split-off and merger, become stockholders of
Johnson & Johnson and Innovations and their rights with respect to their
ownership of Johnson & Johnson shares will be governed by the Johnson & Johnson
certificate of incorporation, the Johnson & Johnson by-laws and New Jersey law
and their rights with respect to their ownership of Innovations shares will be
governed by the Innovations certificate of incorporation, the Innovations
by-laws and Delaware law.

APPROVAL OF THE INNOVATIONS INCENTIVE PLANS (PAGE 88)

     Inverness stockholders are also being asked to approve the Innovations 2001
stock option and incentive plan and the Innovations executive bonus plan. We
refer to these plans collectively as the Innovations incentive plans.
Stockholder approval of the Innovations incentive plans is required to ensure
that Innovations will be able to deduct, for federal income tax purposes,
certain compensation payable under these plans.

     The Innovations incentive plans are an important component of Innovations'
employment incentive program after the split-off. The purpose of these plans is
to enable Innovations to attract, motivate and retain highly-qualified employees
and to further align the interests of employees of Innovations with those of
stockholders of Innovations. The Inverness board of directors unanimously
recommends that Inverness stockholders vote "FOR" the approval of the
Innovations incentive plans.

                         THE SPECIAL MEETING (PAGE 14)

     The special meeting of Inverness stockholders will be held at the offices
of Goodwin Procter LLP, 53 State Street, Boston, Massachusetts 02109, at --
a.m., local time, on --, --, 2001. At the special meeting, Inverness
stockholders will be asked to adopt the split-off and merger agreement and to
approve the Innovations incentive plans.

                                        4
   15

RECORD DATE; VOTING POWER (PAGE 14)

     Inverness stockholders are entitled to vote at the special meeting if they
owned shares of Inverness common stock as of the close of business on --, 2001,
the record date.

     On the record date, there were -- shares of Inverness common stock entitled
to vote at the special meeting. Stockholders will have one vote at the special
meeting for each share of Inverness common stock that they owned on the record
date.

VOTE REQUIRED (PAGE 14)

     The adoption of the split-off and merger agreement requires the affirmative
vote of stockholders holding a majority of the shares of Inverness common stock
outstanding on the record date.

     The approval of the Innovations incentive plans requires the affirmative
vote of stockholders holding a majority of the shares of Inverness common stock
present in person or represented by proxy at the special meeting and entitled to
vote on those matters.

VOTING BY INVERNESS DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES (PAGE 15)

     On the record date, directors and executive officers of Inverness and their
affiliates beneficially owned and were entitled to vote -- shares of Inverness
common stock, which represented approximately --% of the shares of Inverness
common stock outstanding on that date.

                       THE SPLIT-OFF AND MERGER (PAGE 19)

     The split-off and merger agreement is attached as Annex 1 to this proxy
statement/prospectus. We encourage you to read the split-off and merger
agreement because it is the principal document governing the split-off and
merger.

CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE 54)

     Johnson & Johnson and Inverness will complete the merger only if they
satisfy, or in some cases, waive, several conditions, including the following:

     - the split-off and merger agreement has been adopted by the affirmative
       vote of stockholders representing a majority of the shares of Inverness
       common stock outstanding on the record date

     - the shares of Johnson & Johnson common stock to be issued to Inverness
       stockholders upon completion of the merger have been approved for listing
       on the New York Stock Exchange, and the shares of Innovations common
       stock to be issued to Inverness stockholders upon completion of the
       split-off have been approved for listing on a national securities
       exchange or for quotation on NASDAQ

     - the waiting period applicable to the merger under the Hart-Scott-Rodino
       Antitrust Improvements Act of 1976 has expired or has been terminated

     - the execution and delivery of the restructuring agreement, tax allocation
       agreement, post-closing covenants agreement and license agreement, which
       together with the split-off and merger agreement are referred to as the
       transaction agreements, and the completion of the restructuring as
       described in the restructuring agreement

     - no temporary restraining order, injunction or other court order or
       statute, law, rule, legal restraint or prohibition is in effect that
       prevents the completion of the merger

     - the registration statement on Form S-4 for Johnson & Johnson common stock
       distributed in the merger and the registration statement on Form S-4 for
       Innovations common stock distributed in the split-off, in each case, of
       which this proxy statement/prospectus forms a part, have been declared
       effective by the Securities and Exchange Commission and are not the
       subject of any stop order or proceedings seeking a stop order and

     - other customary contractual conditions set forth in the split-off and
       merger agreement.

                                        5
   16

     Johnson & Johnson's obligation to complete the merger is subject to
satisfaction or waiver of additional conditions, including the following:

     - all consents, approvals, authorizations, qualifications and orders of
       governmental entities required in connection with the split-off and
       merger agreement and the other transaction agreements under any
       applicable competition, merger control, antitrust or similar laws or
       regulations of Switzerland or any country that is part of the European
       Union have been obtained, except for those the failure of which are not
       reasonably expected to (1) restrain or prohibit the merger or related
       transactions or (2) prohibit or limit in any material respect the
       ownership, operation or effective control by Johnson & Johnson of any
       portion of Inverness' post-restructuring business

     - the consents of holders of particular warrants to acquire shares of
       Inverness common stock to amend their respective warrant agreements have
       been obtained

     - Inverness has received at least $50,000,000 of proceeds from financings
       on terms and conditions no less favorable to Inverness than those set
       forth in a commitment letter dated May 18, 2001

     - the consulting and non-competition agreements and all transaction
       agreements are in full force and effect and none of the parties thereto,
       other than Johnson & Johnson, have breached or threatened to breach any
       of the material covenants in those agreements and

     - there is no pending suit, action or proceeding by any governmental entity
       seeking to (1) restrain or prohibit the completion of the merger or any
       of the other transactions contemplated by the transaction agreements, (2)
       prohibit or materially limit Johnson & Johnson's or Inverness' ownership
       or operation of any portion of either company's business or assets, other
       than those transferred to Innovations, (3) compel Johnson & Johnson or
       Inverness to divest or hold separate any portion of any business or
       assets, other than those transferred to Innovations, as a result of the
       merger or any of the other transactions contemplated by the transaction
       agreements or (4) prevent Johnson & Johnson from effectively controlling
       in any material respect any portion of the post-restructuring business of
       Inverness.

     Inverness' obligation to complete the merger also is subject to
satisfaction or waiver of additional conditions, including that Inverness has
received from its tax counsel an opinion stating that (1) the merger will be
treated for United States federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and (2) Johnson &
Johnson and Inverness will each be a party to that reorganization within the
meaning of Section 368(b) of the Internal Revenue Code.

     For a more complete description, see "The Split-off and Merger
Agreement -- Conditions to the Completion of the Merger."

TERMINATION OF THE SPLIT-OFF AND MERGER AGREEMENT; TERMINATION FEE (PAGE 59 AND
60)

     The split-off and merger agreement contains provisions addressing the
circumstances under which Johnson & Johnson or Inverness may terminate the
split-off and merger agreement. In addition, the split-off and merger agreement
provides that, in several circumstances, Inverness may be required to pay
Johnson & Johnson a termination fee of $28 million. For a more complete
description, see "The Split-off and Merger Agreement -- Termination of the
Split-off and Merger Agreement" and "-- Fees and Expenses."

THE STOCK OPTION AGREEMENT (PAGE 66)

     Inverness has granted an option to Johnson & Johnson to purchase up to
6,417,689 shares of Inverness common stock if any of the events occur that
entitle Johnson & Johnson to receive the termination fee under the split-off and
merger agreement. The stock option agreement limits the total amount of profit
that Johnson & Johnson can receive under the agreement, together with the
termination fee, to $28 million in the aggregate.

REGULATORY MATTERS (PAGE 44)

     United States antitrust laws prohibit Johnson & Johnson and Inverness from
completing the merger until they have furnished certain informa-

                                        6
   17

tion and materials to the Antitrust Division of the Department of Justice and
the Federal Trade Commission and a required waiting period has ended. Johnson &
Johnson and Inverness each filed the required notification and report forms with
the Antitrust Division and the Federal Trade Commission on June 27, 2001 and
requested an early termination of the required waiting period. On July 16, 2001,
Johnson & Johnson and Inverness were granted an early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act.

     The merger is not notifiable to the European Commission because it lacks
the requisite European Community dimension. However, filings have been made in
Germany and Italy seeking approval of the merger. On July 19, 2001, Johnson &
Johnson received clearance from the German competition authority to complete the
transaction. Johnson & Johnson believes that the Italian regulatory approval
process will not materially delay or impede the completion of the split-off and
merger.

ACCOUNTING TREATMENT (PAGE 40)

     Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, which means that Inverness will be treated as
a separate entity for periods prior to completion of the merger and, thereafter,
the financial results of Inverness' post-restructuring business, including its
diabetes care products business, will be consolidated with Johnson & Johnson's
financial results.

FEES AND EXPENSES (PAGE 60)

     Each of Johnson & Johnson and Inverness will pay its own fees and expenses
in connection with the split-off and merger and related transactions. Inverness
will pay its expenses and the expenses of Innovations and its subsidiaries
directly relating to the restructuring, the split-off and the merger up to a
specified amount, while Innovations will pay all such expenses, if any, in
excess of that amount, subject to specified exceptions.

THE RESTRUCTURING AND SPLIT-OFF (PAGE 49)

     After completion of the restructuring of Inverness and the split-off of
Innovations, Innovations will be an independent, publicly-owned company that
will hold and operate Inverness' women's health, nutritional supplements and
clinical diagnostics businesses. In the restructuring, Innovations will receive
(1) up to $40 million in net cash, (2) the assets and liabilities primarily
relating to the women's health, nutritional supplements and clinical diagnostics
businesses and (3) rights to intellectual property under a license agreement.
Following completion of the split-off and merger, Inverness and Johnson &
Johnson, on the one hand, and Innovations, on the other hand, will indemnify
each other with respect to various losses, damages, claims and liabilities,
including those arising out of each of their respective businesses.

                            THE COMPANIES (PAGE 17)

Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Telephone: (732) 524-0400

     Johnson & Johnson, with approximately 100,000 employees, is the world's
most comprehensive and broadly-based manufacturer of health care products, as
well as a provider of related services, for the consumer, pharmaceutical and
professional markets. Johnson & Johnson has more than 195 operating companies in
51 countries around the world, selling products in more than 175 countries.

Inverness Medical Technology, Inc.
51 Sawyer Road, Suite 200
Waltham, MA 02453
Telephone: (781) 647-3900

     Inverness develops, manufactures and markets innovative products focused
primarily on diabetes self-management. Inverness' principal products are
advanced electrochemical blood glucose monitoring systems that are used by
people with diabetes to determine their blood glucose levels in order to manage
their disease. In addition to its diabetes products, Inverness sells products
for the women's health market and, to a lesser extent, the infectious disease
market.

                MARKET PRICES AND DIVIDEND INFORMATION (PAGE 76)

     Shares of Johnson & Johnson common stock are listed on the New York Stock
Exchange. Shares of Inverness common stock are listed on
                                        7
   18

the American Stock Exchange. The following table presents:

     - the last reported sale price of a share of Johnson & Johnson common
       stock, as reported by the Dow Jones & Company, Inc.

     - the last reported sale price of a share of Inverness common stock, as
       reported by the Dow Jones & Company, Inc. and

     - the market value of a share of Inverness common stock on an equivalent
       per share basis

in each case on (1) May 8, 2001, the last full trading day prior to the public
announcement that Johnson & Johnson and Inverness were in advanced discussions
regarding the proposed split-off and merger, (2) May 22, 2001, the last full
trading day prior to the public announcement that Johnson & Johnson and
Inverness had signed the definitive split-off and merger agreement and (3) --,
2001, the last practicable trading day prior to the date of this proxy
statement/prospectus. The price information for Johnson & Johnson common stock
has been adjusted to reflect a two-for-one stock split effected in June 2001.
The equivalent price per share data for Inverness common stock has been
determined by multiplying the last reported sale price of a share of Johnson &
Johnson common stock on each of these dates by an exchange ratio determined by
dividing $35.00 by the average of the volume weighted averages of the trading
prices of Johnson & Johnson common stock for each of the 20 consecutive trading
days ending with the third trading day immediately preceding the calculation
date. Because there is currently no public trading market for shares of
Innovations common stock, the 0.20 of a share of Innovations common stock to be
issued in the split-off for each outstanding share of Inverness common stock
were not factored into the calculation of the equivalent price per share of
Inverness common stock.



                                               EQUIVALENT
                                               PRICE PER
                       JOHNSON &                SHARE OF
                        JOHNSON    INVERNESS   INVERNESS
                        COMMON      COMMON       COMMON
DATE                     STOCK       STOCK       STOCK
----                   ---------   ---------   ----------
                                      
May 8, 2001..........   $48.98      $35.91       $36.67
May 22, 2001.........    49.50       34.95        35.82
--, 2001.............    --          --           --


     Innovations has no history as an independent, publicly traded company.
Innovations has applied to have its common stock listed on the American Stock
Exchange and it is anticipated that the Innovations common stock will be listed
on the American Stock Exchange immediately after the completion of the split-off
and merger.

     Johnson & Johnson declares and pays regular quarterly dividends. Inverness
does not pay dividends. It is anticipated that Innovations will not pay
dividends in the foreseeable future. See "Comparative Stock Prices and
Dividends."

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   19

                       COMPARATIVE PER SHARE INFORMATION

     The following table shows certain per share data of Johnson & Johnson and
Inverness and also shows similar information reflecting the combination of the
two companies, which is referred to as "pro forma" information.

     The comparative per share data is derived from, and should be read with,
the historical financial statements of Johnson & Johnson and the historical
financial statements of Inverness that are included in the documents described
under "Where You Can Find More Information" on page 96.

     The Inverness "equivalent pro forma" data was calculated by multiplying the
corresponding pro forma combined data by an exchange ratio of 0.6565, which
would have been the exchange ratio had the merger been completed on August 9,
2001. This data shows how each share of Inverness common stock would have
participated in net income and book value of Johnson & Johnson if the companies
had always been combined for accounting and financial reporting purposes for all
periods presented. These amounts, however, are not intended to reflect future
per share levels of net income and book value of Johnson & Johnson. Inverness
has not declared or paid any cash dividends during any of the periods presented.



                                                            FISCAL YEAR ENDED    THREE MONTHS ENDED
                                                            DECEMBER 31, 2000      APRIL 1, 2001
                                                            -----------------    ------------------
                                                                           
JOHNSON & JOHNSON -- HISTORICAL
  Net income per diluted share............................        $1.61                $ 0.50
  Unaudited book value per share(1).......................        $6.77                $ 7.19
  Cash dividends per share(2).............................        $0.62                $ 0.16
INVERNESS -- DIABETES CARE PRODUCTS ONLY
  Net income (loss) per diluted share.....................        $0.27                $(1.77)
  Unaudited book value per share(1).......................        $5.19                $ 5.83
  Cash dividends per share(2).............................        $  --                $   --
Unaudited pro forma combined net income per diluted share:
  Per Johnson & Johnson share.............................        $1.61                $ 0.48
  Equivalent per Inverness share..........................        $1.05                $ 0.32
Unaudited pro forma combined book value per share:
  Per Johnson & Johnson share(1)..........................        $6.77                $ 7.20
  Equivalent per Inverness share(1).......................        $4.45                $ 4.73


---------------
(1) Historical book value per share is computed by dividing shareowners' equity
    or stockholders' equity by the number of shares of common stock outstanding
    at the end of each period. Johnson & Johnson's unaudited pro forma combined
    book value per share is computed by dividing unaudited pro forma
    shareowners' equity by the unaudited pro forma number of shares of Johnson &
    Johnson common stock that would have been outstanding had the merger been
    completed as of each balance sheet date.

(2) Johnson & Johnson's current quarterly dividend is $0.18 per share ($0.72 per
    share annualized) and is subject to future approval and declaration by the
    Johnson & Johnson board of directors. Inverness does not currently pay a
    cash dividend. The pro forma dividends per share are the same as the
    historical dividends per share since no change in dividend policy is
    expected as a result of the merger.

                                        9
   20

      SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF JOHNSON & JOHNSON

     The following selected financial information of Johnson & Johnson as of and
for the three fiscal years ended December 31, 2000 has been derived from Johnson
& Johnson's audited supplemental financial statements incorporated by reference
in this proxy statement/prospectus. The supplemental financial statements of
Johnson & Johnson reflect the restatement of Johnson & Johnson's historical
financial statements to reflect the merger with ALZA Corporation, which was
accounted for using the pooling of interests method of accounting. The
supplemental financial statements for those periods were audited by
PricewaterhouseCoopers LLP, independent accountants. The selected financial
information for the three fiscal years ended January 3, 1999, have been derived
from Johnson & Johnson's audited financial statements not included or
incorporated by reference in this proxy statement/prospectus. The financial
information for Johnson & Johnson as of and for the three months ended April 1,
2001 and April 2, 2000 has been derived from the unaudited supplemental
financial statements incorporated by reference in this proxy
statement/prospectus and, in the opinion of Johnson & Johnson's management,
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the unaudited interim
periods. The operating results for the three months ended April 1, 2001 are not
necessarily indicative of results for the full fiscal year ending December 30,
2001. This information should be read in conjunction with management's
discussion and analysis of results of operations and financial condition of
Johnson & Johnson and the consolidated financial statements and notes thereto of
Johnson & Johnson incorporated by reference into this proxy
statement/prospectus.



                                                                                                    THREE MONTHS   THREE MONTHS
                                                     FISCAL YEAR ENDED                                 ENDED          ENDED
                           ----------------------------------------------------------------------   ------------   ------------
                             DEC. 29,       DEC. 28,       JAN. 3,       JAN. 2,       DEC. 31,       APR. 2,        APR. 1,
                               1996           1997          1999          2000           2000           2000           2001
                           ------------   ------------   -----------   -----------   ------------   ------------   ------------
                                                           (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                                              
EARNINGS DATA:
Sales....................    $21,984        $23,118        $24,398       $28,007       $29,846         $7,440        $ 8,021
Cost of expenses.........     17,841         18,776         20,065        22,130        22,978          5,526          5,804
Earnings before
  taxes(1)...............      4,143          4,342          4,333         5,877         6,868          1,914          2,217
Net earnings(1)..........    $ 2,958        $ 3,105        $ 3,101       $ 4,273       $ 4,953         $1,331        $ 1,552
Net earnings/diluted
  share(1)...............    $  0.98        $  1.02        $  1.02       $  1.39       $  1.61         $ 0.44        $  0.50
Cash dividends/share.....    $0.3675        $0.4250        $0.4850       $0.5450       $  0.62         $ 0.14        $  0.16
BALANCE SHEET DATA (at
  period end):
Total assets.............    $22,248        $23,615        $28,966       $31,064       $34,245            N/A        $34,901
Long-term debt...........      2,347          2,084          2,652         3,429         3,163            N/A          2,698
Shareowner's equity......    $11,958        $13,300        $14,674       $16,995       $20,395            N/A        $21,762


---------------
(1) Excluding special charges, results for the years ended December 28, 1997,
    January 3, 1999, January 2, 2000 and December 31, 2000, respectively are:



                                            DEC 28, 1997   JAN 3, 1999   JAN 2, 2000   DEC 31, 2000
                                            ------------   -----------   -----------   ------------
                                                                           
Earnings before taxes.....................     $4,698        $5,244        $5,959         $6,901
Net earnings..............................      3,385         3,798         4,348          4,998
Net earnings per diluted share............     $ 1.11        $ 1.24        $ 1.42         $ 1.63


                                        10
   21

          SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INVERNESS

    You should read the following selected consolidated financial data of
Inverness in conjunction with Inverness' consolidated financial statements and
notes and the other information contained in or incorporated by reference into
this proxy statement/ prospectus. The selected consolidated balance sheet data
as of December 31, 1999 and 2000 and the selected consolidated statement of
operations data for the years ended December 31, 1998, 1999 and 2000 have been
derived from Inverness' audited consolidated financial statements that have been
audited by Arthur Andersen LLP, independent public accountants, and are
incorporated by reference into this proxy statement/prospectus. The selected
consolidated balance sheet data as of December 31, 1996, 1997 and 1998 and the
selected consolidated statement of operations data for the years ended December
31, 1996 and 1997 have been derived from Inverness' audited consolidated
financial statements not included or incorporated by reference in this proxy
statement/prospectus. The selected consolidated statement of operations data for
the three-month periods ended March 31, 2000 and 2001 and the selected
consolidated balance sheet data at March 31, 2001 are derived from Inverness'
unaudited consolidated financial statements incorporated by reference into this
proxy statement/prospectus. The unaudited consolidated financial statements for
the three-month periods have been prepared on a basis consistent with Inverness'
audited consolidated financial statements and, in the opinion of Inverness
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of Inverness' consolidated
financial position and consolidated results of operations for these periods. The
consolidated results of operations for the three months ended March 31, 2001 are
not necessarily indicative of results for the year ending December 31, 2001 or
any future period. The following selected historical financial data of
Inverness' is presented on a historical basis and includes financial information
and results of operations of Inverness' women's health, nutritional supplements
and clinical diagnostics businesses, which after the completion of the split-off
and merger will no longer be part of Inverness.



                                                                                                   THREE MONTHS ENDED
                                                          YEAR ENDED DECEMBER 31,                      MARCH 31,
                                            ----------------------------------------------------   ------------------
                                              1996       1997       1998       1999       2000      2000       2001
                                            --------   --------   --------   --------   --------   -------   --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                        
CONSOLIDATED STATEMENT OF OPERATIONS:
Net revenues..............................  $ 19,063   $ 52,250   $117,984   $125,873   $170,344   $37,697   $ 51,254
Cost of sales.............................    10,958     26,277     77,081     83,246     99,723    21,901     34,784
                                            --------   --------   --------   --------   --------   -------   --------
    Gross profit..........................     8,105     25,973     40,903     42,627     70,621    15,796     16,470
                                            --------   --------   --------   --------   --------   -------   --------
Operating expenses:
  Research and development................     6,643     15,633      7,380      6,906     12,489     3,168      4,442
  Selling, general and administrative.....    14,713     25,805     36,290     35,390     38,734     9,121      9,136
  Other expenses..........................     4,397      3,303      7,542         --         --        --     56,123
                                            --------   --------   --------   --------   --------   -------   --------
  Total operating expenses................    25,753     44,741    (51,212)    42,296     51,223    12,289     69,701
                                            --------   --------   --------   --------   --------   -------   --------
    Operating (loss) income...............   (17,648)   (18,768)   (10,309)       331     19,398     3,507    (53,231)
                                            --------   --------   --------   --------   --------   -------   --------
Interest expense, including amortization
  of original issue discount..............   (11,561)    (5,487)    (9,565)    (8,093)    (7,583)   (2,150)      (893)
Interest and other income (expense),
  net.....................................       741        434      1,787       (533)     1,785        68      1,427
                                            --------   --------   --------   --------   --------   -------   --------
    (Loss) income before dividends and
      accretion on mandatorily redeemable
      preferred stock of a subsidiary.....   (28,468)   (23,821)   (18,087)    (8,295)    13,600     1,425    (52,697)
Dividends and accretion on mandatorily
  redeemable preferred stock of a
  subsidiary..............................      (110)      (114)      (147)      (226)      (430)      (55)       (47)
                                            --------   --------   --------   --------   --------   -------   --------
    (Loss) income before extraordinary
      loss and income taxes...............   (28,578)   (23,935)   (18,234)    (8,521)    13,170     1,370    (52,744)
Extraordinary loss on modification and
  early extinguishment of debt............        --       (579)        --       (306)    (2,362)       --         --
                                            --------   --------   --------   --------   --------   -------   --------
    (Loss) income before income taxes.....   (28,578)   (24,514)   (18,234)    (8,827)    10,808     1,370    (52,744)
Provision for income taxes................        --        196        544        245        168       135         57
                                            --------   --------   --------   --------   --------   -------   --------
    Net (loss) income.....................  $(28,578)  $(24,710)  $(18,778)  $ (9,072)  $ 10,640   $ 1,235   $(52,801)
                                            ========   ========   ========   ========   ========   =======   ========
Net (loss) income per common and potential
  common share(1):
Basic.....................................  $  (6.00)  $  (3.36)  $  (1.55)  $  (0.66)  $   0.43   $  0.05   $  (1.74)
                                            ========   ========   ========   ========   ========   =======   ========
Diluted...................................  $  (6.00)  $  (3.36)  $  (1.55)  $  (0.66)  $   0.37   $  0.04   $  (1.74)
                                            ========   ========   ========   ========   ========   =======   ========




                                                                         DECEMBER 31,
                                                   --------------------------------------------------------   MARCH 31,
                                                    1996      1997          1998          1999       2000       2001
                                                   -------   -------   --------------   --------   --------   ---------
                                                                        (IN THOUSANDS)
                                                                                            
BALANCE SHEET DATA:
Cash and cash equivalents........................  $16,459   $15,670      $  9,200      $  5,234   $ 82,272   $ 45,146
Working capital..................................    9,863    (2,282)        2,733        (8,673)    55,599     41,030
Total assets.....................................   41,089    95,372       115,077       114,837    213,303    224,163
Debt obligations.................................    8,833    59,903        62,481        60,375     49,066     26,940
Preferred stock subject to redemption............    1,754     1,868         3,718         3,944      4,375      4,422
Total stockholders' equity.......................  $12,079     5,441      $ 15,009      $ 18,120   $121,384   $153,268


---------------
(1) Historical basic and diluted net (loss) income per common and potential
    common share is computed as described in Inverness' historical financial
    statements and related notes incorporated by reference into this proxy
    statement/prospectus.

                                        11
   22

               RISK FACTORS RELATING TO THE SPLIT-OFF AND MERGER

     In addition to the other information included and incorporated by reference
in this proxy statement/prospectus, Inverness stockholders should consider
carefully the matters described below in determining whether to adopt the
split-off and merger agreement.

     THE NUMBER OF SHARES OF JOHNSON & JOHNSON COMMON STOCK TO BE RECEIVED BY
INVERNESS STOCKHOLDERS IN THE SPLIT-OFF AND MERGER IS SUBJECT TO CHANGES IN THE
STOCK PRICE OF JOHNSON & JOHNSON COMMON STOCK UNTIL SHORTLY BEFORE THE
COMPLETION OF THE SPLIT-OFF AND MERGER.  Under the split-off and merger
agreement, each share of Inverness common stock will be converted into the right
to receive: (1) 0.20 of a share of Innovations common stock, and (2) a fraction
of a share of Johnson & Johnson common stock based on an exchange ratio intended
to value that fractional share at $35.00. The amount of Johnson & Johnson common
stock to be received for each share of Inverness common stock will not be
determined until shortly before the completion of the split-off and merger. The
exchange ratio will be determined by dividing $35.00 by the average of the
volume weighted averages of the trading prices of Johnson & Johnson common stock
on the New York Stock Exchange for each of the 20 consecutive trading days
ending with the third trading day immediately preceding the date on which the
split-off and merger are completed. We have included in this proxy
statement/prospectus an estimate of the exchange ratio based on the closing
price per share of Johnson & Johnson common stock on --, 2001, the last
practicable trading day before the date of this proxy statement/prospectus. The
actual exchange ratio could be more or less than this estimated exchange ratio,
which means that the number of shares of Johnson & Johnson common stock you
actually receive could be more or less than you would receive based on the
estimated exchange ratio. The price of Johnson & Johnson common stock upon the
completion of the split-off and merger may vary from its price on the date of
this proxy statement/prospectus and on the date of the special meeting. The
price may vary as a result of changes in the business, operations or prospects
of Johnson & Johnson, market assessments of the likelihood that the split-off
and merger will be completed, the timing of the completion of the split-off and
merger, the prospects of post-merger operations, regulatory considerations,
general market and economic conditions and other factors. Because the date that
the split-off and merger are completed may be later than the date of the special
meeting, the price of Johnson & Johnson common stock on the date of the special
meeting may not be indicative of its price on the date the split-off and merger
are completed. We urge Inverness stockholders to obtain current market
quotations for Johnson & Johnson common stock.

     THE MARKET VALUE OF SHARES OF JOHNSON & JOHNSON COMMON STOCK TO BE RECEIVED
BY INVERNESS STOCKHOLDERS IN THE SPLIT-OFF AND MERGER MAY BE MORE OR LESS THAN
THE VALUE ATTRIBUTED TO SHARES OF INVERNESS COMMON STOCK IN CALCULATING THE
EXCHANGE RATIO.  The exchange ratio will be based on an average trading price of
Johnson & Johnson common stock during a period of 20 trading days. The market
value of Johnson & Johnson common stock on the date on which the split-off and
merger are completed may be different than the average Johnson & Johnson share
price during the 20-day period used in determining the exchange ratio. As a
result, the market value of the shares of Johnson & Johnson common stock that
Inverness stockholders will receive in the split-off and merger may be more or
less than the value attributed to shares of Inverness common stock in
calculating the exchange ratio.

     THE INTEGRATION OF INVERNESS' DIABETES CARE PRODUCTS BUSINESS INTO JOHNSON
& JOHNSON FOLLOWING THE SPLIT-OFF AND MERGER WILL PRESENT SIGNIFICANT
CHALLENGES.  Johnson & Johnson and Inverness will face significant challenges in
combining their diabetes care operations and product lines in a timely and
efficient manner and retaining key Inverness personnel. The integration of
Inverness' diabetes care products business into Johnson & Johnson will be
complex and time-consuming. The failure to integrate successfully Inverness'
diabetes care products business into Johnson & Johnson and to manage
successfully the challenges presented by the integration process may result in
Johnson & Johnson and Inverness not achieving the anticipated potential benefits
of the merger.

     THE PRICE OF JOHNSON & JOHNSON COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE PRICE OF INVERNESS COMMON STOCK.  Upon
completion of the merger, holders of Inverness common stock will become holders
of Johnson & Johnson common stock. Johnson & Johnson's business is

                                        12
   23

different from that of Inverness, and Johnson & Johnson's results of operations,
as well as the price of Johnson & Johnson common stock, may be affected by
factors different than those affecting Inverness' results of operations and the
price of Inverness common stock. For a discussion of Johnson & Johnson's and
Inverness' businesses and certain factors to consider in connection with such
businesses, see Johnson & Johnson's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, as amended, and Inverness' Annual Report on Form
10-K for the fiscal year ended December 31, 2000, each of which is incorporated
by reference in this proxy statement/prospectus.

     THERE ARE VARIOUS RISKS ASSOCIATED WITH HOLDING AN INTEREST IN
INNOVATIONS.  In the split-off, Inverness stockholders will receive shares of
the common stock of Innovations, an independent, publicly-owned company with no
prior operating history as a stand-alone entity. There are various risks which
may materially impact your interest in Innovations or materially affect
Innovations and its business, financial condition, results of operations and
prospects. For a more complete discussion of the risk factors relating to
Innovations and its common stock that should be carefully considered in
determining whether to adopt the split-off and merger agreement, see "Risk
Factors" beginning on page X-6 of the Innovations prospectus portion of this
proxy statement/prospectus.

                                        13
   24

                              THE SPECIAL MEETING

     We are furnishing this proxy statement/prospectus to Inverness stockholders
as of the record date as part of the solicitation of proxies by the Inverness
board of directors for use at the special meeting.

DATE, TIME AND PLACE

     We will hold the special meeting at the offices of Goodwin Procter LLP, 53
State Street, Boston, Massachusetts, at -- a.m., local time, on --, --, 2001.

PURPOSE OF THE SPECIAL MEETING

     At the special meeting, we will ask holders of Inverness common stock to
adopt the split-off and merger agreement. A vote for the adoption of the
split-off and merger agreement has the effect of approving the merger, including
the split-off, and the other transactions contemplated by the split-off and
merger agreement. No separate vote on the split-off is required or being
requested. The split-off and merger agreement is attached as Annex 1 to this
proxy statement/prospectus. Please read it and the other information contained
in this proxy statement/prospectus carefully before deciding how to vote on the
split-off and merger agreement.

     At the special meeting, we will also ask holders of Inverness common stock
to approve the Innovations 2001 stock option and incentive plan and the
Innovations executive bonus plan. The completion of the split-off and merger is
not conditioned on approval of the Innovations incentive plans, but the
effectiveness of these plans is conditioned on completion of the split-off and
merger. The Innovations stock option plan is attached as Annex 9 to this proxy
statement/prospectus. Please read it and the other information contained in this
proxy statement/prospectus carefully before deciding how to vote on the
Innovations incentive plans.

RECOMMENDATION OF THE INVERNESS BOARD OF DIRECTORS

     The Inverness board of directors has determined that the merger, including
the split-off, and the other transactions contemplated by the split-off and
merger agreement are advisable and in the best interests of Inverness and its
stockholders, and has unanimously approved the split-off and merger agreement
and the transactions contemplated by the split-off and merger agreement. THE
INVERNESS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
ADOPTION OF THE SPLIT-OFF AND MERGER AGREEMENT. THE INVERNESS BOARD OF DIRECTORS
ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE INNOVATIONS
INCENTIVE PLANS.

RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM

     Only holders of record of Inverness common stock at the close of business
on --, 2001, the record date for the special meeting, are entitled to notice of,
and to vote at, the special meeting or any adjournment or postponement of it. On
the record date, -- shares of Inverness common stock were issued and outstanding
and held by approximately -- holders of record. A quorum will be present at the
special meeting if a majority of all the shares of Inverness common stock issued
and outstanding on the record date and entitled to vote at the special meeting
are represented at the special meeting in person or by proxy. Holders of record
of Inverness common stock on the record date are entitled to one vote per share
on each matter submitted to a vote at the special meeting.

VOTE REQUIRED

     The adoption of the split-off and merger agreement requires the affirmative
vote of stockholders holding a majority of the shares of Inverness common stock
outstanding on the record date. Because the required vote of Inverness
stockholders is based upon the number of outstanding shares of Inverness common
stock, rather than upon the shares actually voted, the failure by the holder of
any such shares to

                                        14
   25

submit a proxy or to vote in person at the special meeting, including
abstentions and broker non-votes, will have the same effect as a vote against
the adoption of the split-off and merger agreement.

     The approval of the Innovations incentive plans requires the affirmative
vote of stockholders holding a majority of the shares of Inverness common stock
present in person or represented by proxy at the special meeting and entitled to
vote on those matters. Abstentions will be counted as present and entitled to
vote and, accordingly, will have the effect of votes against the approval of the
Innovations incentive plans. Broker non-votes will not be considered as present
and entitled to vote and, accordingly, will have no effect on the proposals
relating to the Innovations incentive plans.

SHARES OWNED BY INVERNESS DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES

     At the close of business on the record date, directors and executive
officers of Inverness and their affiliates beneficially owned and were entitled
to vote -- shares of Inverness common stock, which represented approximately --%
of the shares of Inverness common stock outstanding on that date.

VOTING OF PROXIES

     All shares represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders. Properly executed proxies that do not contain voting
instructions will be voted "FOR" the adoption of the split-off and merger
agreement and "FOR" the approval of the Innovations incentive plans.

     Shares of Inverness common stock represented at the special meeting but not
voting, including shares representing abstentions or broker non-votes, will be
treated as present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business.

     Brokers who hold shares of Inverness common stock in "street name" for
customers who are the beneficial owners of such shares may not give a proxy to
vote those customers' shares without specific instructions from those customers.
These non-voted shares are referred to as "broker non-votes" and will have the
same effect as votes against the adoption of the split-off and merger agreement.
ACCORDINGLY, IF YOUR SHARES ARE HELD IN THE NAME OF A BANK OR BROKER, PLEASE
FOLLOW THE INSTRUCTIONS YOU RECEIVE ON YOUR PROXY CARD TO ENSURE YOUR SHARES ARE
PROPERLY VOTED AT THE MEETING. Broker non-votes will have no effect on the
proposals relating to the Innovations incentive plans.

     Inverness does not expect that any matter other than the proposal to adopt
the split-off and merger agreement and the proposals to approve the Innovations
incentive plans will be brought before the special meeting. If, however, the
Inverness board of directors properly presents other matters, the persons named
as proxies will vote in accordance with their judgment.

REVOCATION OF PROXIES

     The grant of a proxy pursuant to this solicitation does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time prior to its exercise by submitting a new proxy
bearing a later date, including a proxy given by telephone or Internet, by
notifying the Secretary of Inverness in writing that the proxy has been revoked,
or by appearing at the special meeting and voting in person. Attendance at the
special meeting will not in and of itself constitute revocation of a proxy.

SOLICITATION OF PROXIES

     Inverness will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Inverness may solicit proxies from stockholders by telephone or
other electronic means or in person. Inverness will cause brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of stock held of record by such persons. Inverness will
reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in doing so.

                                        15
   26

     -- will assist in the solicitation of proxies by Inverness. Inverness will
pay -- a fee of $--, plus reimbursement of certain out-of-pocket expenses, and
will indemnify -- against any losses arising out of its proxy solicitation
services on behalf of Inverness.

     STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
A transmittal form with instructions for the surrender of Inverness common stock
certificates will be mailed to Inverness stockholders shortly after completion
of the split-off and merger.

                                        16
   27

                                 THE COMPANIES

JOHNSON & JOHNSON

     Johnson & Johnson, with approximately 100,000 employees, is the world's
most comprehensive and broadly-based manufacturer of health care products, as
well as a provider of related services, for the consumer, pharmaceutical and
medical devices and diagnostics markets. Johnson & Johnson has more than 195
operating companies in 51 countries around the world, selling products in more
than 175 countries.

     Johnson & Johnson's worldwide business is divided into three segments:
consumer, pharmaceutical and medical devices and diagnostics. The consumer
segment's principal products are personal care and hygienic products, including
oral and baby care products, first aid products, nonprescription drugs, sanitary
protection products and adult skin and hair care products. These products are
marketed principally to the general public and distributed both to wholesalers
and directly to independent and chain retail outlets.

     The pharmaceutical segment's principal worldwide franchises are in the
anti-infective, anti-fungal, anti-anemia, central nervous system, contraceptive,
dermatology, gastrointestinal and pain management fields. These products are
distributed both directly and through wholesalers for use by health care
professionals and the general public.

     The medical devices and diagnostics segment includes suture and mechanical
wound closure products, minimally invasive surgical instruments, diagnostic
products, cardiology products, disposable contact lenses, surgical instruments,
orthopaedic joint replacements and products for wound management and infection
prevention and other medical equipment and devices. These products are used
principally in the professional fields by physicians, nurses, therapists,
hospitals, diagnostic laboratories and clinics. Distribution to these markets is
done both directly and through surgical supply and other dealers.

     Johnson & Johnson was organized in the State of New Jersey in 1887. The
address of its principal executive offices is One Johnson & Johnson Plaza, New
Brunswick, New Jersey, and the telephone number at that address is (732)
524-0400.

INVERNESS

     Inverness develops, manufactures and markets innovative products focused
primarily on diabetes self-management. Inverness' principal products are
advanced electrochemical blood glucose monitoring systems that are used by
people with diabetes to determine their blood glucose levels in order to manage
their disease. In addition to its diabetes products, Inverness sells products
for the women's health market and, to a lesser extent, the infectious disease
market.

     Inverness was incorporated in the State of Delaware on August 25, 1992
under the name Selfcare, Inc. Inverness changed its name to Inverness Medical
Technology, Inc. in May 2000. The address of its principal executive offices is
51 Sawyer Road, Suite 200, Waltham, Massachusetts 02453, and its telephone
number is (781) 647-3900.

INNOVATIONS

     Following the restructuring and the split-off, Innovations will develop,
manufacture and sell products for the women's health market, and, to a lesser
extent, clinical diagnostic products for the infectious disease market. Its
self-test products for the women's health market will include home pregnancy
detection tests and ovulation prediction tests. Innovations will also sell a
line of nutritional supplements targeted primarily at the women's health market.
Innovations' clinical diagnostic products will consist of test kits used by
smaller laboratories, small blood banks, physicians' offices, and other patient
point-of-care sites for the detection of certain infectious diseases.

     Innovations was incorporated in Delaware on May 11, 2001 under the name New
IMT Corporation. Innovations changed its name to Inverness Medical Innovations,
Inc. on July 19, 2001. The address of its

                                        17
   28

principal executive offices is 51 Sawyer Road, Suite 200, Waltham, MA 02453, and
its telephone number is (781) 647-3900.

     For more complete information concerning Innovations, please see the
Innovations prospectus portion of this proxy statement/prospectus beginning on
page X-i.

MATERIAL CONTRACTS BETWEEN JOHNSON & JOHNSON AND INVERNESS

     Beginning in 1995, Inverness entered into development and global
distribution agreements with Johnson & Johnson Development Corporation and
LifeScan, Inc., both of which are subsidiaries of Johnson & Johnson. These
agreements were amended in June 1999 and again in February 2001, effective as of
January 1, 2001. Under these agreements, Inverness develops and manufactures,
and LifeScan markets as Inverness' sole distributor, electrochemical blood
glucose monitoring systems. Under the terms of the agreements, LifeScan is not
prohibited from selling other blood glucose monitoring systems, including
electrochemical systems. However, if LifeScan either (1) introduces such a
system not sourced from Inverness prior to December 31, 2002 or (2) fails to
purchase specified minimum annual levels of test strips, Inverness is released
from a restriction under the agreements prohibiting it from selling complete
electrochemical blood glucose monitoring systems to parties other than LifeScan.

     As part of these agreements, LifeScan loaned Inverness an aggregate of
8,281,250 British Pounds Sterling (approximately $12,800,000) to fund the
increased costs related to anticipated production levels. All such loans have
been repaid in full through incremental deductions from the invoice price of
test strips sold to LifeScan. Under these agreements, Inverness has the right to
receive additional loans from LifeScan upon the accomplishment of certain
milestones relating to new products Inverness is to develop for LifeScan.

                                        18
   29

               THE SPLIT-OFF AND MERGER AND RELATED TRANSACTIONS

BACKGROUND TO THE SPLIT-OFF AND MERGER AND RELATED TRANSACTIONS

     In pursuing strategies for enhancing stockholder value, Inverness regularly
considers opportunities for acquisitions, dispositions and other strategic
alliances and alternatives. As part of that process, during the course of its
relationship with Johnson & Johnson, representatives of Inverness have from time
to time had discussions with representatives of Johnson & Johnson regarding ways
in which the companies could expand and enhance their existing relationship.

     On March 26 and 27, 2001, Ron Zwanziger, Chairman, Chief Executive Officer
and President of Inverness, and David Scott, Chairman of Inverness Medical
Limited, met with Eric P. Milledge, Company Group Chairman of LifeScan, and
Robert Coradini, President of LifeScan, in Milpitas, California to discuss the
Inverness/LifeScan commercial relationship in general. In connection with those
discussions, the possibility of a business combination between Inverness and
Johnson & Johnson, several alternative structures for such a transaction and the
potential strategic, commercial and financial benefits of such a transaction
were also discussed. Following this meeting, Mr. Zwanziger conferred with
several members of the Inverness board of directors and senior management
regarding the potential benefits of a business combination with Johnson &
Johnson.

     On April 2, 2001, Mr. Milledge sent a letter to Mr. Zwanziger indicating
Johnson & Johnson's continued interest in exploring a business combination with
Inverness. The letter contemplated the complete acquisition of Inverness by
Johnson & Johnson and stated that such a proposal assumed that the parties would
be able to reach mutually satisfactory arrangements for the retention of key
people and for appropriate non-competition provisions. The letter also stated
that in order to make a final proposal, Johnson & Johnson would have to conduct
customary due diligence.

     On April 5, 2001, Mr. Zwanziger sent a letter to Mr. Milledge in response
to Mr. Milledge's letter of April 2, 2001. In the letter, Mr. Zwanziger
indicated that, depending on the proposed purchase price, he would support an
acquisition of all of Inverness. He indicated that he would also support a
possible two-step transaction in which, among other things, Johnson & Johnson
would acquire the current glucose business and all future developments of those
products and Inverness would retain the rights to new products under development
(including diabetes-related products), as well as the women's health,
nutritional supplements and clinical diagnostics businesses.

     On April 9, 2001, Mr. Milledge sent a letter to Mr. Zwanziger in response
to Mr. Zwanziger's letter of April 5, 2001. In response to the two-step
transaction suggested by Mr. Zwanziger in his letter of April 5, 2001, Mr.
Milledge indicated that Johnson & Johnson was open to discussing alternatives to
a complete acquisition, but noted that a number of complex issues would need to
be addressed. The letter suggested that the parties meet later that week to
continue discussions.

     On April 10, 2001, the Inverness board of directors held a regularly
scheduled meeting. At that meeting, Mr. Zwanziger consulted with the Inverness
board on his discussions with Johnson & Johnson regarding a potential business
combination and outlined some of the major issues. A representative of
Inverness' financial advisor, Covington Associates, also participated in this
regularly scheduled board meeting.

     On April 12, 2001, Mr. Zwanziger and Dr. Scott met with Mr. Milledge and
James T. Lenehan, Vice Chairman of Johnson & Johnson and Worldwide Chairman,
Medical Devices and Diagnostics Group, at Johnson & Johnson's facilities in New
Brunswick, New Jersey to continue discussions regarding a potential business
combination. At that meeting, Johnson & Johnson again discussed the possibility
and potential terms for an acquisition of all of Inverness. Johnson & Johnson
also requested an opportunity to begin a full due diligence review.

     At a special meeting of the Inverness board of directors held on April 13,
2001, Mr. Zwanziger again consulted with the Inverness board on his and Dr.
Scott's meeting with Mr. Lenehan and Mr. Milledge and the status of discussions
with Johnson & Johnson regarding a potential business combination.

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     On April 18, 2001, Inverness and LifeScan entered into a confidential
disclosure agreement. Thereafter, over the course of the next few weeks,
representatives of Johnson & Johnson and its legal advisors conducted a due
diligence review of Inverness, focusing their efforts on Inverness' diabetes
care products business. During this period, Inverness' representatives and
advisors continued to discuss the possible terms of a proposed transaction with
Johnson & Johnson's representatives and legal advisors, including a split-off
and merger transaction in which Inverness' women's health, nutritional
supplements and clinical diagnostics businesses would be separated from the rest
of its businesses and split-off as a new publicly traded company to be owned by
Inverness stockholders.

     In late April 2001, Inverness retained ABN AMRO Incorporated to act as one
of its financial advisors in connection with the Inverness board of directors'
evaluation and review of a possible transaction with Johnson & Johnson.

     On April 24, 2001, a draft merger agreement was circulated to Inverness'
legal advisor, Goodwin Procter LLP, by Cravath, Swaine & Moore, Johnson &
Johnson's legal advisor. Drafts of the related agreements, including those
necessary to effect the split-off of Innovations and to license certain
intellectual property rights to Innovations after the split-off and merger, were
circulated during the first week of May 2001. Thereafter, Inverness, Johnson &
Johnson and their respective representatives and advisors had numerous meetings
and conference calls to review and negotiate the terms of the split-off and
merger agreement and the related agreements.

     On April 25, 2001, Mr. Zwanziger and Dr. Scott met with Messrs. Milledge
and Coradini in Boston, Massachusetts to discuss the proposed transaction. At
that meeting, the participants discussed the proposed transaction, including
potential terms and conditions for the acquisition of the diabetes care products
business in exchange for Johnson & Johnson common stock, the split-off of
Inverness businesses other than its diabetes care products business, the
licensing of intellectual property rights between Johnson & Johnson and
Inverness and non-competition agreements with specified Inverness executives.

     On April 26, 2001, the Johnson & Johnson board of directors held a meeting
at which the Johnson & Johnson board considered the potential terms and
conditions of the proposed transaction with Inverness and authorized the Finance
Committee of the Johnson & Johnson board to approve, in their sole discretion,
the final terms of a transaction with Inverness.

     On April 27, 2001, a special meeting of the Inverness board of directors
was held to discuss the proposed transaction with Johnson & Johnson. At that
meeting, Mr. Zwanziger updated the Inverness board on the status of the
discussions with Johnson & Johnson and the proposed transaction structure, which
involved Johnson & Johnson's acquisition of the diabetes care products business
and the simultaneous split-off of the women's health, nutritional supplements
and clinical diagnostics businesses to the existing stockholders of Inverness.
Mr. Zwanziger and a representative of Covington Associates then reviewed the
principal terms of the proposed transaction. Goodwin Procter LLP advised the
Inverness board on legal issues related to the proposed transaction and reviewed
with the Inverness board a possible schedule for completing such a transaction.

     On May 3 and 4, 2001, representatives of Inverness and Johnson & Johnson
met at Inverness' headquarters in Waltham, Massachusetts to continue the due
diligence process and to review business and organizational issues relating to
the proposed split-off and merger, including transition services that would be
necessary for both Innovations and Johnson & Johnson after completion of the
split-off and merger.

     On May 6, 2001, representatives of Inverness and Johnson & Johnson and
their respective advisors met at Johnson & Johnson's facilities in New
Brunswick, New Jersey to negotiate the major terms of the proposed transaction
and the related agreements. Further negotiations occurred between
representatives of Inverness and Johnson & Johnson on May 7 and May 8, 2001.

     On May 7, 2001, the Inverness board of directors met to discuss the status
of the proposed transaction with Johnson & Johnson. At that meeting, Mr.
Zwanziger updated the Inverness board on the status of the discussions and
negotiations about the proposed transaction and the related agreements.
Inverness' financial and legal advisors also participated in the meeting,
updating the Inverness board on the
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open issues and the status of negotiations regarding those issues. ABN AMRO also
updated the Inverness board on the status of its financial review of the
proposed transaction.

     On May 8, 2001, a special meeting of the Inverness board of directors was
held to review the status of the proposed transaction. Inverness' financial and
legal advisors also participated in the meeting. At that meeting, Mr. Zwanziger
and the advisors again updated the Inverness board on the status of the
discussions and negotiations about the proposed transaction and the related
agreements, including the license of intellectual property rights to Innovations
after the split-off and merger and the consulting and non-competition agreements
to be entered into by Mr. Zwanziger, Dr. Scott and Dr. Jerry McAleer, Vice
President of Research and Development of Inverness Medical Ltd. Mr. Zwanziger
informed the Inverness board that Inverness had reached a preliminary
understanding with Johnson & Johnson regarding a structure for the proposed
transaction in which Johnson & Johnson would acquire the diabetes care products
business, and the women's health, nutritional supplements and clinical
diagnostics businesses would be split-off to the existing stockholders of
Inverness. At the request of the Inverness board, representatives of Johnson &
Johnson were present during portions of the meeting. After the meeting,
negotiations between representatives and advisors of Inverness and Johnson &
Johnson continued throughout the night and into the following morning.

     On May 9, 2001, Inverness and Johnson & Johnson issued a joint press
release announcing that the companies were in advanced discussions regarding a
definitive agreement, whereby Johnson & Johnson would acquire Inverness,
excluding certain businesses, in a stock-for-stock exchange. The press release
indicated that, at the time of the acquisition, Inverness would split-off its
businesses in women's health, nutritional supplements and clinical diagnostics
to form a new publicly traded company owned by the existing stockholders of
Inverness, and that, under the terms being discussed, Inverness stockholders
would receive Johnson & Johnson common stock with a value of $35.00 per share,
plus a common stock interest in the new company, for each share of Inverness
common stock.

     On May 9 and May 10, 2001, representatives of Inverness and Johnson &
Johnson and their respective legal advisors and Inverness' financial advisors
continued negotiating the terms of the proposed transaction and the related
agreements. During this time, Inverness also retained UBS Warburg to assist the
Inverness board of directors in its evaluation and review of the consideration
to be received in the proposed transaction.

     On May 11, 2001, the Inverness board of directors held a special meeting to
review and discuss the status of the proposed transaction. Inverness' legal and
financial advisors also participated in that meeting. At the meeting, Mr.
Zwanziger updated the Inverness board on the status of negotiations. In
addition, Goodwin Procter LLP reviewed with the Inverness board the remaining
open issues, as well as various legal matters. ABN AMRO and UBS Warburg also
reviewed with the Inverness board financial aspects of the proposed transaction.

     Between May 14, 2001 and May 21, 2001, Johnson & Johnson, Inverness, their
respective legal advisors and representatives of Covington Associates held
numerous discussions and negotiations regarding the terms of the proposed
transaction and the related agreements.

     At a regularly scheduled meeting held on May 21, 2001, the Inverness board
of directors discussed the proposed split-off and merger. Inverness' legal and
financial advisors also participated in the meeting. At that meeting, Mr.
Zwanziger and the advisors reviewed with the Inverness board the status of
negotiations, including the resolution of previously open issues and the
principal terms of the proposed transaction and the related agreements. ABN AMRO
and UBS Warburg reviewed with the Inverness board their respective financial
analysis of the aggregate consideration to be received by holders of Inverness
common stock in the transaction. Based on the assumption that the terms of the
definitive transaction agreements would remain substantially the same as those
contained in the drafts of the agreements provided to them, ABN AMRO and UBS
Warburg rendered separate oral opinions, subsequently confirmed by delivery of
written opinions dated May 23, 2001, the date of the definitive split-off and
merger agreement, to the effect that, as of the date of the opinion and based on
and subject to the matters described in its opinion, the aggregate consideration
to be received in the split-off and merger was
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fair, from a financial point of view, to the holders of Inverness common stock.
After further review and discussion, the Inverness board approved the split-off
and merger and all related agreements, declared their advisability and
authorized management to execute and deliver such agreements.

     Prior to the execution of the split-off and merger agreement on May 23,
2001, the Finance Committee of the Johnson & Johnson board authorized the
execution and delivery of the split-off and merger agreement and all related
agreements.

     Between May 21, 2001 and May 23, 2001, Johnson & Johnson and Inverness
finalized the transaction agreements and completed due diligence.

     On May 23, 2001, the parties executed the definitive split-off and merger
agreement and related agreements and issued a joint press release announcing the
execution of the split-off and merger agreement.

REASONS FOR THE SPLIT-OFF AND MERGER AND RELATED TRANSACTIONS

     REASONS FOR THE TRANSACTION.  In reaching its decision to approve the
split-off and merger agreement, the related agreements and the transactions
contemplated by those agreements, and to recommend that Inverness stockholders
adopt the split-off and merger agreement, the Inverness board of directors
consulted with its management team, financial advisors, legal counsel and other
advisors and considered the short-term and long-term interests of Inverness. In
particular, the Inverness board of directors considered the following factors,
all of which it deemed favorable, in reaching its decision to approve the
split-off and merger agreement, the related agreements, the merger, including
the split-off, and the other transactions contemplated by the split-off and
merger agreement and the related agreements:

     - Inverness' dependency on Johnson & Johnson as its primary customer and
       the risk that Johnson & Johnson could in the future develop its own
       electrochemical test strip technology, acquire another electrochemical
       test strip manufacturer or change the technology underlying its diabetes
       monitoring systems

     - the Inverness board of directors' view that maintaining and building
       market share within the rapidly growing diabetes care products industry
       will require large investments in management and other resources, and the
       fact that the merger with Johnson & Johnson would result in a combined
       entity with the resources necessary to fund and manage a substantial
       escalation of Inverness' diabetes care products business

     - the Inverness board of directors' view that maintaining and building
       market share as a stand-alone entity within the rapidly growing diabetes
       care products industry would require large investments in management and
       other infrastructure that could alter Inverness' entrepreneurial
       management and development environments and negatively impact the pace of
       innovation and adaptation that have, in the Inverness board's view, been
       critical to Inverness' success to date

     - the transaction allows Inverness stockholders to receive interests in
       Johnson & Johnson, a more diversified entity with greater size and
       financial strength, in exchange for their interest in Inverness' diabetes
       care products business, while retaining their interest in Inverness'
       women's health, nutritional supplements and clinical diagnostics
       businesses

     - the value of the Johnson & Johnson common stock to be received for each
       share of Inverness common stock is set at $35.00 and is not subject to
       change, with the exact exchange ratio to be based on an average trading
       price of Johnson & Johnson common stock prior to the completion of the
       split-off and merger

     - following the split-off, based upon the proposed transaction agreements,
       Innovations will be virtually free from debt and will have net cash of
       $40 million

     - Innovations will retain rights to utilize Inverness' electrochemical and
       interstitial technology platform for certain diagnostic applications
       outside the field of diabetes

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     - the separate financial presentations of ABN AMRO and UBS Warburg to the
       Inverness board of directors, including the opinions of each of ABN AMRO
       and UBS Warburg as to the fairness, from a financial point of view, of
       the aggregate consideration to be received by the holders of Inverness
       common stock in the split-off and merger, as described in more detail in
       "Opinions of ABN AMRO Incorporated and UBS Warburg LLC"

     - the expected tax treatment of the split-off and merger to Inverness
       stockholders and

     - the terms and conditions of the split-off and merger agreement and the
       related agreements, including the provisions that permit Inverness to
       continue to receive unsolicited inquiries and proposals regarding other
       potential business combinations, negotiate and provide information to
       third parties making such inquiries or proposals, and, subject to the
       satisfaction of certain conditions, in the exercise of its fiduciary
       duties, withdraw or modify its recommendation to the Inverness
       stockholders regarding the split-off and merger, or terminate the
       split-off and merger agreement, and enter into a more favorable
       transaction with a third party, subject to the payment of a $28 million
       termination fee to Johnson & Johnson.

     The Inverness board of directors also considered a number of potentially
negative factors in its deliberations concerning the split-off and merger
agreement and related agreements, including:

     - the risk that the benefits sought to be achieved in the split-off and
       merger will not be achieved

     - the risks inherent in Johnson & Johnson's health care products business,
       including risks associated with potential changes in the health care
       industry generally, and the effect that negative changes in Johnson &
       Johnson's valuation would have on stockholders after completion of the
       transaction

     - the fact that it was and is difficult to estimate what the value of the
       shares of Innovations common stock will be at the time they are issued in
       the split-off and the fact that the value of the shares of Johnson &
       Johnson stock to be issued in the merger was close to the price of
       Inverness common stock prior to the announcement that Inverness and
       Johnson & Johnson were in advanced discussions regarding the proposed
       split-off and merger on May 9, 2001 and prior to the announcement of the
       execution of the split-off and merger agreement on May 23, 2001 and

     - the risks to Inverness' business that might result from constraints
       imposed by interim operating covenants contained in the split-off and
       merger agreement.

     The Inverness board of directors also considered the financial viability of
Innovations as an independent company. Set forth below are the material factors
considered by the Inverness board of directors in analyzing the split-off:

     - the financial condition, results of operation, business and prospects of
       Innovations as an independent company

     - the non-competition obligations that would be imposed on Innovations by
       certain of the transaction agreements which prohibit Innovations from
       engaging in the diabetes care products business

     - the current women's health, nutritional supplements and clinical
       diagnostics industries and market conditions and

     - the indemnification rights and obligations of Innovations following the
       split-off.

     The Inverness board of directors was aware of certain potential benefits to
the members of Inverness' management and the Inverness board of directors,
discussed below in "-- Interests of Inverness Directors and Executive Officers
in the Split-off and Merger and Related Transactions." The Inverness board of
directors was also aware of the proposed consulting and non-competition
agreements to be entered into between Johnson & Johnson and each of Mr.
Zwanziger, Dr. Scott and Dr. McAleer, none of which included lump-sum payments
or overall compensation materially in excess of each of their current
compensation and that, in the case of Mr. Zwanziger, contained only limited
compensatory provisions. The

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Inverness board of directors determined that these potential benefits were such
that they would not affect the ability of the members of the Inverness board of
directors to discharge their duties.

     In view of the wide variety of factors considered by the Inverness board of
directors, the board did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered.
The Inverness board of directors viewed its position and recommendation as being
based on the totality of the information presented to and considered by it.
After taking into consideration all of the factors set forth above, the
Inverness board of directors determined that the potential benefits of the
proposed split-off and merger outweighed the potential detriments associated
with the proposed transaction.

     RECOMMENDATION OF THE INVERNESS BOARD OF DIRECTORS.  After careful
consideration, the Inverness board of directors has unanimously approved the
split-off and merger agreement and the transactions contemplated by the
split-off and merger agreement, and has determined that the split-off and merger
and the other transactions contemplated by the split-off and merger agreement
are advisable and in the best interests of Inverness and its stockholders.
ACCORDINGLY, THE INVERNESS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
INVERNESS STOCKHOLDERS VOTE "FOR" THE ADOPTION OF THE SPLIT-OFF AND MERGER
AGREEMENT.

OPINIONS OF ABN AMRO INCORPORATED AND UBS WARBURG LLC

     OPINION OF ABN AMRO INCORPORATED.  The Inverness board of directors
retained ABN AMRO Incorporated to act as one of its financial advisors in
connection with the Inverness board of directors' review of the proposed
split-off and merger. At the meeting of the Inverness board of directors held on
May 21, 2001, ABN AMRO delivered its oral opinion to the effect that, as of the
date of the opinion and based on and subject to the matters described in the
opinion, including a review of the definitive agreements for the transaction,
the consideration to be received in the proposed split-off and merger was fair,
from a financial point of view, to the holders of Inverness common stock. All of
the directors were present at this meeting and were given the opportunity to ask
questions. The opinion was subsequently confirmed by delivery of a written
opinion dated May 23, 2001, the date of execution of the split-off and merger
agreement.

     The following summary of the ABN AMRO opinion is qualified in its entirety
by reference to the full text of the opinion. The full text of the ABN AMRO
opinion sets forth the assumptions made, procedures followed, matters considered
and limitations on the scope of the review undertaken and is attached as Annex 7
to this proxy statement/prospectus. We encourage you to carefully read the ABN
AMRO opinion in its entirety.

     The ABN AMRO opinion:

     - relates to the fairness, from a financial point of view, of the
       consideration to be received in the proposed split-off and merger by
       holders of Inverness common stock

     - addresses only the financial terms of the consideration to be received in
       the proposed split-off and merger by the holders of Inverness common
       stock and

     - does not constitute a recommendation to any holder of Inverness common
       stock as to how such holder should vote with respect to the adoption of
       the split-off and merger agreement.

     In arriving at its opinion, ABN AMRO, among other things:

     - reviewed Inverness' Annual Report on Form 10-K for each of the fiscal
       years ended December 31, 1998, December 31, 1999 and December 31, 2000,
       Inverness' Quarterly Reports on Form 10-Q for each of the quarters ended
       March 31, 2000 and March 31, 2001 and other business information relating
       to Inverness and Johnson & Johnson

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     - reviewed unaudited, pro forma income statements, balance sheets and other
       financial and operating data concerning Inverness, Inverness after giving
       effect to the proposed split-off and merger and Innovations, prepared by
       management of Inverness

     - analyzed unaudited, pro forma financial projections, relating to
       Inverness, Inverness after giving effect to the proposed split-off and
       merger and Innovations, for the fiscal years ended December 31, 2000
       through 2005, prepared by management of Inverness

     - discussed the past and current operations and financial condition and the
       prospects of Inverness, Inverness after giving effect to the proposed
       split-off and merger and Innovations, including information relating to
       certain strategic, financial and operational benefits anticipated from
       the proposed split-off and merger, with senior executives of Inverness

     - reviewed the reported prices and trading activity for Inverness common
       stock for the last 12 months and Johnson & Johnson common stock for the
       last three years, respectively

     - compared the pro forma financial and operating performance of Inverness
       after giving effect to the proposed split-off and merger and Innovations
       with that of certain publicly-traded companies that ABN AMRO considered
       to be relevant

     - compared the proposed financial terms of the merger with the financial
       terms of certain other public transactions that ABN AMRO considered to be
       relevant

     - reviewed and discussed with the senior management of Inverness the
       strategic rationale for, and the potential benefits of, the proposed
       split-off and merger

     - reviewed the amended and restated Sales Distribution Agreement for
       Testing System for Glucose in Humans between LifeScan and Inverness dated
       June 7, 1999 and as amended as of January 1, 2001

     - reviewed the executed split-off and merger agreement dated May 23, 2001,
       including certain exhibits and schedules

     - reviewed the form of restructuring agreement dated May 23, 2001 and
       certain related documents, which ABN AMRO had been advised were in
       substantially final form and

     - reviewed the form of license agreement dated May 23, 2001, including
       certain exhibits thereto, which ABN AMRO had been advised was in
       substantially final form.

     In connection with its review, ABN AMRO:

     - assumed and relied upon the accuracy and completeness of the financial
       and other information reviewed by ABN AMRO and did not obtain, nor made
       or assumed responsibility for undertaking, any independent verification
       of such information

     - assumed that financial data have been reasonably prepared on bases
       reflecting the best currently available estimates and judgment of
       Inverness management as to the future financial performance of Inverness

     - relied upon, without independent verification, the assessment by
       management of Inverness of the strategic and other benefits expected to
       result from the split-off and merger

     - assumed, with Inverness' consent, that the merger will be consummated in
       accordance with the terms set forth in the split-off and merger agreement
       and that the merger shall qualify as a tax-free reorganization or
       exchange pursuant to Section 368(a) of the Internal Revenue Code of 1986,
       as amended

     - assumed, with Inverness' consent, that the restructuring and the
       split-off will be consummated in accordance with the terms set forth in
       the restructuring agreement and the split-off and merger agreement

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     - assumed that the final forms of each of the restructuring agreement and
       the license agreement would be consistent with the last draft reviewed by
       ABN AMRO in all material respects and

     - did not make an independent evaluation or appraisal of the assets and
       liabilities of Inverness or any of its subsidiaries or of the licensed
       technology pursuant to the license agreement, nor was furnished with such
       evaluations or appraisals.

     ABN AMRO's opinion:

     - is necessarily based on the economic, monetary, market and other
       conditions as in effect on, and the information made available to ABN
       AMRO on or prior to, the date of its opinion

     - does not address Inverness' underlying business decision to enter into
       the split-off and merger agreement or to effect the split-off and

     - does not express any opinion as to the prices at which the Johnson &
       Johnson common stock has or will trade following the announcement or
       consummation of the proposed split-off and merger or the price at which
       the common stock of Innovations will trade following the split-off.

     In connection with this engagement, ABN AMRO was not authorized to solicit,
and did not solicit, indications of interest from third parties with respect to
a possible transaction with Inverness.

     In preparing its opinion, ABN AMRO performed a variety of financial and
comparative analyses. The material analyses are described below. The summary of
these analyses is not a complete description of the analyses underlying ABN
AMRO's opinion. The preparation of a fairness opinion is a complex analytical
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, is not susceptible to partial analysis
or summary descriptions. In arriving at its opinion, ABN AMRO made qualitative
judgments as to the significance and relevance of each analysis and factor
considered by it. Accordingly, ABN AMRO believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, or focusing on information presented in tabular format
without considering all analyses and factors, could create an incomplete view of
the processes underlying the analyses set forth in its opinion.

     In its analyses, ABN AMRO made numerous assumptions with respect to
industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of Inverness
or Johnson & Johnson. No company, transaction or business used in those analyses
as a comparison is identical to Inverness or Johnson & Johnson or their
businesses or the merger, nor is an evaluation of the results entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions being analyzed.

     The estimates contained in the analyses performed by ABN AMRO and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than suggested by these analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which a business might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future.

     The following is a summary of each of the material financial analyses
prepared and presented by ABN AMRO in connection with the rendering of its
opinion. The financial analyses summarized below include information presented
in tabular format. In order to fully understand the financial analyses of ABN
AMRO, the tables must be read together with the text of each summary. The tables
alone do not constitute a complete description of the financial analyses.
Considering the data set forth below without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses of the financial advisor.
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        Selected Companies Analysis.  ABN AMRO reviewed and compared selected
financial information and public market multiples of the following five selected
high-growth companies in the medical technology and diagnostics industry:

     - Advanced Neuromodulation Systems, Inc.

     - Integra Lifesciences Holdings Corp.

     - i-STAT Corporation

     - MiniMed Inc.

     - ResMed Inc.

     ABN AMRO chose the selected companies because they were publicly-traded
companies that, for purposes of the analysis, ABN AMRO considered reasonably
similar to Inverness' diabetes business after giving effect to the restructuring
and split-off in that these companies operate in the medical technology and
diagnostics industry. The selected companies may significantly differ from
Inverness based on, among other things, the size of the companies, the
geographic coverage of the companies' operations, and the particular specialties
within the medical technology and diagnostics industry that the companies focus
on.

     ABN AMRO reviewed, among other things, enterprise values, calculated as the
market value of equity securities plus indebtedness and minority interests less
cash and marketable securities, as of May 17, 2001, as a multiple of actual
trailing 12 months and estimated calendar 2001 revenues, earnings before
interest, taxes, depreciation and amortization, commonly referred to as EBITDA,
and earnings before interest and taxes, commonly referred to as EBIT. ABN AMRO
then compared the implied multiples derived for the selected companies with the
multiples implied in the merger for Inverness, excluding the Innovations
businesses, based on the estimated transaction value of the merger. For purposes
of determining the estimated transaction value of the merger, ABN AMRO assumed
merger consideration of $35.00 per share of Inverness common stock and
approximately $24.6 million net in Inverness indebtedness to be assumed by
Johnson & Johnson. Actual trailing 12 months data for Inverness, excluding the
Innovations businesses, were based on pro forma financial statements provided by
Inverness management. Estimated financial data for the selected companies were
based on publicly available research analysts' estimates. Estimated financial
data for Inverness, excluding the Innovations businesses, were based on
estimates provided by Inverness management. This analysis indicated the
following implied multiples for the selected companies, as compared to the
multiples implied in the merger for Inverness, excluding the Innovations
businesses, based on the estimated transaction value of the merger:



                                              IMPLIED RANGE
                                              OF MULTIPLES
                                               OF SELECTED     IMPLIED MULTIPLES OF INVERNESS,
                                                COMPANIES         EXCLUDING THE INNOVATIONS
                                              -------------         BUSINESSES, BASED ON
ENTERPRISE VALUE AS A MULTIPLE OF:            LOW     HIGH       TRANSACTION VALUE OF MERGER
----------------------------------            ----    -----    -------------------------------
                                                      
Actual trailing 12 months revenues..........  4.18x   13.03x                11.31x
Estimated calendar 2001 revenues............  3.93    11.87                  6.75
Actual trailing 12 months EBITDA............  29.5     50.5                  78.9
Estimated calendar 2001 EBITDA..............  31.0     42.2                  64.9
Actual trailing 12 months EBIT..............  45.6     66.5                 102.4
Estimated calendar 2001 EBIT................  41.0     88.6                  88.0


                                        27
   38

        Selected Transactions Analysis.  ABN AMRO reviewed and compared publicly
available information relating to the following 18 selected transactions in the
medical technology and diagnostics industry announced since 1998:



                     ACQUIROR                                        TARGET
                     --------                                        ------
                                                    
- Boston Scientific                                    Interventional Technologies, Inc.
- Johnson & Johnson                                    Heartport Inc.
- Royal Philips Electronics NV                         ADAC Laboratories
- Tyco International                                   InnerDyne Inc.
- Thermo Cardiosystems Inc.                            Thoratec Corp.
- Siemens Medical                                      Acuson Corp.
- Jomed NV                                             EndoSonics Corp.
- Alcon Holdings (Nestle SA)                           Summit Autonomous Inc.
- Biomet                                               Implant Innovations Inc.
- Medtronic, Inc.                                      Xomed Surgical Products
- GE Medical Systems                                   OEC Medical Systems
- Abbot Laboratories                                   Perclose Inc.
- Kimberly-Clark                                       Ballard Medical Products
- Maxxim Medical                                       Circon Corp.
- GE Medical Systems                                   Marquette Medical Systems
- Royal Philips Electronics NV                         ATL Ultrasound Inc.
- Johnson & Johnson                                    DePuy Inc.
- Medtronic, Inc.                                      Physio-Control International, Inc.


     ABN AMRO chose the selected transactions because they were business
combination transactions that, for purposes of the analysis, ABN AMRO considered
reasonably similar to the merger in that these transactions involved companies
in the medical technology and diagnostics industry. The selected transactions
may significantly differ from the merger based on, among other things, the size
of the transactions, the form of consideration paid in the transactions, the
structure of the transactions, and the date the transactions were consummated.

     ABN AMRO reviewed, among other things, implied enterprise values in the
transactions as a multiple of actual trailing 12 months revenues, EBITDA, and
EBIT. ABN AMRO then compared the implied multiples derived for the selected
transactions with the multiples implied in the merger for Inverness, excluding
the Innovations businesses, based on the estimated transaction value of the
merger. All multiples for the selected transactions were based on publicly
available information at the time of the announcement of the particular selected
transaction. Actual trailing 12 months data for Inverness, excluding the
Innovations businesses, were based on pro forma financial statements provided by
Inverness management. This analysis indicated the following implied multiples
for the selected transactions, as compared to the multiples implied in the
merger for Inverness, excluding the Innovations businesses, based on the
estimated transaction value of the merger:



                                              IMPLIED RANGE
                                              OF MULTIPLES
                                               OF SELECTED     IMPLIED MULTIPLES OF INVERNESS,
                                              TRANSACTIONS        EXCLUDING THE INNOVATIONS
                                              -------------         BUSINESSES, BASED ON
ENTERPRISE VALUE AS A MULTIPLE OF:            LOW     HIGH       TRANSACTION VALUE OF MERGER
----------------------------------            ----    -----    -------------------------------
                                                      
Actual trailing 12 months revenues..........  1.28x   11.95x                11.31x
Actual trailing 12 months EBITDA............  10.6     68.6                  78.9
Actual trailing 12 months EBIT..............  15.2     84.2                 102.4


          Discounted Cash Flow Analysis.  ABN AMRO performed a discounted cash
flow analysis, using estimates provided by Inverness management, with respect to
Inverness' businesses and operations other than the Innovations businesses in
order to derive an implied equity value per share reference range for

                                        28
   39

those businesses and operations as if such businesses and operations were to
continue on a stand-alone basis. This analysis was based on:

     - the present value of the estimated unlevered, after-tax free cash flows
       that those businesses could generate over the five-year period 2001
       through 2005 and

     - the terminal value of those businesses and operations based on a range of
       multiples applied to estimated 2005 EBITDA.

     For purposes of this analysis, ABN AMRO used discount rates of 12.0% to
14.0%, which were based on ABN AMRO's judgement of the estimated weighted
average cost of capital, including debt, of Inverness and terminal 2005 EBITDA
multiples of 20.0x to 30.0x, which were derived by reference to the implied
public market trading multiples of enterprise value to EBITDA of selected
companies in the medical technology and diagnostics industry. This analysis
indicated an implied equity value per share reference range for Inverness'
businesses and operations other than the Innovations businesses of approximately
$22.62 to $38.48, as compared to the proposed offer price of $35.00 per share.

        Other Factors.  In rendering its opinion, ABN AMRO considered other
factors for informational purposes, including:

     - a business, financial and shareholder profile of Johnson & Johnson

     - selected published analysts' reports on Johnson & Johnson, including
       calendar years 2001 and 2002 EPS estimates of those analysts, the
       recommendations of those analysts and the implied P/E estimates for
       calendar years 2001 and 2002

     - Johnson & Johnson's Annual Report on Form 10-K for each of the fiscal
       years ended January 3, 1999, January 2, 2000 and December 31, 2000,
       Johnson & Johnson's Quarterly Report on Form 10-Q for each of the
       quarters ended April 2, 2000 and April 1, 2001 and other business
       information relating to Johnson & Johnson

     - the recent trading history of shares of Johnson & Johnson common stock

     - implied multiples for selected transactions comparable to the Innovations
       businesses

     - implied trading multiples for selected women's health, nutritional
       supplements and clinical diagnostics businesses and

     - historical and projected financial information for the Innovations
       businesses prepared by the management of Inverness.

     OPINION OF UBS WARBURG LLC.  On May 21, 2001, at a meeting of the Inverness
board of directors held to evaluate the terms of the proposed restructuring and
split-off and merger, UBS Warburg delivered to the Inverness board an oral
opinion, which opinion was confirmed by delivery of a written opinion dated May
23, 2001, the date of execution of the split-off and merger agreement, to the
effect that, as of the date of the opinion and based on and subject to various
assumptions, matters considered and limitations described in the opinion, the
aggregate consideration provided for in the split-off and merger was fair, from
a financial point of view, to the holders of Inverness common stock.

     The full text of UBS Warburg's opinion describes the assumptions made,
procedures followed, matters considered and limitations on the review undertaken
by UBS Warburg. This opinion is attached as Annex 8 and is incorporated into
this proxy statement/prospectus by reference. UBS WARBURG'S OPINION IS DIRECTED
ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE AGGREGATE
CONSIDERATION PROVIDED FOR IN THE SPLIT-OFF AND MERGER AND DOES NOT ADDRESS ANY
OTHER ASPECT OF THE RESTRUCTURING, SPLIT-OFF AND MERGER OR ANY RELATED
TRANSACTION. THE OPINION DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF
INVERNESS TO EFFECT THE RESTRUCTURING, SPLIT-OFF AND MERGER OR CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW TO VOTE WITH RESPECT TO ANY MATTERS
RELATING TO THE PROPOSED SPLIT-OFF AND MERGER. HOLDERS OF INVERNESS COMMON STOCK
ARE ENCOURAGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY. The summary of

                                        29
   40

UBS Warburg's opinion described below is qualified in its entirety by reference
to the full text of its opinion.

     In arriving at its opinion, UBS Warburg:

     - reviewed current and historical market prices and trading volumes of
       Inverness common stock and Johnson & Johnson common stock

     - reviewed publicly available business and historical financial information
       relating to Inverness and Johnson & Johnson

     - reviewed internal financial information and other data relating to the
       businesses and financial prospects of Inverness and Innovations,
       including estimates and financial forecasts prepared by the management of
       Inverness, that were provided to or discussed with UBS Warburg by
       Inverness and were not publicly available

     - reviewed publicly available financial forecasts relating to Johnson &
       Johnson

     - conducted discussions with members of the senior management of Inverness

     - reviewed publicly available financial and stock market data with respect
       to other companies in lines of businesses that UBS Warburg believed to be
       generally comparable to those of Inverness, Innovations and Johnson &
       Johnson

     - compared the financial terms of the merger with the publicly available
       financial terms of other transactions which UBS Warburg believed to be
       generally relevant

     - reviewed the split-off and merger agreement and forms of the
       restructuring agreement and other related documents attached as annexes
       to the merger agreement and

     - conducted other financial studies, analyses and investigations, and
       considered other information, as UBS Warburg deemed necessary or
       appropriate.

     In connection with its review, with the consent of Inverness, UBS Warburg
did not assume any responsibility for independent verification of any of the
information that UBS Warburg was provided or reviewed for the purpose of its
opinion and, with the consent of Inverness, UBS Warburg relied on that
information being complete and accurate in all material respects. In addition,
at the direction of Inverness, UBS Warburg did not make any independent
evaluation or appraisal of any of the assets or liabilities, contingent or
otherwise, of Inverness (including those to be transferred to Innovations) or
Johnson & Johnson, and was not furnished with any evaluation or appraisal of any
such assets or liabilities.

     With respect to the financial forecasts and estimates that it reviewed
relating to Inverness and Innovations, UBS Warburg assumed, at the direction of
Inverness, that they were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of Inverness as to
the future financial performance of Inverness and Innovations. With respect to
publicly available forecasts that it reviewed relating to Johnson & Johnson, UBS
Warburg assumed, with the consent of Inverness, that they represented reasonable
estimates and judgments as to the future financial performance of Johnson &
Johnson. In connection with its engagement, UBS Warburg was not requested to,
and it did not, solicit third party indications of interest in the acquisition
of all or a part of Inverness. UBS Warburg's opinion was necessarily based on
economic, monetary, market and other conditions existing, and information
available to UBS Warburg, on the date of its opinion.

     At the direction of Inverness, UBS Warburg was not requested to, and it did
not, participate in the negotiation or structuring of the restructuring or
split-off and merger. At the direction of Inverness, UBS Warburg was not asked
to, and it did not, offer any opinion as to the terms of, or the obligations
under, the split-off and merger agreement or related documents or the form of
the restructuring or split-off and merger. UBS Warburg expressed no opinion as
to the value of Johnson & Johnson common stock and Innovations common stock when
issued in the split-off and merger or the prices at which Johnson & Johnson
common stock and Innovations common stock will trade or otherwise be
transferable at any time.

                                        30
   41

     In rendering its opinion, UBS Warburg assumed, at the direction of
Inverness, that each of Inverness, Johnson & Johnson, Sunrise Acquisition Corp.
and Innovations would comply with all material covenants and agreements
contained in, and other material terms of, the split-off and merger agreement
and related documents and that the restructuring, split-off and merger would be
consummated in accordance with their terms without waiver, modification or
amendment of any material term, condition or agreement. UBS Warburg also relied,
in rendering its opinion, on the representations and warranties of Inverness and
Johnson & Johnson contained in the split-off and merger agreement and assumed,
at the direction of Inverness, that the restructuring, split-off and merger
would be consummated in compliance with all applicable laws, including, with
respect to the restructuring and split-off, laws relating to insolvency and
fraudulent conveyance. Representatives of Inverness advised UBS Warburg, and UBS
Warburg therefore assumed, that the final terms of the restructuring agreement
and related documents in the forms attached as annexes to the split-off and
merger agreement would not vary materially from the forms reviewed by it. Except
as described above, Inverness imposed no other instructions or limitations on
UBS Warburg with respect to the investigations made or the procedures followed
by UBS Warburg in rendering its opinion.

     In connection with rendering its opinion to the Inverness board of
directors, UBS Warburg performed a variety of financial and comparative analyses
which are summarized below. The following summary is not a complete description
of all of the analyses performed and factors considered by UBS Warburg in
connection with its opinion. The preparation of a fairness opinion is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. With respect to the analysis of
selected publicly traded companies and the analysis of selected transactions
summarized below, no company or transaction used as a comparison is either
identical or directly comparable to Inverness, Innovations, Johnson & Johnson or
the restructuring, split-off and merger. These analyses necessarily involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the public trading or
acquisition values of the companies concerned.

     UBS Warburg believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its analyses and factors or
focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying UBS Warburg's
analyses and opinion. None of the analyses performed by UBS Warburg was assigned
greater significance by UBS Warburg than any other. UBS Warburg arrived at its
ultimate opinion based on the results of all analyses undertaken by it and
assessed as a whole. UBS Warburg did not draw, in isolation, conclusions from or
with regard to any one factor or method of analysis.

     The estimates of the future performance of Inverness, Innovations and
Johnson & Johnson provided by the management of Inverness or derived from public
sources in or underlying UBS Warburg's analyses are not necessarily indicative
of future results or values, which may be significantly more or less favorable
than those estimates. In performing its analyses, UBS Warburg considered
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Inverness and Johnson &
Johnson. Estimates of the financial value of companies do not necessarily
purport to be appraisals or reflect the prices at which companies actually may
be sold.

     The consideration provided for in the merger was determined through
negotiation between Inverness and Johnson & Johnson and the decision to enter
into the restructuring, split-off and merger was solely that of the Inverness
board of directors. UBS Warburg's opinion and financial analyses were only one
of many factors considered by the Inverness board of directors in its evaluation
of the restructuring, split-off and merger and should not be viewed as
determinative of the views of the Inverness board of directors or management
with respect to the restructuring or split-off and merger or the consideration
provided for in the split-off and merger.

     The following is a brief summary of the material financial analyses
performed by UBS Warburg and reviewed with the Inverness board of directors in
connection with its opinion relating to the proposed restructuring, split-off
and merger. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION
PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND UBS WARBURG'S
FINANCIAL ANALYSES, THE TABLES

                                        31
   42

MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT
CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE
DATA BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL
ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES,
COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF UBS WARBURG'S FINANCIAL
ANALYSES.

      Inverness: Analysis of Selected Public Companies.  UBS Warburg compared
selected financial information and operating statistics for Inverness, excluding
the Innovations businesses, with corresponding financial information and
operating statistics of the following nine selected publicly held companies:


                                              
    - MiniMed Inc.                               - IMPATH, Inc.
    - Cytyc Corporation                          - Wilson Greatbatch Technologies, Inc.
    - Disetronic Group                           - i-STAT Corporation
    - IDEXX Laboratories, Inc.                   - Regeneration Technologies, Inc.
    - Biosite Diagnostics Incorporated


     UBS Warburg reviewed enterprise values, calculated as fully diluted equity
value, plus total debt and minority interests, less cash, as multiples of latest
12 months sales, earnings before interest, taxes, depreciation and amortization,
commonly known as EBITDA, and earnings before interest and taxes, commonly known
as EBIT. UBS Warburg also reviewed equity values as a multiple of latest 12
months and one-year and two-year forward net income. UBS Warburg then compared
the multiples derived from the selected companies with corresponding multiples
for Inverness, excluding the Innovations businesses, based on the merger
consideration. Multiples for the selected companies were based on closing stock
prices on May 18, 2001. Estimated financial data for the selected companies were
based on publicly available research analysts' consensus estimates and estimated
financial data for Inverness were based on internal estimates of the management
of Inverness. This analysis indicated the following implied low, mean, median
and high enterprise value and equity value multiples for the selected companies,
as compared to the multiples for Inverness, excluding the Innovations
businesses, implied by the merger consideration:



                                          IMPLIED MULTIPLES OF           IMPLIED MULTIPLES OF
                                           SELECTED COMPANIES            INVERNESS, EXCLUDING
                                      ----------------------------   INNOVATIONS BUSINESSES, BASED
ENTERPRISE VALUE AS MULTIPLES OF:     LOW    MEAN   MEDIAN   HIGH       ON MERGER CONSIDERATION
---------------------------------     ----   ----   ------   -----   -----------------------------
                                                      
Latest 12 Months Sales..............   1.4x  7.8x     6.2x    16.9x               11.2x
Latest 12 Months EBITDA.............  13.3   35.6    24.9     64.9                78.4
Latest 12 Months EBIT...............  18.3   48.1    36.6     99.6               101.7




                                          IMPLIED MULTIPLES OF           IMPLIED MULTIPLES OF
                                           SELECTED COMPANIES            INVERNESS, EXCLUDING
                                      ----------------------------   INNOVATIONS BUSINESSES, BASED
EQUITY VALUE AS MULTIPLES OF:         LOW    MEAN   MEDIAN   HIGH       ON MERGER CONSIDERATION
-----------------------------         ----   ----   ------   -----   -----------------------------
                                                      
Latest 12 Months Net Income.........  28.5x  73.8x   58.4x   141.7x              115.3x
One-Year Forward Net Income.........  23.7   58.7    57.1     95.2                92.2
Two-Year Forward Net Income.........  19.5   36.6    34.3     63.7                40.3


                                        32
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      Inverness: Analysis of Selected Precedent Transactions.  UBS Warburg
reviewed transaction and equity values in the following 15 selected
transactions:



               ACQUIROR                                         TARGET
               --------                                         ------
                                    
    - Medtronic, Inc.                  Xomed Surgical Products, Inc.
    - Abbott Laboratories              Perclose, Inc.
    - Medtronic, Inc.                  Arterial Vascular Engineering, Inc.
    - Medtronic, Inc.                  Sofamor Danek Group, Inc.
    - Stryker Corporation              Howmedica, a division of Pfizer Inc.
    - Johnson & Johnson                DePuy, Inc.
    - Tyco International Ltd.          U. S. Surgical Corporation
    - Tyco International Ltd.          Sherwood-Davis & Geck, a division of American Home
                                       Products Corporation
    - Johnson & Johnson                Biopsys Medical, Inc.
    - St. Jude Medical, Inc.           Ventritex, Inc.
    - Boston Scientific Corporation    Target Therapeutics, Inc.
    - Abbot Laboratories               MediSense, Inc.
    - Medtronic, Inc.                  InStent Inc.
    - Boston Scientific Corporation    Heart Technology, Inc.
    - Boston Scientific Corporation    SCIMED Life Systems, Inc.


     UBS Warburg reviewed transaction values, calculated as fully diluted equity
value, plus total debt and minority interests, less cash, as multiples of latest
12 months sales, EBITDA and EBIT. UBS Warburg also reviewed equity values as a
multiple of one-year forward earnings per share, commonly known as EPS. UBS
Warburg then compared the implied multiples derived from the selected
transactions with corresponding multiples for Inverness, excluding the
Innovations businesses, based on the merger consideration. All multiples were
based on publicly available information at the time of announcement of the
relevant transaction. This analysis indicated the following implied mean and
median transaction value and equity value multiples for the selected
transactions, as compared to the multiples for Inverness, excluding the
Innovations businesses, implied by the merger consideration:



                                             IMPLIED MULTIPLES
                                                OF SELECTED             IMPLIED MULTIPLES OF
                                                TRANSACTIONS            INVERNESS, EXCLUDING
                                             ------------------    INNOVATIONS BUSINESSES, BASED
ENTERPRISE VALUE AS MULTIPLES OF:             MEAN      MEDIAN        ON MERGER CONSIDERATION
---------------------------------            ------    --------    ------------------------------
                                                          
Latest 12 months Sales.....................   11.3x       6.0x                  12.2x
Latest 12 months EBITDA....................   25.6       17.4                   78.4
Latest 12 months EBIT......................   33.4       22.7                  101.7




                                             IMPLIED MULTIPLES
                                                OF SELECTED             IMPLIED MULTIPLES OF
                                                TRANSACTIONS            INVERNESS, EXCLUDING
                                             ------------------    INNOVATIONS BUSINESSES, BASED
EQUITY VALUE AS MULTIPLES OF:                 MEAN      MEDIAN        ON MERGER CONSIDERATION
-----------------------------                ------    --------    ------------------------------
                                                          
One-year Forward Earnings Per Share........   40.4x      37.2x                  92.2x


      Inverness: Discounted Cash Flow Analysis.  UBS Warburg performed an
analysis of the present value of the estimated unlevered, after-tax free cash
flows that Inverness, excluding the Innovations businesses, could generate over
the last six months of 2001 and calendar years 2002 through 2005 based on
internal estimates of the management of Inverness. UBS Warburg applied terminal
value multiples ranging from 16.0x to 20.0x to the estimated calendar year 2005
EBITDA of Inverness, excluding the New Inverness businesses, using discount
rates ranging from 12% to 16%. This analysis indicated the following

                                        33
   44

implied per share equity reference range for Inverness, excluding the
Innovations businesses, as compared to the per share equity value for Inverness
implied by the merger consideration:



                                     IMPLIED INVERNESS PER SHARE
   IMPLIED INVERNESS PER         EQUITY VALUE, EXCLUDING INNOVATIONS
SHARE EQUITY REFERENCE RANGE  BUSINESSES, BASED ON MERGER CONSIDERATION
----------------------------  -----------------------------------------
                           
      $22.31 - $31.45                          $35.00


      Innovations: Discounted Cash Flow Analysis.  UBS Warburg performed an
analysis of the present value of the estimated unlevered, after-tax free cash
flows that Innovations could generate over the last six months of 2001 and
calendar years calendar years 2002 through 2005 based on internal estimates of
the management of Inverness. UBS Warburg applied terminal value multiples
ranging from 7.0x to 11.0x to the estimated calendar year 2005 EBITDA of
Innovations, using discount rates ranging from 10% to 14%. This analysis
indicated an implied per share equity reference range for Innovations of
approximately $2.68 to $3.56 per share.

      Innovations: Analysis of Selected Public Companies.  UBS Warburg compared
selected financial information and operating statistics for Innovations with
corresponding financial information and operating statistics of the following
six selected publicly held companies:


                                
    - Arrow International, Inc.    - PolyMedica Corp.
    - Datascope Corp.              - Vital Signs, Inc.
    - ICU Medical, Inc.            - Young Innovations, Inc.


     UBS Warburg reviewed enterprise values as multiples of latest 12 months
sales, EBITDA and EBIT. UBS Warburg also reviewed equity values as a multiple of
latest 12 months and one-year and two-year forward net income. UBS Warburg then
compared the multiples derived from the selected companies with corresponding
multiples for Innovations based on an illustrative range of trading prices for
Innovations common stock of $2.00 to $5.00 per share. Multiples for the selected
companies were based on closing stock prices on May 18, 2001. Estimated
financial data for the selected companies were based on publicly available
research analysts' consensus estimates and estimated financial data for
Innovations were based on internal estimates of the management of Inverness.
This analysis indicated the following implied low, mean, median and high
enterprise value and equity value multiples for the selected companies, as
compared to the multiples implied for Innovations based on an illustrative range
of trading prices for Innovations common stock of $2.00 to $5.00 per share:



                                       IMPLIED MULTIPLES OF           IMPLIED MULTIPLE RANGES OF
                                        SELECTED COMPANIES        INNOVATIONS BASED ON ILLUSTRATIVE
                                    ---------------------------      RANGE OF INNOVATIONS TRADING
ENTERPRISE VALUE AS MULTIPLES OF:   LOW    MEAN   MEDIAN   HIGH   PRICES OF $2.00 TO $5.00 PER SHARE
---------------------------------   ----   ----   ------   ----   ----------------------------------
                                                   
Latest 12 months Sales............   1.9x  3.0x     2.7x    5.8x             0.6x -  2.6x
Latest 12 months EBITDA...........   6.2   10.5    10.3    15.4              3.7  - 15.9
Latest 12 months EBIT.............   9.4   13.4    13.0    19.7              4.8  - 20.7




                                       IMPLIED MULTIPLES OF           IMPLIED MULTIPLE RANGES OF
                                        SELECTED COMPANIES        INNOVATIONS BASED ON ILLUSTRATIVE
                                    ---------------------------      RANGE OF INNOVATIONS TRADING
ENTERPRISE VALUE AS MULTIPLES OF:   LOW    MEAN   MEDIAN   HIGH   PRICES OF $2.00 TO $5.00 PER SHARE
---------------------------------   ----   ----   ------   ----   ----------------------------------
                                                   
Latest 12 months Net Income.......  15.5x  19.7x   19.1x   28.1x            20.9x - 52.3x
One-Year Forward Net Income.......  12.3   16.9    16.3    23.6              10.0  - 25.0
Two-Year Forward Net Income.......   9.6   14.6    14.6    19.8              10.1  - 25.2


      Johnson & Johnson: Analysis of Selected Public Companies.  UBS Warburg
compared selected financial information and operating statistics for Johnson &
Johnson with corresponding financial information and operating statistics of the
following seven selected publicly held companies:

    - Abbott Laboratories

     - Baxter International Inc.

                                        34
   45

     - The Gillette Company

     - Guidant Corporation

     - Medtronic, Inc.

     - Pfizer Inc.

     - The Procter & Gamble Company

     UBS Warburg reviewed enterprise values as multiples of latest 12 months
sales, EBITDA and EBIT. UBS Warburg also reviewed equity value as multiples of
latest 12 months and one-year and two-year forward net income. UBS Warburg then
compared the multiples derived from the selected companies with corresponding
multiples implied for Johnson & Johnson based on the closing price of Johnson &
Johnson common stock on May 18, 2001. Multiples for the selected companies also
were based on closing stock prices on May 18, 2001. Estimated financial data for
the selected companies and Johnson & Johnson were based on publicly available
research analysts' estimates. This analysis indicated the following implied low,
mean, median and high enterprise value and equity value multiples for the
selected companies, as compared to the multiples implied for Johnson & Johnson
based on the closing price of Johnson & Johnson common stock on May 18, 2001:



                                      IMPLIED MULTIPLES OF              IMPLIED MULTIPLES OF
                                       SELECTED COMPANIES            JOHNSON & JOHNSON BASED ON
                                   ---------------------------   CLOSING PRICE OF JOHNSON & JOHNSON
ENTERPRISE VALUE AS MULTIPLES OF:  LOW    MEAN   MEDIAN   HIGH      COMMON STOCK ON MAY 18, 2001
---------------------------------  ----   ----   ------   ----   ----------------------------------
                                                  
Latest 12 months Sales........      2.6x  5.9x     4.8x   10.0x                  4.9x
Latest 12 months EBITDA.......     13.0   19.2    18.6    29.2                  18.0
Latest 12 months EBIT.........     16.3   23.3    24.6    32.4                  22.2




                                      IMPLIED MULTIPLES OF              IMPLIED MULTIPLES OF
                                       SELECTED COMPANIES            JOHNSON & JOHNSON BASED ON
                                   ---------------------------   CLOSING PRICE OF JOHNSON & JOHNSON
ENTERPRISE VALUE AS MULTIPLES OF:  LOW    MEAN   MEDIAN   HIGH      COMMON STOCK ON MAY 18, 2001
---------------------------------  ----   ----   ------   ----   ----------------------------------
                                                  
Latest 12 months Net Income....    23.4x  31.4x   29.8x   44.0x                 29.5x
One-Year Forward Net Income....    19.3   27.5    27.5    37.5                  26.3
Two-Year Forward Net Income....    17.7   23.5    23.6    31.2                  23.2


      Johnson & Johnson: Accretion/Dilution Analysis.  UBS Warburg analyzed the
potential pro forma financial effect of the merger on Johnson & Johnson's
estimated EPS for calendar years 2001 through 2004, without taking into account
potential cost savings and other synergies from the merger. Estimated data for
this analysis were based on, in the case of Johnson & Johnson, publicly
available research analysts' estimates and Johnson & Johnson's public guidance
and, in the case of Inverness, internal estimates of the management of
Inverness. Based on the merger consideration and under accounting rules in
effect until June 30, 2001, and under newly enacted accounting rules in effect
since June 30, 2001, this analysis suggested that the merger could be dilutive
to, or represent a decrease in, Johnson & Johnson's estimated EPS in calendar
years 2001 through 2004. The actual results achieved by the combined company may
vary from projected results and the variations may be material.

     MISCELLANEOUS.  Inverness has agreed to pay ABN AMRO and UBS Warburg for
their opinion services fees of $1,000,000 in the aggregate. In addition,
Inverness has agreed to reimburse ABN AMRO and UBS Warburg for their reasonable
expenses, including reasonable fees and disbursements of counsel, and to
indemnify ABN AMRO and UBS Warburg and related parties against liabilities,
including liabilities under federal securities laws, relating to, or arising out
of, their engagement.

     Inverness selected ABN AMRO and UBS Warburg because ABN AMRO and UBS
Warburg are internationally recognized investment banking firms with substantial
experience in similar transactions and are familiar with Inverness and its
business. ABN AMRO and UBS Warburg are continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
leveraged

                                        35
   46

buyouts, negotiated underwritings, competitive bids, secondary distributions of
listed and unlisted securities and private placements.

     UBS Warburg and its affiliates in the past have provided services to
Inverness and Johnson & Johnson unrelated to the proposed restructuring and
merger, for which services UBS Warburg and its affiliates have received
compensation. In the past, ABN AMRO and its affiliates and predecessors have
provided financial services for Inverness and have received customary fees for
the rendering of those services.

     In the ordinary course of business, ABN AMRO and UBS Warburg, their
successors and affiliates may actively trade Inverness common stock, Johnson &
Johnson common stock and other securities of Inverness and Johnson & Johnson for
their own accounts and the accounts of their customers and, accordingly, may at
any time hold a long or short position in those securities.

INTERESTS OF INVERNESS DIRECTORS AND EXECUTIVE OFFICERS IN THE SPLIT-OFF AND
MERGER AND RELATED TRANSACTIONS

     In considering the recommendation of the Inverness board of directors that
the holders of Inverness common stock vote in favor of the adoption of the
split-off and merger agreement, Inverness stockholders should be aware that the
members of the Inverness board of directors and Inverness' executive officers
have personal interests in the split-off and merger and the related transactions
that are or may be different from, or in addition to, the interests of other
Inverness stockholders. These interests are summarized below. In approving the
split-off and merger agreement and the transactions contemplated by the
split-off and merger agreement, the Inverness board of directors was aware of,
and considered, the interests of the Inverness directors and executive officers,
other than certain officers' interests as executive officers of Innovations
which arose subsequent to the execution of the split-off and merger agreement.

     ACCELERATION OF STOCK OPTIONS.  Under the terms of the restructuring
agreement, immediately prior to the completion of the split-off and merger and
as part of the restructuring, each outstanding option to purchase shares of
Inverness common stock, including those held by executive officers and directors
of Inverness, will be converted into (1) a new option to purchase shares of
Inverness common stock, referred to in this section as a replacement Inverness
option, and (2) an option to purchase shares of Innovations common stock. For a
more complete description of the terms of these new options, including with
respect to the number of shares subject to such options and the related exercise
prices of such options, see "--Effect on Options and Warrants Relating to
Inverness Common Stock." Whether or not the original Inverness options are
vested at the time of the restructuring, all replacement Inverness options and
Innovations options will be fully vested and immediately exercisable at and
following the completion of the split-off and merger. In addition, all
replacement Inverness options which will be held by persons who are not going to
be employees or directors of Inverness or its subsidiaries immediately following
the split-off and merger and all Innovations options which will be held by
persons who are not going to be employees or directors of Innovations or its
subsidiaries immediately following the split-off and merger will remain
exercisable for the remainder of the originally stated term of the original
Inverness options irrespective of employment by or service to Johnson & Johnson,
Inverness, Innovations or any subsidiaries of those companies. Based upon
options outstanding as of --, 2001, options held by Inverness' executive
officers and directors relating to -- shares of Inverness common stock will be
subject to the conversion and accelerated vesting provisions described above.

                                        36
   47

     The following table sets forth, as of --, 2001, the number of shares
subject to unvested options held by Inverness' directors and the average
exercise prices of those options:



                                                         NUMBER OF SHARES          AVERAGE EXERCISE PRICE
NAME OF DIRECTOR                                    SUBJECT TO UNVESTED OPTIONS        PER SHARE ($)
----------------                                    ---------------------------    ----------------------
                                                                             
Ernest A. Carabillo, Jr...........................                --                         --
Carol K. Goldberg.................................                --                         --
John F. Levy......................................                --                         --
Peter Townsend....................................                --                         --
Willard L. Umphrey................................                --                         --
Ron Zwanziger.....................................                --                         --


     The exercise price of each outstanding option issued under the Inverness
stock plans is equal to the fair market value of Inverness common stock on the
date of the option grant.

     INDEMNIFICATION AND INSURANCE.  The split-off and merger agreement provides
that all rights to indemnification, advancement of expenses and exculpation from
liabilities for acts or omissions occurring at or prior to the completion of the
split-off and merger existing in favor of current or former directors or
officers of Inverness under the Inverness certificate of incorporation, bylaws
or indemnification agreements, if any, will be assumed by the surviving
corporation in the merger and will continue in full force and effect in
accordance with their terms for not less than six years following completion of
the split-off and merger. The split-off and merger agreement also provides that
Johnson & Johnson will cause the surviving corporation to reimburse each current
director of Inverness for such person's reasonable expenses, including legal
fees and expenses, incurred in connection with the investigation and defense of
any claim arising out of or related to the transactions contemplated by the
split-off and merger agreement or the other transaction agreements to the extent
(1) such fees and expenses are not paid pursuant to Inverness' insurance
coverage or statutory indemnification obligations within 30 days after the
receipt by the surviving corporation of an invoice for such fees and expenses
and (2) it is permitted by Delaware law for a party to reimburse another party
for such fees and expenses.

     The split-off and merger agreement also provides that for six years after
the completion of the split-off and merger, Johnson & Johnson will maintain
directors' and officers' liability insurance for acts or omissions occurring at
or prior to the time when the split-off and merger are completed, covering each
person who was, as of the date of the split-off and merger agreement, covered by
Inverness' directors' and officers' liability insurance, on terms no less
favorable than those in effect as of the date of the split-off and merger
agreement, and the limit of coverage will be increased to $20 million. Johnson &
Johnson's obligation to provide this insurance coverage is subject to a cap of
$250,000 in annual premiums. If Johnson & Johnson cannot maintain the existing
or equivalent insurance coverage without exceeding $250,000, Johnson & Johnson
is required to maintain only that amount of insurance coverage that can be
obtained by paying an annual premium equal to $250,000. In lieu of requiring
Johnson & Johnson to maintain such insurance, Inverness has the right to
purchase an extended reporting period endorsement under Inverness' existing
directors' and officers' liability insurance, and/or under one or more other
policies which provide such coverage, in order to provide such directors and
executive officers with $20 million of coverage for six years after the
completion of the split-off and merger, provided that the aggregate premiums for
such coverage may not exceed $500,000.

     CONSULTING AND NONCOMPETITION AGREEMENTS.  Each of Ron Zwanziger, Jerry
McAleer and David Scott has entered into a consulting and noncompetition
agreement with Johnson & Johnson and Inverness.

     The consulting and noncompetition agreements provide that upon the
completion of the split-off and merger, Ron Zwanziger, Jerry McAleer and David
Scott will end their employment with Inverness and become consultants to
Inverness, Johnson & Johnson and their subsidiaries.

     The term of Ron Zwanziger's consulting relationship will be for a period of
36 months commencing on the completion of the split-off and merger. He has
agreed to provide part-time consulting services during that time (up to three
days per calendar quarter). The term of each of Jerry McAleer's and David

                                        37
   48

Scott's consulting relationship will be for a period of 42 months commencing on
the completion of the split-off and merger. Jerry McAleer and David Scott are
required to serve as consultants on a full-time basis for the first six months
of their consulting relationships, except that each may be employed by
Innovations during that period if Innovations temporarily assigns him to Johnson
& Johnson or Inverness on a full time basis for the remainder of those six
months. After that initial six month period, Jerry McAleer and David Scott will
only provide consulting services on a part-time basis (up to three days per
calendar quarter). Each consultant has the right to terminate his consulting
relationship with 90 days advance written notice, except that in the case of
Jerry McAleer and David Scott, any such termination will not be effective until
after the initial six months period. Inverness has the right to terminate each
of the consulting relationships for cause, and Johnson & Johnson and Inverness
may terminate the consulting relationships at any time other than for cause with
90 days advance written notice.

     Ron Zwanziger's role as a consultant will be to provide general consulting
services related to new products and business opportunities in the diabetes
field. Jerry McAleer's role as a consultant will be to develop specific diabetes
product development plans, profiles and prototypes and work with research and
development vendors and teams. David Scott's role as a consultant will be to
develop and implement manufacturing processes for diabetes products, formalize
supplier and contractor relationships and provide assistance with respect to
employee matters.

     During the term of his consulting relationship, Ron Zwanziger will be paid
a fee for each day actually worked. Jerry McAleer and David Scott will each be
paid $165,000 for the first six months of the consulting relationship, and will
be paid a fee for each day actually worked for the remainder of the consulting
relationship.

     Ron Zwanziger, Jerry McAleer and David Scott are also required to maintain
the confidentiality of product and corporate information regarding Inverness,
Johnson & Johnson and their affiliates, in the case of Ron Zwanziger for a
period of seven years, and in the cases of Jerry McAleer and David Scott for a
period of five years, from the completion of the split-off and merger.

     Each of Ron Zwanziger, Jerry McAleer and David Scott has agreed that,
commencing upon the completion of the split-off and merger and continuing until
the later of six months from the termination of his consulting relationship and
the date that is, in the case of Ron Zwanziger five years, and in the cases of
Jerry McAleer and David Scott three years, from the completion of the split-off
and merger, subject to limited exceptions similar to those applicable to
Innovations contained in the post-closing covenants agreement, he will not:

     - compete with Johnson & Johnson, Inverness or any of their affiliates in
       the diabetes field

     - engage in any activity in the diabetes field or

     - actively participate in, control, manage, own any interest in or share in
       the earnings of, finance or invest in the capital stock of any person who
       is engaged in any activity in the diabetes field or consult with any
       person on matters in the diabetes field.

     See "Post-Closing Arrangements -- Post-Closing Covenants
Agreement -- Agreements Not to Compete and Not to Solicit or Hire Employees" for
a description of the applicable portions of that agreement.

     Each of Ron Zwanziger, Jerry McAleer and David Scott also has agreed that
for a period of three years from the completion of the split-off and merger,
subject to limited exceptions similar to those applicable to Innovations
contained in the post-closing covenants agreement, he will not:

     - induce an employee of any of Inverness and its post-closing subsidiaries
       to leave the employ of Inverness and its post-closing subsidiaries

     - recommend to any other person that they employ that employee or

     - hire any such employee.

                                        38
   49

     Each of Ron Zwanziger, Jerry McAleer and David Scott has agreed that,
commencing upon the completion of the split-off and merger and continuing until
the later of six months from the termination of his consulting relationship and
the date that is, in the case of Ron Zwanziger five years, and in the cases of
Jerry McAleer and David Scott three years, from the completion of the split-off
and merger, subject to limited exceptions similar to those applicable to
Innovations contained in the post-closing covenants agreement, he will not:

     - solicit any customer or supplier of Johnson & Johnson, Inverness or any
       of their affiliates to (1) transact business in the diabetes field with a
       business or enterprise that competes with Johnson & Johnson, Inverness or
       any affiliates in the diabetes field or (2) reduce or refrain from doing
       any business with Johnson & Johnson, Inverness or any of their respective
       affiliates in the diabetes field or

     - disparage Johnson & Johnson or Inverness or any of their products or
       activities in the diabetes field.

     Nothing mentioned above prevents Ron Zwanziger, Jerry McAleer or David
Scott from participating, directly or indirectly, in physician practice
management activities in the diabetes field, as described under "Post-Closing
Arrangements -- Post-Closing Covenants Agreement," including competing,
engaging, controlling, managing, owning, investing, consulting and soliciting
customers.

     BENEFITS AS EXECUTIVE OFFICERS OF INNOVATIONS.  Subsequent to the execution
of the split-off and merger agreement, Innovations adopted the Innovations stock
option plan and the Innovations executive bonus plan, and each of Ron Zwanziger,
David Scott and Jerry McAleer agreed to become executive officers of
Innovations. As executive officers of Innovations, Mr. Zwanziger, Dr. Scott and
Dr. McAleer will be entitled to the compensation and benefits described under
the "Management" section of the Innovations prospectus portion of this proxy
statement/prospectus beginning on page X-59.

     Mr. Zwanziger, Dr. Scott and Dr. McAleer have also received benefits under
the Innovations stock option plan. For a more detailed description of the terms
of these benefits, see "Other Proposals -- Approval of the Inverness Medical
Innovations, Inc. 2001 Stock Option and Incentive Plan."

     In addition to the annual cash bonuses described under the "Management"
section of the Innovations prospectus portion of this proxy
statement/prospectus, each of Mr. Zwanziger, Dr. McAleer and Dr. Scott are also
eligible to receive cash bonuses under the Innovations executive bonus plan.
Under the Innovations executive bonus plan, these executives will receive cash
bonuses if the Innovations common stock achieves specified stock price targets
following completion of the split-off and merger. For a more detailed
description of the terms of the executive bonus plan, see "Other
Proposals -- Approval of the Inverness Medical Innovations, Inc. Executive Bonus
Plan."

PRE-MERGER RESTRUCTURING TRANSACTIONS

     It is contemplated that immediately prior to the completion of the
split-off and merger and pursuant to the terms of the restructuring agreement
and the other transaction agreements, Inverness and its subsidiaries will
complete the restructuring of Inverness upon the terms and subject to the
conditions set forth in the restructuring agreement. In connection with this
restructuring, Inverness recently organized Innovations, a wholly-owned
subsidiary of Inverness. The purpose and effect of the restructuring of
Inverness is to facilitate the split-off and merger by separating Inverness'
diabetes care products business from its other principal businesses. Inverness
will effect this separation by transferring the assets and liabilities of its
women's health, nutritional supplements and clinical diagnostics businesses to
Innovations immediately prior to the split-off. As a result, at the time of the
split-off and merger, Inverness will own only those businesses not transferred
to Innovations, including the related assets and liabilities, which will consist
principally of the diabetes care products business. Completion of the
restructuring of Inverness is a condition to the merger. Inverness will not
proceed with the split-off and merger unless the restructuring is complete. For
a more complete description of the terms of the restructuring agreement, see
"Pre-Merger Restructuring Transactions" on page 49.

                                        39
   50

ACCOUNTING TREATMENT OF THE MERGER

     Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, which means that Inverness will be treated as
a separate entity for periods prior to the completion of the merger and,
thereafter, the financial results of Inverness' post-restructuring business,
including its diabetes care products business, will be consolidated with Johnson
& Johnson's financial results.

FORM OF THE MERGER

     Subject to the terms and conditions of the split-off and merger agreement
and in accordance with Delaware law, at the effective time of the split-off and
merger, Sunrise Acquisition Corp., a wholly-owned subsidiary of Johnson &
Johnson and a party to the split-off and merger agreement, will merge with and
into Inverness. Inverness will survive the merger as a wholly-owned Delaware
subsidiary of Johnson & Johnson.

MERGER AND SPLIT-OFF CONSIDERATION

     At the effective time of the split-off and merger, each outstanding share
of Inverness common stock will be converted into the right to receive: (1) 0.20
of a share of Innovations common stock, and (2) a fraction of a share of Johnson
& Johnson common stock based on an exchange ratio intended to value that
fractional share at $35.00, except that treasury stock and stock held by Johnson
& Johnson and Sunrise Acquisition Corp. will be canceled. The exchange ratio
will be determined by dividing $35.00 by the average of the volume weighted
averages of the trading prices of Johnson & Johnson common stock on the New York
Stock Exchange for each of the 20 consecutive trading days ending with the third
trading day immediately preceding the date on which the split-off and merger are
completed. Inverness stockholders will receive cash for any fractional shares of
Johnson & Johnson common stock and Innovations common stock they would otherwise
receive in the split-off and merger. The amount of cash for any fractional
shares that each Inverness stockholder will receive will be calculated by
multiplying the fractional share interest to which he or she is entitled by, in
the case of Johnson & Johnson common stock, the closing price of Johnson &
Johnson common stock on the date on which the split-off and merger are completed
as reported on the New York Stock Exchange Composite Transactions Tape, and, in
the case of Innovations common stock, the closing price of Innovations common
stock as reported on the American Stock Exchange, on the first full trading day
following the date on which the split-off and merger are completed. The
consideration to be received in the merger was determined through arms'-length
negotiations between Johnson & Johnson and Inverness.

OWNERSHIP OF JOHNSON & JOHNSON AND INNOVATIONS FOLLOWING THE SPLIT-OFF AND
MERGER

     Based on the number of outstanding shares of Inverness common stock and the
closing price of Johnson & Johnson common stock, each as of the record date, we
anticipate that Inverness stockholders will receive approximately -- shares of
Johnson & Johnson common stock in the merger. Based on that number and on the
number of outstanding shares of Johnson & Johnson common stock on the record
date, Inverness stockholders will own approximately --% of the outstanding
shares of Johnson & Johnson common stock immediately following the split-off and
merger.

     Based on the number of outstanding shares of Inverness common stock on the
record date, we anticipate that Inverness stockholders will receive
approximately -- shares of Innovations common stock in the split-off.
Immediately following the split-off and merger, Inverness stockholders and
members of Innovations' management will own 100% of the outstanding shares of
Innovations common stock. For a more detailed description of the capitalization
of Innovations following completion of the split-off and merger, see
"Capitalization" beginning on page X-31 of the Innovations prospectus portion of
this proxy statement/prospectus.

                                        40
   51

CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES

     The conversion of Inverness common stock into the right to receive
Innovations common stock and Johnson & Johnson common stock will occur
automatically at the effective time of the split-off and merger. As soon as
reasonably practicable after the completion of the split-off and merger,
EquiServe Trust Company, the exchange agent in the split-off and merger, will
send a letter of transmittal to each former Inverness stockholder. The
transmittal letter will contain instructions for obtaining shares of Innovations
common stock and Johnson & Johnson common stock and cash for any fractional
shares of Innovations common stock and Johnson & Johnson common stock in
exchange for shares of Inverness common stock.

INVERNESS STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.

     After the completion of the split-off and merger, each certificate that
previously represented shares of Inverness common stock will no longer be
outstanding, will be automatically canceled and retired, will cease to exist and
will represent only the right to receive the Johnson & Johnson common stock and
Innovations common stock into which such shares are converted in the split-off
and merger and the right to receive cash for any fractional shares of Johnson &
Johnson common stock and Innovations common stock as described below.

     Until holders of certificates previously representing Inverness common
stock have surrendered those certificates to the exchange agent for exchange,
those holders will not receive any dividends or distributions on the Johnson &
Johnson common stock and Innovations common stock into which such shares have
been converted with a record date after the date on which the split-off and
merger are completed and will not receive cash for any fractional shares of
Johnson & Johnson common stock and Innovations common stock. When holders
surrender such certificates, they will receive any dividends with a record date
after the date on which the split-off and merger are completed and a payment
date on or prior to the date of surrender and any cash for fractional shares of
Johnson & Johnson common stock and Innovations common stock, in each case
without interest.

     In the event of a transfer of ownership of Inverness common stock that is
not registered in the transfer records of Inverness, a certificate representing
the proper number of shares of Innovations common stock and a certificate
representing the proper number of shares of Johnson & Johnson common stock may
be issued to a person other than the person in whose name the certificate so
surrendered is registered if:

     - the certificate is properly endorsed or otherwise is in proper form for
       transfer and

     - the person requesting the exchange pays any transfer or other taxes
       resulting from the issuance of shares of Innovations common stock and
       Johnson & Johnson common stock to a person other than the registered
       holder of the certificate.

     All shares of Johnson & Johnson common stock and Innovations common stock
issued in exchange for shares of Inverness common stock, including any cash paid
instead of any fractional shares of Johnson & Johnson common stock and
Innovations common stock, will be issued in full satisfaction of all rights
relating to such shares of Inverness common stock.

     No fractional shares of Johnson & Johnson common stock or Innovations
common stock will be issued to any Inverness stockholder upon surrender of
certificates previously representing Inverness common stock. Each Inverness
stockholder who would otherwise have been entitled to receive a fraction of a
share of Johnson & Johnson common stock or Innovations common stock will receive
cash in an amount equal to the product obtained by multiplying (1) the
fractional share interest to which such holder would otherwise be entitled by
(2) in the case of Johnson & Johnson common stock, the closing price for a share
of Johnson & Johnson common stock on the closing date of the split-off and
merger as reported on the New York Stock Exchange Composite Transactions Tape,
and in the case of Innovations common stock, the closing price for a share of
Innovations common stock, as reported on the American Stock Exchange, on the
first full trading day following the date on which the split-off and merger are
completed.
                                        41
   52

EFFECTIVE TIME OF THE MERGER

     The merger will become effective upon the filing of the certificate of
merger with the Secretary of State of the State of Delaware or such later time
as is agreed upon by Johnson & Johnson and Inverness and specified in the
certificate of merger. The filing of the certificate of merger will occur as
soon as practicable after satisfaction or waiver of the conditions to the
completion of the merger described in the split-off and merger agreement.

POST-CLOSING ARRANGEMENTS BETWEEN JOHNSON & JOHNSON, INVERNESS AND INNOVATIONS

     The terms of the post-closing covenants agreement will govern the terms of
the relationship between Johnson & Johnson and Inverness, on the one hand, and
Innovations, on the other hand, after the completion of the split-off and merger
with respect to, among other things, indemnification rights, payment of
restructuring, split-off and merger expenses, an agreement by Innovations not to
compete with Inverness in the diabetes field or solicit Inverness employees and
adjustments to the net cash position of Innovations. These terms are described
in greater detail under "Post-Closing Arrangements -- The Post-Closing Covenants
Agreement" on page 70. The terms of the tax allocation agreement will govern the
relationship of the same parties with respect to, among other things, the
preparation of tax returns, the responsibility of the parties for the payment of
taxes for each of Innovations and its post-closing subsidiaries, on the one
hand, and Inverness and its post-closing subsidiaries, on the other hand, and
indemnification for certain tax liabilities. These terms are described in
greater detail under "Post-Closing Arrangements -- The Tax Allocation Agreement"
on page 69.

STOCK EXCHANGE LISTING OF JOHNSON & JOHNSON AND INNOVATIONS COMMON STOCK

     It is a condition to the completion of the merger that the Johnson &
Johnson common stock issuable to Inverness stockholders in the merger are
approved for listing on the New York Stock Exchange, subject to official notice
of issuance. It is also a condition to the completion of the merger that the
Innovations common stock issuable to Inverness stockholders in the split-off are
approved for listing on a national securities exchange, or approved for
quotation on NASDAQ, in either case subject only to official notice of issuance.
The American Stock Exchange, on which Innovations has applied to list its common
stock, constitutes such a national securities exchange.

DELISTING AND DEREGISTRATION OF INVERNESS COMMON STOCK

     If the split-off and merger are completed, Inverness common stock will be
delisted from the American Stock Exchange and will be deregistered under the
Securities Exchange Act of 1934.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SPLIT-OFF AND
MERGER

     The following discussion summarizes the material federal income tax
consequences of the split-off and the merger to holders of Inverness common
stock who are citizens or residents of the United States. This discussion does
not include tax consequences to Inverness stockholders entitled to special
treatment under the Internal Revenue Code of 1986, such as insurance companies,
dealers in securities, tax exempt organizations or foreign persons, or to
Inverness stockholders who acquired their shares of Inverness common stock
pursuant to the exercise of employee stock options or otherwise in compensatory
transactions. In addition, this discussion does not address any state, local or
foreign tax considerations and does not address any federal estate, gift,
employment, excise or other non-income tax considerations. This discussion is
based upon provisions of the Internal Revenue Code, regulations, administrative
rulings and judicial decisions presently in effect, all of which are subject to
change (possibly with retroactive effect) and to different interpretations.
INVERNESS STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE SPLIT-OFF AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX
LAWS.

     Goodwin Procter LLP, counsel to Inverness, has provided to Inverness an
opinion letter regarding certain of the federal income tax consequences of the
split-off and merger. No ruling from the Internal
                                        42
   53

Revenue Service has been or will be sought with respect to any of the tax
matters relating to the split-off and merger. The conclusions of counsel in its
opinion letter are based upon certain assumptions and representations (including
representations made by Inverness and Johnson & Johnson) and are counsel's best
legal judgment. The opinion letter does not bind the IRS, any tax authority or
any court. Accordingly, there can be no assurance that the IRS will agree with
the conclusions set forth in the opinion letter, and it is possible that the IRS
or another tax authority could adopt a position contrary to one or all of those
conclusions and that a court could sustain that contrary position.

     TWO SEPARATE TRANSACTIONS.  Counsel concludes in its opinion letter that
the deemed redemption of a portion of a stockholder's shares of Inverness common
stock in exchange for Innovations common stock in the split-off and the exchange
of a portion of such stockholder's shares of Inverness common stock for Johnson
& Johnson common stock in the merger will be two separate transactions for
federal income tax purposes.

     THE SPLIT-OFF.  Counsel concludes in its opinion letter that, subject to
certain assumptions and representations, it is more likely than not that the
split-off qualifies, as to the Inverness stockholders, as a transaction
described in Section 355 of the Internal Revenue Code. For this purpose, the
phrase "more likely than not" means that if counsel's conclusion is challenged
by the IRS, counsel believes that there is a greater than 50% likelihood that
counsel's conclusion would be sustained by a court of law.

     If counsel is correct that the split-off qualifies, as to the Inverness
stockholders, as a transaction described in Section 355 of the Internal Revenue
Code, then:

     - an Inverness stockholder will not recognize any gain or loss when shares
       of its Inverness common stock are redeemed in exchange for Innovations
       common stock in the split-off

     - cash, if any, that an Inverness stockholder receives instead of a
       fractional share of Innovations common stock will be treated as received
       in exchange for that fractional share. The stockholder will recognize
       gain or loss to the extent of the difference between its tax basis in
       that fractional share and the cash that the stockholder receives for that
       fractional share. Provided that the stockholder holds the Innovations
       common stock that it receives in the split-off as a capital asset, the
       gain or loss will be capital gain or loss

     - an Inverness stockholder's tax basis in its Inverness common stock will
       be divided between the Innovations common stock that it receives in the
       split-off and the Johnson & Johnson common stock that it receives in the
       merger in proportion to the relative fair market values of such
       Innovations common stock and Johnson & Johnson common stock at the time
       that the split-off and merger occur and

     - an Inverness stockholder's holding period for the Innovations common
       stock that it receives in the split-off will include the stockholder's
       holding period for its Inverness common stock that is redeemed in the
       split-off, provided that the stockholder holds its Inverness common stock
       as a capital asset.

     Inverness stockholders should be aware that counsel's conclusion that the
split-off qualifies, as to the Inverness stockholders, as a transaction
described in Section 355 of the Internal Revenue Code is based on counsel's
interpretation of how various requirements of Section 355 of the Internal
Revenue Code apply to the split-off. According to counsel, with respect to some
of these interpretations there is no controlling legal authority, and no
published rulings or cases squarely address the application of Section 355 of
the Internal Revenue Code to a transaction identical to the split-off.

     If certain representations and assumptions relied upon by counsel in
rendering its opinion letter are inaccurate, or if the IRS successfully
challenges counsel's conclusions regarding the federal income tax treatment of
the split-off, then:

     - an Inverness stockholder will recognize gain or loss when shares of its
       Inverness common stock are redeemed in exchange for Innovations common
       stock in the split-off. Such gain or loss will be capital gain or loss if
       the stockholder holds its Inverness common stock as a capital asset
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     - the amount of the gain or loss that an Inverness stockholder will
       recognize will be equal to the difference between its tax basis in its
       redeemed Inverness common stock and the fair market value of the
       Innovations common stock that the stockholder receives in the split-off.
       The stockholder's tax basis in its redeemed Inverness common stock will
       be a percentage of its tax basis in all of its Inverness stock. In
       general, that percentage will be equal to the percentage that the fair
       market value of the Innovations common stock that the stockholder
       receives in the split-off is of the fair market value of the total
       consideration that the stockholder receives in the split-off and merger

     - an Inverness stockholder's tax basis in the Innovations common stock that
       it receives in the split-off will be equal to the fair market value of
       that Innovations common stock and

     - an Inverness stockholder's holding period for the Innovations common
       stock that it receives in the split-off will begin on the day after the
       split-off occurs.

     Even if the split-off qualifies, as to the Inverness stockholders, as a
transaction described in Section 355 of the Internal Revenue Code, Inverness
stockholders should be aware that the split-off will be taxable to Inverness.
The amount of Inverness' taxable gain will depend on both the difference between
the fair market value of the women's health business assets and Inverness' tax
basis in those assets immediately before the pre-split-off restructuring, and on
the difference between the fair market value and tax basis of the Innovations
common stock after the restructuring but before the split-off. Under the tax
allocation agreement, Inverness is solely responsible for the payment of
Inverness' tax liability arising from the restructuring and the split-off and is
not entitled to reimbursement from Innovations or Johnson & Johnson.

     THE MERGER.  Counsel also concludes in its opinion letter that, subject to
certain assumptions and representations, the merger will be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Accordingly:

     - an Inverness stockholder will not recognize any gain or loss when shares
       of its Inverness common stock are exchanged for Johnson & Johnson common
       stock in the merger

     - cash, if any, that an Inverness stockholder receives instead of a
       fractional share of Johnson & Johnson common stock will be treated as
       received in exchange for that fractional share. The stockholder will
       recognize gain or loss to the extent of the difference between its tax
       basis in that fractional share and the cash that the stockholder receives
       for that fractional share. Provided that the stockholder holds the
       Johnson & Johnson common stock that it receives in the merger as a
       capital asset, the gain or loss will be capital gain or loss

     - an Inverness stockholder's tax basis in the Johnson & Johnson common
       stock that it receives in the merger will equal its tax basis in the
       Inverness common stock that the stockholder exchanges in the merger for
       that Johnson & Johnson common stock and

     - an Inverness stockholder's holding period for the Johnson & Johnson
       common stock that it receives in the merger will include the
       stockholder's holding period for the Inverness common stock that the
       stockholder exchanges in the merger for that Johnson & Johnson common
       stock, provided that the stockholder holds its Inverness common stock as
       a capital asset.

     The foregoing discussion is only a summary of the material federal income
tax consequences of the split-off and merger and is included for general
information only. The foregoing discussion may not address federal income tax
consequences relevant to an Inverness stockholder's particular circumstances.
INVERNESS STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE SPLIT-OFF AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX
LAWS.

REGULATORY MATTERS

     UNITED STATES ANTITRUST.  Under the Hart-Scott-Rodino Antitrust
Improvements Act and related rules, certain transactions, including the merger,
may not be completed unless certain notification and
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waiting period requirements have been satisfied. On June 27, 2001, Johnson &
Johnson and Inverness each filed a Notification and Report Form with the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and requested an early termination of the required waiting period. On July 16,
2001, Johnson & Johnson and Inverness were granted an early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. At any
time before or after the completion of the split-off and merger, the Antitrust
Division, the Federal Trade Commission or others could take action under the
antitrust laws, including seeking to prevent the merger, to rescind the merger
or to conditionally approve the merger upon the divestiture of substantial
assets of Johnson & Johnson or Inverness. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.

     EUROPE.  In addition, both Johnson & Johnson and Inverness conduct business
in member states of the European Union. Council Regulation 4064/89 requires
notification to and approval by the European Commission of mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding specified thresholds. The split-off and merger is
not notifiable to the European Commission because it lacks the requisite
European Community dimension. However, filings have been made in Germany and
Italy seeking approval of the split-off and merger. On July 19, 2001, Johnson &
Johnson received clearance from the German competition authority to complete the
transaction. Johnson & Johnson believes that the Italian regulatory approval
process will not materially delay or impede the completion of the split-off and
merger.

     GENERAL.  It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. There can be no assurance that:

     - Johnson & Johnson or Inverness will be able to satisfy or comply with
       such conditions

     - compliance or non-compliance will not have adverse consequences on
       Johnson & Johnson after completion of the split-off and merger or

     - the required regulatory approvals will be obtained within the time frame
       contemplated by Johnson & Johnson and referred to in this proxy
       statement/prospectus or on terms that will be satisfactory to Johnson &
       Johnson and Inverness.

See "The Split-off and Merger Agreement -- Conditions to the Completion of the
Merger."

APPRAISAL RIGHTS

     Under Delaware law, holders of Inverness common stock are not entitled to
appraisal rights in connection with the split-off and merger because, on the
record date, Inverness common stock was listed on the American Stock Exchange
and will be converted into (1) shares of Johnson & Johnson common stock, which
on the date on which the split-off and merger are completed will be listed on
the New York Stock Exchange, and (2) Innovations common stock, which on the date
on which the split-off and merger are completed will be listed on the American
Stock Exchange or another national securities exchange or quoted on NASDAQ.

LITIGATION

     Inverness and its directors are defendants in an action brought by an
individual stockholder of Inverness who allegedly owns 15,000 shares of
Inverness common stock. The complaint alleges that the transaction between
Inverness and Johnson & Johnson that is the subject of this proxy
statement/prospectus is unfair to the Inverness stockholders. That action, which
is styled Bruce Katz v. Ernest A. Carabillo, Jr., Carol Goldberg, John F. Levy,
Peter Townsend, Willard L. Umphrey, Ron Zwanziger, and Inverness Medical
Technology, Inc., Civil Action No. 18913NC, was filed on May 23, 2001, and is
pending in the Chancery Court of New Castle County, Delaware. Specifically, the
complaint alleges that the Inverness directors did not engage in a sales process
that would have yielded the highest price for Inverness' diabetes care business,
that the exchange value agreed upon does not reflect the value
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of the diabetes care business, and that the split-off and merger agreement
should, but does not, include a "collar" or other price protection mechanism.
The complaint also alleges that Inverness and its directors entered into this
transaction in breach of their fiduciary duties to the plaintiff and the
Inverness stockholders. The action seeks damages in an unspecified amount and
seeks to enjoin completion of this transaction "without adequate safeguards."
Although the complaint is styled as a class action complaint, no class has been
certified at this time. Inverness and its directors believe that these claims
are without merit and are defending the action by, among other things, asking
the court to dismiss the complaint.

INVERNESS EMPLOYEE BENEFITS MATTERS

     Johnson & Johnson and Inverness have agreed that:

     - for a period ending not earlier than December 31, 2002, all employees and
       consultants of Inverness to be retained by Inverness following the
       split-off and merger, other than employees located in Ireland, will be
       provided pension and welfare benefits that are substantially comparable
       in the aggregate to the pension and welfare benefits provided to such
       employees and consultants immediately prior to the completion of the
       split-off and merger

     - except as described below, (1) for a period ending not earlier than
       December 31, 2002, the employees and consultants to be retained by
       Inverness following the split-off and merger will be provided base salary
       or hourly wage rates that are at least equal to those being received by
       them immediately prior to the completion of the split-off and merger and
       (2) for a period ending not earlier than December 31, 2001, those
       employees and consultants will be provided other employee benefits that
       are substantially comparable in the aggregate to the employee benefits
       provided immediately prior to the completion of the split-off and merger.
       Except as provided in the transaction agreements, neither Johnson &
       Johnson nor Inverness, as the surviving corporation in the merger, will
       have any obligation to issue, or adopt any plans or arrangements
       providing for the issuance of, shares of capital stock, warrants,
       options, stock appreciation rights or other rights in respect of any
       shares of capital stock of any entity or any securities convertible or
       exchangeable into such shares pursuant to any such plans or arrangement.
       Any plans or arrangements of Inverness or any of its subsidiaries
       providing for such issuance will be disregarded in determining whether
       employee benefits provided after completion of the split-off and merger
       are substantially comparable in the aggregate to pre-split-off and merger
       benefits

     - with respect to those employees and consultants to be retained by
       Inverness following the split-off and merger who are employed in the
       United States or are covered by Inverness' benefit plans that are subject
       to the Employee Retirement Income Security Act of 1974, or ERISA, Johnson
       & Johnson will recognize the service of each such employee and consultant
       upon the completion of the split-off and merger with his or her service
       through that time as if such service had been performed with Johnson &
       Johnson (1) for purposes of eligibility and vesting (but not benefit
       accrual) under Johnson & Johnson's defined benefit pension plan and (2)
       for purposes of eligibility for vacation under Johnson & Johnson's
       vacation program, in each case only to the extent Johnson & Johnson makes
       such plan or program available to employees of Inverness, as the
       surviving corporation in the merger, but not for purposes of any other
       benefit plan of Johnson & Johnson. With respect to those employees and
       consultants to be retained by Inverness who are employed outside of the
       United States, Johnson & Johnson will comply with all applicable local
       laws in respect of any requirement to credit service of those employees
       prior to the completion of the split-off and merger for employee benefit
       plan purposes and

     - Inverness will take all actions necessary to cause the Inverness employee
       stock purchase plan to terminate immediately prior to the completion of
       the split-off and merger, and in accordance with the terms of the
       Inverness employee stock purchase plan refund to each participant under
       the plan the accumulated contributions made by the participant through
       the completion of the split-off and merger.

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For additional information regarding the treatment of Inverness employees, see
"Pre-Merger Restructuring Transactions -- Employee Matters."

EFFECT ON OPTIONS AND WARRANTS RELATING TO INVERNESS COMMON STOCK

     OPTIONS.  Under the terms of the restructuring agreement, each outstanding
option to purchase shares of Inverness common stock is to be converted, as part
of the restructuring, into:

     - an option to purchase the same number of shares of Inverness common
       stock, referred to in this description as the replacement Inverness
       option and

     - an option to purchase the number of shares of Innovations common stock
       equal to the number of shares of Inverness common stock subject to the
       original Inverness option multiplied by 0.20.

     The exercise prices of the replacement Inverness option and the Innovations
option will be set so that the combined exercise prices of the new options will
equal the exercise price of each original Inverness option to purchase Inverness
common stock. For additional information regarding the treatment of outstanding
Inverness options in the restructuring, see "Pre-Merger Restructuring
Transactions -- Conversion of Options and Warrants."

     The split-off and merger agreement provides that upon the completion of the
split-off and merger, each outstanding replacement Inverness option will be
converted into an option to purchase, on the same terms and conditions as are
applicable under that option, the number of shares of Johnson & Johnson common
stock determined by multiplying:

     - the number of shares of Inverness common stock subject to the replacement
       Inverness option by

     - the same exchange ratio used to convert Inverness common stock into
       Johnson & Johnson common stock in the merger.

     The exercise price per share of Johnson & Johnson common stock issuable
under the converted option will be determined by dividing:

     - the aggregate exercise price for the shares of Inverness common stock
       issuable under the replacement Inverness option by

     - the aggregate number of shares of Johnson & Johnson common stock that may
       be purchased pursuant to the replacement Inverness option following the
       conversion.

     WARRANTS.  Under the terms of the restructuring agreement, each outstanding
warrant to acquire shares of Inverness common stock is to be converted (with, if
necessary, the consent of the warrant holder), as part of the restructuring,
into:

     - a warrant to acquire the same number of shares of Inverness common stock,
       referred to in this description as the replacement Inverness warrant and

     - a warrant to acquire the number of shares of Innovations common stock
       equal to the number of shares of Inverness common stock subject to the
       original Inverness warrant multiplied by 0.20.

     The exercise prices of the replacement Inverness warrant and the
Innovations warrant will be set so that the combined exercise prices of the new
warrants will equal the exercise price of each original warrant to acquire
Inverness common stock. For additional information regarding the treatment of
outstanding Inverness warrants in the restructuring, see "Pre-Merger
Restructuring Transactions -- Conversion of Options and Warrants."

     The split-off and merger agreement provides that upon the completion of the
split-off and merger, each outstanding replacement Inverness warrant will be
converted into a warrant to acquire, on the same terms and conditions as are
applicable under that warrant, the number of shares of Johnson & Johnson common
stock determined by multiplying:

     - the number of shares of Inverness common stock subject to the replacement
       Inverness warrant by
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     - the same exchange ratio used to convert Inverness common stock into
       Johnson & Johnson common stock in the merger.

     The exercise price per share of Johnson & Johnson common stock issuable
under the converted warrant will be determined by dividing:

     - the aggregate exercise price for the shares of Inverness common stock
       issuable under the replacement Inverness warrant by

     - the aggregate number of shares of Johnson & Johnson common stock that may
       be purchased pursuant to the replacement Inverness warrant following the
       conversion.

RESALE OF JOHNSON & JOHNSON COMMON STOCK

     Johnson & Johnson common stock issued in the merger will not be subject to
any restrictions on transfer arising under the Securities Act of 1933, except
for shares issued to any Inverness stockholder who may be deemed to be an
"affiliate" of Inverness or Johnson & Johnson for purposes of Rule 145 under the
Securities Act. It is expected that each affiliate will agree not to transfer
any Johnson & Johnson common stock received in the merger except in compliance
with the resale provisions of Rule 144 or 145 under the Securities Act or as
otherwise permitted under the Securities Act. The split-off and merger agreement
requires Inverness to use commercially reasonable efforts to cause its
affiliates to enter into such agreements. This proxy statement/prospectus does
not cover resales of Johnson & Johnson common stock received by any person upon
completion of the merger, and no person is authorized to make any use of this
proxy statement/prospectus in connection with any such resale.

RESALE OF INNOVATIONS COMMON STOCK

     For a discussion of the restrictions and limitations on resales of
Innovations common stock, see "Shares Eligible for Future Sale" on page X-76 of
the Innovations prospectus portion of this proxy statement/prospectus.

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                     PRE-MERGER RESTRUCTURING TRANSACTIONS

     This is a summary of the material terms of the restructuring agreement. The
restructuring agreement, which is attached as Annex 3 to this proxy
statement/prospectus, contains the complete terms of that agreement. You should
read the entire restructuring agreement carefully.

GENERAL

     Innovations, a subsidiary of Inverness, was recently organized for purposes
of the split-off and merger. Prior to the completion of the split-off and
merger, Inverness, Innovations and certain subsidiaries of Inverness will enter
into the restructuring agreement. Completion of the restructuring of Inverness,
as contemplated by the restructuring agreement, is a condition to the merger.
Inverness will not proceed with the split-off and merger unless the
restructuring is completed.

     The purpose and effect of the restructuring of Inverness is to facilitate
the split-off and merger by separating Inverness' diabetes care products
business from its other principal businesses. Inverness will effect this
separation by transferring the assets and liabilities of its women's health,
nutritional supplements and clinical diagnostics businesses to Innovations
immediately prior to the split-off and merger. As a result, at the time of the
split-off and merger, Inverness will own only those businesses not transferred
to Innovations, including the related assets and liabilities, which will consist
principally of the diabetes care products business. Unless otherwise indicated,
references to the post-restructuring business of Inverness refer to the
businesses of Inverness and its subsidiaries not transferred to Innovations.

THE RESTRUCTURING AND TRANSFER OF ASSETS

     The restructuring agreement provides that prior to the completion of the
split-off and merger, Inverness will contribute or cause to be contributed to
Innovations any of its or any of its subsidiaries' right, title and interest in
and to (1) all of the assets of Inverness that are used or held for use
primarily in the operation or conduct of the women's health, nutritional
supplements and clinical diagnostics businesses, referred to as the Innovations
businesses and (2) other specified assets, including cash in an amount necessary
to ensure that at the time of the split-off Innovations will have $40 million of
net cash, defined as cash and marketable securities less debt for borrowed money
(other than debt outstanding under any revolving line of credit). The
restructuring will be effected through a series of stock and asset transfers
from Inverness and its subsidiaries to Innovations. Under the restructuring
agreement, Inverness will retain and will not contribute to Innovations any of
its or its subsidiaries' right, title and interest to the assets that are not
used or held for use primarily in the operation of the Innovations businesses
and certain other specified assets. The restructuring agreement further provides
that the parties will cooperate in good faith to provide for the use or shared
ownership of any asset that is material to the operation of either the
Innovations businesses or the post-restructuring Inverness businesses that is
primarily related to the businesses of the other company.

ASSUMPTION OF LIABILITIES

     The restructuring agreement provides that at or prior to the completion of
the split-off and merger, Innovations and/or one of its subsidiaries will
unconditionally assume (1) all liabilities of Inverness and its subsidiaries to
the extent primarily related to or arising out of the Innovations businesses and
(2) other specified liabilities. Under the restructuring agreement, Inverness
will retain, assume, or cause one of its subsidiaries (other than Innovations)
to assume all liabilities of Inverness that Innovations is not otherwise
obligated to assume, as well as other specified liabilities.

USE OF NAME

     The restructuring agreement provides that Innovations will have all rights
in and use of the names "Inverness" and "Inverness Medical" and all derivatives
of those names and that Inverness will take actions as are reasonably necessary
to vest such rights in Innovations or any of its subsidiaries. However,
Inverness will retain the right to use the "Inverness" and "Inverness Medical"
names on signs and other
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displays at its manufacturing facilities in Inverness, Scotland, and Inverness
and its suppliers and distributors will retain the right to use those names and
applicable trademarks and trade dress on product packaging and related materials
for a one year period after completion of the split-off and merger.

ANCILLARY AGREEMENTS

     The restructuring agreement provides that prior to the completion of the
split-off and merger, Inverness, or another of its subsidiaries (other than
Innovations), and Innovations, or another of its subsidiaries, will enter into:

     - a transition services agreement relating to the women's health business
       of Can-Am Care Corporation and Inverness Medical Europe GmbH, and the
       kitting services and secondary packaging services provided at the Galway,
       Ireland facility

     - the license agreement attached as Annex 6 to this proxy
       statement/prospectus and described under "Post-Closing
       Arrangements -- The License Agreement" and

     - a sublease from Inverness to Innovations of Inverness' corporate
       headquarters currently subleased by Inverness at 51 Sawyer Road, Waltham,
       Massachusetts on the same terms as those of the sublease currently held
       by Inverness.

EMPLOYEE MATTERS

     The restructuring agreement provides that:

     - specified employees and consultants of Inverness and its subsidiaries and
       employees of Inverness hired after the date of the split-off and merger
       agreement and prior to the completion of the split-off and merger and who
       are engaged primarily in a business other than an Innovations business
       will remain or become employees of Inverness and its subsidiaries in the
       same capacities as then held by those employees (or in such other
       capacities and upon such terms and conditions as Inverness determines in
       its sole discretion)

     - other specified employees and consultants and employees of Inverness
       hired after the date of the split-off and merger agreement and prior to
       the completion of the split-off and merger and who are engaged primarily
       in an Innovations business will remain or become employees of Innovations
       and its subsidiaries in the same capacities as then held by those
       employees (or in such other capacities and upon such terms and conditions
       as Innovations determines in its sole discretion) and

     - a third category of specified employees who will perform transition
       services under the transition services agreement will be deemed
       transition employees and will be employed by Innovations, which will
       provide compensation and benefits to those employees, although Inverness
       will be responsible for any retention bonuses and severance costs
       associated with those employees.

     Upon completion of the split-off and merger, Innovations will assume and be
responsible for all liabilities related to the designated Innovations employees
and the former employees of Inverness and its subsidiaries whose primary
responsibilities related to an Innovations business, and Inverness will assume
and be responsible for all liabilities and obligations related to the designated
Inverness employees and the former employees of Inverness and its subsidiaries
whose primary responsibilities related to the businesses of Inverness and its
subsidiaries other than the Innovations businesses. The restructuring agreement
provides that, to the extent permitted by applicable law, the transactions
contemplated by the restructuring agreement will not constitute a termination of
employment that would entitle an employee to receive severance or similar
compensation and benefits and that Inverness and Innovations will use their
reasonable best efforts to amend, if necessary, any benefit plans to achieve
that result. The restructuring agreement does not confer on any employee any
right to continued employment after the completion of the split-off and merger.

     Innovations will assume sponsorship of each employee benefit, welfare
benefit, employment, personal services, compensation, change in control,
severance, time-off, perquisite and other benefit plan, policy or
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agreement relating exclusively to one or more Innovations employees. In
addition, to the extent any Innovations employee participates prior to the
completion of the split-off and merger in benefit plans that do not relate
exclusively to Innovations employees, Innovations will establish and maintain,
upon the completion of the split-off and merger, benefit plans (not including
equity plans) that provide substantially comparable benefits to those provided
to the Innovations employee prior to the completion of the split-off and merger.

     If specified Inverness employees or former employees of Inverness whose
primary responsibilities related to a business of Inverness other than an
Innovations business participate in a benefit plan that is a defined benefit
pension plan that is maintained by Innovations or its subsidiaries, the
liabilities in respect of those participants, together with assets equal to such
liabilities, will be transferred from that defined benefit pension plan to a
benefit plan established or maintained by Inverness or Johnson & Johnson or one
of their respective subsidiaries. Similarly, if Innovations employees or former
employees of Inverness whose primary responsibilities related to a Innovations
business participate in a benefit plan that is a defined benefit pension plan
that is maintained by Inverness or its subsidiaries, the liabilities in respect
of those participants, together with assets equal to such liabilities, will be
transferred from that defined benefit pension plan to a benefit plan established
or maintained by Innovations or one of its subsidiaries.

     Upon the completion of the split-off and merger, with respect to collective
bargaining agreements to which Inverness or its subsidiaries is a party,
Innovations will assume those agreements covering Innovations employees and
Inverness will assume those agreements covering its continuing employees.
Innovations and Inverness also will take all other actions necessary to ensure
that Innovations and Inverness remain solely responsible for the liabilities and
obligations under those collective bargaining agreements covering their
respective employees.

CONVERSION OF OPTIONS AND WARRANTS

     OPTIONS.  Under the terms of the restructuring agreement, each outstanding
option to purchase shares of Inverness common stock is to be converted, as part
of the restructuring, into:

     - an option to purchase the same number of shares of Inverness common
       stock, referred to in this description as the replacement Inverness
       option, and

     - an option to purchase the number of shares of Innovations common stock
       equal to the number of shares of Inverness common stock subject to the
       original Inverness option multiplied by 0.20.

     The exercise prices of the replacement Inverness option and the Innovations
option will be set so that the combined exercise prices of the new options will
equal the exercise price of each original Inverness option to purchase Inverness
common stock. The aggregate exercise price of each original Inverness option
will be allocated between the replacement Inverness option and the Innovations
option in proportion to the deemed fair market value of the shares of Johnson &
Johnson common stock and Innovations common stock, in each case, to be received
for one share of Inverness common stock in the split-off and merger. The deemed
fair market value of such shares will be determined with reference to the
closing prices of Johnson & Johnson common stock on the New York Stock Exchange
and the Innovations common stock on the American Stock Exchange on the first
full trading day following the completion of the split-off and merger.

     The exercise price per share of Inverness common stock issuable under the
replacement Inverness option will be determined by dividing:

     - the aggregate exercise price allocated to the replacement Inverness
       option by

     - the aggregate number of shares of Inverness common stock that may be
       purchased under the replacement Inverness option.

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     The exercise price per share of Innovations common stock issuable under the
Innovations option will be determined by dividing:

     - the aggregate exercise price allocated to the Innovations option by

     - the aggregate number of shares of Innovations common stock that may be
       purchased under the Innovations option.

     All other terms of the original Inverness options will continue to apply to
the replacement Inverness options and the Innovations options, except that (1)
all replacement Inverness options and Innovations options will be fully vested
and immediately exercisable at and following the completion of the split-off and
merger and (2) all replacement Inverness options which will be held by persons
who are not going to be employees or directors of Inverness or its subsidiaries
immediately following the split-off and merger and all Innovations options which
will be held by persons who are not going to be employees or directors of
Innovations or its subsidiaries immediately following the split-off and merger
will, in each case, remain exercisable for the remainder of the originally
stated term of the original Inverness options irrespective of employment by or
service to Johnson & Johnson, Inverness, Innovations or any subsidiaries of
those companies.

     WARRANTS.  Under the terms of the restructuring agreement, each outstanding
warrant to acquire shares of Inverness common stock is to be converted, as part
of the restructuring, into:

     - a warrant to acquire the same number of shares of Inverness common stock,
       referred to in this description as the replacement Inverness warrant and

     - a warrant to acquire the number of shares of Innovations common stock
       equal to the number of shares of Inverness common stock subject to the
       original Inverness warrant multiplied by 0.20.

     The exercise prices of the replacement Inverness warrant and the
Innovations warrant will be set so that the combined exercise prices of the
replacement warrants will equal the exercise price of each original Inverness
warrant to acquire Inverness common stock. The aggregate exercise price of each
original Inverness warrant will be allocated between the replacement Inverness
warrant and the Innovations warrant in proportion to the deemed fair market
value of the shares of Johnson & Johnson common stock and Innovations common
stock, in each case, to be received for one share of Inverness common stock in
the split-off and merger. The deemed fair market value of such shares will be
determined with reference to the closing prices of Johnson & Johnson common
stock on the New York Stock Exchange and the Innovations common stock on the
American Stock Exchange on the first full trading day following the completion
of the split-off and merger.

     The exercise price per share of Inverness common stock issuable under the
replacement Inverness warrant will be determined by dividing:

     - the aggregate exercise price allocated to the replacement Inverness
       warrant by

     - the aggregate number of shares of Inverness common stock that may be
       purchased under the replacement Inverness warrant.

     The exercise price per share of Innovations common stock issuable under the
Innovations warrant will be determined by dividing:

     - the aggregate exercise price allocated to the Innovations warrant by

     - the aggregate number of shares of Innovations common stock that may be
       purchased under the Innovations warrant.

     All other terms of the original Inverness warrants will continue to apply
to the replacement Inverness warrants and the Innovations warrants.

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CONDITIONS

     The obligations of Inverness and Innovations to complete the restructuring
are subject to the fulfillment of each of the following conditions:

     - each of (1) the tax allocation agreement attached to this proxy
       statement/prospectus as Annex 4, (2) the transition services agreement
       described above, (3) the license agreement attached as Annex 6 to this
       proxy statement/prospectus and (4) the sublease of Inverness' current
       corporate headquarters have been executed and delivered by each of
       Inverness, Innovations and Johnson & Johnson

     - each condition to the closing of the merger in the split-off and merger
       agreement, other than the condition to each party's obligation as to the
       consummation of the transactions contemplated by the restructuring
       agreement, has been satisfied or waived

     - liens on assets contributed, or to be contributed, to Innovations and
       capital stock of any Innovations subsidiaries, in each case arising
       pursuant to Inverness' credit agreement dated as of February 18, 1998,
       with Chase Manhattan Bank have been released, and there are no liens on
       Innovations assets or the capital stock of any Innovations subsidiaries
       imposed in connection with the financing required by the split-off and
       merger agreement and

     - the Inverness board of directors is reasonably satisfied that, after
       giving effect to the restructuring, Innovations will not be insolvent and
       will not have unreasonably small capital with which to engage in its
       business.

MUTUAL RELEASE

     Effective upon the completion of the split-off and merger and except as
otherwise specifically set forth in the transaction agreements, each of
Inverness and its subsidiaries, on the one hand, and Innovations and its
subsidiaries, on the other hand, will release and discharge the other and its
affiliates, and their directors, officers, employees and agents of and from all
debts, demands, actions, causes of action, suits, accounts, covenants,
contracts, agreements, damages, and any and all claims, demands and liabilities
whatsoever of every name and nature, both in law and in equity, against such
other person or any of its assigns, which the releasing person has or ever had
(other than those based on fraud, gross negligence or wilful misconduct by such
other person) which arise out of or relate to events, circumstances or actions
taken by such other person prior to the completion of the split-off and merger.
This release does not apply to any transaction agreement or the transactions
contemplated by those agreements and does not affect any person's right to
enforce any transaction agreement or any other agreement contemplated in
accordance with its terms.

TERMINATION

     In the event the split-off and merger agreement is terminated pursuant to
its terms, the restructuring agreement will automatically and simultaneously
terminate and the restructuring and split-off will automatically and
simultaneously be abandoned without the approval of Innovations or the
stockholders of Inverness.

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                       THE SPLIT-OFF AND MERGER AGREEMENT

     This is a summary of the material provisions of the split-off and merger
agreement. The split-off and merger agreement, which is attached as Annex 1 to
this proxy statement/prospectus and is incorporated herein by reference,
contains the complete terms of that agreement. You should read the entire
split-off and merger agreement carefully.

CONDITIONS TO THE COMPLETION OF THE MERGER

     CONDITIONS TO JOHNSON & JOHNSON'S AND INVERNESS' OBLIGATIONS TO COMPLETE
THE MERGER.  Each party's obligation to effect the merger is subject to the
satisfaction or waiver of various conditions that include, in addition to other
customary closing conditions, the following:

     - the split-off and merger agreement has been adopted by the affirmative
       vote of stockholders representing a majority of the shares of Inverness
       common stock outstanding and entitled to vote at the special meeting

     - the shares of Johnson & Johnson common stock to be issued to Inverness
       stockholders upon completion of the split-off and merger have been
       approved for listing on the New York Stock Exchange, subject only to
       official notice of issuance

     - the shares of Innovations common stock to be issued to Inverness
       stockholders upon completion of the split-off and merger have been
       approved for listing on a national securities exchange, or approved for
       quotation on NASDAQ, in either case subject only to official notice of
       issuance

     - the waiting period applicable to the merger under the Hart-Scott-Rodino
       Antitrust Improvements Act has expired or has been terminated

     - no temporary restraining order, injunction or other court order or
       statute, law, rule, legal restraint or prohibition is in effect that
       prevents the completion of the merger

     - the Johnson & Johnson registration statement on Form S-4 and the
       Innovations registration statement on Form S-4, in each case, of which
       this proxy statement/prospectus forms a part, have been declared
       effective by the Securities and Exchange Commission and are not the
       subject of any stop order or proceedings seeking a stop order and

     - the pre-merger transactions, including the restructuring of Inverness and
       the delivery of the executed transaction agreements, have been completed
       in all material respects in accordance with the terms of the split-off
       and merger agreement and the restructuring agreement.

     CONDITIONS TO JOHNSON & JOHNSON'S OBLIGATION TO COMPLETE THE
MERGER.  Johnson & Johnson's obligation to effect the merger is further subject
to satisfaction or waiver of the following additional conditions:

     - the representations and warranties of Inverness set forth in the
       split-off and merger agreement relating to aspects of its capital
       structure, increases in compensation and benefits, noncompetition and
       long-term sale contracts, employee severance arrangements, benefits
       plans, parachute payments, its hypothetical tax basis in Innovations
       common stock, properties and assets retained by Inverness after the
       restructuring, particular aspects of its intellectual property and
       product recalls and related governmental proceedings to the extent that
       they are qualified as to materiality are true and correct, and such
       representations and warranties of Inverness to the extent that they are
       not so qualified are true and correct in all material respects, in each
       case as of the date of the split-off and merger agreement and as of the
       closing date of the split-off and merger as though made on the closing
       date, except to the extent that such representations and warranties
       expressly relate to a specified date, in which case as of that specified
       date

     - all the other representations and warranties of Inverness set forth in
       the split-off and merger agreement are true and correct as of the date of
       the split-off and merger agreement and as of the closing date of the
       merger as though made on the closing date, or if such representations and
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       warranties expressly relate to a specified date, then as of that
       specified date, and except to the extent that the facts or matters as to
       which such representations and warranties are not so true and correct as
       of such dates, without giving effect to any qualifications or limitations
       as to materiality or material adverse effect set forth in such
       representations and warranties, individually or in the aggregate, have
       not had and are not reasonably expected to have a material adverse effect
       on Inverness

     - Inverness has performed in all material respects all obligations required
       to be performed by it under the split-off and merger agreement on or
       prior to the date on which the split-off and merger are to be completed

     - there is no pending suit, action or proceeding by any governmental entity
       relating to any of the transactions contemplated by the split-off and
       merger agreement and the other transaction agreements:

      - challenging the acquisition by Johnson & Johnson or Sunrise Acquisition
        Corp. of any shares of Inverness common stock, seeking to restrain or
        prohibit the completion of the merger or any other transactions
        contemplated by the transaction agreements, or seeking to place
        limitations on the ownership of shares of Inverness common stock (or
        shares of common stock of the surviving corporation in the merger) by
        Johnson & Johnson or Sunrise Acquisition Corp. or seeking to obtain from
        Johnson & Johnson, Inverness or Sunrise Acquisition Corp. any damages
        that are material in relation to Inverness' post-restructuring business

      - seeking to prohibit or materially limit the ownership or operation by
        Inverness or any of its post-closing subsidiaries or Johnson & Johnson
        or any of its subsidiaries of any portion of any post-restructuring
        business of Inverness or of the business or assets of Johnson & Johnson
        and its subsidiaries, or to compel Inverness or any of its
        post-restructuring subsidiaries or Johnson & Johnson or any of its
        subsidiaries to divest or hold separate any portion of the
        post-restructuring business of Inverness or of the business or assets of
        Johnson & Johnson or any of its subsidiaries as a result of the
        transactions contemplated by the transaction agreements or

      - seeking to prohibit Johnson & Johnson or any of its subsidiaries from
        effectively controlling in any material respect any portion of the
        post-restructuring business of Inverness

     - there is no order, ruling, judgment or other similar restraint in effect
       that is reasonably expected to result in any of the effects referred to
       in the previous paragraph

     - Johnson & Johnson has received evidence, in form and substance reasonably
       satisfactory to it, that (1) Inverness has obtained consents of holders
       of particular warrants to acquire shares of Inverness common stock to
       amend their respective warrant agreements to add provisions that will
       facilitate the conversion of the warrants in the manner contemplated by
       the transaction agreements and (2) all consents, approvals,
       authorizations, qualifications and order of governmental entities
       required in connection with the split-off and merger agreement, the other
       transaction agreements and the transactions contemplated by those
       agreements under any applicable competition, merger control, antitrust or
       similar law or regulation of Switzerland or any country that is part of
       the European Union have been obtained, except, in the case of the
       consents, approvals, authorizations, qualifications and orders listed in
       this clause (2), where the failure to obtain them are not reasonably
       expected to restrain or prohibit the consummation of the merger or the
       other transactions contemplated by the transactions agreements or
       prohibit or limit in any material respect the ownership or operation by
       Johnson & Johnson of any portion of the post-restructuring business of
       Inverness

     - the consulting and non-competition agreements with Ron Zwanziger, David
       Scott and Jerry McAleer and all other transaction agreements are in full
       force and effect and none of the parties to those agreements (other than
       Johnson & Johnson) have breached or threatened to breach any material
       covenants contained in those agreements and

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     - Inverness has received at least $50,000,000 of proceeds from financings
       on terms and conditions no less favorable to it than those set forth in a
       commitment letter dated May 18, 2001.

     CONDITIONS TO INVERNESS' OBLIGATION TO COMPLETE THE MERGER.  Inverness'
obligation to effect the merger is further subject to satisfaction or waiver of
the following additional conditions:

     - the representations and warranties of Johnson & Johnson and Sunrise
       Acquisition Corp. set forth in the split-off and merger agreement and the
       other transaction agreements that are qualified as to materiality are
       true and correct, and the representations and warranties of Johnson &
       Johnson and Sunrise Acquisition Corp. that are not so qualified are true
       and correct in all material respects, in each case as of the date of the
       split-off and merger agreement and as of the closing date of the
       split-off and merger as though made on the closing date, or if such
       representations and warranties expressly relate to a specified date, then
       as of such specified date

     - Johnson & Johnson and Sunrise Acquisition Corp. have performed in all
       material respects all obligations required to be performed by them under
       the split-off and merger agreement on or prior to the date on which the
       split-off and merger are to be completed and

     - Inverness has received from Goodwin Procter LLP, counsel to Inverness, on
       the date on which the registration statements on Form S-4 are filed with
       the SEC and on the closing date of the split-off and merger, an opinion,
       in form and substance reasonably satisfactory to Inverness, to the effect
       that (1) the merger will be treated for United States Federal income tax
       purposes as a reorganization within the meaning of Section 368(a) of the
       Internal Revenue Code and (2) Johnson & Johnson and Inverness will each
       be a party to that reorganization within the meaning of Section 368(b) of
       the Internal Revenue Code.

     The split-off and merger agreement provides that a "material adverse
effect" or "material adverse change" means, when used with respect to Inverness,
any change, effect, event, occurrence or state of facts (or any development or
developments which individually or in the aggregate are reasonably expected to
result in any change or effect) that is materially adverse to the business,
properties, assets, liabilities (contingent or otherwise), financial condition
or results of operations of the post-restructuring business of Inverness, other
than any change, effect, event, occurrence, state of facts or development:

     - relating to the economy in general

     - relating to the industries in which Inverness operates in general

     - resulting from changes in foreign currency rates

     - resulting from the effects of the pendency of the transactions
       contemplated by the split-off and merger agreement on current or
       prospective customers or suppliers

     - resulting from any action required to be taken by Inverness or any other
       party pursuant to the transaction agreements in order to effect the
       restructuring of Inverness and the other contemplated transactions and

     - resulting from any unjustified action, including the cancellation or
       extension of any orders for products, taken by Johnson & Johnson or any
       of its affiliates in respect of the business relationship between Johnson
       & Johnson or such affiliate, on the one hand, and Inverness and its
       subsidiaries, on the other hand.

     The split-off and merger agreement provides a "material adverse effect" or
"material adverse change" means, when used with respect to Johnson & Johnson,
any change, effect, event, occurrence or state of facts (or any development or
developments which individually or in the aggregate are reasonably expected to
result in any change or effect) that is materially adverse to the business,
properties, assets, liabilities (contingent or otherwise), financial condition,
results of operations or prospects of Johnson & Johnson or that could reasonably
be expected to impair the ability of Johnson & Johnson to consummate the
transactions contemplated by, or satisfy its obligations under, the split-off
and merger agreement and the

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other transaction agreements, other than any change, effect, event, occurrence,
state of facts or development:

     - relating to the economy in general

     - relating to the industries in which Inverness operates in general

     - resulting from changes in foreign currency rates and

     - resulting from the effects of the pendency of the transactions
       contemplated by the split-off and merger agreement on current or
       prospective customers or suppliers.

NO SOLICITATION

     The split-off and merger agreement provides that Inverness will not, nor
will it authorize or permit any of its subsidiaries, any of its or their
respective directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other advisor, agent or representative retained
by it or any of its subsidiaries to, directly or indirectly through another
person:

     - solicit, initiate or encourage, or take any other action to facilitate,
       any inquiries or the making of any proposal that constitutes, or could
       reasonably be expected to lead to, a takeover proposal, as described
       below or

     - participate in any discussions or negotiations regarding, or furnish to
       any person any information, or otherwise cooperate in any way with, any
       takeover proposal.

     The split-off and merger agreement provides that the term "takeover
proposal" means:

     - any inquiry, proposal or offer from any person relating to, or that is
       reasonably likely to lead to, any direct or indirect acquisition or
       purchase, in one transaction or a series of transactions, of assets or
       businesses of Inverness or its subsidiaries that constitute 20% or more
       of the revenues, net income or assets of Inverness and its subsidiaries,
       taken as a whole, or 20% or more of Inverness' common stock

     - any tender offer or exchange offer that if consummated would result in
       any person beneficially owning 20% or more of Inverness common stock or

     - any merger, consolidation, business combination, recapitalization,
       liquidation, dissolution, joint venture, binding share exchange or
       similar transaction involving Inverness pursuant to which any person or
       the shareholders of any person would own 20% or more of Inverness or any
       resulting parent company of Inverness, other than the transactions
       contemplated by the split-off and merger agreement or the other
       transaction agreements.

     The split-off and merger agreement provides further that, notwithstanding
the restrictions described above, if, at any time prior to the time Inverness
stockholders have adopted the split-off and merger agreement with Johnson &
Johnson:

     - Inverness receives a bona fide written takeover proposal that the
       Inverness board of directors determines in good faith, after consultation
       with outside counsel and a financial advisor of nationally recognized
       reputation, constitutes or is reasonably likely to lead to a superior
       proposal, as described below, and

     - the takeover proposal was unsolicited and made after the date of the
       split-off and merger agreement and did not otherwise result from a breach
       by Inverness of the no solicitation provisions described above,

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Inverness may, if the Inverness board of directors determines in good faith,
after consultation with outside counsel, that it is required to do so in order
to comply with its fiduciary duties to the Inverness stockholders under
applicable law, subject to providing prior notice to Johnson & Johnson:

     - furnish information about Inverness to the person making the takeover
       proposal under a customary confidentiality agreement and

     - participate in discussions or negotiations with the person making the
       takeover proposal regarding the takeover proposal.

     The split-off and merger agreement provides that the term "superior
proposal" means any bona fide offer made by a third party that if completed
would result in that person (or its shareholders) owning, directly or
indirectly, all or substantially all of the shares of Inverness common stock
then outstanding (or of the surviving entity in a merger or the direct or
indirect parent of the surviving entity in a merger) or all or substantially all
the assets of Inverness and its subsidiaries, taken as a whole, which the
Inverness board of directors determines in good faith, after consultation with a
financial advisor of nationally recognized reputation, to be more favorable to
the Inverness stockholders from a financial point of view than the merger,
taking into account all the terms and conditions of such proposal, including its
financial terms and the likelihood of the proposal being completed, and the
split-off and merger agreement with Johnson & Johnson, including any changes to
the financial terms of the split-off and merger agreement proposed by Johnson &
Johnson in response to such proposal or otherwise.

     The split-off and merger agreement provides further that neither the
Inverness board of directors nor any committee of the Inverness board of
directors may:

     - withdraw or modify in a manner adverse to Johnson & Johnson, or propose
       to withdraw or modify in a manner adverse to Johnson & Johnson, the
       approval, recommendation or declaration of advisability by the Inverness
       board of directors or committee of the Inverness board of directors of
       the split-off and merger agreement

     - recommend, adopt or approve, or propose publicly to recommend, adopt or
       approve, any takeover proposal or

     - approve or recommend, or propose to approve or recommend, or allow
       Inverness or any of its subsidiaries to execute or enter into, any letter
       of intent, memorandum of understanding, agreement in principle, merger
       agreement, acquisition agreement, option agreement, joint venture
       agreement, partnership agreement or other similar agreement constituting
       or related to, or that is intended to or is reasonably likely to lead to,
       any takeover proposal.

     However, at any time before Inverness stockholders have adopted the
split-off and merger agreement with Johnson & Johnson, the Inverness board of
directors may, in response to an unsolicited superior proposal that was made
after the date of the split-off and merger agreement and that did not otherwise
result from a breach of the no solicitation provisions of the split-off and
merger agreement, if the board of directors determines in good faith, after
consultation with outside counsel, that it is required to do so in order to
comply with its fiduciary duties to Inverness' stockholders under applicable
law, withdraw or modify its recommendation of the split-off and merger agreement
or recommend the approval of the superior proposal and/or cause Inverness to
terminate the split-off and merger agreement. No withdrawal of the Inverness
board of directors' recommendation of the split-off and merger agreement or
recommendation of the superior proposal may be made, and no such termination by
Inverness may be made, until after the fourth business day following Johnson &
Johnson's receipt of written notice from Inverness advising Johnson & Johnson
that the Inverness board of directors intends to take such action and specifying
the terms and conditions of such superior proposal. In determining whether to
take such action, the Inverness board of directors must take into account any
changes to the financial terms of the split-off and merger agreement proposed by
Johnson & Johnson in response to its receipt of such written notice from
Inverness or otherwise.

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     In addition to the no solicitation provisions described above, the
split-off and merger agreement provides that Inverness must promptly advise
Johnson & Johnson orally and in writing of any takeover proposal, the material
terms and conditions of any takeover proposal and the identity of the person
making any takeover proposal. Inverness must keep Johnson & Johnson fully
informed of the status and material details, including any changes to the
material terms, of any such takeover proposal and must provide to Johnson &
Johnson, as soon as practicable after receipt or delivery, with copies of all
correspondence and other written material sent or provided to Inverness from any
person in connection with any takeover proposal or sent or provided by Inverness
to any person in connection with any takeover proposal, except for
correspondence and materials previously provided to Johnson & Johnson by
Inverness.

     Nothing in the split-off and merger agreement prohibits Inverness from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Securities
Exchange Act or from making any required disclosure to Inverness' stockholders
if, in the good faith judgment of the Inverness board of directors, after
consultation with outside counsel, failure to make such a disclosure would
constitute a violation of applicable law. Neither Inverness nor its board of
directors or any committee of the board of directors may withdraw its
recommendation of the split-off and merger agreement, recommend a takeover
proposal or enter into an agreement regarding a takeover proposal in a manner
prohibited by the no solicitation provisions described above.

TERMINATION OF THE SPLIT-OFF AND MERGER AGREEMENT

     The split-off and merger agreement may be terminated at any time prior to
the completion of the split-off and merger, even if the split-off and merger
agreement has been adopted by the Inverness stockholders:

     - by mutual written consent of Johnson & Johnson, Sunrise Acquisition Corp.
       and Inverness

     - by either Johnson & Johnson or Inverness, if the merger has not been
       completed by January 31, 2002, except that this right to terminate the
       split-off and merger agreement will not be available to any party whose
       action or failure to act has been a principal cause of or resulted in the
       failure of the merger to be completed on or before that date

     - by either Johnson & Johnson or Inverness, if there exists a restraining
       order, injunction or other court order or statute, law, rule, legal
       restraint or prohibition, in each case that has become final and cannot
       be appealed and which prevents the completion of the merger

     - by either Johnson & Johnson or Inverness, if the Inverness stockholders
       do not adopt the split-off and merger agreement at the special meeting

     - by either Johnson & Johnson or Inverness, if the other party has breached
       or failed to perform any of its representations, warranties, covenants or
       agreements set forth in the split-off and merger agreement, which breach
       or failure to perform would give rise to the failure of a condition to
       the merger and has not been or cannot be cured within 30 calendar days
       following receiving written notice from the other party of such breach or
       failure to perform

     - by Johnson & Johnson if there exists a final, non-appealable order,
       ruling, judgment or other similar legal restraint that is reasonably
       expected to (1) prohibit or materially limit the direct or indirect
       acquisition or ownership of Inverness common stock by Johnson & Johnson,
       (2) restrain or prohibit the completion of the merger or any of the other
       transactions contemplated by the transaction agreements, (3) obtain from
       Inverness, Johnson & Johnson or Sunrise Acquisition Corp. any damages
       that are material in relation to the post-restructuring business of
       Inverness, (4) prohibit or materially limit the ownership or operation by
       Inverness or any of its post-closing subsidiaries or Johnson & Johnson or
       any of its subsidiaries of any portion of the post-restructuring business
       of Inverness or the business or assets of Johnson & Johnson and its
       subsidiaries, (5) compel Inverness or any of its post-closing
       subsidiaries or Johnson & Johnson or any of its subsidiaries to divest or
       hold separate any portion of the post-restructuring business of Inverness
       or of the business or assets of Johnson & Johnson or any of its
       subsidiaries as a result of the transactions contemplated by the
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       transaction agreements or (6) prohibit Johnson & Johnson or any of its
       subsidiaries from effectively controlling in any material respect any
       portion of the post-restructuring business of Inverness

     - by Johnson & Johnson, if the Inverness board of directors or any
       committee of the Inverness board of directors withdraws, or modifies in a
       manner adverse to Johnson & Johnson, or proposes to withdraw, or modify
       in a manner adverse to Johnson & Johnson, its approval, recommendation or
       declaration of advisability of the split-off and merger agreement or
       recommends, adopts or approves, or proposes publicly to recommend, adopt
       or approve, any takeover proposal or

     - by Inverness in response to a superior proposal and in accordance with
       the no solicitation provisions described above.

FEES AND EXPENSES

     GENERAL.  The split-off and merger agreement provides that each party will
pay its own fees and expenses in connection with the split-off and merger
agreement and the transactions contemplated by the split-off and merger
agreement, whether or not the split-off and merger are completed. See
"Post-Closing Arrangements -- Post-Closing Covenants Agreement -- Expenses" for
further information on how Inverness and Innovations will allocate their
expenses directly related to the restructuring, split-off and merger.

     TERMINATION FEE.  Inverness must pay to Johnson & Johnson a termination fee
of $28 million in each of the following circumstances:

     - the split-off and merger agreement is terminated by Johnson & Johnson
       pursuant to its right described in the second to last bullet point under
       "--Termination of the Split-off and Merger Agreement"

     - the split-off and merger agreement is terminated by Inverness pursuant to
       its right described in the last bullet point under "--Termination of the
       Split-off and Merger Agreement" or

     - a takeover proposal is made to Inverness or directly to the Inverness
       stockholders generally or otherwise becomes publicly known or any person
       publicly announces an intention, whether or not conditional, to make a
       takeover proposal, the split-off and merger agreement is terminated by
       either Johnson & Johnson or Inverness pursuant to their right to
       terminate if the merger has not been consummated on or before January 31,
       2002 without a vote at the Inverness stockholder's meeting having been
       taken or pursuant to their right to terminate if stockholder approval has
       not been obtained at the Inverness stockholders' meeting, and within 12
       months after such termination, Inverness enters into a definitive
       agreement for, or completes, the transactions contemplated by any
       takeover proposal (involving the acquisition or purchase of assets or
       businesses of Inverness constituting 35% or more, rather than 20%, of
       Inverness' revenues, net income, assets or stock).

CONDUCT OF BUSINESS PENDING THE SPLIT-OFF AND MERGER

     Under the split-off and merger agreement, Inverness has agreed that,
subject to specified exceptions, during the period from the date of the
split-off and merger agreement to the time when the split-off and merger are
completed, it will, and will cause each of its subsidiaries to, carry on its
business in the ordinary course of business consistent with past practice,
including in respect of research and development activities and programs and
making capital expenditures as described in Inverness' 2001 budget with respect
to the post-restructuring business of Inverness, and in compliance in all
material respects with all applicable laws and regulations and, to the extent
consistent with such laws and regulations, will use all commercially reasonable
efforts to preserve intact their current business organizations, keep available
the services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them with the intention that their goodwill
and ongoing businesses will be unimpaired at the time the split-off and merger
are completed. In addition, without limiting the generality of the foregoing,
during the period from the date of the split-off and merger agreement to the
time the split-off and merger are completed, Inverness has agreed that,

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subject to specified exceptions, it will not, and will not permit any of its
subsidiaries to, without Johnson & Johnson's prior written consent:

     - declare, set aside or pay any dividends on, or make any other
       distributions (whether in cash, stock or property) in respect of, any of
       its capital stock

     - split, combine or reclassify any of its capital stock or issue or
       authorize the issuance of any other securities in respect of, in lieu of
       or in substitution for shares of its capital stock

     - purchase, redeem or otherwise acquire any shares of its capital stock or
       any other securities of Inverness or any rights, warrants or options to
       acquire any such shares or other securities

     - issue, deliver, sell, grant, pledge or otherwise encumber or subject to
       any lien any shares of its capital stock, any other voting securities,
       equity interests or any securities convertible into, or any rights,
       warrants or options to acquire, any such shares, voting securities or
       convertible securities, or any "phantom" stock, "phantom" stock rights,
       stock appreciation rights or stock based performance units, other than:

      - the issuance of shares of Inverness common stock upon the exercise of
        stock options, warrants or rights under Inverness' employee stock
        purchase plan to acquire Inverness common stock outstanding on the date
        of the split-off and merger agreement and

      - the issuance of stock options (and shares of Inverness common stock upon
        the exercise of these options) to any employee of Inverness hired after
        the date of the split-off and merger agreement in connection with that
        hiring, provided that the issuance is in the ordinary course of business
        consistent with past practice and that the stock options have an
        exercise price per share at least equal to the market value of Inverness
        common stock on the date of issuance and with other material terms no
        more favorable to such employee than the terms of the existing Inverness
        stock options issued under similar circumstances

     - amend or propose to amend the Inverness certificate of incorporation or
       the Inverness by-laws or other comparable organizational documents of any
       of Inverness' subsidiaries

     - directly or indirectly acquire (1) by merging or consolidating with, or
       by purchasing assets of, or by any other manner, any person or division,
       business or equity interest of any person or (2) any assets that,
       individually, have a purchase price in excess of $50,000 or, in the
       aggregate, have a purchase price in excess of $250,000, except for
       purchases of raw materials, components or supplies in the ordinary course
       of business consistent with past practice

     - sell, lease, license, mortgage, sell and leaseback or otherwise encumber
       or subject to any lien or otherwise dispose of any of its properties or
       other assets or any interests therein (including securitizations), except
       for sales of inventory and used equipment in the ordinary course of
       business consistent with past practice

     - incur any indebtedness for borrowed money or guarantee any such
       indebtedness of another person, issue or sell any debt securities or
       warrants or other rights to acquire any debt securities of Inverness,
       guarantee any debt securities of another person, enter into any "keep
       well" or other agreement to maintain any financial statement condition of
       another person or enter into any arrangement having the economic effect
       of any of the foregoing, except for short-term borrowings incurred in the
       ordinary course of business consistent with past practice not to exceed
       $250,000 at any time outstanding

     - make any loans, advances or capital contributions to, or investments in,
       any other person, other than to employees in the ordinary course of
       business consistent with past practice

     - except for projects specifically identified in Inverness' 2001 budget,
       make any new capital expenditure or expenditures which, individually, is
       in excess of $50,000 or, in the aggregate, are in excess of $250,000

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     - pay, discharge, settle or satisfy any claims, liabilities, obligations or
       litigation (absolute, accrued, asserted or unasserted, contingent or
       otherwise), other than the payment, discharge, settlement or satisfaction
       in the ordinary course of business consistent with past practice or in
       accordance with their terms, of liabilities disclosed, reflected or
       reserved against in the most recent audited financial statements of
       Inverness (or the notes thereto) filed with the Securities and Exchange
       Commission or incurred since the date of such financial statements in the
       ordinary course of business consistent with past practice, cancel any
       indebtedness for borrowed money, waive or assign any claims or rights of
       substantial value, waive any benefits of, or agree to modify in any
       respect, any confidentiality, standstill or similar agreements to which
       Inverness or any of its post-closing subsidiaries is a party

     - except in the ordinary course of business consistent with past practice,
       modify, amend or terminate any material contract or agreement to which
       Inverness or any of its subsidiaries is a party or waive, release or
       assign any material rights or claims thereunder

     - enter into any contracts, agreements, binding arrangements or
       understandings relating to the supply of components for the research,
       development, distribution, manufacturing and assembling by third parties
       of, and the training, license and marketing of, products of Inverness or
       any of its subsidiaries or products licensed by Inverness or any of its
       subsidiaries, other than under any contracts, agreements, arrangements or
       understandings currently in place, that have been disclosed in writing to
       Johnson & Johnson prior to the date of the split-off and merger
       agreement, in accordance with their terms as of the date of the split-off
       and merger agreement

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, adopt, enter into, terminate
       or amend in any material respect any collective bargaining agreement,
       benefit plan or any benefit agreement involving Inverness or any of its
       subsidiaries and their current or former directors, officers, employees
       or consultants

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, increase in any manner the
       compensation, bonus or fringe or other benefits of, any current or former
       officer, director, employee or consultant of Inverness or any of its
       subsidiaries, except for normal increases in cash compensation in the
       ordinary course of business consistent with past practice

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, pay any benefit or amount not
       required under any benefit plan or benefit agreement or any other benefit
       arrangement of Inverness or any of its subsidiaries as in effect on the
       date of the split-off and merger agreement

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, increase in any manner the
       severance or termination pay of any current or former director, officer,
       employee or consultant of Inverness or any of its subsidiaries

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, make any material
       determinations not in the ordinary course of business consistent with
       past practice, under any collective bargaining agreement, benefit plan or
       benefit agreement of Inverness or any of its subsidiaries as in effect on
       the date of split-off and merger agreement

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, grant any awards under any
       bonus, incentive, performance or other compensation plan or arrangement
       or benefit plan, except for the issuance of stock options to any employee
       of Inverness hired after the date of the split-off and merger agreement
       and otherwise in compliance with the terms of the split-off and merger
       agreement

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     - except as otherwise contemplated by the split-off and merger agreement,
       the restructuring agreement or as required to comply with applicable law,
       amend or modify any stock option or warrant

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, take any action to fund or in
       any other way secure the payment of compensation or benefits under any
       employee plan, agreement, contract or arrangement or benefit plan

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, take any action to accelerate
       the vesting or payment of any compensation or benefit under any benefit
       plan or benefit agreement, other than non-discretionary actions required
       by the terms of any existing benefit plans or benefit agreement as in
       effect on the date of the split-off and merger agreement

     - except as otherwise contemplated by the split-off and merger agreement or
       as required to comply with applicable law, change any actuarial or other
       assumption used to calculate funding obligations with respect to any
       pension plan or change the manner in which contributions to any pension
       plan are made or the basis on which such contributions are determined

     - except as otherwise contemplated by the split-off and merger agreement,
       enter into any agreement of a nature that would be required to be filed
       as an exhibit to Form 10-K under the Securities Exchange Act, other than
       contracts for the sale of Inverness' products in the ordinary course of
       business consistent with past practice

     - revalue any material assets of Inverness or any of its subsidiaries or,
       except as required by generally accepted accounting principles, make any
       change in accounting methods, principles or practices

     - except in the ordinary course of business consistent with past practice,
       extend, accelerate, discount, compromise or settle any account payable or
       account receivable

     - sell, transfer or license to any person or otherwise extend, amend or
       modify any rights to the intellectual property rights of Inverness or any
       of its subsidiaries or

     - authorize any of, or commit, propose or agree to take any of, the
       foregoing actions.

     Despite the prohibitions listed above, prior to the completion of the
split-off and merger, Innovations is entitled to enter into contractual and
other arrangements and understandings with third parties related solely to the
Innovations businesses, subject to specified limitations.

REPRESENTATIONS AND WARRANTIES

     The split-off and merger agreement contains representations and warranties
relating to, among other things:

     - corporate organization and similar corporate matters of Johnson &
       Johnson, Sunrise Acquisition Corp. and Inverness

     - capital structure of Inverness

     - obligations with respect to the capital stock of Inverness

     - authorization, execution, delivery, performance and enforceability of,
       and required consents, approvals, orders and authorizations of
       governmental authorities relating to, the split-off and merger agreement
       and other transaction agreements of Johnson & Johnson, Sunrise
       Acquisition Corp. and Inverness

     - approval by the Inverness board of directors of the split-off and merger
       agreement, the other transaction agreements and related transactions

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     - documents filed by each of Johnson & Johnson and Inverness with the
       Securities and Exchange Commission and the accuracy of information
       contained in such documents

     - absence of undisclosed liabilities of Johnson & Johnson and Inverness

     - accuracy of information supplied by each of Johnson & Johnson, Sunrise
       Acquisition Corp. and Inverness in connection with this proxy
       statement/prospectus and the registration statement of which it is a part

     - absence of material changes or events concerning Inverness

     - pending or threatened material litigation of Inverness

     - accuracy of financial statements of Inverness Medical Limited, a
       subsidiary of Inverness

     - certain contracts and agreements of Inverness, including agreements that
       relate to the research, development, distribution, training, sale,
       license, marketing and supply of components for, and manufacturing of by
       third parties of, the products of Inverness or products licensed by
       Inverness

     - compliance with applicable laws, including environmental laws, the
       Federal Food, Drug and Cosmetic Act of 1938 and the regulations of the
       Food and Drug Administration, by Inverness

     - absence of changes in benefit plans and labor relations matters of
       Inverness

     - matters relating to the Employee Retirement Income Security Act for
       Inverness

     - absence of excess parachute payments to any director, officer, employee
       or consultant of Inverness or its affiliates

     - filing of tax returns and payment of taxes by Inverness

     - the hypothetical tax basis of Inverness in Innovations common stock, the
       tax basis of the assets held by Inverness Medical Inc., a subsidiary of
       Inverness, and the net operating loss carryovers of Inverness

     - title to Inverness' properties and Inverness' compliance with the terms
       of its material leases

     - the property and assets of the post-restructuring business of Inverness

     - intellectual property rights of Inverness

     - required stockholder vote of Inverness and no required stockholder vote
       of Johnson & Johnson

     - satisfaction of the requirements of certain state takeover statutes and
       provisions of the Inverness certificate of incorporation and the
       Inverness by-laws by Inverness

     - engagement and payment of fees of brokers, investment bankers, finders
       and financial advisors of Johnson & Johnson and Inverness

     - receipt by Inverness of opinions from ABN AMRO and UBS Warburg

     - absence of actions by Johnson & Johnson, Sunrise Acquisition Corp. and
       Inverness that would prevent the merger from qualifying as a tax-free
       reorganization for Federal income tax purposes

     - compliance by Inverness with applicable regulatory and governmental
       requirements

     - solvency of Innovations

     - organization and operations of Sunrise Acquisition Corp. and

     - Johnson & Johnson common stock to be issued in the merger.

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CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION

     The split-off and merger agreement provides that (1) the amended and
restated certificate of incorporation of Inverness, as in effect immediately
prior to the completion of the split-off and merger, will be the certificate of
incorporation of the surviving corporation until thereafter changed or amended,
except that the name of Inverness will be changed to Sunrise Acquisition Corp,
and (2) the by-laws of Sunrise Acquisition Corp., as in effect immediately prior
to the completion of the split-off and merger, will be the by-laws of the
surviving corporation until thereafter changed or amended.

AMENDMENT

     The split-off and merger agreement may be amended by the parties to it at
any time before or after the stockholders of Inverness adopt the split-off and
merger agreement with, if necessary, the approval of their respective boards of
directors, except that after the Inverness stockholders adopt the split-off and
merger agreement, no amendment may be made that by law requires further approval
by the stockholders of Inverness or the approval of the stockholders of Johnson
& Johnson without such approval. The split-off and merger agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties to it. At any time prior to the adoption of the split-off and merger
agreement by the Inverness stockholders, Inverness may, in its sole discretion,
unilaterally change the number of shares of Innovations common stock to be
received in exchange for each share of Inverness common stock in the split-off
and merger with, if necessary, approval of its board of directors.

EXTENSION; WAIVER

     At any time prior to the completion of the split-off and merger, a party
may, by written instrument signed on behalf of such party:

     - extend the time for performance of any of the obligations or other acts
       of any other party to the split-off and merger agreement

     - waive inaccuracies in representations and warranties of any other party
       contained in the split-off and merger agreement or in any related
       document or

     - waive compliance with any of the agreements or conditions in the
       split-off and merger agreement, except that no such waiver may be made
       after the split-off and merger agreement has been adopted by the
       stockholders of Inverness which by law requires further approval by the
       stockholders of Inverness or the approval of the stockholders of Johnson
       & Johnson unless such approval is obtained.

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                           THE STOCK OPTION AGREEMENT

     This is a summary of the material provisions of the stock option agreement
between Johnson & Johnson and Inverness. The stock option agreement, which is
attached as Annex 2 to this proxy statement/prospectus and is incorporated
herein by reference, contains the complete terms of that agreement. You should
read the entire stock option agreement carefully.

GENERAL

     Concurrently with the execution and delivery of the split-off and merger
agreement, Johnson & Johnson and Inverness entered into a stock option agreement
under which Inverness granted Johnson & Johnson an option to purchase up to
6,417,689 shares of Inverness common stock, at a purchase price of $38.00 per
share.

EXERCISE OF THE OPTION

     Except as described below, the option is exercisable by Johnson & Johnson
at any time after the occurrence of any event as a result of which Johnson &
Johnson is entitled to receive the termination fee under the split-off and
merger agreement. The right to purchase shares under the Inverness stock option
agreement will expire upon the first to occur of:

     - the completion of the split-off and merger

     - 12 months after the first occurrence of any event as a result of which
       Johnson & Johnson is entitled to receive the termination fee under the
       split-off and merger agreement and

     - termination of the split-off and merger agreement prior to the occurrence
       of any event as a result of which Johnson & Johnson is entitled to
       receive the termination fee, unless Johnson & Johnson has the right to
       receive such termination fee upon the occurrence of certain events, in
       which case the option will not terminate until the later of (1) ten
       business days following the time such termination fee becomes payable and
       (2) the expiration of the period during which Johnson & Johnson has the
       right to receive a termination fee.

     Any purchase of shares upon the exercise of the option is subject to
compliance with the Hart-Scott-Rodino Antitrust Improvements Act and the
obtaining or making of any governmental or regulatory consents, approvals,
orders, notifications, filings or authorizations, the failure of which to have
obtained or made would make the issuance of shares subject to the option
illegal. If the option has been exercised before its termination, Johnson &
Johnson will be entitled to purchase the option shares and the termination of
the option will not affect any rights under the stock option agreement. If
Johnson & Johnson receives notice that a regulatory approval required for the
purchase of any option shares under the option will not be issued or granted or
such regulatory approval has not been issued or granted within six months of the
date of the exercise notice, Johnson & Johnson will have the right to exercise
its cash-out right with respect to the option shares for which such regulatory
approval will not be issued or granted or has not been issued or granted.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

     The number and type of securities subject to the option and the purchase
price will be adjusted for any change in the common stock subject to the option
by reason of a stock dividend, split-up, merger, recapitalization, combination,
exchange of shares or similar transaction, such that Johnson & Johnson will
receive, upon exercise of the option, the number and type of securities that it
would have received if the option had been exercised immediately before the
occurrence of such event, or the record date of such event. If any additional
shares of Inverness common stock are issued after the date of the stock option
agreement, or if the number of outstanding shares of Inverness common stock is
reduced, the number of shares of Inverness common stock subject to the option
will be adjusted so that, after such issuance or reduction, it equals the same
percentage of the aggregate number of issued and outstanding shares of Inverness
common stock as it did prior to such issuance or reduction. The stock option
agreement provides
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further that in no event may the number of shares of Inverness common stock
subject to the option exceed 19.9% of the issued and outstanding shares of
Inverness common stock at the time of exercise of the option, without giving
effect to the issuance of shares pursuant to such exercise.

     If Inverness agrees to (1) consolidate with or merge into any person other
than Johnson & Johnson or one of its subsidiaries, (2) permit any person other
than Johnson & Johnson or one of its subsidiaries to merge into it or (3) sell
or otherwise transfer all or substantially all of its assets to any person other
than Johnson & Johnson or one of its subsidiaries, then the agreement governing
that transaction must provide that the option will, upon the completion of such
transaction, be converted into or exchanged for an option to acquire the number
and class of shares or other securities or property Johnson & Johnson would have
received in respect of Inverness common stock if the option had been exercised
immediately prior to such consolidation, merger, sale or transfer, or the record
date of such event.

CASH PAYMENTS FOR THE OPTION

     Instead of purchasing shares of common stock under the option, Johnson &
Johnson may exercise its right to have Inverness pay to Johnson & Johnson an
amount per share of Inverness common stock equal to the number of shares of
Inverness common stock subject to the option multiplied by the difference
between:

     - the average closing price on the American Stock Exchange of shares of
       Inverness common stock for the 10 trading days commencing on the 12th
       trading day immediately preceding the date on which Johnson & Johnson
       notifies Inverness of its exercise of the option and

     - the per share exercise price of the option.

LIMITATION ON TOTAL PROFIT

     In addition, the stock option agreement provides that in no event will
Johnson & Johnson's total profit from the option exceed in the aggregate $28
million minus any termination fee actually received by Johnson & Johnson
pursuant to the terms of the split-off and merger agreement and, if Johnson &
Johnson's total profit under the stock option agreement or as part of the
termination fee would otherwise exceed such amount, Johnson & Johnson is
required to:

     - reduce the number of shares of common stock subject to the option

     - deliver to Inverness for cancellation shares of Inverness common stock
       previously purchased by Johnson & Johnson under the option

     - pay cash to Inverness or

     - do any combination of the foregoing, so that Johnson & Johnson's total
       profit from the option does not exceed such amount.

REGISTRATION RIGHTS AND LISTING

     Johnson & Johnson has certain rights to require registration by Inverness
of any shares purchased under the option under the securities laws if necessary
for Johnson & Johnson to be able to sell such shares and to require the listing
of such shares on the American Stock Exchange or other national securities
exchange or national securities quotation system.

ASSIGNABILITY; TRANSFER RESTRICTIONS

     The stock option agreement may not be assigned or delegated by Johnson &
Johnson or Inverness without the prior written consent of the other. Shares of
Inverness common stock received by Johnson & Johnson pursuant to an exercise of
the option may not be sold, assigned, transferred or otherwise disposed of
except (1) in an underwritten public offering pursuant to its registration
rights or (2) to a purchaser or transferee who would not, immediately after such
sale, assignment, transfer or disposal, beneficially own

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more than 5.0% of the outstanding voting power of Inverness stockholders.
However, Johnson & Johnson is permitted to sell any shares if the sale is made
in connection with a tender or exchange offer that has been approved or
recommended by a majority of the members of the Inverness board of directors.

EFFECT OF STOCK OPTION AGREEMENT

     The stock option agreement is intended to increase the likelihood that the
split-off and merger will be completed on the terms set forth in the split-off
and merger agreement. Consequently, certain aspects of the stock option
agreement may discourage persons who might now or prior to the completion of the
split-off and merger be interested in acquiring all or a significant interest in
Inverness from considering or proposing such an acquisition, even if such
persons were prepared to offer higher consideration per share for Inverness
common stock than that the aggregate consideration offered to Inverness common
stock holders as part of the split-off and merger agreement.

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                           POST-CLOSING ARRANGEMENTS

     This is a summary of material post-closing arrangements with respect to,
among other things, tax allocation, indemnification, noncompetition,
solicitation and hiring of employees and the licensing of intellectual property
rights to Innovations. The tax allocation agreement, which is attached as Annex
4 to this proxy statement/prospectus and is incorporated herein by reference,
contains the complete terms of that agreement. The post-closing covenants
agreement, which is attached as Annex 5 to this proxy statement/prospectus and
is incorporated herein by reference, contains the complete terms of that
agreement. The license agreement, which is attached as Annex 6 to this proxy
statement/prospectus and is incorporated herein by reference, contains the
complete terms of that agreement. You should read those agreements carefully.

THE TAX ALLOCATION AGREEMENT

     Prior to the restructuring, Inverness, Innovations and Johnson & Johnson
will enter into a tax allocation agreement which sets forth each party's rights
and obligations with respect to payments and refunds, if any, of Federal, state,
local or foreign taxes for periods before and after the split-off and merger and
related matters such as the filing of tax returns and the conduct of audits and
other tax proceedings.

     PREPARATION AND FILING OF TAX RETURNS.  Innovations is responsible for
preparing and filing (or causing to be prepared and filed) all separate state,
local or foreign tax returns of Innovations and its post-closing subsidiaries,
referred to as the Innovations group, and any consolidated, combined, unitary or
aggregate state, local, or foreign tax returns that do not include Inverness or
any of its post-closing subsidiaries, referred to as the Inverness group.
Johnson & Johnson is responsible for preparing and filing (or causing to be
prepared and filed), with the cooperation of Innovations and the members of the
Innovations group, all other tax returns.

     PAYMENTS WITH RESPECT TO TAXES.  For all taxes with respect to which
Johnson & Johnson, Inverness or any other member of the Inverness group is
required to file a tax return as described above, Innovations will pay Inverness
the amount of the taxes attributable to the Innovations business within ten
business days after receipt from Johnson & Johnson or Inverness of a copy of the
tax return (or a copy of the decision or agreement with respect to any final
determination regarding the period to which the tax return relates), together
with a statement showing in reasonable detail the calculation of any taxes
attributable to the Innovations business. The tax allocation agreement provides
specific guidelines for calculating the amount of taxes attributable to the
Innovations business.

     For all taxes with respect to which Innovations or any other member of the
Innovations group is required to file a tax return as described above, Inverness
will pay Innovations the amount of the taxes attributable to the Inverness
group's business within ten days after receipt from Innovations of a copy of the
tax return (or a copy of the decision or agreement with respect to any final
determination regarding the period to which the tax return relates), together
with a statement showing in reasonable detail the calculation of any taxes
attributable to the Inverness group's business. The tax allocation agreement
provides specific guidelines for calculating the amount of taxes attributable to
the Inverness group's business.

     INDEMNIFICATION.  Inverness and each other member of the Inverness group
will indemnify and hold Innovations and each member of the Innovations group
harmless from and against:

     - any liability for taxes attributable to the Inverness group's business as
       calculated pursuant to the tax allocation agreement and

     - any liability for taxes directly or indirectly attributable to the
       split-off or merger or any related transaction.

     Innovations and each other member of the Innovations group will indemnify
and hold Johnson & Johnson, Inverness and each other member of the Inverness
group harmless from and against any liability for taxes attributable to the
Innovations businesses as calculated pursuant to the tax allocation agreement.

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     COOPERATION.  Johnson & Johnson and Inverness, on the one hand, and
Innovations, on the other hand, will, and will cause the members of the
Inverness group and the Innovations group, respectively, to, cooperate with each
other in the preparation and filing of tax returns and the conduct of any audit
or other proceeding, and will deliver powers of attorney and make available
other documents as are necessary to carry out the intent of the tax allocation
agreement. Johnson & Johnson, Inverness and Innovations will use reasonable
efforts to reduce any transfer, sales or other similar taxes that may be
incurred with respect to the transactions contemplated by the transaction
agreements.

THE POST-CLOSING COVENANTS AGREEMENT

     Prior to the completion of the split-off and merger, Johnson & Johnson,
Inverness, certain subsidiaries of Inverness, Innovations and certain
subsidiaries of Innovations will enter into the post-closing covenants
agreement. The post-closing covenants agreement will govern the terms of the
relationship between Johnson & Johnson and Inverness, on the one hand, and
Innovations, on the other hand, after the completion of the split-off and merger
with respect to, among other things, indemnification rights, payment of
restructuring, split-off and merger expenses, non-compete and nonsolicitation
agreements and adjustments to the net cash position of Innovations.

     INDEMNIFICATION BY INNOVATIONS AND ITS SUBSIDIARIES.  The post-closing
covenants agreement provides that Innovations and its post-closing subsidiaries,
referred to as the Innovations companies, will jointly and severally indemnify,
defend and hold harmless Johnson & Johnson and its affiliates, subsidiaries and
representatives, referred to as the Johnson & Johnson indemnitees, from and
against, and pay or reimburse the Johnson & Johnson indemnities for all losses,
as incurred:

     - relating to or arising from the Innovations businesses or the assets or
       liabilities transferred to and assumed by Innovations in the
       restructuring, whether such losses relate to or arise from events,
       occurrences, action, omissions, facts or circumstances occurring,
       existing or asserted before, at or after the completion of the split-off
       and merger

     - relating to or arising from any untrue statement or alleged untrue
       statement of a material fact relating to any Innovations company,
       contained in any of the filings made or required to be made with the SEC
       in connection with the transactions contemplated by the split-off and
       merger agreement and the other transaction agreements, or any omission or
       alleged omission to state in any of the filings a material fact relating
       to any Innovations company required to be stated in the filings or
       necessary to make the statements in the filings, in light of the
       circumstances under which they were made, not misleading, but only with
       respect to statements made in the filings or incorporated by reference in
       the filings based upon information supplied by any Innovations company
       specifically for inclusion or incorporation by reference in the filings

     - relating to or arising from the breach by any Innovations company of any
       agreement or covenant contained in any transaction agreement which is to
       be performed or complied with after the completion of the split-off and
       merger or

     - relating to or arising from the failure of Inverness to obtain, prior to
       the completion of the split-off and merger, the consent of particular
       holders of warrants to purchase Inverness common stock to amend the terms
       of those warrants to permit their conversion into warrants to purchase
       Johnson & Johnson common stock and Innovations common stock as
       contemplated by the transaction agreements.

     Notwithstanding the joint and several nature of the indemnification
obligations described above, each Innovations subsidiary will only be liable for
losses:

     - in the case of the losses described in the first bullet point of this
       subsection, relating to or arising from (1) the Innovations business
       conducted by that Innovations subsidiary, (2) the assets used, held for
       use or intended for use in the Innovations business conducted by that
       Innovations subsidiary and (3) the liabilities of or attributable to the
       Innovations business of that Innovations subsidiary and
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     - in the case of the losses described in the third bullet point of this
       subsection, relating to or arising from a breach by that Innovations
       subsidiary.

     INDEMNIFICATION BY INVERNESS AND ITS POST-CLOSING SUBSIDIARIES.  The
post-closing covenants agreement provides that Inverness and its post-closing
subsidiaries will jointly and severally indemnify, defend and hold harmless
Innovations, its affiliates, subsidiaries and representatives, referred to as
the Innovations indemnitees, from and against, and pay or reimburse the
Innovations indemnitees for:

     - all losses, as incurred, relating to or arising from Inverness'
       post-restructuring business or the assets or liabilities retained by
       Inverness in the restructuring, whether such losses related to or arise
       from events, occurrences, actions, omissions, facts or circumstances
       occurring, existing or asserted before, at or after the completion of the
       split-off and merger or

     - all losses, as incurred (together with interest on those losses at a rate
       equal to 15% per annum calculated from the date written notice of a claim
       for indemnification relating to such losses is delivered to Inverness
       after the completion of the split-off and merger), relating to or arising
       from the breach by Inverness or its post-closing subsidiaries of any
       agreement or covenant contained in any transaction agreement which is to
       be performed or complied with after the completion of the split-off and
       merger.

     Notwithstanding the joint and several nature of the indemnification
obligations described above, each post-closing subsidiary of Inverness will only
be liable for losses:

     - in the case of the losses described in the first bullet point of this
       subsection, relating to or arising from (1) the assets used, held for use
       or intended for use in the post-restructuring business conducted by that
       subsidiary and (2) the liabilities of or attributable to the
       post-restructuring business of that subsidiary and

     - in the case of the losses described in the second bullet point of this
       subsection, relating to or arising from a breach by that subsidiary.

     In the event that Inverness transfers any material portion of its assets in
a single transaction or in a series of transactions, Johnson & Johnson promptly
will either guarantee the indemnification obligations referred to in the first
bullet point of this subsection or take such other action to insure that the
ability of Inverness, legal and financial, to satisfy such indemnification
obligations will not be diminished in any material respect.

     INDEMNIFICATION BY JOHNSON & JOHNSON.  The post-closing covenants agreement
provides that Johnson & Johnson will indemnify, defend and hold harmless the
Innovations indemnitees from and against, and pay or reimburse the Innovations
indemnitees for:

     - all losses, as incurred, relating to or arising form any untrue statement
       or alleged untrue statement of a material fact contained in any of the
       filings made or required to be made with the SEC in connection with the
       transactions contemplated by the split-off and merger agreement and the
       other transaction agreements, or any omission or alleged omission to
       state in any of the filings a material fact required to be stated in the
       filings or necessary to make the statements in the filings, in light of
       the circumstances under which they were made, not misleading, but only
       with respect to statements made in the filings or incorporated by
       reference in the filings based upon information supplied by Johnson &
       Johnson specifically for inclusion or incorporation by reference in the
       filings or

     - all losses, as incurred (together with interest on those losses at a rate
       equal to 15% per annum calculated from the date written notice of a claim
       for indemnification relating to such losses is delivered to Inverness
       after the completion of the split-off and merger), relating to or arising
       from the breach by Inverness or any of its post-restructuring
       subsidiaries of any agreement or covenant contained in any transaction
       agreement which is to be performed or complied with after the completion
       of the split-off and merger.

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     EXPENSES.  Notwithstanding anything to the contrary in the split-off and
merger agreement, Inverness will be responsible for:

     - all expenses of Inverness, its subsidiaries and Innovations and its
       subsidiaries directly related to the restructuring, the split-off and the
       merger in an amount of up to $12 million plus

     - all fees and expenses incurred in connection with any litigation to the
       extent arising out of or related in any way to the transaction
       contemplated by the transaction agreements and

     - all fees and expenses up to $2 million in connection with securing
       financing required as a closing condition to the split-off and merger.

     Innovations will be responsible for all such expenses in excess of those
amounts.

     AGREEMENTS NOT TO COMPETE AND NOT TO SOLICIT OR HIRE EMPLOYEES.  For a
period of ten years from the completion of the split-off and merger, Innovations
will not, and will not permit any of its affiliates, in any manner, directly or
indirectly, alone or in association with any person, to:

     - subject to limited exceptions, compete with Johnson & Johnson, Inverness
       or any of their affiliates in the field of diabetes generally, including
       the testing, monitoring, diagnosing, prognostication, treatment,
       management or cure of diabetes and diabetes symptoms and conditions,
       referred to as the diabetes field

     - engage in any activity in the diabetes field or

     - actively participate in, control, manage, own any interest in or share in
       the earnings of, finance or invest in the capital stock of any person who
       is engaged in any activity in the diabetes field or, with the exception
       of Ernest Carabillo, consult with any person on matters in the diabetes
       field, except physician practice management activities, as described
       below, and except that Innovations and its subsidiaries in the aggregate,
       and each other affiliate of Innovations, may acquire:

      - an entity which participates in the diabetes field if at the time of the
        acquisition and during the ten year period referred to above, (1) the
        entity's activity in the diabetes field is limited to the sale of
        products and services and (2) the revenues derived from the sale of the
        products and services constitute no more than 3% of the entity's total
        revenues, and the entity does not receive any royalty revenue from the
        diabetes field and

      - up to 2% of the equity or voting interest in an entity that is engaged
        in activities in the diabetes field, so long as none of Ron Zwanziger,
        David Scott or Jerry McAleer is actively involved, whether directly or
        indirectly, in the management of the entity during the period of the
        applicable non-competition covenants contained in his consulting and
        noncompetition agreement with Johnson & Johnson and Inverness.

     Despite the noncompetition provisions described above, Innovations will not
be prohibited from participating, directly or indirectly, in physician practice
management activities in the diabetes field, including competing, engaging,
controlling, managing, owning, investing, consulting and soliciting customers.
For the purposes of the post-closing covenants agreement, "physician practice
management activities" means and is limited to the following:

     - owning physician practices

     - providing back office management services to physicians and
       practitioners, such as billing, collections, scheduling and reimbursement

     - compiling data from physicians and practitioners for the purposes of
       establishing disease management best practices and

     - providing group-buying services for physicians and practitioners,
       excluding any and all products and services in the diabetes field and
       excluding particular testing system applications, including diabetes
       tests, involving multiple analytes.

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     For a period of three years from the completion of the split-off and
merger, Innovations will not, and will cause its affiliates not to, in any
manner, directly or indirectly:

     - induce any person that has been an employee of any of Inverness and its
       post-closing subsidiaries at any time between January 1, 2001 and the
       time when the split-off and merger are completed, to leave the employ of
       Inverness and its post-closing subsidiaries

     - except in response to a good faith request by a person that is not an
       affiliate of Innovations for a recommendation regarding the employment
       qualifications of an employee, recommend to any other person that such
       person employ that employee or

     - subject to limited exceptions, hire any such employee.

     For a period of five years from the completion of the split-off and merger,
Innovations will not, and will cause its affiliates not to, in any manner,
directly or indirectly:

     - solicit, either directly or indirectly, any customer or supplier of
       Johnson & Johnson, Inverness or any of their affiliates to (1) transact
       business in the diabetes field with a business or enterprise that
       competes with Johnson & Johnson, Inverness or any affiliates in the
       diabetes field or (2) reduce or refrain from doing any business with
       Johnson & Johnson, Inverness or any of their respective affiliates in the
       diabetes field except with respect to physician practice management
       activities or

     - disparage, including by relative comparison, Johnson & Johnson or
       Inverness or any of their products or activities in the diabetes field,
       except good faith comparative assessment with respect to physician
       practice management activities.

     NET CASH ADJUSTMENT.  As part of the restructuring, Innovations and its
subsidiaries are to be funded by Inverness with $40 million of net cash, defined
as cash and marketable securities less debt for borrowed money (other than debt
outstanding under any revolving line of credit). Under the terms of the post-
closing covenants agreement, if upon the completion of the split-off and merger,
Innovations and its subsidiaries have more than $40 million in net cash,
Innovations will pay any excess amount to Inverness.

THE LICENSE AGREEMENT

     Prior to the completion of the split-off and merger, Inverness and
Innovations will enter into the license agreement. Under the terms of the
license agreement, Inverness will grant Innovations a paid-up, royalty-free
license with respect to certain of Inverness' intellectual property and
Innovations will grant Inverness a paid-up, royalty-free license with respect to
certain of Innovations' intellectual property, each as described in more detail
below.

     DIVISION OF FIELDS.  The license agreement defines the various fields in
which the parties may use the intellectual property rights granted to them under
that agreement.

      Inverness' Field.  For purposes of the license agreement, Inverness' field
is defined as the field of diabetes generally, including the testing,
monitoring, diagnosing, prognosticating, treatment, management and cure of
diabetes. Inverness' field does not include certain testing systems involving
multiple analytes, referred to as multi-analyte systems, nor does it include the
testing, monitoring, diagnosing, prognosticating, treatment, or management of
cholesterol, creatinine and similar analytes.

      Innovations' Field.  For purposes of the license agreement, Innovations'
field is defined as the manufacture, marketing, licensing, support, performance
and use of products and services that are not included in Inverness' field and
fall within any of the following categories, referred to as Innovations'
subfields:

     - point of care applications

     - prothrombin applications

     - multi-analyte system applications

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     - immunodiagnostic applications, including products for the detection or
       measurement of cardiac markers

     - pregnancy, ovulation or osteoporosis applications and

     - pain management applications

      Shared Field.  For purposes of the license agreement, the shared field is
defined as all fields outside of Innovations' field and Inverness' field.

     LICENSE GRANTS RELATING TO ELECTROCHEMICAL INTELLECTUAL PROPERTY.  For
purposes of the license agreement, electrochemical intellectual property refers
to all technology that relates to the design, manufacture or use of devices
useful for the detection of analytes by applying a current or voltage potential
to a fluid containing the analyte, and all related intellectual property rights,
but excluding intellectual property pertaining to the sampling of interstitial
fluids. The license agreement provides for the grant of the following rights
with respect to Inverness' electrochemical intellectual property:

     - for use in Innovations' field, Inverness grants Innovations a perpetual,
       irrevocable, worldwide, paid-up, royalty-free, exclusive license to use
       Inverness' electrochemical intellectual property and all technology
       developed by or for Inverness during the first three years of the license
       relating to certain methods and apparatus for coating or infusing strips
       with chemicals for use in testing and all related intellectual property.
       Although this license is perpetual and irrevocable, Innovations' right to
       use the licensed intellectual property rights in a Innovations subfield
       will terminate in ten years if, by that time, Innovations has not
       commercialized a product in that subfield. Innovations has certain rights
       to transfer its licensed rights with respect to one or more of its
       subfields, subject to specified limitations

     - for use in the shared field, Inverness grants Innovations a perpetual,
       irrevocable, worldwide, paid-up, royalty-free, co-exclusive license to
       use Inverness' electrochemical intellectual property and all technology
       developed by or for Inverness during the first three years of the license
       relating to certain methods and apparatus for coating or infusing strips
       with chemicals for use in testing and all related intellectual property
       and

     - for use in Inverness' field, Innovations grants Inverness a perpetual,
       irrevocable, worldwide, paid-up, royalty-free, exclusive license to use
       all electrochemical technology developed by or for Innovations during the
       first three years of the license using the electrochemical technology and
       intellectual property licensed to Innovations from Inverness under the
       license agreement.

     LICENSE GRANTS RELATING TO INTERSTITIAL INTELLECTUAL PROPERTY AND WIRELESS
INTELLECTUAL PROPERTY.  For purposes of the license agreement, interstitial
intellectual property refers to intellectual property pertaining to the sampling
of interstitial fluid, and wireless intellectual property refers to intellectual
property pertaining to the wireless transmission of information. The license
agreement provides for the grant of the following rights with respect to
Inverness' interstitial intellectual property and wireless intellectual
property:

     - for use in Innovations' field and the shared field, Inverness grants
       Innovations a perpetual, irrevocable, worldwide, paid-up, royalty-free,
       co-exclusive license to use its interstitial intellectual property and

     - for use in Inverness' field, Innovations grants Inverness a perpetual,
       irrevocable, worldwide, paid-up, royalty-free, exclusive license to use
       all electrochemical technology developed by or for Innovations during the
       first three years of the license using the interstitial intellectual
       property and wireless intellectual property licensed to Innovations from
       Inverness under the license agreement.

     CONFIDENTIALITY AND OWNERSHIP.  The license agreement provides that,
subject to certain limited exceptions, each party will not use any confidential
information of the other party except as authorized by the agreement and only
for the purposes of the license agreement, and will not disclose such
confidential information to anyone, except to its employees, contractors,
consultants, agents and sublicensees who have a need to know such information in
connection with their activities pursuant to the licenses granted under

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the license agreement. These confidentiality obligations will extend for a
period of five years following the date of disclosure of any such confidential
information.

     The license agreement also provides that, as between the parties, any new
technology that is invented, developed or created by or on behalf of a party,
and all related intellectual property, will be the property of such party. Any
new technology that is invented, developed or created jointly by or on behalf of
both parties, and all related intellectual property, will be jointly owned by
the parties.

     RIGHTS OF FIRST REFUSAL AND SHARING OF PROFITS ON DIABETES TESTS.  The
license agreement provides that if Innovations commercializes a multi-analyte
system, and the system includes one or more diabetes tests, Innovations must pay
Inverness an amount equal to Innovations' gross profits from sales of that
system multiplied by the ratio of the number of diabetes tests in the system to
the total number of tests in the system.

     The license agreement also provides that if Innovations develops a product,
process, or service in its subfield of prothrombin applications that it wishes
to commercialize, Innovations will notify Inverness of such development and
offer Inverness the right to become the exclusive distributor of that product,
process, or service on terms substantially similar to the distribution agreement
between Inverness and LifeScan, Inc. dated as of June 7, 1999, but with pricing
specific to the applicable product, process, or service which is commercially
reasonable. Inverness will then have a period of time to accept such terms or
object that the pricing terms are not commercially reasonable. If Inverness
fails to timely make an election to become the exclusive distributor of such a
product, process or service, it will lose its rights under the license agreement
to become such an exclusive distributor.

     The license agreement further provides that Innovations will not grant any
exclusive sublicense of any intellectual property licensed to Innovations under
the license agreement or enter into any exclusive distribution agreement with
respect to products manufactured by Innovations using any such licensed
intellectual property without first delivering to Inverness a written term sheet
outlining the terms of such a transaction. Inverness will then have a period of
30 days in which to agree to enter into that transaction with Innovations on the
proposed terms. If Inverness fails to exercise this right, Innovations may enter
into the transaction with any other person, but only if the transaction is
consummated by a written agreement within 6 months from the end of the 30-day
response period and the final terms of the transaction, taken as a whole, are
not substantially more favorable to the other person than the terms proposed in
the written term sheet delivered by Innovations to Inverness.

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                     COMPARATIVE STOCK PRICES AND DIVIDENDS

     Johnson & Johnson common stock is listed for trading on the New York Stock
Exchange under the trading symbol "JNJ" and Inverness common stock is listed for
trading on the American Stock Exchange under the trading symbol "IMA." The
following table sets forth, for the periods indicated, dividends declared and
the high and low sales prices per share of Johnson & Johnson common stock and of
Inverness common stock as reported by Dow Jones & Company, Inc. The prices and
dividend information for the Johnson & Johnson common stock have been adjusted
to reflect a two-for-one stock split effected in June 2001. For current price
information, Inverness stockholders are urged to consult publicly available
sources.



                                          JOHNSON & JOHNSON                    INVERNESS
                                            COMMON STOCK                     COMMON STOCK
                                    -----------------------------    -----------------------------
                                                        DIVIDENDS                        DIVIDENDS
CALENDAR PERIOD                      HIGH      LOW      DECLARED      HIGH      LOW      DECLARED
---------------                     ------    ------    ---------    ------    ------    ---------
                                                                       
1999                                                                                          --
  First Quarter...................  $47.00    $38.50     $0.125      $ 5.94    $ 2.00         --
  Second Quarter..................   51.50     43.91       0.14        5.19      2.75         --
  Third Quarter...................   52.94     45.00       0.14        3.88      2.38         --
  Fourth Quarter..................   53.44     45.06       0.14        4.69      2.56         --
2000                                                                                          --
  First Quarter...................   48.47     33.06       0.14       11.38      3.19         --
  Second Quarter..................   50.94     35.00       0.16        9.75      4.13         --
  Third Quarter...................   50.72     45.13       0.16       22.44      8.56         --
  Fourth Quarter..................   52.97     44.59       0.16       41.00     16.56         --
2001                                                                                          --
  First Quarter...................   52.35     40.25       0.16       39.00     16.87         --
  Second Quarter..................   54.20     42.60       0.18       57.75     22.60         --
  Third Quarter (through --,
     2001)........................      --        --         --          --        --         --


     The following table sets forth the high, low and last reported sales prices
per share of Johnson & Johnson common stock and of Inverness common stock as
reported by Dow Jones & Company, Inc. on (1) May 8, 2001, the last full trading
day prior to the public announcement that Johnson & Johnson and Inverness were
in advanced discussions regarding the proposed transaction, (2) May 22, 2001,
the last full trading day prior to the public announcement that Johnson &
Johnson and Inverness had signed the definitive split-off and merger agreement
and (3) --, 2001, the last practicable trading day before the date of this proxy
statement/prospectus. The price information for Johnson & Johnson common stock
has been adjusted to reflect a two-for-one stock split effected in June 2001.
The equivalent price per share data for Inverness common stock has been
determined by multiplying the last reported sale price of a share of Johnson &
Johnson common stock on each of these dates by an exchange ratio determined by
dividing $35.00 by the average of the volume weighted averages of the trading
prices of Johnson & Johnson common stock for each of the 20 consecutive trading
days ending with the third trading day immediately preceding the calculation
date. Because there is currently no public trading market for shares of
Innovations common stock, the 0.20 shares of Innovations common stock to be
issued in respect of each outstanding share of Inverness common stock were not
factored into the calculation of the equivalent price per share of Inverness
common stock.



                                    JOHNSON & JOHNSON                 INVERNESS             EQUIVALENT PRICE
                                       COMMON STOCK                  COMMON STOCK             PER SHARE OF
                                --------------------------    --------------------------       INVERNESS
                                 HIGH      LOW      CLOSE      HIGH      LOW      CLOSE       COMMON STOCK
                                ------    ------    ------    ------    ------    ------    ----------------
                                                                       
May 8, 2001...................  $49.05    $48.50    $48.98    $35.99    $33.40    $35.91         $36.67
May 22, 2001..................   50.32     49.38     49.50     35.23     34.54     34.95          35.82
--, 2001......................      --        --        --        --        --        --             --


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                 DESCRIPTION OF JOHNSON & JOHNSON CAPITAL STOCK

     The following summary of the capital stock of Johnson & Johnson is subject
in all respects to applicable New Jersey law, the Johnson & Johnson restated
certificate of incorporation, as amended, and the Johnson & Johnson by-laws. See
"Comparison of Rights of Common Stockholders of Johnson & Johnson and Inverness"
on page 78 and "Where You Can Find More Information" on page 96.

     The total authorized shares of capital stock of Johnson & Johnson consist
of (1) 4,320,000 shares of common stock, par value $1.00 per share, and (2)
2,000,000 shares of preferred stock, without par value. At the close of business
on --, 2001, approximately -- shares of Johnson & Johnson common stock were
issued and outstanding and no shares of Johnson & Johnson preferred stock were
issued and outstanding.

     The Johnson & Johnson board of directors is authorized to provide for the
issuance from time to time of Johnson & Johnson preferred stock in series and,
as to each series, to fix the designation, the dividend rate and the
preferences, if any, which dividends on that series will have compared to any
other class or series of capital stock of Johnson & Johnson, the voting rights,
if any, the voluntary and involuntary liquidation prices, the conversion or
exchange privileges, if any, applicable to that series and the redemption price
or prices and the other terms of redemption, if any, applicable to that series.
Cumulative dividends, dividend preferences and conversion, exchange and
redemption provisions, to the extent that some or all of these features may be
present when shares of Johnson & Johnson preferred stock are issued, could have
an adverse effect on the availability of earnings for distribution to the
holders of Johnson & Johnson common stock or for other corporate purposes.

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                  COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
                       OF JOHNSON & JOHNSON AND INVERNESS

     Johnson & Johnson is a New Jersey corporation subject to the provisions of
the New Jersey Business Corporation Act, which we refer to as New Jersey law.
Inverness is a Delaware corporation subject to the provisions of the General
Corporation Law of the State of Delaware, which we refer to as Delaware law.
Inverness stockholders, whose rights are currently governed by the Inverness
certificate of incorporation, the Inverness by-laws and Delaware law, will, upon
completion of the split-off and merger, become stockholders of Johnson & Johnson
and their rights with respect to Johnson & Johnson common stock will be governed
by the Johnson & Johnson certificate of incorporation, the Johnson & Johnson
by-laws and New Jersey law.

     The following description summarizes the material differences that may
affect the rights of stockholders of Johnson & Johnson and Inverness but does
not purport to be a complete statement of all those differences, or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. Stockholders should read
carefully the relevant provisions of New Jersey law, Delaware law, the Johnson &
Johnson certificate of incorporation, the Johnson & Johnson by-laws, the
Inverness certificate of incorporation and the Inverness by-laws.

CAPITALIZATION

     JOHNSON & JOHNSON

     Johnson & Johnson's authorized capital stock is described under
"Description of Johnson & Johnson Capital Stock".

     INVERNESS

     The total authorized shares of capital stock of Inverness consist of (1)
70,000,000 shares of common stock, par value $0.001 per share, and (2) 5,000,000
shares of preferred stock, par value $0.001 per share. On the close of business
on --, 2001, approximately -- shares of Inverness common stock were issued and
outstanding and no shares of Inverness preferred stock were issued and
outstanding.

     The Inverness certificate of incorporation provides that the Inverness
board of directors is authorized to provide for the issuance from time to time
of shares of Inverness preferred stock in one or more series. The Inverness
board of directors is expressly authorized to fix the designations, powers,
including voting powers, preferences, rights, qualifications, limitations,
restrictions and other terms of any series of Inverness preferred stock. The
Inverness board of directors may also increase or decrease the number of shares
of any series subsequent to the issuance of shares of such series, but not below
the number of shares of such series then outstanding.

NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS

     JOHNSON & JOHNSON

     The Johnson & Johnson certificate of incorporation and the Johnson &
Johnson by-laws provide that the total number of Johnson & Johnson directors
will be not less than nine nor more than 18, as determined by the Johnson &
Johnson board of directors from time to time. Johnson & Johnson currently has 15
directors. All directors are elected at each annual meeting of stockholders to
serve until the next annual meeting. The Johnson & Johnson by-laws do not
provide for cumulative voting in the election of directors. The Johnson &
Johnson by-laws provide that vacancies on the Johnson & Johnson board of
directors will be filled by appointment made by a majority vote of the remaining
directors. The Johnson & Johnson certificate of incorporation and the Johnson &
Johnson by-laws provide that directors may be removed, with cause, by a majority
vote of the stockholders.

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     INVERNESS

     The Inverness certificate of incorporation and by-laws provide that the
number of directors of Inverness shall be fixed by a resolution duly adopted
from time to time by the Inverness board of directors. The Inverness board of
directors currently consists of six directors. The Inverness certificate of
incorporation provides that the Inverness board of directors will be divided
into three classes, which shall be as nearly equal in number as possible. Each
director serves for a term ending on the date of the third annual meeting of
stockholders following the annual meeting at which the director was elected.
Holders of Inverness common stock are not entitled to vote cumulatively for the
election of directors. The Inverness certificate of incorporation provides that
any director may be removed from office, only with cause and only by an
affirmative vote of the holders of at least two-thirds of the shares entitled to
vote in an election of directors. The Inverness certificate of incorporation and
by-laws provide that in the event of any increase or decrease in the authorized
number of directors, the board of directors will determine the class or classes
to which the newly-created or eliminated directorships resulting from such
increase or decrease will be apportioned. No decrease in the number of directors
constituting the board of directors may shorten the term of any incumbent
director. Newly-created directorships resulting from any increase in the number
of directors and any vacancies on the Inverness board of directors resulting
from death, resignation, disqualification or removal shall be filled solely by
the affirmative vote of a majority of the remaining directors then in office,
even if the remaining directors do not constitute a quorum. Any director elected
to a vacant or newly-created directorship shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been duly elected or qualified.

AMENDMENTS TO CHARTER DOCUMENTS

     JOHNSON & JOHNSON

     Under New Jersey law, a proposed amendment to a corporation's certificate
of incorporation requires approval by its board of directors and an affirmative
vote of a majority of the votes cast by the holders of shares entitled to vote
on the amendment, unless a specific provision of New Jersey law or the
corporation's certificate of incorporation provides otherwise. The Johnson &
Johnson certificate of incorporation provides that if any class or series of
shares is entitled to vote thereon as a class, the affirmative vote of a
majority of the votes cast in each class is required. The Johnson & Johnson
certificate of incorporation also provides that the affirmative vote of the
holders of not less than 80% of the votes entitled to be cast by the holders of
all then outstanding shares of voting stock, voting together as a single class,
and the affirmative vote of a majority of the combined votes entitled to be cast
by "disinterested stockholders" voting together as a single class is required to
amend, repeal or adopt provisions inconsistent with Article Eight of the Johnson
& Johnson certificate of incorporation which relates to business combinations
with interested parties, unless the amendment, repeal or adoption is unanimously
recommended by the Johnson & Johnson board of directors if none of its directors
are affiliates or associates of any interested stockholder.

     INVERNESS

     Under Delaware law, an amendment to the certificate of incorporation of a
corporation requires the approval of the board of directors and the approval of
the holders of a majority of the outstanding stock entitled to vote upon the
proposed amendment. The holders of the outstanding shares of a class are
entitled to vote as a separate class on a proposed amendment that would:

     - increase or decrease the aggregate number of authorized shares of the
       class

     - increase or decrease the par value of the shares of the class or

     - alter or change the powers, preferences or special rights of the shares
       of the class, so as to affect them adversely.

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     If any proposed amendment would alter or change the powers, preferences or
special rights of one or more series of any class so as to affect them
adversely, but would not so affect the entire class, then only the shares of the
series so affected by the amendment will be considered a separate class.

     The Inverness certificate of incorporation provides that Inverness reserves
the right to amend and repeal any provision contained in the Inverness
certificate of incorporation in the manner prescribed by Delaware law and the
certificate of incorporation. The Inverness certificate of incorporation
provides that whenever any vote of the holders of voting stock is required to
amend or repeal any provision of the certificate of incorporation, the
affirmative vote of a majority of the outstanding shares entitled to vote
thereon, and the affirmative vote of a majority of the outstanding shares of
each class entitled to vote thereon as a class, shall be required to amend or
repeal any provision, except that the affirmative vote of not less than
two-thirds of the outstanding shares entitled to vote thereon, and the
affirmative vote of not less than two-thirds of the outstanding shares of each
class entitled to vote thereon as a class, is required to amend or repeal any
provisions of the articles of the Inverness certificate of incorporation
relating to stockholder action, directors, limitation of liability and amendment
of the certificate of incorporation.

AMENDMENTS TO BY-LAWS

     JOHNSON & JOHNSON

     Under New Jersey law, the Johnson & Johnson certificate of incorporation
and the Johnson & Johnson by-laws, the Johnson & Johnson by-laws generally may
be amended or repealed in whole or in part by the stockholders at a regular or
special meeting of the stockholders or by the Johnson & Johnson board of
directors at a regular or special meeting of the board of directors, if notice
of the proposed amendment is contained in the notice of such meeting, except
that a by-law adopted or amended by the Johnson & Johnson board of directors may
be superseded by stockholder action and that stockholder action may preempt any
further action by the Johnson & Johnson board of directors with respect to that
by-law provision.

     INVERNESS

     Under Delaware law, unless a corporation's certificate of incorporation
provides otherwise, the stockholders entitled to vote have the power to adopt,
amend or repeal the corporation's by-laws. The Inverness certificate of
incorporation and by-laws provide that the Inverness board of directors and
Inverness stockholders are each expressly authorized to amend or repeal the
Inverness by-laws. Such action by the Inverness stockholders requires the
affirmative vote of at least two-thirds of the shares present in person or
represented by proxy at the stockholders' meeting voting as a single class,
unless the Inverness board of directors recommends that the stockholders approve
such amendment or repeal, in which case such amendment or repeal only requires
the affirmative vote of a majority of the shares present in person or
represented by proxy at the stockholders' meeting.

ACTION BY WRITTEN CONSENT

     JOHNSON & JOHNSON

     Under New Jersey law, any action required or permitted to be taken at a
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, upon the written consent of stockholders who would have been
entitled to cast the minimum number of votes which would be necessary to
authorize the action at a meeting at which all stockholders entitled to vote
thereon were present and voting; provided, however, that in case of an annual
meeting of stockholders for the election of directors, any consent in writing
must be unanimous.

     INVERNESS

     Under the Inverness certificate of incorporation, any action required or
permitted to be taken by the stockholders at any annual or special meeting of
stockholders must be effected at a duly called meeting of stockholders and may
not be effected by a written consent of stockholders.
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NOTICE OF STOCKHOLDER ACTIONS

     JOHNSON & JOHNSON

     New Jersey law and the Johnson & Johnson by-laws provide that written
notice of the time, place and purpose or purposes of every meeting of
stockholders must be given not less than 10 nor more than 60 days before the
date of the meeting, either personally or by mail, telegram or telex, to each
stockholder of record entitled to vote at the meeting. The Johnson & Johnson
by-laws further provide that the only matters that may be considered and acted
upon at an annual meeting of stockholders are those matters brought before the
meeting:

     - through the notice of meeting

     - by the Johnson & Johnson board of directors or

     - by a stockholder of record entitled to vote at the meeting.

Generally, the Johnson & Johnson by-laws require a stockholder who intends to
bring matters before an annual meeting to provide advance notice of such
intended action not less than 120 days prior to the date of the proxy statement
relating to the prior year's annual meeting. The notice must contain a brief
description of the business desired to be brought before the meeting and must
identify any personal or other material interest of the stockholder in such
proposed business. The person presiding at the meeting will have the discretion
to determine whether any item of business was brought before such meeting in
compliance with the above procedures.

     INVERNESS

     The Inverness by-laws provide that a written notice of the place, date and
time of all meetings of stockholders shall be given not less than 10 days nor
more than 60 days before the date of the meeting by delivering the notice
personally or mailing it to each stockholder entitled to vote at the meeting. In
the case of a stockholder meeting where stockholders will vote on a merger of
Inverness, Delaware law requires notice to be provided to each stockholder not
less than 20 days prior to the meeting. The Inverness by-laws further provide
that the only matters that may be considered and acted upon at an annual meeting
of stockholders are those matters brought before the meeting:

     - through the notice of meeting

     - by the Inverness board of directors or

     - by a stockholder of Inverness upon proper written notice.

     Under the Inverness by-laws, a stockholder of Inverness may submit
proposals, including director nominations, before an annual meeting of the
stockholders by giving timely notice and by being present at the meeting either
in person or by a representative. The stockholder's notice must set forth, among
other things, a brief description of the business the stockholder desires to
bring before the annual meeting and the reasons for doing so, the name and
address of the stockholder advancing the proposal, any material interest of such
person in the proposal and any other information concerning the person making
such proposal and the proposal itself that is required by the appropriate rules
and regulations of the Securities and Exchange Commission to be included in a
proxy statement soliciting proxies for the proposal. If the proposal relates to
a director nomination, the notice must also include information regarding the
nominee. In order to be timely, notice of the proposal must be delivered by the
stockholder to the Secretary of Inverness not later than 75 days nor more than
120 days prior to the anniversary of the preceding year's annual meeting of
stockholders, except that if the date of the current year's annual meeting is
advanced by more than 30 days prior to, or delayed by more than 60 days after,
the anniversary of the preceding year's annual meeting, the notice must be
delivered not later than the close of business on the later of the 75th day
prior to the annual meeting or the 15th day following the date on which the date
of the current year's annual meeting was first publicly announced in order to be
timely.

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SPECIAL STOCKHOLDER MEETINGS

     JOHNSON & JOHNSON

     Under the Johnson & Johnson by-laws, a special meeting of the stockholders
may be called at any time by the chairman of the Johnson & Johnson board of
directors, a vice-chairman of the Johnson & Johnson board of directors, the
chairman of the executive committee, a vice-chairman of the executive committee,
the president or by a majority of the Johnson & Johnson board of directors, and
may be held on the business day and place stated in the notice of the meeting.

     In addition, New Jersey law provides that holders of not less than 10% of
all shares entitled to vote at a meeting may apply to the New Jersey Superior
Court to request that a special meeting of the stockholders be called for good
cause shown. At such a meeting, the stockholders present in person or by proxy
will constitute a quorum for the transaction of business described in such
order.

     INVERNESS

     Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by other persons authorized by the certificate of
incorporation or the by-laws. The Inverness by-laws provide that special
meetings of the stockholders may only be called by the Inverness board of
directors. Only matters set forth in the notice of the special meeting may be
considered or acted upon at the special meeting, unless otherwise provided by
law.

STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS

     JOHNSON & JOHNSON

     Under New Jersey law, a stockholder who has been a stockholder for at least
six months or who holds, or is authorized in writing by holders of, at least 5%
of the outstanding shares of any class or series of stock of a corporation has
the right, for any proper purpose and upon at least five days' written notice,
to inspect in person or by agent or attorney the minutes of the proceedings of
the corporation's stockholders and its record of stockholders. Irrespective of
the period such stockholder has held his, her or its stock or the amount of
stock such stockholder holds, a court may, upon proof of proper purpose, compel
production for examination by the stockholder of the books and records of
account, minutes and record of stockholders of Johnson & Johnson.

     INVERNESS

     Under Delaware law, any stockholder, in person or by attorney or other
agent, may inspect for any proper purpose Inverness' stock ledger, a list of its
stockholders and its other books and records by serving the corporation with a
written demand, given under oath, that states his purpose for doing so. A proper
purpose is a purpose reasonably related to such person's interest as a
stockholder. A complete list of stockholders entitled to vote at any meeting of
stockholders must be open to the examination of any stockholder, for any purpose
germane to the meeting, for a period of at least 10 days prior to such meeting.
The list must also be kept at the place of the meeting during the whole time of
the meeting and may be inspected by any stockholder who is present at the
meeting.

LIMITATION OF PERSONAL LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

     JOHNSON & JOHNSON

     Under New Jersey law, a corporation may indemnify a director or officer
against his or her expenses and liabilities in connection with any proceeding
involving the director or officer by reason of his or her being or having been a
director or officer, other than a proceeding by or in the right of the
corporation, if:

     - the director or officer acted in good faith and in a manner he or she
       reasonably believed to be in or not opposed to the best interests of the
       corporation and

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     - with respect to any criminal proceeding, the director or officer had no
       reasonable cause to believe his or her conduct was unlawful.

     The Johnson & Johnson certificate of incorporation provides that, to the
full extent permitted under New Jersey law, no director or officer of Johnson &
Johnson will be personally liable to Johnson & Johnson or its stockholders for
damages for breach of any duty owed to Johnson & Johnson or its stockholders.

     The Johnson & Johnson by-laws provide that to the full extent permitted
under New Jersey law, Johnson & Johnson will indemnify any person who was or is
involved in any manner in any threatened, pending or completed investigation,
claim, action, suit or proceeding, whether civil, criminal, administrative,
arbitrative, legislative or investigative, or who is threatened with being so
involved, by reason of the fact that he or she is or was a director or officer
of Johnson & Johnson or, while serving as a director or officer of Johnson &
Johnson, is or was at the request of Johnson & Johnson also serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses (including attorneys'
fees), judgments, fines, penalties, excise taxes and amounts paid in settlement
actually and reasonably incurred in connection with such proceeding.

     Johnson & Johnson enters into indemnification agreements with its directors
and officers and enters into insurance agreements on its own behalf.

     INVERNESS

     The Inverness certificate of incorporation provides that no director shall
be held personally liable to Inverness or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability:

     - for any breach of a director's duty of loyalty to Inverness or its
       stockholders

     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law

     - under appropriate Delaware statutory provisions for any unlawful payment
       of dividends or unlawful stock purchase or redemption or

     - for any transaction from which the director derived an improper personal
       benefit.

     The Inverness by-laws provide that, to the fullest extent authorized by
Delaware law, Inverness will indemnify any director or officer who was or is
made a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, because he or she is or
was a director or officer of Inverness or is or was serving at the request of
Inverness as a director, officer, employee or agent of another corporation or of
a partnership, joint venture, trust, employee benefit plan or other enterprise,
against all expenses (including attorneys' fees), judgments, penalties, fines
and amounts reasonably paid in settlement that are incurred by the director or
officer in connection with such proceeding, except that Inverness will indemnify
any such person seeking indemnification in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Inverness
board of directors. Such indemnification shall continue as to a person who has
ceased to be a director or officer and will inure to the benefit of his or her
heirs, executors and administrators.

     The by-laws of Inverness also permit the board of directors, in its
discretion, to allow Inverness to indemnify, to the fullest extent authorized by
Delaware law, any non-officer employee of Inverness. The indemnification can be
for any expenses or other costs incurred by the employee in connection with any
proceeding in which he or she is involved as a result of serving or having
served as an employee of Inverness or, at the request of Inverness, as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.

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     However, the Inverness by-laws also provide that no indemnification will be
provided by Inverness to any person unless a determination shall have been made
that the person acted in good faith and in a manner that the person reasonably
believed to be in or not opposed to the best interests of Inverness and, with
respect to any criminal proceeding, where the person had no reasonable cause to
believe his conduct was unlawful. This determination shall be made (1) by a
majority vote of the disinterested directors, (2) by the Inverness stockholders
or (3) at the direction of a majority of the disinterested directors, or if
there are no disinterested directors, by independent legal counsel in a written
opinion.

     Inverness is also required to advance all expenses incurred by a director
in connection with any proceeding in which a director is involved by reason of
such director's status as a director, provided that the director delivers to
Inverness an undertaking, by or on behalf of the director, to repay all advanced
expenses in the event it is ultimately determined that the director is not
entitled to be indemnified against such expenses. Inverness may, in the
discretion of the Inverness board of directors, advance expenses to a person
that is or was an officer or employee of Inverness on the same terms and
conditions upon which it is required to advance expenses to a director.

     The right to indemnification and advancement of expenses conferred by the
Inverness by-laws is a contractual right, and any repeal or modification of the
related provisions shall not affect any rights or obligations then existing. The
Inverness by-laws further provide that the rights to indemnification and
advancement of expenses set forth in the Inverness by-laws are not exclusive of
any other right which any person may have or acquire under any statute,
provision of the Inverness certificate of incorporation, by-laws, agreement,
vote of stockholders or disinterested directors or otherwise.

     The Inverness by-laws also provide that Inverness may maintain insurance,
at its expense, to protect itself and any director, officer or employee of
Inverness against any liability whether or not Inverness would have the power to
indemnify that person against liability under Delaware law or the by-laws.

DIVIDENDS

     JOHNSON & JOHNSON

     The Johnson & Johnson certificate of incorporation provides that the
Johnson & Johnson board of directors may from time to time declare dividends on
its outstanding shares in accordance with New Jersey law.

     INVERNESS

     The Inverness certificate of incorporation provides that, subject to
applicable law, the Inverness board of directors may from time to time declare
dividends on its outstanding shares. Holders of common stock will share ratably
in any dividends declared by the Inverness board of directors, subject to the
preferential rights of any preferred stock then outstanding.

CONVERSION

     JOHNSON & JOHNSON

     Holders of Johnson & Johnson common stock have no rights to convert their
shares into any other securities.

     INVERNESS

     Holders of Inverness common stock have no rights to convert their shares
into any other securities.

VOTING RIGHTS; REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS

     JOHNSON & JOHNSON

     Each holder of Johnson & Johnson common stock is entitled to one vote for
each share held of record and may not cumulate votes for the election of
directors.

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     Merger or Consolidation.  Under New Jersey law, the consummation of a
merger or consolidation of a New Jersey corporation organized prior to January
1, 1969, such as Johnson & Johnson, requires the approval of such corporation's
board of directors and the affirmative vote of two-thirds of the votes cast by
the holders of shares of the corporation entitled to vote thereon; however, no
such approval and vote are required if such corporation is the surviving
corporation and

     - such corporation's certificate of incorporation is not amended

     - the stockholders of the surviving corporation whose shares were
       outstanding immediately before the effective date of the merger will hold
       the same number of shares, with identical designations, preferences,
       limitations, and rights, immediately after and

     - the number of voting shares and participation shares outstanding after
       the merger will not exceed by 40% the total number of voting or
       participating shares of the surviving corporation before the merger.

Similarly, a sale of all or substantially all of such corporation's assets other
than in the ordinary course of business, or a voluntary dissolution of such
corporation, requires the approval of such corporation's board of directors and
the affirmative vote of two-thirds of the votes cast by the holders of shares of
such corporation entitled to vote thereon.

     Business Combinations.  Under New Jersey law, no New Jersey corporation may
engage in any "business combination" with any interested stockholder (generally,
a 10% or greater stockholder) for a period of five years following such
interested stockholder's stock acquisition, unless such business combination is
approved by the board of directors of such corporation prior to the stock
acquisition.

     Under New Jersey law, "business combination" includes:

     - any merger or consolidation of a resident domestic corporation or one of
       its subsidiaries:

       - with an interested stockholder or

       - with any corporation which is, or would be after such merger or
         consolidation, an affiliate or associate of an interested stockholder

     - any transfer or other disposition to or with an interested stockholder or
       any affiliate or associate of an interested stockholder of at least 10%
       of (1) the assets, (2) the outstanding shares or (3) the earning power or
       income, on a consolidated basis, of such resident domestic corporation
       and

     - other specified self-dealing transactions between such resident domestic
       corporation and an interested stockholder or any affiliate or associate
       thereof.

     In addition, no resident domestic corporation may engage, at any time, in
any business combination with any interested stockholder of such corporation
other than:

     - a business combination approved by the board of directors of such
       corporation prior to the stock acquisition

     - a business combination approved by the affirmative vote of the holders of
       two-thirds of the voting stock not beneficially owned by such interested
       stockholder at a meeting called for such purpose or

     - a business combination in which the interested stockholder meets certain
       fair price criteria.

     In addition to the requirement under New Jersey law regarding business
combinations with an interested stockholder, the Johnson & Johnson certificate
of incorporation prohibits Johnson & Johnson from engaging in any "business
combination" with any interested stockholder (generally, a 10% or greater
stockholder) without (1) the affirmative vote of at least 80% of the votes
entitled to be cast by the holders of all then outstanding shares of Johnson &
Johnson voting stock, voting together as a single class, and (2) the affirmative
vote of a majority of the combined votes entitled to be cast by "disinterested
stockholders" (as defined in the all then outstanding shares of Johnson &
Johnson restated certificate of incorporation), voting together as a single
class; provided that any business combination will require only
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the approval required under New Jersey law if, among other things, such business
combination has been approved at any time by a majority of the "continuing
directors" (as defined in the Johnson & Johnson restated certificate of
incorporation) and certain fair price requirements are met.

     The Johnson & Johnson certificate of incorporation defines "business
combination" to include:

     - any merger or consolidation of Johnson & Johnson

       - with an interested stockholder or

       - with any other corporation which is, or after such merger or
         consolidation would be, an affiliate or associate of an interested
         stockholder

     - any transfer or other disposition to or with any interested stockholder
       or any affiliate or associate of an interested stockholder of any assets
       or securities of Johnson & Johnson or any of its subsidiaries having an
       aggregate fair market value of 5% of the total assets of Johnson &
       Johnson and its subsidiaries

     - the adoption of a plan of liquidation of Johnson & Johnson proposed by an
       interested stockholder or any affiliate or associate of an interested
       stockholder and

     - any transaction which increases the capital stock beneficially owned by
       an interested stockholder or any affiliate or associate of an interested
       stockholder.

     INVERNESS

     Each holder of Inverness common stock is entitled to one vote for each
share held of record and may not cumulate votes for the election of directors.

     Merger or Consolidation.  Under Delaware law, mergers or consolidations or
sales or exchanges of all or substantially all of a corporation's assets or a
dissolution of the corporation require the affirmative vote of the board of
directors and the affirmative vote of a majority of outstanding shares of the
corporation's capital stock entitled to vote on the matter (except in certain
limited circumstances).

     Under Delaware law, no vote of the stockholders of a constituent
corporation surviving a merger shall be necessary to authorize a merger if:

     - the merger agreement does not amend in any respect such constituent
       corporation's certificate of incorporation

     - each share of stock of such constituent corporation outstanding
       immediately prior to the merger remains an identical outstanding share of
       the surviving corporation after the merger and

     - such constituent corporation does not issue in the merger more than 20%
       of its outstanding shares immediately prior to the merger.

     Business Combinations.  Inverness is subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly held Delaware corporation
from consummating a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless:

     - before such person became an interested stockholder, the board of
       directors of the corporation approved the transaction in which the
       interested stockholder became an interested stockholder or approved the
       business combination

     - upon the closing of the transaction that resulted in the interested
       stockholder becoming such, the interested stockholder owned at least 85%
       of the voting stock of the corporation outstanding at the time the
       transaction commenced, excluding shares held by directors who are also
       officers of the corporation and shares held by employee stock plans or

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     - following the transaction in which such person became an interested
       stockholder, the business combination is approved by the board of
       directors of the corporation and authorized at a meeting of stockholders
       by the affirmative vote of the holders of at least two-thirds of the
       outstanding voting stock of the corporation not owned by the interested
       stockholder.

     The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock.

     The term "business combination" includes mergers, consolidations, asset
sales involving 10% or more of a corporation's assets and other similar
transactions resulting in a financial benefit to an interested stockholder.

     Section 203 makes it more difficult for an "interested stockholder" to
effect various business combinations with a corporation for a three-year period.
A Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of at least a majority of the outstanding voting stock. Neither the
Inverness certificate of incorporation nor the Inverness by-laws contain any
such provision.

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                                OTHER PROPOSALS

APPROVAL OF THE INVERNESS MEDICAL INNOVATIONS, INC. 2001 STOCK OPTION AND
INCENTIVE PLAN

     The Innovations board of directors has adopted, and Inverness, as the sole
stockholder of Innovations prior to the sale of restricted stock described
below, has approved the Inverness Medical Innovations, Inc. 2001 Stock Option
and Incentive Plan. The Inverness board of directors is recommending the
Innovations stock option plan to the stockholders for approval because the board
believes that the stock options and stock-based awards allowed by the plan will
help Innovations attract, motivate and retain the caliber of directors,
officers, employees and other key persons necessary for its future growth and
success.

     The Innovations stock option plan would authorize Innovations to issue up
to -- shares of its common stock pursuant to various stock incentive awards. The
number of shares of Innovations common stock reserved for issuance under the
stock option plan is subject to adjustment for stock splits, stock dividends and
similar events.

     Section 162(m) of the Internal Revenue Code generally would disallow a
federal income tax deduction to Innovations for compensation in excess of $1
million paid in any year to any executive officer included in the summary
compensation table who is employed by Innovations on the last day of its fiscal
year, referred to as "covered employees." However, this limitation on
compensation expense does not apply to payments of "performance-based
compensation," the material terms of which have been approved by stockholders.
To satisfy the performance-based compensation requirements of Section 162(m) of
the Internal Revenue Code, stock options with respect to no more than -- shares
of Innovations common stock, subject to adjustment for stock splits and similar
events, may be granted to any one individual during any one calendar year.

     SUMMARY OF THE INNOVATIONS STOCK OPTION PLAN.  The following description of
material terms of the Innovations stock option plan is intended to be a summary
only. This summary is qualified in its entirety by the full text of the
Innovations stock option plan which is attached as Annex 9 to this proxy
statement/prospectus.

     Administration.  The Innovations stock option plan provides for
administration by the Innovations board of directors or by a committee of not
fewer than two independent directors, referred to as the "administrator," as
appointed by the Innovations board of directors from time to time.

     The administrator has full power to select, from among the individuals
eligible for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms and
conditions of each award, subject to the provisions of the Innovations stock
option plan. The administrator may permit Innovations common stock, and other
amounts payable pursuant to an award, to be deferred. In such instances, the
administrator may permit interest, dividends or deemed dividends to be credited
to the amount of deferrals.

     Eligibility and Limitations on Grants.  All officers, employees, directors,
consultants and other key persons of Innovations are eligible to participate in
the Innovations stock option plan, subject to the discretion of the
administrator. In no event may any one participant receive options to purchase
more than -- shares of Innovations common stock, subject to adjustment for stock
splits and similar events, during any one calendar year, as stated above.
Approximately -- individuals are potentially eligible to participate in the
Innovations stock option plan.

     Stock Options.  Options granted under the Innovations stock option plan may
be either incentive stock options, referred to as "incentive options," (within
the definition of Section 422 of the Internal Revenue Code), or non-qualified
stock options, referred to as "non-qualified options." Options granted under the
Innovations stock option plan will be non-qualified options if they (i) fail to
meet the Internal Revenue Code definition of incentive options, (ii) are granted
to a person not eligible to receive incentive options under the Internal Revenue
Code or (iii) otherwise so provide. Incentive options may be granted only to
officers or other employees of Innovations or its subsidiaries. Non-qualified
options may be granted to persons eligible to receive incentive options and to
non-employee directors and other key persons.

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     Other Option Terms.  The administrator has authority to determine the terms
of options granted under the Innovations stock option plan. Generally, options
are granted with an exercise price that is not less than the fair market value
of the shares of Innovations common stock on the date of the option grant.

     The life of each option will be fixed by the administrator and may not
exceed ten years from date of grant. The administrator will determine at what
time or times each option may be exercised and the period of time, if any, after
retirement, death, disability or termination of employment during which options
may be exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the administrator. In general,
unless otherwise permitted by the administrator, no option granted under the
Innovations stock option plan is transferable by the optionee other than by will
or by the laws of descent and distribution, and options may be exercised during
the optionee's lifetime only by the optionee, or by the optionee's legal
representative or guardian in the case of the optionee's incapacity.

     Options granted under the Innovations stock option plan may be exercised
for cash or by transfer to Innovations (either actually or by attestation) of
shares of Innovations common stock which are not then subject to restrictions
under any Innovations stock plan, which have been held by the optionee for at
least six months or were purchased on the open market, and which have a fair
market value equivalent to the option exercise price of the shares being
purchased, or by compliance with certain provisions pursuant to which a
securities broker delivers the purchase price for the shares to Innovations.

     At the discretion of the administrator, stock options granted under the
Innovations stock option plan may include a "reload" feature pursuant to which
an optionee exercising an option by the delivery of shares of Innovations common
stock would automatically be granted an additional stock option (with an
exercise price equal to the fair market value of the Innovations common stock on
the date the additional stock option is granted) to purchase that number of
shares of Innovations common stock equal to the number delivered to exercise the
original stock option. The purpose of this feature is to enable participants to
maintain any equity interest in Innovations without dilution.

     To qualify as incentive options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares subject to
incentive options which first become exercisable in any one calendar year, and a
shorter term and higher minimum exercise price in the case of certain large
stockholders.

     Restricted Stock Awards.  The administrator may grant or sell shares (at
par value or for a higher purchase price determined by the administrator) of
Innovations common stock to any participant subject to such conditions and
restrictions as the administrator may determine. These conditions and
restrictions may include the achievement of pre-established performance goals
and/or continued employment with Innovations through a specified vesting period.
The vesting period shall be determined by the administrator but shall be at
least one year for attainment of pre-established performance goals or at least
three years for other conditions and restrictions. If the applicable performance
goals and other restrictions are not attained, the participant will forfeit his
or her award of restricted stock.

     Unrestricted Stock Awards.  The administrator may also grant shares of
Innovations common stock which are free from any restrictions under the
Innovations stock option plan. Unrestricted stock may be granted to any
participant in recognition of past services or other valid consideration, and
may be issued in lieu of cash compensation due to such participant.

     Deferred Stock Awards.  The administrator may also award phantom stock
units as deferred stock awards to participants. The deferred stock awards are
ultimately payable in the form of shares of Innovations common stock and may be
subject to such conditions and restrictions as the administrator may determine.
These conditions and restrictions may include the achievement of certain
performance goals and/or continued employment with Innovations through a
specified vesting period. During the deferral period, subject to terms and
conditions imposed by the administrator, the deferred stock awards may be
credited with dividend equivalent rights. Subject to the consent of the
administrator, a participant may make an advance election to receive a portion
of his compensation or restricted stock award otherwise due in the form of a
deferred stock award.

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     Performance Share Awards.  The administrator may grant performance share
awards to any participant which entitle the recipient to receive shares of
Innovations common stock upon the achievement of individual or company
performance goals and such other conditions as the administrator shall
determine.

     Dividend Equivalent Rights.  The administrator may grant dividend
equivalent rights, which entitle the recipient to receive credits for dividends
that would be paid if the grantee had held specified shares of common stock.
Dividend equivalent rights may be granted as a component of another award or as
a freestanding award.

     Change of Control Provisions.  The Innovations stock option plan provides
that in the event of a "change of control" as defined in the Innovations stock
option plan, all stock options will automatically become fully exercisable. The
restrictions and conditions on all other awards will automatically be deemed
waived.

     Adjustments for Stock Dividends, Mergers, etc.  The Innovations stock
option plan authorizes the administrator to make appropriate adjustments to the
number of shares of Innovations common stock that are subject to the Innovations
stock option plan and to any outstanding stock options to reflect stock
dividends, stock splits and similar events. In the event of certain
transactions, such as a merger, consolidation, dissolution or liquidation of
Innovations, the plan and all awards will terminate unless the parties to the
transaction, in their discretion, provide for appropriate substitutions or
adjustments of outstanding stock options or awards. Before any outstanding stock
options and awards will terminate, the option holder will have an opportunity to
exercise all outstanding options, and holders of other awards will receive a
cash or in kind payment of such appropriate consideration as determined by the
administrator in its sole discretion after taking into account the consideration
payable per share of Innovations common stock pursuant to the business
combination.

     Repricing Awards.  The exercise price of an award may be reduced only upon
a finding by the administrator that the value of such awards has been
jeopardized by extreme circumstances beyond the control of management, and, in
such a case, not more than 10% of the shares authorized for grant under the plan
may be repriced.

     Amendments and Termination.  The Innovations board of directors may at any
time amend or discontinue the Innovations stock option plan and the
administrator may at any time amend or cancel any outstanding award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect the rights under any outstanding awards
without the holder's consent. To the extent required by the Internal Revenue
Code to ensure that options granted under the Innovations stock option plan
qualify as incentive options or that compensation earned under Innovations stock
options granted under the stock option plan qualify as performance-based
compensation under the Internal Revenue Code, plan amendments shall be subject
to approval by Innovations stockholders.

     NEW PLAN BENEFITS -- RESTRICTED STOCK SALE.  Pursuant to the Innovations
stock option plan, on August --, 2001, Innovations sold 1,168,191 shares of
restricted stock to Ron Zwanziger, Chairman and Chief Executive Officer of
Innovations, at a price of $9.13 per share. Mr. Zwanziger paid for the shares
using the proceeds of a five-year promissory note from Mr. Zwanziger to
Innovations. The note accrues interest which compounds annually at the rate of
4.99% per year. Both principal and interest are payable at the end of the
five-year term, unless repaid earlier. The promissory note is 75% non-recourse
as to principal and full recourse as to the remaining principal and all
interest. Two-thirds of these shares of restricted stock, or 778,794 shares,
vest in 36 equal monthly installments beginning on the last day of the calendar
month in which the split-off occurs. Vesting on these 778,794 shares will also
accelerate in the event of death, disability or actual or constructive
termination without cause. One-third of these shares of restricted stock, or
389,397 shares, vests in 48 equal monthly installments beginning on the last day
of the calendar month in which the split-off occurs. Any non-vested shares
forfeited by Mr. Zwanziger will be subject to repurchase by Innovations at cost.
If Inverness stockholders do not approve the Innovations stock option plan or
the Innovations executive bonus plan, all shares sold will be repurchased by
Innovations at cost.
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     NEW PLAN BENEFITS -- OPTION GRANTS.  Pursuant to the Innovations stock
option plan, on August --, 2001, Innovations granted options to purchase shares
of Innovations common stock to certain executive officers of Innovations. It is
anticipated that these options will be exercised within a few months after the
split-off. The following table sets forth certain information regarding these
options.

                               NEW PLAN BENEFITS



                                                                NUMBER OF SHARES
                                                              ISSUABLE ON EXERCISE    EXERCISE
                     NAME AND POSITION                             OF OPTIONS          PRICE
                     -----------------                        --------------------    --------
                                                                                
David Scott, Ph.D. .........................................        399,381            $6.20
  Chief Scientific Officer
Jerry McAleer, Ph.D. .......................................        379,413            $6.20
  Vice President, Research and Development


     These options will expire on January 31, 2002. The exercise price of these
options may be paid using the proceeds of a five-year promissory note from the
optionee to Innovations. Each note will accrue interest which compounds annually
at the applicable federal rate for a five-year note for the month in which the
option is exercised. Both principal and interest will be payable at the end of
the five-year term, unless repaid earlier. The promissory note of each executive
will be 75% non-recourse as to principal and full recourse as to the remaining
principal and all interest. Upon exercise, the shares of Innovations common
stock purchased will vest in 36 equal monthly installments beginning on the last
day of the calendar month in which the option is exercised. Vesting on these
shares will also accelerate in the event of death, disability or actual or
constructive termination without cause. Upon termination of employment, any
non-vested shares will be subject to repurchase by Innovations at their then
fair market value. In the event that the executive has not purchased all of the
shares underlying the option by the expiration date, Innovations will grant the
executive a new option for the number, if any, of unpurchased shares underlying
the original option. This new option will have a ten-year term, will become
exercisable in 36 equal monthly installments and will have a per share exercise
price equal to the greater of the per share exercise price of the original
option or the fair market value of a share of Innovations common stock on the
date of the grant. Exercisability of these options will accelerate in the event
of death, disability or actual or constructive termination without cause. The
exercise price of the new option may be paid using the proceeds of a five-year
promissory note which will have terms similar to those discussed above.

     Innovations has also agreed to grant additional options to these executive
officers immediately following the split-off. The following table sets forth
certain information regarding these options.

                               NEW PLAN BENEFITS



                                                                NUMBER OF SHARES
                                                              ISSUABLE ON EXERCISE    EXERCISE
                            NAME                                   OF OPTIONS          PRICE
                            ----                              --------------------    --------
                                                                                
David Scott, Ph.D. .........................................        199,691            $15.00
Jerry McAleer, Ph.D. .......................................        189,706            $15.00


     These options will have a ten-year term and will become exercisable in 48
equal monthly installments. The exercise price of these options may be paid
using the proceeds of a five-year promissory note which will have terms similar
to those discussed above.

     If Inverness stockholders do not approve the Innovations stock option plan
or the Innovations executive bonus plan, the options granted on August --, 2001
will be canceled and the additional options will not be granted immediately
following the split-off.

     FEDERAL INCOME TAX CONSEQUENCES.  The following is a summary of the
principal federal income tax consequences of transactions under the Innovations
stock option plan. It does not describe all federal tax consequences under the
Innovations stock option plan, nor does it describe state or local tax
consequences.

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     Incentive options.  No taxable income is generally realized by the optionee
upon the grant or exercise of an incentive option. If shares of Innovations
common stock issued to an optionee pursuant to the exercise of an incentive
option are sold or transferred after two years from the date of grant and after
one year from the date of exercise, then (i) upon sale of such shares, any
amount realized in excess of the option price (the amount paid for the shares)
will be taxed to the optionee as a long-term capital gain, and any loss
sustained will be a long-term capital loss, and (ii) there will be no deduction
for Innovations for federal income tax purposes. The exercise of an incentive
option will give rise to an item of tax preference that may result in
alternative minimum tax liability for the optionee.

     If shares of Innovations common stock acquired upon the exercise of an
incentive option are disposed of prior to the expiration of the two-year and
one-year holding periods described above, a "disqualifying disposition",
generally (i) the optionee will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market value
of the shares of Innovations common stock at exercise (or, if less, the amount
realized on a sale of such shares of Innovations common stock) over the option
price thereof, and (ii) Innovations will be entitled to deduct such amount.
Special rules will apply where all or a portion of the exercise price of the
incentive option is paid by tendering shares of Innovations common stock.

     If an incentive option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a non-qualified
option. Generally, an incentive option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment (or one year in the case of termination of employment
by reason of disability). In the case of termination of employment by reason of
death, the three-month rule does not apply.

     Non-Qualified Options.  With respect to non-qualified options under the
Innovations stock option plan, no income is realized by the optionee at the time
the option is granted. Generally (i) at exercise, ordinary income is realized by
the optionee in an amount equal to the difference between the option price and
the fair market value of the shares of Innovations common stock on the date of
exercise, and Innovations receives a tax deduction for the same amount, and (ii)
at disposition, appreciation or depreciation after the date of exercise is
treated as either short-term or long-term capital gain or loss depending on how
long the shares of Innovations common stock have been held. Special rules will
apply where all or a portion of the exercise price of the non-qualified option
is paid by tendering shares of Innovations common stock.

     Parachute Payments.  The vesting or exercisability of any portion of any
option or other award that is accelerated due to the occurrence of a change of
control may cause a portion of the payments with respect to such accelerated
awards to be treated as "parachute payments" as defined in the Internal Revenue
Code. Any such parachute payments may be non-deductible to Innovations, in whole
or in part, and may subject the recipient to a non-deductible 20% federal excise
tax on all or a portion of such payment (in addition to other taxes ordinarily
payable).

     Limitation on Innovations Deductions.  As a result of Section 162(m) of the
Internal Revenue Code, Innovations' deduction for certain awards under the stock
option plan may be limited to the extent that a covered employee receives
compensation in excess of $1,000,000 in such taxable year of Innovations (other
than performance-based compensation that otherwise meets the requirements of
Section 162(m) of the Internal Revenue Code).

     VOTE REQUIRED FOR APPROVAL.  Approval of this proposal requires the
affirmative vote of stockholders holding a majority of the shares of Inverness
common stock present in person or represented by proxy at the special meeting
and entitled to vote on this proposal. Abstentions will be counted as present
and entitled to vote and, accordingly, will have the effect of votes against the
approval of the stock option plan. Broker non-votes will not be considered
present and entitled to vote and, accordingly, will not have any effect on this
proposal. Properly executed proxies that do not contain voting instructions will
be voted "FOR" the approval of this proposal.

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     THE INVERNESS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE INNOVATIONS STOCK OPTION PLAN.

APPROVAL OF THE INVERNESS MEDICAL INNOVATIONS, INC. EXECUTIVE BONUS PLAN

     The Innovations board of directors has adopted the Innovations executive
bonus plan pursuant to which certain key executives of Innovations may be
entitled to annual cash bonuses if shares of Innovations common stock attain
certain targeted prices per share.

     The Innovations board of directors believes the Innovations executive bonus
plan will advance the interest of Innovations and its stockholders by enabling
Innovations to align the long-term financial incentives of its executive
officers with increases in stockholder value. If stockholders do not approve the
Innovations executive bonus plan, the Innovations executive bonus plan will be
rescinded and no payments will be made under the Innovations executive bonus
plan. However, Innovations reserves the right to provide other forms of
incentive payments to its key executives which may not be deductible to
Innovations.

     Section 162(m) of the Internal Revenues Code generally would disallow
Innovations a federal tax deduction for compensation in excess of $1 million
paid in any fiscal year to any executive officer included in the summary
compensation table who is employed by Innovations on the last day of its fiscal
year. This limitation on deductibility does not apply to payments of
"performance-based compensation," the material terms of which have been approved
by the stockholders. As stated above, the bonus plan is designed to align the
long-term financial incentives of its executive officers with increases in
stockholder value, while assuring that bonus payments to the executive officers
from the bonus plan each year constitute "performance-based compensation" under
Section 162(m) of the Internal Revenue Code.

     SUMMARY OF THE INNOVATIONS EXECUTIVE BONUS PLAN. The primary features of
the Innovations executive bonus plan are summarized below:

     The Innovations executive bonus plan will be administered by the
Innovations compensation committee, which is composed of "outside directors"
within the meaning of Section 162(m) of the Internal Revenue Code. Three key
executives. Ron Zwanziger, David Scott and Jerry McAleer, are eligible to
receive bonuses under the Innovations executive bonus plan.

     The Inverness compensation committee has established certain stock price
targets, which may be adjusted to reflect stock splits. The key executives will
be eligible to receive the performance bonuses set forth in Table I below if the
Innovations common stock achieves specified stock price targets. The key
executives will be eligible to receive the additional performance bonuses set
forth in Table II below if the Innovations common stock achieves higher
specified stock price targets. With respect to each cash bonus listed in the
tables below, each key executive will be entitled to receive that bonus if the
average closing price of Innovations common stock during any 30-day period
exceeds:

     - the price per share target for a particular cash bonus on or prior to its
       target date or

     - any higher price per share target for any other cash bonus having a later
       target date on or prior to said later target date.

     At the end of each calendar year, the Innovations compensation committee
will certify in writing whether the price per share target has been achieved. If
the price per share target or targets have been

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achieved, bonuses earned will be paid in cash in January of the following year
pursuant to the following tables:

                                    TABLE I



                                                           MAXIMUM CASH BONUSES PAYABLE
                                                       IF PRICE PER SHARE TARGET IS ACHIEVED
                                     TARGET PRICE    -----------------------------------------
TARGET DATES                          PER SHARE      MR. ZWANZIGER    DR. SCOTT    DR. MCALEER
------------                         ------------    -------------    ---------    -----------
                                                                       
December 31, 2002..................    $28.125        $2,400,000      $850,000      $800,000
December 31, 2003..................      33.75         2,400,000       850,000       800,000
December 31, 2004..................     39.375         2,400,000       850,000       800,000


                                    TABLE II



                                                           MAXIMUM CASH BONUSES PAYABLE
                                                       IF PRICE PER SHARE TARGET IS ACHIEVED
                                     TARGET PRICE    -----------------------------------------
TARGET DATES                          PER SHARE      MR. ZWANZIGER    DR. SCOTT    DR. MCALEER
------------                         ------------    -------------    ---------    -----------
                                                                       
December 31, 2002..................    $ 33.75        $  900,000      $750,000      $725,000
December 31, 2003..................      45.00           900,000       750,000       725,000
December 31, 2004..................      56.25           900,000       750,000       725,000
December 31, 2005..................      67.50           900,000       750,000       725,000


     The Innovations compensation committee has the right to amend the
Innovations executive bonus plan, but any amendment that would (i) increase the
maximum bonus that might be payable to any key executive, or (ii) establish
different performance targets, is subject to further stockholder approval in
order for the bonus payments to the key executives to constitute
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code.

     VOTE REQUIRED FOR APPROVAL.  Approval of this proposal requires the
affirmative vote of stockholders holding a majority of the shares of Inverness
common stock present in person or represented by proxy at the special meeting
and entitled to vote on this proposal. Abstentions will be counted as present
and entitled to vote and, accordingly, will have the effect of votes against the
approval of the Innovations executive bonus plan. Broker non-votes will not be
considered present and entitled to vote and, accordingly, will not have any
effect on this proposal. Properly executed proxies that do not contain voting
instructions will be voted "FOR" the approval of this proposal.

     THE INVERNESS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE INNOVATIONS EXECUTIVE BONUS PLAN.

                                 LEGAL MATTERS

     The legality of Johnson & Johnson common stock offered by this proxy
statement/prospectus will be passed upon for Johnson & Johnson by Joseph S.
Orban, Esq., Associate General Counsel of Johnson & Johnson. Joseph S. Orban is
paid a salary by Johnson & Johnson, is a participant in various employee benefit
plans offered to employees of Johnson & Johnson generally and owns and has
options to purchase shares of Johnson & Johnson common stock.

     Certain United States Federal income tax consequences of the split-off and
merger will be passed upon for Inverness by its counsel, Goodwin Procter LLP.
Goodwin Procter LLP from time to time acts as counsel for Inverness and its
subsidiaries. The owners and presidents of two professional corporations which
are partners in the firm of Goodwin Procter LLP beneficially own an aggregate of
approximately 50,142 shares of Inverness common stock and 3,995 shares of
Inverness common stock, respectively.

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                                    EXPERTS

     The supplemental consolidated financial statements as of December 31, 2000
and January 2, 2000, and for each of the three fiscal years in the period ended
December 31, 2000 of Johnson & Johnson and subsidiaries incorporated in this
proxy statement/prospectus by reference to the Johnson & Johnson Current Report
on Form 8-K filed on August 7, 2001, and the historical consolidated financial
statements and financial statement schedule of Johnson & Johnson and
subsidiaries as of December 31, 2000 and January 2, 2000, and for each of the
three fiscal years in the period ended December 31, 2000, which are included in
or incorporated by reference in its Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, which has also been incorporated by reference in
this proxy statement/prospectus, have been so incorporated in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

     The consolidated financial statements of Inverness Medical Technology, Inc.
(formerly Selfcare, Inc.) and its subsidiaries as of December 31, 2000 and 1999,
and for each of the three years in the period ended December 31, 2000,
incorporated by reference in this proxy statement/prospectus and elsewhere in
this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference in this proxy statement/prospectus in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.

     The financial statements of Integ Incorporated as of December 31, 2000 and
1999, and for each of the years in the three-year period ended December 31,
2000, incorporated in this proxy statement/ prospectus and elsewhere in this
registration statement by reference to Inverness Medical Technology, Inc.'s
Current Report on Form 8-K/A filed on April 9, 2001, have been audited by Ernst
& Young LLP, independent auditors, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.

     The financial statements of LXN Corporation as of and for the year ended
December 31, 2000, incorporated by reference in this proxy statement/prospectus
and elsewhere in this registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.

     The financial statements of LXN Corporation as of and for the year ended
December 31, 1999, incorporated in this proxy statement/prospectus and elsewhere
in this registration statement by reference to Inverness Medical Technology,
Inc.'s Current Report on Form 8-K/A filed on June 11, 2001, have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.

                                 OTHER MATTERS

     As of the date of this proxy statement/prospectus, the Inverness board of
directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus.

                          FUTURE STOCKHOLDER PROPOSALS

     Inverness' 2001 annual meeting of stockholders was held on May 21, 2001.
Inverness will hold a 2002 annual meeting of Inverness stockholders only if the
split-off and merger are not completed before the time of such meeting.
Inverness stockholders who wish to present proposals pursuant to Rule 14a-8
promulgated under the Securities Exchange Act for consideration at the 2002
annual meeting, if one is held, must submit the proposals in proper form to
Inverness at its address set forth in this proxy

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statement/prospectus not later than December 19, 2001 in order for the proposals
to be considered for inclusion in Inverness' proxy statement and form of proxy
relating to the 2002 annual meeting.

     Stockholder proposals intended to be presented at Inverness' 2002 annual
meeting submitted outside the processes of Rule 14a-8 must be received in
writing by Inverness no later than March 7, 2002, nor earlier than January 21,
2002, together with all supporting documentation required by Inverness' amended
and restated by-laws.

                      WHERE YOU CAN FIND MORE INFORMATION

     Johnson & Johnson and Inverness file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that Johnson & Johnson and Inverness file with the Securities and Exchange
Commission at the Securities and Exchange Commission's public reference rooms at
the following locations:


                                            
Public Reference Room   New York Regional Office  Chicago Regional Office
450 Fifth Street, N.W.    7 World Trade Center        Citicorp Center
      Room 1024                Suite 1300         500 West Madison Street
Washington, D.C. 20549     New York, NY 10048           Suite 1400
                                                  Chicago, IL 60661-2511


     Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the website maintained by the Securities and Exchange
Commission at "http://www.sec.gov". Reports, proxy statements and other
information concerning Johnson & Johnson may also be inspected at the offices of
the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
Reports, proxy statements and other information concerning Inverness may also be
inspected at the offices of the American Stock Exchange, which are located at
1735 K Street, N.W., Washington, D.C. 20006.

     Johnson & Johnson filed a registration statement on Form S-4 on August 13,
2001 to register with the Securities and Exchange Commission the Johnson &
Johnson common stock to be issued to Inverness stockholders in the merger.
Innovations filed a registration statement on Form S-4 on August 13, 2001 to
register with the Securities and Exchange Commission the Innovations common
stock to be issued to Inverness stockholders in the split-off. This proxy
statement/prospectus is a part of each of those registration statements and
constitutes a prospectus of Johnson & Johnson and a prospectus of Innovations in
addition to being a proxy statement of Inverness. As allowed by Securities and
Exchange Commission rules, this proxy statement/prospectus does not contain all
the information you can find in Johnson & Johnson's or Innovations' registration
statement or the exhibits to those registration statements.

     The Securities and Exchange Commission allows Johnson & Johnson and
Inverness to "incorporate by reference" information into this proxy
statement/prospectus, which means that the companies can disclose important
information to you by referring you to other documents filed separately with the
Securities and Exchange Commission. The information incorporated by reference is
considered part of this proxy statement/prospectus, except for any information
superseded by information contained directly in this proxy statement/prospectus
or in later filed documents incorporated by reference in this proxy
statement/prospectus.

     This proxy statement/prospectus incorporates by reference the documents set
forth below that Johnson & Johnson and Inverness have previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about Johnson & Johnson and Inverness that is not
included in or delivered with this proxy statement/prospectus.

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JOHNSON & JOHNSON FILINGS                       PERIOD
(FILE NO. 001-03215)
Annual Report on Form 10-K..................    Fiscal Year ended December 31, 2000, as
                                                amended by Amendment No. 1 thereto filed on
                                                Form 10-K/A on June 28, 2001
Quarterly Report on Form 10-Q...............    Quarter ended April 1, 2001
Current Report on Form 8-K..................    Filed on August 7, 2001

INVERNESS FILINGS                               PERIOD
(FILE NO. 000-20871)
Annual Report on Form 10-K..................    Fiscal Year ended December 31, 2000
Quarterly Report on Form 10-Q...............    Quarter ended March 31, 2001
Current Reports on Form 8-K.................    Filed on February 7, 2001 (and amendments
                                                thereto), April 12, 2001 (and amendments
                                                thereto) and June 18, 2001
Proxy Statement for 2001 annual meeting of
  stockholders..............................    Dated April 18, 2001
The description of Inverness common stock
contained in its Registration Statement on
Form 8-A, and all amendments and reports
updating the description....................    Filed on July 24, 1996


     Johnson & Johnson and Inverness also incorporate by reference additional
documents that may be filed with the Securities and Exchange Commission under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this
proxy statement/prospectus and, in the case of Johnson & Johnson, the date of
the completion of the split-off and merger, and, in the case of Inverness, the
date of the special meeting of Inverness' stockholders. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.

     Johnson & Johnson has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Johnson & Johnson and
Inverness has supplied all such information relating to Inverness and
Innovations.

     Inverness stockholders should not send in their Inverness certificates
until they receive the transmittal materials from the exchange agent. Inverness
stockholders of record who have further questions about their share certificates
or the exchange of their Inverness common stock for Johnson & Johnson common
stock and Innovations common stock should contact the exchange agent at the
address or telephone number that will be included in the transmittal materials.

     If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the Securities and Exchange Commission or the Securities and Exchange
Commission's website as described above. Documents incorporated by reference are
available from the companies without charge, excluding all exhibits, except that
if the companies have specifically incorporated by reference an exhibit in this
proxy statement/prospectus, the exhibit will also be provided without charge.
Stockholders may obtain documents incorporated by reference in this proxy

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statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:


                                             
                  Johnson & Johnson             Inverness Medical Technology, Inc.
             One Johnson & Johnson Plaza            51 Sawyer Road, Suite 200
               New Brunswick, NJ 08933                  Waltham, MA 02453
       Attention: Corporate Secretary's Office    Attention: Investor Relations
              Telephone: (732) 524-2455             Telephone: (781) 647-3900


     You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement/prospectus. This proxy statement/prospectus is dated --, 2001.
You should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than that date. Neither
the mailing of this proxy statement/prospectus to stockholders nor the issuance
of Johnson & Johnson common stock or Innovations common stock in the split-off
and merger creates any implication to the contrary.

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               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Johnson & Johnson and Inverness and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues and income, in each case relating to Johnson
& Johnson and Inverness, wherever they occur in this proxy statement/prospectus,
are necessarily estimates reflecting the best judgment of the senior management
of Johnson & Johnson (with regard to matters relating to Johnson & Johnson) and
Inverness (with regard to matters relating to Inverness) and involve a number of
risks and uncertainties that could cause actual results to differ materially
from those suggested by the forward-looking statements. Such forward-looking
statements should, therefore, be considered in light of various important
factors, including those set forth in this proxy statement/prospectus. Important
factors that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include without
limitation:

     - competitive factors, including technological advances achieved and
       patents attained by competitors and generic competition as patents on
       Johnson & Johnson's and Inverness' products expire

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

     - risks and uncertainties described in Johnson & Johnson's and Inverness'
       reports filed with the Securities and Exchange Commission under the
       Securities Exchange Act of 1934, including those risks and uncertainties
       described in each company's Annual Report on Form 10-K for the year ended
       December 31, 2000, as amended.

     Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
December 31, 2000 of Johnson & Johnson, including any amendments, and the Annual
Report on Form 10-K for the year ended December 31, 2000 of Inverness, including
any amendments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. Neither
Johnson & Johnson nor Inverness undertakes any obligation to publicly update or
release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this proxy statement/ prospectus or to reflect
the occurrence of unanticipated events.

     The foregoing list sets forth some, but not all, of the factors that could
impact upon Johnson & Johnson's and Inverness' ability to achieve results
described in any forward-looking statements. Investors are cautioned not to
place undue reliance on such statements, which speak only as of the date made.
Investors also should understand that it is not possible to predict or identify
all such factors and that this list should not be considered a complete
statement of all potential risks and uncertainties. Investors should also
realize that if underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results could vary materially from Johnson &
Johnson's and Inverness' projections. Johnson & Johnson and Inverness undertake
no obligation to update any forward-looking statements as a result of future
events or developments.

     For information regarding forward-looking statements relating to
Innovations, see "Special Statement Regarding Forward-Looking Statements" on
page X-18 of the Innovations prospectus portion of this proxy
statement/prospectus.

                                        99
   110

 This Inverness Medical Innovations, Inc. prospectus should be attached to the
  proxy statement/prospectus and is a part of the proxy statement/prospectus.

     The offer or sale of our common stock in those states where the offer is
required by state laws to be made by a licensed broker or dealer are deemed to
be made to Inverness Medical Technology, Inc.'s stockholders residing in those
states by --, a registered broker or dealer licensed under the laws of those
states, as an accommodation to, and on behalf of, Inverness Medical Technology,
Inc. and Inverness Medical Innovations, Inc. Questions and requests for
assistance or for additional copies of this prospectus and related materials may
be directed to Investor Relations, Inverness Medical Technology, Inc., 51 Sawyer
Road, Suite 200, Waltham, MA 02453, or by telephone at (781) 647-3900.

                                       X-i
   111

                 INVERNESS MEDICAL INNOVATIONS, INC. PROSPECTUS

     The information in this Innovations prospectus, which is a part of the
proxy statement/prospectus, relates to Innovations and the shares of Innovations
common stock to be issued to holders of Inverness common stock in connection
with the split-off.

                               PROSPECTUS SUMMARY

     This summary highlights selected information regarding Innovations and the
issuance of Innovations common stock to the holders of Inverness common stock,
which we refer to as the split-off. You should read this entire prospectus,
including our financial statements and the notes to our financial statements,
for more detailed information relating to the split-off and Innovations. Unless
otherwise indicated, references in this prospectus to "Innovations," "us," "we,"
and "our" refer to Inverness Medical Innovations, Inc. and its subsidiaries and
assume the completion of (1) the restructuring of Inverness, involving the
separation of the women's health, nutritional supplements and clinical
diagnostics businesses of Inverness from the other businesses of Inverness,
which consist primarily of its diabetes care products business, and (2) the
merger, including the split-off. Unless otherwise indicated, references to
"Inverness" refer to Inverness Medical Technology, Inc. and its subsidiaries
prior to the restructuring, split-off and merger.

     This prospectus contains forward-looking statements. You can identify these
statements by forward-looking words such as "may," "could," "should," "would,"
"intend," "will," "expect," "anticipate," "believe," "estimate," "continue" or
similar words. You should read statements that contain these words carefully
because they discuss our future expectations, contain projections of our future
results of operations or of our financial condition or state other
"forward-looking" information. There may be events in the future that we are not
able to predict accurately or control and that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. We caution investors that all forward-looking statements involve
risks and uncertainties, and actual results may differ materially from those we
discuss in this prospectus as a result of various factors, including those
factors described in the sections of this prospectus entitled "Risk Factors" and
"Special Statement Regarding Forward-Looking Statements." Readers should not
place undue reliance on our forward-looking statements. Before you invest in our
common stock, you should be aware that the occurrence of the events described in
the "Risk Factors" section and elsewhere in this prospectus could harm our
business, prospects, operating results and financial condition. We do not
undertake or intend to update any forward-looking statements after the date of
this prospectus.

                                  INNOVATIONS

     We are currently a majority-owned subsidiary of Inverness. Upon completion
of the restructuring, we will operate the women's health, nutritional
supplements and clinical diagnostics businesses of Inverness, which we refer to
as the Innovations business. After the split-off, we will be an independent,
publicly owned company. As noted above, except where otherwise indicated,
discussions in this prospectus regarding Innovations' business and operations
assume the completion of the restructuring and the split-off.

     We develop, manufacture and market self-test diagnostic and other products
for the women's health market and, to a lesser extent, clinical diagnostic
products for the infectious disease market. Self-test diagnostic products allow
individuals to obtain accurate information regarding various medical conditions
on a confidential, non-prescription basis, without the expense, inconvenience
and delay associated with physician visits or laboratory testing. This
information gives individuals greater control over their health and their lives,
allowing them to make informed decisions and take action to protect their
health, alone or in consultation with healthcare professionals. Our existing
self-test products are targeted at the women's health market, one of the two
largest existing markets for self-care diagnostics, and include home pregnancy
detection tests and ovulation prediction tests. We also sell a line of
nutritional supplements targeted primarily at the women's health market. Our
products for the infectious disease market include test kits used by smaller
laboratories, physicians' offices and other point-of-care sites for the
detection of certain diseases and agents such as HIV-1, HIV-2, hepatitis and
chlamydia. The products are based on

                                       X-1
   112

proprietary technologies centered on unique platforms which utilize in-vitro
antigen antibody reactions that enable users to obtain a rapid and reliable
result.

     Our principal executive offices are located at 51 Sawyer Road, Suite 200,
Waltham, MA 02453 and our telephone number is (781) 647-3900.

                                THE TRANSACTION

     Inverness and Johnson & Johnson have entered into a split-off and merger
agreement which provides that Inverness will merge with and become a
wholly-owned subsidiary of Johnson & Johnson. As a condition to, and immediately
prior to, the merger, Inverness will undertake a corporate restructuring in
order to separate its women's health, nutritional supplements and clinical
diagnostics businesses from its other businesses, which consist primarily of its
diabetes care products business. As part of the merger, we will split-off from
Inverness and Inverness will deliver all of the shares of our common stock held
by Inverness to its stockholders. The split-off will not be completed unless the
merger is completed. A restructuring agreement, together with a post-closing
covenants agreement, a tax allocation agreement and other related agreements
referred to in the restructuring agreement, will govern the terms of the
separation of the women's health, nutritional supplements and clinical
diagnostics businesses from the other businesses of Inverness and the
relationship among us, Inverness and Johnson & Johnson before and after the
split-off.

     Subject to the split-off and merger agreement, at the time of the merger
each share of Inverness common stock held by an Inverness stockholder will be
exchanged for:

          - shares of our common stock, par value $0.001 per share and cash in
            lieu of fractional shares, which constitute the split-off
            consideration and

          - shares of Johnson & Johnson common stock, and cash in lieu of
            fractional shares, which constitute the merger consideration.

                            SUMMARY OF THE SPLIT-OFF

Purpose of transaction........   The split-off is an integral part of the merger
                                 of Inverness and Johnson & Johnson and it will
                                 occur only if the merger is completed. The
                                 purpose of the split-off is to separate
                                 Inverness' women's health, nutritional
                                 supplements and clinical diagnostics businesses
                                 from its other businesses, primarily related to
                                 diabetes care products, so that Johnson &
                                 Johnson will not acquire the women's health,
                                 nutritional supplements or clinical diagnostics
                                 businesses through the merger.

Parent corporation prior to
the split-off.................   Inverness Medical Technology, Inc.

Split-off corporation.........   Inverness Medical Innovations, Inc., a newly
                                 formed company which, following the
                                 restructuring, will operate the women's health,
                                 nutritional supplements and clinical
                                 diagnostics businesses of Inverness. The assets
                                 to be transferred to us in the restructuring
                                 and before the split-off generally consist of
                                 tangible and intangible assets used primarily
                                 in the women's health, nutritional supplements
                                 and clinical diagnostics businesses of
                                 Inverness. Liabilities to be assigned to and
                                 assumed by us include liabilities related to
                                 the women's health, nutritional supplements and
                                 clinical diagnostics businesses of Inverness,
                                 as described more fully under the heading "The
                                 Restructuring and the Split-off." After the
                                 split-off, we will become an independent,
                                 publicly owned company.

                                       X-2
   113

Split-off ratio...............   .20 of a share of our common stock for each
                                 share of Inverness common stock owned of record
                                 on the date of the split-off.

Fractional shares of our
common stock..................   Instead of receiving any fraction of a share of
                                 our common stock, you will receive cash in an
                                 amount equal to the fraction of a share of our
                                 common stock you would have received in the
                                 split-off multiplied by the closing price of
                                 our common stock as reported on a national
                                 securities exchange or the Nasdaq National
                                 Market, as the case may be, on the first full
                                 trading day after the split-off.

Securities to be issued to
Inverness Stockholders........   In the split-off, we expect to issue a total of
                                 approximately -- shares of our common stock,
                                 based on the number of issued and outstanding
                                 shares of Inverness common stock as of --
                                 multiplied by .20. The actual number of shares
                                 of our common stock which will be issued to
                                 Inverness stockholders in the split-off will be
                                 determined based on the number of issued and
                                 outstanding shares of Inverness common stock as
                                 of the effective time of the merger.

Appraisal rights..............   Under Delaware law, Inverness stockholders will
                                 not have appraisal rights in connection with
                                 the split-off.

Listing of our common stock...   We have applied for our common stock to be
                                 approved for listing on the American Stock
                                 Exchange at the time of the split-off.

Tax consequences..............   The material tax consequences of the split-off
                                 and merger are described under the heading
                                 "Material Tax Consequences."

Indemnification obligations
after the split-off...........   We have agreed to indemnify Inverness and
                                 Johnson & Johnson, and Inverness and Johnson &
                                 Johnson have agreed to indemnify us, after the
                                 split-off with respect to various losses,
                                 damages, claims and liabilities arising out of
                                 the pre-split-off operation of each of our
                                 businesses. We have also agreed to indemnify
                                 Inverness and Johnson & Johnson for other
                                 liabilities more fully described under the
                                 heading "Post-Closing Arrangements -- The
                                 Post-Closing Covenants Agreement."

Relationship with Inverness
after the split-off...........   After the split-off, we and Inverness will
                                 operate as independent companies. For up to
                                 nine months after the split-off, we and
                                 Inverness have agreed to provide each other
                                 with some transitional services. The terms of
                                 the ongoing relationship between us and
                                 Inverness are more fully described under the
                                 heading "The Restructuring and the Split-off."

Risk factors..................   You should carefully read the section entitled
                                 "Risk Factors" beginning on page X-6 for a
                                 discussion of risks related to the split-off
                                 and our business.

THE INFORMATION ABOVE IS A SUMMARY OF SOME OF THE TERMS OF THE SPLIT-OFF. THE
SPLIT-OFF, THE RESTRUCTURING AGREEMENT, AND THE RELATED AGREEMENTS ARE MORE
FULLY DESCRIBED IN THIS PROSPECTUS UNDER THE HEADING "THE RESTRUCTURING AND THE
SPLIT-OFF."

                                       X-3
   114

 SUMMARY FINANCIAL DATA OF INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

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



                                                                        HISTORICAL
                                            -------------------------------------------------------------------
                                                                                                THREE MONTHS
                                                                                                    ENDED
                                                        YEAR ENDED DECEMBER 31,                   MARCH 31,
                                            -----------------------------------------------   -----------------
                                             1996      1997      1998      1999      2000      2000      2001
                                            -------   -------   -------   -------   -------   -------   -------
                                                                                   
Consolidated Statement of Operations:
Net revenues..............................  $14,024   $50,606   $74,645   $79,294   $84,529   $20,952   $18,662
Cost of sales.............................   10,592    24,725    40,563    45,534    48,183    11,620    10,860
                                            -------   -------   -------   -------   -------   -------   -------
Gross profit..............................    3,432    25,881    34,082    33,760    36,346     9,332     7,802
                                            -------   -------   -------   -------   -------   -------   -------
Operating expenses:
  Research and development................    6,011     7,001     2,869     1,428     1,359       362       299
  Selling, general and administrative.....    6,518    21,070    28,484    25,275    26,519     6,615     6,154
  Other expenses..........................       --        81     5,372        --        --        --        --
                                            -------   -------   -------   -------   -------   -------   -------
    Total operating expenses..............   12,529    28,152    36,725    26,703    27,878     6,977     6,453
                                            -------   -------   -------   -------   -------   -------   -------
      Operating (loss) income.............   (9,097)   (2,271)   (2,643)    7,057     8,468     2,355     1,349
Interest and other expenses, net..........     (443)   (2,377)   (4,314)   (3,724)   (3,377)     (824)     (641)
                                            -------   -------   -------   -------   -------   -------   -------
      (Loss) income before income taxes...   (9,540)   (4,648)   (6,957)    3,333     5,091     1,531       708
Provision for income taxes................       --     1,456     2,103     2,793     2,909       992       579
                                            -------   -------   -------   -------   -------   -------   -------
      Net (loss) income...................  $(9,540)  $(6,104)  $(9,060)  $   540   $ 2,182   $   539   $   129
                                            =======   =======   =======   =======   =======   =======   =======
Net (loss) income per common and potential
  common share:(1)
  Basic and diluted.......................  $(9,540)  $(6,104)  $(9,060)  $   540   $ 2,182   $   539   $   129
                                            =======   =======   =======   =======   =======   =======   =======




                                                                                                       THREE
                                                                                                      MONTHS
                                                                                                       ENDED
                                                               YEAR ENDED DECEMBER 31,               MARCH 31,
                                                   -----------------------------------------------   ---------
                                                    1996      1997      1998      1999      2000       2001
                                                   -------   -------   -------   -------   -------   ---------
                                                                                   
Balance Sheet Data:
  Cash and cash equivalents......................    2,113     5,099     1,120       695     3,090      3,404
  Working capital................................   (2,226)   (1,882)   (3,924)   (1,092)   (2,224)    (2,082)
  Total assets...................................   17,518    67,663    89,771    90,092    89,541     90,656
  Debt obligations(2)............................    2,542    26,595    38,994    31,948    22,257     19,698
  Total stockholders' equity.....................    3,053    18,442    28,932    34,953    41,812     44,936


---------------
(1) Computed as described in our historical financial statements and related
    notes included in this prospectus.

(2) Excludes amounts due to related parties.

                                       X-4
   115

                 PRO FORMA SUMMARY CONSOLIDATED FINANCIAL DATA

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                       PRO FORMA(1)
                                            -------------------------------------------------------------------
                                                                                                THREE MONTHS
                                                                                                    ENDED
                                                        YEAR ENDED DECEMBER 31,                   MARCH 31,
                                            -----------------------------------------------   -----------------
                                             1996      1997      1998      1999      2000      2000      2001
                                            -------   -------   -------   -------   -------   -------   -------
                                                                                   
Consolidated Statement of Operations:
Net revenues..............................  $14,024   $50,606   $54,685   $50,584   $51,051   $13,455   $11,812
Cost of sales.............................   10,592    24,725    26,720    26,890    25,075     6,547     5,826
                                            -------   -------   -------   -------   -------   -------   -------
Gross profit..............................    3,432    25,881    27,965    23,694    25,976     6,908     5,986
                                            -------   -------   -------   -------   -------   -------   -------
Operating expenses:
  Research and development................    5,853     6,210     2,322     1,395     1,360       362       299
  Selling, general and administrative.....    6,518    21,070    22,769    18,350    17,763     4,563     4,172
  Other expenses..........................       --        81     4,969        --        --        --        --
                                            -------   -------   -------   -------   -------   -------   -------
    Total operating expenses..............   12,371    27,361    30,060    19,745    19,123     4,925     4,471
                                            -------   -------   -------   -------   -------   -------   -------
      Operating (loss) income.............   (8,939)   (1,480)   (2,095)    3,949     6,853     1,983     1,515
Interest and other (expenses) income,
  net.....................................      136       846      (651)     (562)     (388)      (53)      (79)
                                            -------   -------   -------   -------   -------   -------   -------
      (Loss) income from continuing
         operations before income taxes...   (8,803)     (634)   (2,746)    3,387     6,465     1,930     1,436
Provision for income taxes................       --     1,456     1,115     1,007     1,781       609       354
                                            -------   -------   -------   -------   -------   -------   -------
      (Loss) income from continuing
         operations.......................   (8,803)   (2,090)   (3,861)    2,380     4,684     1,321     1,082
      (Loss) income from discontinued
         operations.......................     (158)     (791)   (2,882)      183      (598)     (296)     (581)
                                            -------   -------   -------   -------   -------   -------   -------
      Net (loss) income...................  $(8,961)  $(2,881)  $(6,743)  $ 2,563   $ 4,086   $ 1,025   $   501
                                            =======   =======   =======   =======   =======   =======   =======
PRO FORMA (LOSS) INCOME FROM CONTINUING
  OPERATIONS PER COMMON SHARE -- BASIC AND
  DILUTED.................................  $ (9.23)  $ (1.31)  $ (1.58)  $  0.71   $  0.99   $  0.34   $  0.18
PRO FORMA (LOSS) INCOME FROM DISCONTINUED
  OPERATIONS PER COMMON SHARE -- BASIC AND
  DILUTED.................................     (.17)     (.49)    (1.18)     0.05     (0.13)    (0.08)    (0.10)
                                            -------   -------   -------   -------   -------   -------   -------
Net (loss) income per common and potential
  common share:(1)
  Basic and diluted.......................  $ (9.40)  $ (1.80)  $ (2.76)  $  0.76   $  0.86   $  0.26   $  0.08
                                            =======   =======   =======   =======   =======   =======   =======




                                                                     PRO FORMA
                                                              ------------------------
                                                              DECEMBER 31,   MARCH 31,
                                                              ------------   ---------
                                                                2000(3)       2001(4)
                                                              ------------   ---------
                                                                   (IN THOUSANDS)
                                                                       
Balance Sheet Data:
  Cash and cash equivalents.................................      3,071       40,000
  Working capital...........................................     16,090       44,721
  Total assets..............................................     75,774       93,276
  Debt obligations(2).......................................     12,830           --
  Total stockholders' equity................................     41,812       81,565


---------------
(1) Reflects the reclassification of diabetes operations as discontinued
    operations and elimination of third-party and related-party interest
    expense.

(2) Excludes amounts due to related parties.

(3) Reflects the reclassification of net diabetes assets as net assets of
    discontinued operations.

(4) Reflects the assumption or discharge of all third-party and related party
    debt by Inverness, the contribution of $40 million of net cash by Inverness
    and the transfer of the diabetes operations of our subsidiaries to
    Inverness.

                                       X-5
   116

                                  RISK FACTORS

     In addition to the other information in this prospectus, you should
carefully consider the following risk factors with respect to the split-off and
our business.

                         RISKS RELATED TO THE SPLIT-OFF

OUR BUSINESSES WILL FACE CHALLENGES AS PART OF A STAND-ALONE COMPANY THAT THEY
DID NOT EXPERIENCE AS PART OF INVERNESS.

     As an independent, publicly owned company, we will face new issues and
challenges that we did not experience when we were part of Inverness. If we are
unable to resolve these issues or overcome these challenges, our results of
operations and financial position may be adversely affected. Examples of
potential issues include:

     - our inability to rely on the long term financial strength of Inverness

     - our inability to rely on the earnings, cash flow, assets and goodwill of
       Inverness' diabetes business

     - our inability to rely on the experience and business relationships of
       some personnel who will not be continuing employment with our company

     - greater difficulty in obtaining financing on terms satisfactory to us, if
       needed, and

     - greater difficulty in obtaining and maintaining insurance on terms that
       are acceptable to us.

     Our results of operations and prospects, as well as stock price, may be
affected by factors that are different from those that have affected Inverness
in the past. After the split-off, we will be a smaller and less diversified
company than Inverness was prior to the split-off. Our results of operations
will be more affected by competitive and market factors specific to the women's
health, nutritional supplements and clinical diagnostics industries. In
addition, our sources of revenue will be less diversified than those of
Inverness prior to the split-off.

OUR BUSINESSES HAVE TRADITIONALLY RELIED ON INVERNESS FOR FINANCIAL ASSISTANCE
AND MAY HAVE DIFFICULTY WITH LIQUIDITY AND CAPITAL REQUIREMENTS WITHOUT THIS
ASSISTANCE.

     Our businesses have historically relied on the earnings, assets and cash
flow of Inverness for liquidity, capital requirements and administrative
services. In the past, when the liquidity needs of our businesses exceeded their
cash flow, Inverness provided the necessary funds. Our inability to rely on
Inverness in the future for financial assistance may adversely affect our
financial condition.

WE HAVE NOT FULLY ESTABLISHED THE CORPORATE INFRASTRUCTURE THAT IS REQUIRED FOR
A STAND-ALONE COMPANY.

     After the split-off, we may or may not be able to establish the departments
and services necessary to conduct our business as an independent, publicly owned
company in an efficient and timely manner or on favorable terms. Inverness has
agreed to provide to us certain services on a cost basis for up to nine months
after the split-off. We will, however, need to establish our company as a
stand-alone entity and will not be able to rely on Inverness other than for
these limited transitional services. In establishing these departments and
services, we may face issues and challenges, including:

     - increased costs of hiring and retaining employees in departments
       previously shared by all the businesses of Inverness, including the
       legal, risk management, tax, treasury, human resources and public
       relations departments and

     - generally increased overhead and administrative costs as a result of
       establishing a stand-alone company.

     If we are unable to establish the required departments and services in a
timely or cost effective manner, it could adversely affect our operations.
                                       X-6
   117

OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY.

     The historical financial information we have included in this prospectus
may not reflect what our results of operations, financial position and cash
flows would have been had we been a separate, stand-alone company during the
periods presented. This information may not reflect what our results of
operations, financial position and cash flows will be in the future. This is not
only related to the various risks associated with the fact that we have not been
a stand-alone company, but also because:

     - various adjustments and allocations were made to the historical financial
       statements in this prospectus because Inverness did not account for us as
       a single stand-alone business for any period presented and

     - the historical information does not reflect many significant changes that
       will occur in our financial condition, capital structure and operations
       as a result of our separation from Inverness.

     We cannot assure you that the adjustments and allocations we made in
preparing our historical financial statements appropriately reflect our
operations during the periods presented as if we had operated as a stand-alone
company, nor can we predict what the actual effect of our separation from
Inverness will be.

THE CHANGE OF SOME PERSONNEL IN OUR COMPANY MAY HAVE AN ADVERSE EFFECT ON OUR
SUCCESS.

     In conjunction with the split-off, it is expected that some of the
personnel of Inverness will become our initial employees, while others will not.
In particular, certain significant employees who have been engaged primarily in
the diabetes care products business will remain with that business and will not
be our employees after the split-off. In addition, some members of Inverness'
management who currently work substantially for Inverness' diabetes care
products business will become our employees. Finally, some Inverness personnel
who have provided services beneficial to our businesses through their work in
Inverness' accounting, sales, marketing, operations, quality assurance,
regulatory compliance and other areas will not become part of our company after
the split-off or, in certain cases, their services may only be available to us
on a transitional basis for up to nine months. We cannot assure you that the
loss of certain significant employees, the transition of personnel from
Inverness' diabetes business to our company and the loss of other Inverness
personnel who will not become our employees will not disrupt the operations of
our business. Any disruption in our business could have a material adverse
effect on our results of operations. We cannot predict with certainty the
financial impact any potential disruption might have on our business.

THERE IS NO EXISTING TRADING MARKET FOR OUR COMMON STOCK.

     There is no existing trading market for our common stock and there can be
no assurance that an active trading market will be established. We have applied
for approval for listing of our common stock on the American Stock Exchange and
expect to receive approval for quotation on the American Stock Exchange at the
time of the split-off. Our common stock may experience volatility until trading
values become established. As a result, it could be difficult to make purchases
or sales of our common stock in the market at any particular time. We do not
know what price our common stock will trade at after the split-off.

VARIOUS FACTORS MAY DEPRESS THE TRADING VALUE OF OUR COMMON STOCK.

     Inverness stockholders immediately prior to the split-off will become
stockholders of our company immediately after the split-off. Some stockholders
who receive our common stock in the split-off may decide that they do not want
to maintain an investment in a company involved primarily in women's health
products or in a public company that does not have a proven track record as a
stand-alone company. If these stockholders decide to sell all or some of their
shares or if the market perceives that those sales could occur the trading value
of your shares may decline. In addition, because we will be a smaller and less
diversified company than Inverness, our common stock may not be followed as
closely by

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market analysts or the investment community as Inverness common stock has been
in the past. If there is only a limited following by market analysts or the
investment community, the amount of market activity in our common stock may be
reduced, making it more difficult for you to sell your shares.

WE ARE OBLIGATED TO INDEMNIFY INVERNESS AND OTHERS FOR LIABILITIES WHICH COULD
REQUIRE US TO PAY INVERNESS AMOUNTS THAT WE MAY NOT HAVE.

     The restructuring agreement, post-closing covenants agreement and related
agreements provide that we will indemnify Inverness and other related persons
after the split-off for specified liabilities related to our businesses,
statements in the proxy statement/prospectus, including this prospectus, about
our businesses and breaches of our obligations under the restructuring
agreement, post-closing covenants agreement and related agreements. We are also
required to indemnify Inverness for particular losses arising from the failure,
if any, to amend some outstanding warrants for the purchase of Inverness common
stock.

     In addition, under our tax allocation agreement with Inverness and Johnson
& Johnson, we will indemnify Johnson & Johnson and Inverness for any unpaid tax
liabilities attributable to the pre-split-off operation of our women's health,
nutritional supplements and clinical diagnostics businesses.

     We are unable to predict the amount, if any, that may be required for us to
satisfy our indemnification obligations under the restructuring agreement and
related agreements. However, the amount could be substantial. We cannot assure
you that we will have sufficient funds available to satisfy our potential
indemnification obligations or that we will be able to obtain the funds on terms
satisfactory to us, if at all. If we are unable to obtain the necessary funds,
we may be forced to consider other alternatives, including sales of assets, to
raise necessary funds.

WE MAY BE SUBJECT TO LIABILITIES RESULTING FROM LAWS THAT PROTECT OUR AND
INVERNESS' CREDITORS.

     Under United States federal and state fraudulent transfer laws, a court in
a lawsuit by an unpaid creditor or a representative of creditors of ours or
Inverness could determine that, after giving effect to the split-off and merger,
we or Inverness:

     - were or would be rendered insolvent

     - had unreasonably small capital to carry on our business and all
       businesses in which we or Inverness intended to engage or

     - intended to incur, or believed we or Inverness would incur, debts beyond
       our or Inverness' ability to repay as they would mature.

If that determination is made, the court could invalidate, in whole or in part,
the split-off and merger, as a fraudulent transfer and order Inverness
stockholders to return the value of the split-off and merger consideration,
including any shares of our common stock and any dividends paid or require us to
pay various liabilities of Inverness for the benefit of creditors or require
Inverness to pay various liabilities of ours for the benefit of creditors.

     Generally, an entity is considered insolvent if the present fair saleable
value of its assets is less than

     - the amount of its liabilities, including contingent liabilities, or

     - the amount that will be required to pay its probable liabilities on its
       existing debts as they become due.

     We do not know what standard a court would apply in determining insolvency
or whether a court would determine that we or Inverness were "insolvent" at the
time of or after giving effect to the merger. If we or Inverness became a debtor
in a bankruptcy case, the bankruptcy court would apply the standards of United
States federal bankruptcy law to determine whether a transfer that occurred
within a year before the commencement of the bankruptcy case would qualify as a
fraudulent transfer. For transfers that occurred more than one year prior to the
bankruptcy case, the bankruptcy court would apply applicable state law
standards, which may vary among states. If we or Inverness did not become a
debtor in a
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bankruptcy case, creditors who sought to recover or void transfers as fraudulent
transfers would look to the state law standards. It is possible that the
standards for determining whether a fraudulent transfer occurred may vary
between state and federal law, on the one hand, and between various state laws,
on the other.

WE MAY HAVE DIFFICULTY MAINTAINING OUR HEADQUARTERS OR ENTERING INTO NEW LEASES
FOR REAL PROPERTY ON TERMS THAT ARE SATISFACTORY OR IN A TIMELY FASHION.

     Our businesses are currently based out of Inverness' headquarters. The
restructuring agreement states that Inverness' current headquarters will become
our headquarters at the time of the split-off and requires Inverness to assist
us in securing an assignment of the sublease covering its current headquarters.
We cannot assure you that we will obtain an assignment of that sublease in a
timely manner or that the terms of the assignment will be satisfactory to us.
Any difficulty we may experience in acquiring Inverness' rights under the
sublease of our headquarters may affect the operations of our business if we do
not have sufficient office space in which to operate. The result of these
difficulties may involve a disruption in our business, including:

     - an inability to continue to provide the level of activity we have in the
       past at those locations and, in turn, generate the historical revenue
       from those locations

     - a delay in collection of accounts receivable

     - difficulties in retaining personnel and

     - an inability to manage day to day operations.

Any of these difficulties could have a material adverse effect on our business
until we relocate.

                         RISKS RELATED TO OUR BUSINESS

WE MAY HAVE DIFFICULTY OBTAINING FINANCING, IF NECESSARY, ON SATISFACTORY TERMS.

     After the split-off, we will no longer benefit from any financing
arrangements with, or cash advances from, Inverness. We may have difficulty
obtaining financing, if necessary, on terms that are acceptable to us, if at
all. If we fail to obtain the financing we need, it would have a material
adverse effect on our business and financial condition. In addition, although we
will commence operations after the split-off with approximately $40 million in
net cash, we may chose to seek financing for purchases and other expenditures
rather than using some or all of this cash reserve. If we fail to obtain
financing that we choose to seek, we will use some or all of our cash reserve
and will have a smaller cash reserve available to us on a going forward basis.

WE WILL NEED TO DEVOTE CASH FLOW FROM OUR OPERATIONS TO MEET OUR FUTURE DEBT AND
OTHER OBLIGATIONS.

     We cannot assure you that we will generate sufficient cash flow to meet our
future debt and other obligations. If cash flow from operations fall below
expectations, we may be forced to delay planned capital expenditures, reduce
operating expenses or consider additional alternatives designed to enhance
liquidity, such as selling assets or expending some or all of our cash reserves,
if not previously expended.

WE MAY NOT BE ABLE TO REALIZE SOME OR ALL OF THE BENEFITS UNDER THE LICENSE
AGREEMENT.

     In connection with the merger and split-off, we negotiated a license to use
certain of Inverness' technology that Johnson & Johnson is acquiring. The
license agreement imposes limitations on our use of this technology. In
addition, we have some exclusive rights under the license agreement to use the
licensed technology in specified fields which we will lose if, within ten years
from the date of the split-off and merger, we do not commercialize products or
services using the licensed technology. Depending on the decisions we will make
with respect to future product and technology development efforts, and the
success of those efforts, we may be unable to realize the potential benefits
under the license agreement.

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NON-COMPETITION OBLIGATIONS AND OTHER RESTRICTIONS WILL LIMIT OUR ABILITY TO
TAKE FULL ADVANTAGE OF OUR MANAGEMENT TEAM, THE TECHNOLOGY WE OWN OR LICENSE AND
OUR RESEARCH AND DEVELOPMENT CAPABILITIES.

     Members of our management team have had significant experience in the
diabetes field, technology we own or license may have potential applications to
this field, and our research and development capabilities could be applied to
this field. In conjunction with the merger and split-off, however, we agreed in
the post-closing covenants agreement not to compete with Inverness and Johnson &
Johnson in the field of diabetes generally. In addition, Mr. Zwanziger and two
of Inverness' senior scientists, Dr. David Scott and Dr. Jerry McAleer, have
entered into consulting agreements with Inverness that impose similar
obligations. Further, the license agreement prevents us from using any of the
licensed technology in the field of diabetes generally. As a result of these
restrictions, we will be unable to pursue opportunities in the field of diabetes
generally.

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

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

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

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

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

     The manufacturing and marketing of women's health products and clinical
diagnostic products involve an inherent risk of product liability claims. In
addition, our product development and production are extremely complex and could
expose our products to defects. Any defects could harm our credibility and
decrease market acceptance of our products. In addition, our marketing of
nutritional supplements may cause us to be subjected to various product
liability claims, including, among others, claims that the nutritional
supplements have inadequate warnings concerning side effects and interactions
with other substances. Potential product liability claims may exceed the amount
of our insurance coverage or may be excluded from coverage under the terms of
the policy. In the event that we are held liable for a claim for which we are
not indemnified, or for damages exceeding the limits of our insurance coverage,
that claim could materially damage our business and our financial condition.

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OUR SALES OF NUTRITIONAL SUPPLEMENTS HAVE DECLINED EACH YEAR SINCE 1998 DUE TO
THE MATURITY OF THE MARKET SEGMENTS WE CURRENTLY SERVE AND THE AGE OF OUR
PRODUCT LINE.

     Our sales of nutritional products have declined each year since 1998 and we
have budgeted for future sale declines. We believe that our products have
under-performed the overall market because most growth in the industry is
attributed to new products that generate attention in the marketplace. Most of
our nutritional supplements products serve well-established market segments and,
absent unforeseen new developments or trends, are not expected to benefit from
rapid growth. In addition, most of our nutritional supplements products are
aging brands with limited brand retention that are increasingly subject to
private label competition. The age of our product line means that we are subject
to future distribution loss for under-performing brands, while our opportunities
for new distribution on the existing product lines are limited.

INDIVIDUAL SEGMENTS OF THE NUTRITIONAL SUPPLEMENTS MARKET ARE SUBJECT TO
SIGNIFICANT FLUCTUATIONS BASED UPON MEDIA ATTENTION AND NEW DEVELOPMENTS.

     The market for nutritional supplements is highly sensitive to media
commentary regarding the quality and efficacy of nutritional supplements.
Positive media attention resulting from new scientific studies or announcements
can spur rapid growth in individual segments of the market, and also impact
individual brands. Conversely, news that challenges individual segments or
products can have a negative impact on the industry overall as well as on sales
of the challenged segments or products.

OUR CLINICAL DIAGNOSTICS BUSINESS IS FOCUSED ON A NICHE MARKET OF SMALL AND
MEDIUM SIZED LABORATORIES.

     From its inception, Inverness' Orgenics subsidiary has sold clinical
diagnostics products targeted at a niche market of small and medium sized
decentralized laboratories operating in the field of infectious disease. To the
extent that trends or changes in the health care industry favor economies of
scale and centralized laboratory testing, sales of our clinical diagnostics
products could suffer.

TRENDS IN THE OVERALL MARKET FAVOR DIRECT DISEASE DETECTION OVER IMMUNE RESPONSE
TESTING.

     New technologies have made it possible to directly identify the presence of
disease rather than detecting the presence of antibodies produced through an
immune response. The trend of the overall market currently favors direct
detection over antibody detection. Virus detection through nucleic acid testing,
or NAT, is already mandatory for hepatitis C virus and other markers in France,
Australia and certain other developed nations. While we believe that the threat
from direct detection technology in our core market of small and medium sized
decentralized laboratories, small blood banks, physicians and other point of
care facilities, particularly in under developed nations, is several years away,
this trend poses a risk to our core clinical diagnostics business in the long
term.

OUR CLINICAL DIAGNOSTICS PRODUCTS ARE MARKETED TO SMALL AND MEDIUM SIZED
CUSTOMERS IN MORE THAN 92 COUNTRIES AT CONSIDERABLE COST THAT REDUCES OUR
MARGINS.

     Because small and medium sized laboratories are the principal customers for
our clinical diagnostic products, we sell these products worldwide in order to
maintain sufficient sales volume. Our clinical diagnostics products are marketed
in more than 92 countries, including many third world and developing nations
where smaller laboratories are the norm, where more expensive technologies are
not affordable and where infectious diseases are often more prevalent. This
worldwide sales strategy is expensive and results in lower margins than would be
possible if we could generate sufficient sales volume by operating in fewer
markets.

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WE ARE INVOLVED IN VARIOUS LITIGATION MATTERS.

     Inverness and its subsidiaries have been involved in various litigations
arising out of the women's health, nutritional supplements and clinical
diagnostics business. The current material litigation matters are:

     - a lawsuit by Abbott Laboratories against Inverness and Princeton
       BioMeditech Corporation, which manufactured products for Inverness'
       women's health business, claiming, among other things, that some of our
       products relating to pregnancy detection and ovulation prediction
       infringe patents to which Abbott asserts it is the exclusive licensee

     - a lawsuit by Becton, Dickinson and Company against Inverness alleging
       that pregnancy and ovulation test kits sold by Inverness, and which we
       will continue to sell through our women's health business, infringe U.S.
       Patent No. 4,703,017

     - a complaint by Cambridge Biotech Corporation (CBC) and Cambridge
       Affiliate Corporation (CAC) against Inverness, Ron Zwanziger, the
       president of Inverness prior to the split-off, Cambridge Diagnostics
       Ireland, Ltd. (CDIL), our subsidiary in Ireland, Trinity Biotech plc
       (Trinity) and Pasteur Sanofi Diagnostics (Pasteur). The complaint
       alleges, among other things, that actions taken by Mr. Zwanziger as
       President of CAC in connection with the sale by CDIL of its diagnostics
       business to Trinity in 1998 were not properly authorized and that, as a
       result of the actions, CBC may lose the benefit of certain valuable
       patent licenses from Pasteur which were transferred from CDIL to Trinity
       with CDIL's diagnostics business and

     - a complaint by Intervention, Inc. against Inverness, four of its private
       label customers, whom Inverness is defending under agreement, and certain
       other parties alleging that under Section 17200 of the California
       Business and Professions Code the defendants' labeling on their home
       pregnancy tests is misleading as to the level of accuracy under certain
       conditions.

     Because the above claims each seek damages and reimbursement for costs and
expenses without specific amounts, we are unable to assess the probable outcome
or potential liability arising from the lawsuits.

     In connection with the split-off, we have agreed to assume, to the extent
permitted by law, and indemnify Inverness for, its liability in these lawsuits
together with any other liabilities arising out of the women's health,
nutritional supplements and clinical diagnostics businesses before or after the
split-off to the extent such liabilities are not otherwise retained by
Inverness. We are unable to assess the materiality or costs associated with
these lawsuits at this time. We cannot assure you that these lawsuits or any
future lawsuits relating to the health services business will not have a
material adverse effect on the health services business.

WE ARE DEPENDENT ON RELATIONSHIPS WITH THIRD PARTIES.

     The profitability of our business depends in part on our ability to
establish and maintain close working relationships with suppliers, distributors
and customers. For example, J.W.S. Delavau Co., Inc. manufactures most of our
nutritional supplements under a one-year contract with automatic renewal
provisions. In addition, customers of our branded and private label businesses
purchase products through purchase orders only and are not obligated to make
future purchases. In calendar year 2000, both Walgreen Co. and Wal-Mart Stores,
Inc. accounted for approximately 10%, of our net sales. We cannot assure you
that we will be successful in maintaining and improving our relationships or
that additional relationships will be successfully developed and maintained in
existing or future markets. The loss of any existing relationships or the
failure to continue to develop such relationships in the future could have a
material adverse effect on our business, financial condition and results of
operations.

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RETAILER CONSOLIDATION POSES A THREAT TO EXISTING RETAILER RELATIONSHIPS AND CAN
RESULT IN LOST REVENUE.

     Recent years have witnessed rapid consolidation within the mass retail
industry. Drug store chains, grocery stores and mass merchandisers, the primary
purchasers of our women's health and nutritional supplements products, have all
been subject to this trend. Because these customers purchase through purchase
orders, consolidation can interfere with existing retailer relationships,
especially private label relationships, and result in the loss of major
customers and significant revenue streams.

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

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

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

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

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

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

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

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

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

     The medical products industry is rapidly evolving and developments are
expected to continue at a rapid pace. Competition in this industry is intense
and expected to increase as new products and technologies become available and
new competitors enter the market. Our competitors in the United States and
abroad are numerous and include, among others, diagnostic testing and medical
products companies, universities and other research institutions. Our future
success depends upon our maintaining a competitive position in the development
of products and technologies in our areas of focus. Competitors may be more
successful in:

     - developing technologies and products that are more effective than our
       products or that render our technologies or products obsolete or
       noncompetitive

     - obtaining patent protection or other intellectual property rights that
       would prevent us from developing our potential products or

     - obtaining regulatory approval for the commercialization of their products
       more rapidly or effectively than we are in doing so.

     Also, the possibility of patent disputes with competitors holding foreign
patent rights may limit or delay expansion possibilities for our women's health
products business in certain foreign jurisdictions. In addition, many of our
existing or potential competitors have or may have substantially greater
research and development capabilities, clinical, manufacturing, regulatory and
marketing experience and financial and managerial resources.

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

THE RIGHTS WE RELY UPON TO PROTECT THE INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

     Our success will depend in part on our ability to develop or acquire
commercially valuable patent rights and to protect our intellectual property.
Our patent position is generally uncertain and involves complex legal and
factual questions. The degree of future protection for our proprietary rights is
uncertain.

     The risks and uncertainties that we face with respect to our patents and
other proprietary rights include the following:

     - the pending patent applications we have filed or to which we have
       exclusive rights may not result in issued patents or may take longer than
       we expect to result in issued patents

     - the claims of any patents which are issued may not provide meaningful
       protection

     - we may not be able to develop additional proprietary technologies that
       are patentable

     - the patents licensed or issued to us or our customers may not provide a
       competitive advantage

     - other companies may challenge patents licensed or issued to us or our
       customers

     - patents issued to other companies may harm our ability to do business and

     - other companies may design around technologies we have licensed or
       developed.

     In addition to patents, we rely on a combination of trade secrets,
nondisclosure agreements and other contractual provisions and technical measures
to protect our intellectual property rights. Nevertheless, these measures may
not be adequate to safeguard the technology underlying our products. If they do
not protect our rights, third parties could use our technology and our ability
to compete in the market would be reduced. In addition, employees, consultants
and others who participate in the development of our products may breach their
agreements with us regarding our intellectual property and we may not have
adequate remedies for the breach. We also may not be able to effectively protect
our intellectual property rights in some foreign countries. For a variety of
reasons, we may decide not to file for patent, copyright or trademark protection
or prosecute potential infringements of our patents. We also realize that our
trade secrets may become known through other means not currently foreseen by us.
Despite our efforts to protect our intellectual property, our competitors or
customers may independently develop similar or alternative technologies or
products that are equal or superior to our technology and products without
infringing on any of our intellectual property rights or design around our
proprietary technologies.

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

     Substantial litigation over intellectual property rights exists in our
industry. Our products are currently the subject of litigation alleging that we
are infringing on the intellectual property rights of others. We expect that our
products and products in our industry may increasingly be subject to third party
infringement claims as the number of competitors grows and the functionality of
products and technology in different industry segments overlaps. Third parties
may currently have, or may eventually be issued, patents on which our products
or technology may infringe. Any of these third parties might make a claim of
infringement against us. Any litigation could result in the expenditure of
significant financial resources and the diversion of management's time and
resources. In addition, litigation in which we are accused of infringement may
cause negative publicity, have an impact on prospective customers, cause product
shipment delays, require us to develop non-infringing technology or enter into
royalty or license

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agreements, which may not be available on acceptable terms, or at all. If a
successful claim of infringement were made against us and we could not develop
non-infringing technology or license the infringed or similar technology on a
timely and cost-effective basis, our business could be significantly harmed and
we could be exposed to legal actions by our customers.

WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS AND OTHER
INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD BE EXPENSIVE AND, IF WE LOSE, COULD
CAUSE US TO LOSE SOME OF OUR INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD REDUCE
OUR ABILITY TO COMPETE IN THE MARKET.

     We rely on patents to protect a portion of our intellectual property and
our competitive position. In order to protect or enforce our patent rights, we
may initiate patent litigation against third parties, such as infringement suits
or interference proceedings. Litigation may be necessary to:

     - assert claims of infringement

     - enforce our patents

     - protect our trade secrets or know-how or

     - determine the enforceability, scope and validity of the proprietary
       rights of others.

     Lawsuits could be expensive, take significant time and divert management's
attention from other business concerns. Litigation would put our patents at risk
of being invalidated or interpreted narrowly and our patent applications at risk
of not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. We cannot assure you that we will prevail in any of
these suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, our stock price could decline.

IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR
TECHNOLOGIES INSTEAD OF DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE
THESE ACQUISITIONS OR TO SUCCESSFULLY INTEGRATE AN ACQUIRED BUSINESS OR
TECHNOLOGY IN A COST-EFFECTIVE AND NON-DISRUPTIVE MANNER.

     Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. Accordingly, from time to time we have acquired
complementary businesses, products or technologies instead of developing them
ourselves and may choose to do so in the future. We do not know if we will be
able to complete any acquisitions, or whether we will be able to successfully
integrate any acquired business, operate it profitably or retain its key
employees. Integrating any business, product or technology we acquire could be
expensive and time consuming, disrupt our ongoing businesses and distract our
management. In addition, in order to finance any acquisitions, we might need to
raise additional funds through public or private equity or debt financings. In
that event, we could be forced to obtain financing on terms that are not
favorable to us and, in the case of equity financing, that may result in
dilution to our shareholders. If we are unable to integrate any acquired
entities, products or technologies effectively, our business will suffer. In
addition, any amortization of goodwill or other assets or charges resulting from
the costs of acquisitions could harm our business and operating results.

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

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

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

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

VARIOUS FACTORS MAY CAUSE OUR OPERATING RESULTS TO FLUCTUATE.

     Factors relating to our business make our future operating results
uncertain and may cause them to fluctuate from period to period. Such factors
include:

     - the timing of new product announcements and introductions by us and our
       competitors

     - market acceptance of new or enhanced versions of our products

     - changes in manufacturing costs or other expenses

     - competitive pricing pressures

     - the gain or loss of significant distribution outlets or customers

     - the availability and extent of reimbursement for our products

     - increased research and development expenses or

     - general economic conditions.

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

     Our share price may be volatile due to our operating results, as well as
factors beyond our control. In addition, it is possible that in some future
periods the results of our operations will be below the expectations of the
public market. In any such event, the market price of our common stock could be
materially and adversely affected. Furthermore, the stock market may experience
significant price and volume fluctuations, which may affect the market price of
our common stock for reasons unrelated to our operating performance. The market
price of our common stock may be highly volatile and may be affected by factors
such as:

     - our quarterly operating results

     - changes in general conditions in the economy, the financial markets or
       the health care industry

     - government regulation in the health care industry

     - changes in other areas such as tax laws

     - sales of substantial amounts of common stock or the perception that such
       sales could occur or

     - other developments affecting us or our competitors.

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THE MARKET PRICE OF OUR COMMON STOCK WILL LIKELY FLUCTUATE IN RESPONSE TO A
NUMBER OF FACTORS, INCLUDING THE FOLLOWING:

     - our failure to meet the performance estimates of securities analysts

     - changes in financial estimates of our revenues and operating results or
       buy/sell recommendations by securities analysts

     - the timing of announcements by us or our competitors of significant
       products, contracts or acquisitions or publicity regarding actual or
       potential results or performance thereof and

     - general stock market conditions, other economic or external factors.

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

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

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

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

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

WE WILL HAVE BROAD DISCRETION AS TO THE USE OF OUR INITIAL CASH RESERVE AND MAY
USE THE CASH RESERVE IN A MANNER WITH WHICH YOU DISAGREE.

     At the time of the split-off we will have an initial cash reserve of
approximately $40 million. We have not yet identified uses for this initial cash
reserve and our board of directors and management will have broad discretion
over its use. You may disagree with the judgment of our board of directors and
management regarding the uses to which we put our initial cash reserve.

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

     We currently intend to retain our future earnings, if any, to finance the
expansion of our business and do not expect to pay any cash dividends in the
foreseeable future. As a result, the success of your investment in our common
stock will depend entirely upon any future appreciation. There is no guarantee
that our common stock will appreciate in value after the offering or even
maintain the price at which you purchased your shares.

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             SPECIAL STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements. You can identify these
statements by forward-looking words such as "may," "could," "should," "would,"
"intend," "will," "expect," "anticipate," "believe," "estimate," "continue" or
similar words. You should read statements that contain these words carefully
because they discuss our future expectations, contain projections of our future
results of operations or of our financial condition or state other
"forward-looking" information. There may be events in the future that we are not
able to predict accurately or control and that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. We caution investors that all forward-looking statements involve
risks and uncertainties, and actual results may differ materially from those we
discuss in this prospectus as a result of various factors, including those
factors described in the "Risk Factors" section of this prospectus. Some
important additional factors that could cause our actual results to differ
materially from those projected in any such forward-looking statements are as
follows:

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

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

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

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

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

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

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

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

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

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

     Readers should not place undue reliance on our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in the "Risk Factors" section and elsewhere in this
prospectus could harm our business, prospects, operating results and financial
condition. We undertake no obligation to update any forward-looking statements
after the date of this prospectus.

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                      THE RESTRUCTURING AND THE SPLIT-OFF

     This is a summary of the material terms of the restructuring agreement and
a description of the split-off. The restructuring agreement, which is attached
as Annex 3 to this proxy statement/prospectus, contains the complete terms of
that agreement. You should read the entire restructuring agreement carefully.

GENERAL

     We were recently organized as a subsidiary of Inverness for purposes of the
split-off and merger. Prior to the completion of the split-off and merger, we,
Inverness and certain subsidiaries of Inverness will enter into the
restructuring agreement. Completion of the restructuring of Inverness, as
contemplated by the restructuring agreement, is a condition to the merger.
Inverness will not proceed with the split-off and merger unless the
restructuring is completed.

     The purpose and effect of the restructuring of Inverness is to facilitate
the split-off and merger by separating Inverness' diabetes care products
business from its other principal businesses. Inverness will effect this
separation by transferring the assets and liabilities of its women's health,
nutritional supplements and clinical diagnostics businesses to Innovations
immediately prior to the split-off and merger. As a result, at the time of the
split-off and merger, Inverness will own only those businesses not transferred
to us, including the related assets and liabilities, which will consist
principally of the diabetes care products business. Unless otherwise indicated,
references to the post-restructuring business of Inverness refer to the
businesses of Inverness and its subsidiaries not transferred to us.

THE RESTRUCTURING AND TRANSFER OF ASSETS

     The restructuring agreement provides that prior to the completion of the
split-off and merger, Inverness will contribute or cause to be contributed to us
any of its or any of its subsidiaries' right, title and interest in and to (1)
all of the assets of Inverness that are used or held for use primarily in the
operation or conduct of the women's health, nutritional supplements and clinical
diagnostics businesses, referred to as the Innovations businesses or our
businesses and (2) other specified assets, including cash in an amount necessary
to ensure that at the time of the split-off we will have $40 million of net
cash, defined as cash and marketable securities less debt for borrowed money
(other than debt outstanding under any revolving line of credit). The
restructuring will be effected through a series of stock and asset transfers
from Inverness and its subsidiaries to us. Under the restructuring agreement,
Inverness will retain and will not contribute to Innovations any of its or its
subsidiaries' right, title and interest to the assets that are not used or held
for use primarily in the operation of our businesses and certain other specified
assets. The restructuring agreement further provides that the parties will
cooperate in good faith to provide for the use or shared ownership of any asset
that is material to the operation of either our businesses or the post-
restructuring Inverness businesses that is primarily related to the businesses
of the other company.

ASSUMPTION OF LIABILITIES

     The restructuring agreement provides that at or prior to the completion of
the split-off and merger, we and/or one of our subsidiaries will unconditionally
assume (1) all liabilities of Inverness and its subsidiaries to the extent
primarily related to or arising out of our businesses and (2) other specified
liabilities. Under the restructuring agreement, Inverness will retain, assume,
or cause one of its subsidiaries (other than our company) to assume all
liabilities of Inverness that we are not otherwise obligated to assume, as well
as other specified liabilities.

USE OF NAME

     The restructuring agreement provides that we will have all rights in and
use of the names "Inverness" and "Inverness Medical" and all derivatives of
those names and that Inverness will take actions as are reasonably necessary to
vest such rights in us or any of our subsidiaries. However, Inverness will
retain the right to use the "Inverness" and "Inverness Medical" names on signs
and other displays at its
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manufacturing facilities in Inverness, Scotland, and Inverness and its suppliers
and distributors will retain the right to use those names and applicable
trademarks and trade dress on product packaging and related materials for a one
year period after completion of the split-off and merger.

ANCILLARY AGREEMENTS

     The restructuring agreement provides that prior to the completion of the
split-off and merger, Inverness, or another of its subsidiaries (other than us),
and we, or another of our subsidiaries, will enter into:

     - a transition services agreement relating to the women's health business
       of Can-Am Care Corporation and Inverness Medical Europe GmbH, and the
       kitting services and secondary packaging services provided at the Galway,
       Ireland facility

     - the license agreement attached as Annex 6 to this proxy statement/
       prospectus and described under "Post-Closing Arrangements -- The License
       Agreement" and

     - a sublease from Inverness to us of Inverness' corporate headquarters
       currently subleased by Inverness at 51 Sawyer Road, Waltham,
       Massachusetts on the same terms as those of the sublease currently held
       by Inverness.

EMPLOYEE MATTERS

     The restructuring agreement provides that:

     - specified employees and consultants of Inverness and its subsidiaries and
       employees of Inverness hired after the date of the split-off and merger
       agreement and prior to the completion of the split-off and merger and who
       are engaged primarily in a business other than an Innovations business
       will remain or become employees of Inverness and its subsidiaries in the
       same capacities as then held by those employees (or in such other
       capacities and upon such terms and conditions as Inverness determines in
       its sole discretion)

     - other specified employees and consultants and employees of Inverness
       hired after the date of the split-off and merger agreement and prior to
       the completion of the split-off and merger and who are engaged primarily
       in an Innovations business will remain or become employees of Innovations
       and its subsidiaries in the same capacities as then held by those
       employees (or in such other capacities and upon such terms and conditions
       as we determine in our sole discretion) and

     - a third category of specified employees who will perform transition
       services under the transition services agreement will be deemed
       transition employees and will be employed by us and receive compensation
       and benefits from us, although Inverness will be responsible for any
       retention bonuses and severance costs associated with those employees.

     Upon completion of the split-off and merger, we will assume and be
responsible for all liabilities related to the designated Innovations employees
and the former employees of Inverness and its subsidiaries whose primary
responsibilities related to an Innovations business, and Inverness will assume
and be responsible for all liabilities and obligations related to the designated
Inverness employees and the former employees of Inverness and its subsidiaries
whose primary responsibilities related to the businesses of Inverness and its
subsidiaries other than the Innovations businesses. The restructuring agreement
provides that, to the extent permitted by applicable law, the transactions
contemplated by the restructuring agreement will not constitute a termination of
employment that would entitle an employee to receive severance or similar
compensation and benefits and that Inverness and we will use our reasonable best
efforts to amend, if necessary, any benefit plans to achieve that result. The
restructuring agreement does not confer on any employee any right to continued
employment after the completion of the split-off and merger.

     We will assume sponsorship of each employee benefit, welfare benefit,
employment, personal services, compensation, change in control, severance,
time-off, perquisite and other benefit plan, policy or agreement
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relating exclusively to one or more Innovations employees. In addition, to the
extent any Innovations employee participates prior to the completion of the
split-off and merger in benefit plans that do not relate exclusively to
Innovations employees, we will establish and maintain, upon the completion of
the split-off and merger, benefit plans (not including equity plans) that
provide substantially comparable benefits to those provided to the Innovations
employee prior to the completion of the split-off and merger.

     If specified Inverness employees or former employees of Inverness whose
primary responsibilities related to a business of Inverness other than an
Innovations business participate in a benefit plan that is a defined benefit
pension plan that is maintained by us or our subsidiaries, the liabilities in
respect of those participants, together with assets equal to such liabilities,
will be transferred from that defined benefit pension plan to a benefit plan
established or maintained by Inverness or Johnson & Johnson or one of their
respective subsidiaries. Similarly, if Innovations employees or former employees
of Inverness whose primary responsibilities related to an Innovations business
participate in a benefit plan that is a defined benefit pension plan that is
maintained by Inverness or its subsidiaries, the liabilities in respect of those
participants, together with assets equal to such liabilities, will be
transferred from that defined benefit pension plan to a benefit plan established
or maintained by us or one of our subsidiaries.

     Upon the completion of the split-off and merger, with respect to collective
bargaining agreements to which Inverness or its subsidiaries is a party, we will
assume those agreements covering Innovations employees and Inverness will assume
those agreements covering its continuing employees. We and Inverness also will
take all other actions necessary to ensure that we and Inverness remain solely
responsible for the liabilities and obligations under those collective
bargaining agreements covering our respective employees.

CONVERSION OF OPTIONS AND WARRANTS

     Options.  Under the terms of the restructuring agreement, each outstanding
option to purchase shares of Inverness common stock is to be converted, as part
of the restructuring, into:

     - an option to purchase the same number of shares of Inverness common
       stock, referred to in this description as the replacement Inverness
       option, and

     - an option to purchase the number of shares of our common stock equal to
       the number of shares of Inverness common stock subject to the original
       Inverness option multiplied by 0.20.

     The exercise prices of the replacement Inverness option and the Innovations
option will be set so that the combined exercise prices of the new options will
equal the exercise price of each original Inverness option to purchase Inverness
common stock. The aggregate exercise price of each original Inverness option
will be allocated between the replacement Inverness option and the Innovations
option in proportion to the deemed fair market value of the shares of Johnson &
Johnson common stock and Innovations common stock, in each case, to be received
for one share of Inverness common stock in the split-off and merger. The deemed
fair market value of such shares will be determined with reference to the
closing prices of Johnson & Johnson common stock on the New York Stock Exchange
and our common stock on the American Stock Exchange on the first full trading
day following the completion of the split-off and merger.

     The exercise price per share of Inverness common stock issuable under the
replacement Inverness option will be determined by dividing:

     - the aggregate exercise price allocated to the replacement Inverness
       option by

     - the aggregate number of shares of Inverness common stock that may be
       purchased under the replacement Inverness option.

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     The exercise price per share of our common stock issuable under the
Innovations option will be determined by dividing:

     - the aggregate exercise price allocated to the Innovations option by

     - the aggregate number of shares of our common stock that may be purchased
       under the Innovations option.

     All other terms of the original Inverness options will continue to apply to
the replacement Inverness options and the Innovations options, except that (1)
all replacement Inverness options and Innovations options will be fully vested
and immediately exercisable at and following the completion of the split-off and
merger and (2) all replacement Inverness options which will be held by persons
who are not going to be employees of Inverness or its subsidiaries immediately
following the split-off and merger and all Innovations options which will be
held by persons who are not going to be employees of our company or our
subsidiaries immediately following the split-off and merger will, in each case,
remain exercisable for the remainder of the originally stated term of the
original Inverness options irrespective of employment by or service to Johnson &
Johnson, Inverness, our company or any subsidiaries of those companies.

     Warrants.  Under the terms of the restructuring agreement, each outstanding
warrant to acquire shares of Inverness common stock is to be converted, as part
of the restructuring, into:

     - a warrant to acquire the same number of shares of Inverness common stock,
       referred to in this description as the replacement Inverness warrant and

     - a warrant to acquire the number of shares of our common stock equal to
       the number of shares of Inverness common stock subject to the original
       Inverness warrant multiplied by 0.20.

     The exercise prices of the replacement Inverness warrant and the
Innovations warrant will be set so that the combined exercise prices of the
replacement warrants will equal the exercise price of each original Inverness
warrant to acquire Inverness common stock. The aggregate exercise price of each
original Inverness warrant will be allocated between the replacement Inverness
warrant and the Innovations warrant in proportion to the deemed fair market
value of the shares of Johnson & Johnson common stock and our common stock, in
each case, to be received for one share of Inverness common stock in the split-
off and merger. The deemed fair market value of such shares will be determined
with reference to the closing prices of Johnson & Johnson common stock on the
New York Stock Exchange and the our common stock on the American Stock Exchange
on the first full trading day following the completion of the split-off and
merger.

     The exercise price per share of Inverness common stock issuable under the
replacement Inverness warrant will be determined by dividing:

     - the aggregate exercise price allocated to the replacement Inverness
       warrant by

     - the aggregate number of shares of Inverness common stock that may be
       purchased under the replacement Inverness warrant.

     The exercise price per share of our common stock issuable under the
Innovations warrant will be determined by dividing:

     - the aggregate exercise price allocated to the Innovations warrant by

     - the aggregate number of shares of our common stock that may be purchased
       under the Innovations warrant.

     All other terms of the original Inverness warrants will continue to apply
to the replacement Inverness warrants and the Innovations warrants.

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CONDITIONS

     The obligations of Inverness and our company to consummate the
restructuring are subject to the fulfillment of each of the following
conditions:

     - each of (1) the tax allocation agreement attached to this proxy
       statement/prospectus as Annex 4, (2) the transition services agreement
       described above, (3) the license agreement attached as Annex 6 to this
       proxy statement/prospectus and (4) the sublease of Inverness' current
       corporate headquarters have been executed and delivered by each of
       Inverness, our company and Johnson & Johnson

     - each condition to the closing of the merger in the split-off and merger
       agreement, other than the condition to each party's obligation as to the
       consummation of the transactions contemplated by the restructuring
       agreement, has been satisfied or waived

     - liens on assets contributed, or to be contributed, to us and capital
       stock of any of our subsidiaries, in each case arising pursuant to
       Inverness' credit agreement dated as of February 18, 1998, with Chase
       Manhattan Bank have been released, and there are no liens on our assets
       or the capital stock of any of our subsidiaries imposed in connection
       with the financing required by the split-off and merger agreement and

     - the Inverness board of directors is reasonably satisfied that, after
       giving effect to the restructuring, we will not be insolvent and will not
       have unreasonably small capital with which to engage in our business.

MUTUAL RELEASE

     Effective upon the completion of the split-off and merger and except as
otherwise specifically set forth in the transaction agreements, each of
Inverness and its subsidiaries, on the one hand, and we and our subsidiaries, on
the other hand, will release and discharge the other and its affiliates, and
their directors, officers, employees and agents of and from all debts, demands,
actions, causes of action, suits, accounts, covenants, contracts, agreements,
damages, and any and all claims, demands and liabilities whatsoever of every
name and nature, both in law and in equity, against such other person or any of
its assigns, which the releasing person has or ever had (other than those based
on fraud, gross negligence or wilful misconduct by such other person) which
arise out of or relate to events, circumstances or actions taken by such other
person prior to the completion of the split-off and merger. This release does
not apply to any transaction agreement or the transactions contemplated by those
agreements and does not affect any person's right to enforce any transaction
agreement or any other agreement contemplated in accordance with its terms.

TERMINATION

     In the event the split-off and merger agreement is terminated pursuant to
its terms, the restructuring agreement will automatically and simultaneously
terminate and the restructuring and split-off will automatically and
simultaneously be abandoned without our approval or that of the Inverness
stockholders.

THE SPLIT-OFF AND MERGER

     At the effective time of the split-off and merger, each outstanding share
of Inverness common stock will be converted into the right to receive: (1) 0.20
of a share of our common stock, and (2) a fraction of a share of Johnson &
Johnson common stock based on an exchange ratio intended to value that
fractional share at $35.00, except that treasury stock and stock held by Johnson
& Johnson and Sunrise Acquisition Corp. will be canceled. Inverness stockholders
will receive cash for any fractional shares of Johnson & Johnson common stock
and our common stock they would otherwise receive in the split-off and merger.
For a more complete description of the terms of the split-off and merger, see
"The Split-off and Merger Agreement" on page 54 of this proxy
statement/prospectus.

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                           POST-CLOSING ARRANGEMENTS

     This is a summary of material post-closing arrangements with respect to,
among other things, tax allocation, indemnification, noncompetition,
solicitation and hiring of employees and the licensing of intellectual property
rights to us. The tax allocation agreement, which is attached as Annex 4 to this
proxy statement/prospectus and is incorporated herein by reference, contains the
complete terms of that agreement. The post-closing covenants agreement, which is
attached as Annex 5 to this proxy statement/prospectus and is incorporated
herein by reference, contains the complete terms of that agreement. The license
agreement, which is attached as Annex 6 to this proxy statement/prospectus and
is incorporated herein by reference, contains the complete terms of that
agreement. You should read those agreements carefully.

THE TAX ALLOCATION AGREEMENT

     Prior to the restructuring, we, Inverness and Johnson & Johnson will enter
into a tax allocation agreement which sets forth each party's rights and
obligations with respect to payments and refunds, if any, of Federal, state,
local or foreign taxes for periods before and after the split-off and merger and
related matters such as the filing of tax returns and the conduct of audits and
other tax proceedings.

     Preparation and Filing of Tax Returns.  We are responsible for preparing
and filing (or causing to be prepared and filed) all separate state, local or
foreign tax returns of Innovations and our post-closing subsidiaries, referred
to as the Innovations group, and any consolidated, combined, unitary or
aggregate state, local, or foreign tax returns that do not include Inverness or
any of its post-closing subsidiaries, referred to as the Inverness group.
Johnson & Johnson is responsible for preparing and filing (or causing to be
prepared and filed), with our cooperation and that of the members of the
Innovations group, all other tax returns.

     Payments with Respect to Taxes.  For all taxes with respect to which
Johnson & Johnson, Inverness or any other member of the Inverness group is
required to file a tax return as described above, we will pay Inverness the
amount of the taxes attributable to the Innovations business within ten business
days after receipt from Johnson & Johnson or Inverness of a copy of the tax
return (or a copy of the decision or agreement with respect to any final
determination regarding the period to which the tax return relates), together
with a statement showing in reasonable detail the calculation of any taxes
attributable to the Innovations business. The tax allocation agreement provides
specific guidelines for calculating the amount of taxes attributable to the
Innovations business.

     For all taxes with respect to which we or any other member of the
Innovations group is required to file a tax return as described above, Inverness
will pay us the amount of the taxes attributable to the Inverness group's
business within ten days after receipt from us of a copy of the tax return (or a
copy of the decision or agreement with respect to any final determination
regarding the period to which the tax return relates), together with a statement
showing in reasonable detail the calculation of any taxes attributable to the
Inverness group's business. The tax allocation agreement provides specific
guidelines for calculating the amount of taxes attributable to the Inverness
group's business.

     Indemnification.  Inverness and each other member of the Inverness group
will indemnify and hold us and each member of the Innovations group harmless
from and against:

     - any liability for taxes attributable to the Inverness group's business as
       calculated pursuant to the tax allocation agreement and

     - any liability for taxes directly or indirectly attributable to the
       split-off or merger or any related transaction.

     We and each other member of the Innovations group will indemnify and hold
Johnson & Johnson, Inverness and each other member of the Inverness group
harmless from and against any liability for taxes attributable to the
Innovations businesses as calculated pursuant to the tax allocation agreement.

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     Cooperation.  Johnson & Johnson and Inverness, on the one hand, and we, on
the other hand, will, and will cause the members of the Inverness group and the
Innovations group, respectively, to, cooperate with each other in the
preparation and filing of tax returns and the conduct of any audit or other
proceeding, and will deliver powers of attorney and make available other
documents as are necessary to carry out the intent of the tax allocation
agreement. Johnson & Johnson, Inverness and we will use reasonable efforts to
reduce any transfer, sales or other similar taxes that may be incurred with
respect to the transactions contemplated by the transaction agreements.

THE POST-CLOSING COVENANTS AGREEMENT

     Prior to the completion of the split-off and merger, Johnson & Johnson,
Inverness, certain subsidiaries of Inverness, we and certain of our subsidiaries
will enter into the post-closing covenants agreement. The post-closing covenants
agreement will govern the terms of the relationship between Johnson & Johnson
and Inverness, on the one hand, and us, on the other hand, after the completion
of the split-off and merger with respect to, among other things, indemnification
rights, payment of restructuring, split-off and merger expenses, non-compete and
nonsolicitation agreements and adjustments to our net cash position.

     Indemnification by Innovations and Our Subsidiaries.  The post-closing
covenants agreement provides that we and our post-closing subsidiaries, referred
to as the Innovations companies, will jointly and severally indemnify, defend
and hold harmless Johnson & Johnson and its affiliates, subsidiaries and
representatives, referred to as the Johnson & Johnson indemnitees, from and
against, and pay or reimburse the Johnson & Johnson indemnities for all losses,
as incurred:

     - relating to or arising from the Innovations businesses or the assets or
       liabilities transferred to and assumed by us in the restructuring,
       whether such losses relate to or arise from events, occurrences, action,
       omissions, facts or circumstances occurring, existing or asserted before,
       at or after the completion of the split-off and merger

     - relating to or arising from any untrue statement or alleged untrue
       statement of a material fact relating to any Innovations company,
       contained in any of the filings made or required to be made with the SEC
       in connection with the transactions contemplated by the split-off and
       merger agreement and the other transaction agreements, or any omission or
       alleged omission to state in any of the filings a material fact relating
       to any Innovations company required to be stated in the filings or
       necessary to make the statements in the filings, in light of the
       circumstances under which they were made, not misleading, but only with
       respect to statements made in the filings or incorporated by reference in
       the filings based upon information supplied by any Innovations company
       specifically for inclusion or incorporation by reference in the filings

     - relating to or arising from the breach by any Innovations company of any
       agreement or covenant contained in any transaction agreement which is to
       be performed or complied with after the completion of the split-off and
       merger or

     - relating to or arising from the failure of Inverness to obtain, prior to
       the completion of the split-off and merger, the consent of particular
       holders of warrants to purchase Inverness common stock to amend the terms
       of those warrants to permit their conversion into warrants to purchase
       Johnson & Johnson common stock and our common stock as contemplated by
       the transaction agreements.

     Notwithstanding the joint and several nature of the indemnification
obligations described above, each subsidiary of ours will only be liable for
losses:

     - in the case of the losses described in the first bullet point of this
       subsection, relating to or arising from (1) the Innovations business
       conducted by that subsidiary, (2) the assets used, held for use or
       intended for use in the Innovations business conducted by that subsidiary
       and (3) the liabilities of or attributable to the Innovations business of
       that subsidiary and

     - in the case of the losses described in the third bullet point of this
       subsection, relating to or arising from a breach by that subsidiary.

                                       X-25
   136

     Indemnification by Inverness and Its Post-Closing Subsidiaries.  The
post-closing covenants agreement provides that Inverness and its post-closing
subsidiaries will jointly and severally indemnify, defend and hold harmless us,
our affiliates, subsidiaries and representatives, referred to as the Innovations
indemnitees, from and against, and pay or reimburse the Innovations indemnitees
for:

     - all losses, as incurred, relating to or arising from Inverness'
       post-restructuring business or the assets or liabilities retained by
       Inverness in the restructuring, whether such losses related to or arise
       from events, occurrences, actions, omissions, facts or circumstances
       occurring, existing or asserted before, at or after the completion of the
       split-off and merger or

     - all losses, as incurred (together with interest on those losses at a rate
       equal to 15% per annum calculated from the date written notice of a claim
       for indemnification relating to such losses is delivered to Inverness
       after the completion of the split-off and merger), relating to or arising
       from the breach by Inverness or its post-closing subsidiaries of any
       agreement or covenant contained in any transaction agreement which is to
       be performed or complied with after the completion of the split-off and
       merger.

     Notwithstanding the joint and several nature of the indemnification
obligations described above, each post-closing subsidiary of Inverness will only
be liable for losses:

     - in the case of the losses described in the first bullet point of this
       subsection, relating to or arising from (1) the assets used, held for use
       or intended for use in the post-restructuring business conducted by that
       subsidiary and (2) the liabilities of or attributable to the
       post-restructuring business of that subsidiary and

     - in the case of the losses described in the second bullet point of this
       subsection, relating to or arising from a breach by that subsidiary.

     In the event that Inverness transfers any material portion of its assets in
a single transaction or in a series of transactions, Johnson & Johnson promptly
will either guarantee the indemnification obligations referred to in the first
bullet point of this subsection or take such other action to insure that the
ability of Inverness, legal and financial, to satisfy such indemnification
obligations will not be diminished in any material respect.

     Indemnification by Johnson & Johnson.  The post-closing covenants agreement
provides that Johnson & Johnson will indemnify, defend and hold harmless the
Innovations indemnitees from and against, and pay or reimburse the Innovations
indemnitees for:

     - all losses, as incurred, relating to or arising form any untrue statement
       or alleged untrue statement of a material fact contained in any of the
       filings made or required to be made with the SEC in connection with the
       transactions contemplated by the split-off and merger agreement and the
       other transaction agreements, or any omission or alleged omission to
       state in any of the filings a material fact required to be stated in the
       filings or necessary to make the statements in the filings, in light of
       the circumstances under which they were made, not misleading, but only
       with respect to statements made in the filings or incorporated by
       reference in the filings based upon information supplied by Johnson &
       Johnson specifically for inclusion or incorporation by reference in the
       filings or

     - all losses, as incurred (together with interest on those losses at a rate
       equal to 15% per annum calculated from the date written notice of a claim
       for indemnification relating to such losses is delivered to Inverness
       after the completion of the split-off and merger), relating to or arising
       from the breach by Inverness or any of its post-restructuring
       subsidiaries of any agreement or covenant contained in any transaction
       agreement which is to be performed or complied with after the completion
       of the split-off and merger.

                                       X-26
   137

     Expenses.  Notwithstanding anything to the contrary in the split-off and
merger agreement, Inverness will be responsible for:

     - all expenses of Inverness, its subsidiaries and us and our subsidiaries
       directly related to the restructuring, the split-off and the merger in an
       amount of up to $12 million plus

     - all fees and expenses incurred in connection with any litigation to the
       extent arising out of or related in any way to the transaction
       contemplated by the transaction agreements and

     - all fees and expenses up to $2 million in connection with securing
       financing required as a closing condition to the split-off and merger.

     We will be responsible for all such expenses in excess of those amounts.

     Agreements Not to Compete and Not to Solicit or Hire Employees.  For a
period of ten years from the completion of the split-off and merger, we will
not, and will not permit any of our affiliates, in any manner, directly or
indirectly, alone or in association with any person, to:

     - subject to limited exceptions, compete with Johnson & Johnson, Inverness
       or any of their affiliates in the field of diabetes generally, including
       the testing, monitoring, diagnosing, prognostication, treatment,
       management or cure of diabetes and diabetes symptoms and conditions,
       referred to as the diabetes field

     - engage in any activity in the diabetes field or

     - actively participate in, control, manage, own any interest in or share in
       the earnings of, finance or invest in the capital stock of any person who
       is engaged in any activity in the diabetes field or, with the exception
       of Ernest Carabillo, consult with any person on matters in the diabetes
       field, except physician practice management activities, as described
       below, and except that we and our subsidiaries in the aggregate, and each
       other affiliate of ours, may acquire:

      - an entity which participates in the diabetes field if at the time of the
        acquisition and during the ten year period referred to above, (1) the
        entity's activity in the diabetes field is limited to the sale of
        products and services and (2) the revenues derived from the sale of the
        products and services constitute no more than 3% of the entity's total
        revenues, and the entity does not receive any royalty revenue from the
        diabetes field and

      - up to 2% of the equity or voting interest in an entity that is engaged
        in activities in the diabetes field, so long as none of Ron Zwanziger,
        David Scott or Jerry McAleer is actively involved, whether directly or
        indirectly, in the management of the entity during the period of the
        applicable non-competition covenants contained in his consulting and
        noncompetition agreement with Johnson & Johnson and Inverness.

     Despite the noncompetition provisions described above, we will not be
prohibited from participating, directly or indirectly, in physician practice
management activities in the diabetes field, including competing, engaging,
controlling, managing, owning, investing, consulting and soliciting customers.
For the purposes of the post-closing covenants agreement, "physician practice
management activities" means and is limited to the following:

     - owning physician practices

     - providing back office management services to physicians and
       practitioners, such as billing, collections, scheduling and reimbursement

     - compiling data from physicians and practitioners for the purposes of
       establishing disease management best practices and

     - providing group-buying services for physicians and practitioners,
       excluding any and all products and services in the diabetes field and
       excluding particular testing system applications, including diabetes
       tests, involving multiple analytes.

                                       X-27
   138

     For a period of three years from the completion of the split-off and
merger, we will not, and will cause our affiliates not to, in any manner,
directly or indirectly:

     - induce any person that has been an employee of any of Inverness and its
       post-closing subsidiaries at any time between January 1, 2001 and the
       time when the split-off and merger are completed, to leave the employ of
       Inverness and its post-closing subsidiaries

     - except in response to a good faith request by a person that is not an
       affiliate of ours for a recommendation regarding the employment
       qualifications of an employee, recommend to any other person that such
       person employ that employee or

     - subject to limited exceptions, hire any such employee.

     For a period of five years from the completion of the split-off and merger,
we will not, and will cause our affiliates not to, in any manner, directly or
indirectly:

     - solicit, either directly or indirectly, any customer or supplier of
       Johnson & Johnson, Inverness or any of their affiliates to (1) transact
       business in the diabetes field with a business or enterprise that
       competes with Johnson & Johnson, Inverness or any affiliates in the
       diabetes field or (2) reduce or refrain from doing any business with
       Johnson & Johnson, Inverness or any of their respective affiliates in the
       diabetes field except with respect to physician practice management
       activities or

     - disparage, including by relative comparison, Johnson & Johnson or
       Inverness or any of their products or activities in the diabetes field,
       except good faith comparative assessment with respect to physician
       practice management activities.

     Net Cash Adjustment.  As part of the restructuring, we and our subsidiaries
are to be funded by Inverness with $40 million of net cash, defined as cash and
marketable securities less debt for borrowed money (other than debt outstanding
under any revolving line of credit). Under the terms of the post-closing
covenants agreement, if upon the completion of the split-off and merger, we and
our subsidiaries have more than $40 million in net cash, we will pay any excess
amount to Inverness.

THE LICENSE AGREEMENT

     Prior to the completion of the split-off and merger, we and Inverness will
enter into the license agreement. Under the terms of the license agreement,
Inverness will grant us a paid-up, royalty-free license with respect to certain
of Inverness' intellectual property and we will grant Inverness a paid-up,
royalty-free license with respect to certain of our intellectual property, each
as described in more detail below.

     Division of Fields.  The license agreement defines the various fields in
which the parties may use the intellectual property rights granted to them under
that agreement.

      Inverness' Field.  For purposes of the license agreement, Inverness' field
is defined as the field of diabetes generally, including the testing,
monitoring, diagnosing, prognosticating, treatment, management and cure of
diabetes. Inverness' field does not include certain testing systems involving
multiple analytes, referred to as multi-analyte systems, nor does it include the
testing, monitoring, diagnosing, prognosticating, treatment, or management of
cholesterol, creatinine and similar analytes.

      Innovations' Field.  For purposes of the license agreement, our field is
defined as the manufacture, marketing, licensing, support, performance and use
of products and services that are not included in Inverness' field and fall
within any of the following categories, referred to as Innovations' subfields:

     - point of care applications

     - prothrombin applications

     - multi-analyte system applications

                                       X-28
   139

     - immunodiagnostic applications, including products for the detection or
       measurement of cardiac markers

     - pregnancy, ovulation or osteoporosis applications and

     - pain management applications

      Shared Field.  For purposes of the license agreement, the shared field is
defined as all fields outside of Innovations' field and Inverness' field.

     License Grants Relating to Electrochemical Intellectual Property.  For
purposes of the license agreement, electrochemical intellectual property refers
to all technology that relates to the design, manufacture or use of devices
useful for the detection of analytes by applying a current or voltage potential
to a fluid containing the analyte, and all related intellectual property rights,
but excluding intellectual property pertaining to the sampling of interstitial
fluids. The license agreement provides for the grant of the following rights
with respect to Inverness' electrochemical intellectual property:

     - for use in Innovations' field, Inverness grants us a perpetual,
       irrevocable, worldwide, paid-up, royalty-free, exclusive license to use
       Inverness' electrochemical intellectual property and all technology
       developed by or for Inverness during the first three years of the license
       relating to certain methods and apparatus for coating or infusing strips
       with chemicals for use in testing and all related intellectual property.
       Although this license is perpetual and irrevocable, our right to use the
       licensed intellectual property rights in an Innovations subfield will
       terminate in ten years if, by that time, we have not commercialized a
       product in that subfield. We have certain rights to transfer our licensed
       rights with respect to one or more of our subfields, subject to specified
       limitations

     - for use in the shared field, Inverness grants us a perpetual,
       irrevocable, worldwide, paid-up, royalty-free, co-exclusive license to
       use Inverness' electrochemical intellectual property and all technology
       developed by or for Inverness during the first three years of the license
       relating to certain methods and apparatus for coating or infusing strips
       with chemicals for use in testing and all related intellectual property
       and

     - for use in Inverness' field, we grant Inverness a perpetual, irrevocable,
       worldwide, paid-up, royalty-free, exclusive license to use all
       electrochemical technology developed by or for us during the first three
       years of the license using the electrochemical technology and
       intellectual property licensed to us from Inverness under the license
       agreement.

     License Grants Relating to Interstitial Intellectual Property and Wireless
Intellectual Property.  For purposes of the license agreement, interstitial
intellectual property refers to intellectual property pertaining to the sampling
of interstitial fluid, and wireless intellectual property refers to intellectual
property pertaining to the wireless transmission of information. The license
agreement provides for the grant of the following rights with respect to
Inverness' interstitial intellectual property and wireless intellectual
property:

     - for use in Innovations' field and the shared field, Inverness grants us a
       perpetual, irrevocable, worldwide, paid-up, royalty-free, co-exclusive
       license to use its interstitial intellectual property and

     - for use in Inverness' field, we grant Inverness a perpetual, irrevocable,
       worldwide, paid-up, royalty-free, exclusive license to use all
       electrochemical technology developed by or for us during the first three
       years of the license using the interstitial intellectual property and
       wireless intellectual property licensed to us from Inverness under the
       license agreement.

     Confidentiality and Ownership.  The license agreement provides that,
subject to certain limited exceptions, each party will not use any confidential
information of the other party except as authorized by the agreement and only
for the purposes of the license agreement, and will not disclose such
confidential information to anyone, except to its employees, contractors,
consultants, agents and sublicensees who have a need to know such information in
connection with their activities pursuant to the licenses granted under the
license agreement. These confidentiality obligations will extend for a period of
five years following the date of disclosure of any such confidential
information.

                                       X-29
   140

     The license agreement also provides that, as between the parties, any new
technology that is invented, developed or created by or on behalf of a party,
and all related intellectual property, will be the property of such party. Any
new technology that is invented, developed or created jointly by or on behalf of
both parties, and all related intellectual property, will be jointly owned by
the parties.

     RIGHTS OF FIRST REFUSAL AND SHARING OF PROFITS ON DIABETES TESTS.  The
license agreement provides that if we commercialize a multi-analyte system, and
the system includes one or more diabetes tests, we must pay Inverness an amount
equal to our gross profits from sales of that system multiplied by the ratio of
the number of diabetes tests in the system to the total number of tests in the
system.

     The license agreement also provides that if we develop a product, process,
or service in our subfield of prothrombin applications that we wish to
commercialize, we will notify Inverness of such development and offer Inverness
the right to become the exclusive distributor of that product, process, or
service on terms substantially similar to the distribution agreement between
Inverness and LifeScan, Inc. dated as of June 7, 1999, but with pricing specific
to the applicable product, process, or service which is commercially reasonable.
Inverness will then have a period of time to accept such terms or object that
the pricing terms are not commercially reasonable. If Inverness fails to timely
make an election to become the exclusive distributor of such a product, process
or service, it will lose its rights under the license agreement to become such
an exclusive distributor.

     The license agreement further provides that we will not grant any exclusive
sublicense of any intellectual property licensed to us under the license
agreement or enter into any exclusive distribution agreement with respect to
products manufactured by us using any such licensed intellectual property
without first delivering to Inverness a written term sheet outlining the terms
of such a transaction. Inverness will then have a period of 30 days in which to
agree to enter into that transaction with us on the proposed terms. If Inverness
fails to exercise this right, we may enter into the transaction with any other
person, but only if the transaction is consummated by a written agreement within
6 months from the end of the 30-day response period and the final terms of the
transaction, taken as a whole, are not substantially more favorable to the other
person than the terms proposed in the written term sheet delivered by us to
Inverness.

                                       X-30
   141

                                 CAPITALIZATION

     The following table sets forth our historical and pro forma capitalization
as of March 31, 2001 on an actual basis and as adjusted to give effect to the
split-off and merger. You should read this table in conjunction with the
consolidated financial statements and notes included herein and the information
under "Selected Historical Consolidated Financial Data of Inverness Medical
Innovations, Inc. and Subsidiaries."



                                                                   MARCH 31, 2001
                                                              ------------------------
                                                               ACTUAL     PRO FORMA(1)
                                                              --------    ------------
                                                               (IN THOUSANDS, EXCEPT
                                                                    SHARE DATA)
                                                                    
Current Portion of Notes Payable............................  $  7,944            --
Long-Term Liabilities:
  Other long-term liabilities...............................     1,286         1,286
  Notes payable, net of current portion.....................    15,811            --
                                                              --------      --------
     Total long-term liabilities............................    17,097         1,286
                                                              --------      --------
Stockholders' equity:
  Common stock, $0.001 par value:...........................         1             7
     Authorized -- 1,000 shares
     Issued and outstanding -- 1,000 shares actual,
      6,550,852 shares pro forma............................
  Additional paid-in capital................................    53,226        93,563
  Net parent Company investment.............................     3,714            --
  Accumulated deficit.......................................   (13,191)      (13,191)
  Accumulated other comprehensive income....................     1,186         1,186
                                                              --------      --------
     Total Stockholders' equity.............................    44,936        81,565
                                                              --------      --------
     Total Capitalization...................................  $ 62,033      $ 82,851
                                                              ========      ========


---------------
(1) Reflects the assumption or discharge of all third-party and related-party
    debt by Inverness, the contribution of $40 million of net cash by Inverness
    and the transfer of the diabetes care products operations to Inverness.

     Following completion of the split-off and merger there will be
approximately -- shares of our common stock issued and outstanding. This amount
includes:

     - -- shares of our common stock issued to Inverness stockholders in the
       split-off

     - -- shares of restricted stock sold to an executive officer of Innovations
       prior to the split-off and

     - -- shares of common stock issuable upon the exercise of Innovations
       options granted to certain executive officers of Innovations prior to the
       split-off, which options are expected to be exercised within a few months
       after the split-off.

     The information above is based on the number of shares of Inverness common
stock outstanding as of --, 2001, assumes that this number will not change prior
to the split-off and merger, and excludes:

     - -- shares of our common stock issuable upon exercise of Inverness options
       outstanding as of --, 2001, which options will partially convert into
       Innovations options in the split-off

     - -- shares of our common stock issuable upon exercise of Inverness
       warrants outstanding as of --, 2001, which warrants will partially
       convert into Innovations warrants in the split-off

     - -- shares reserved for issuance in connection with future grants under
       our 2001 stock option and incentive plan, including options to purchase
       -- shares which will be granted to certain executive officers immediately
       after the split-off, and

     - -- shares reserved for issuance under our employee stock purchase plan.

                                       X-31
   142

                                DIVIDEND POLICY

     We do not intend to pay any dividends on our common stock in the
foreseeable future. Any future payments of dividends and the amount of the
dividend will be determined by our board of directors from time to time based on
our:

     - results of operations

     - financial condition

     - cash requirements

     - applicable legal requirements

     - contractual restrictions on the payment of dividends, such as
       restrictions that are often present in financing documents

     - future prospects and

     - other factors deemed relevant by our board of directors.

                                       X-32
   143

                SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
            OF INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

     You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements, related notes and the
other information contained in this prospectus. The following table provides
selected historical consolidated financial data of Innovations as of and for
each of the fiscal years in the five-year period ended December 31, 2000 and as
of and for each of the three-month periods ended March 31, 2000 and March 31,
2001. The data as of and for each of the fiscal years in the three-year period
ended December 31, 2000 have been derived from our consolidated financial
statements that have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this prospectus. The consolidated
financial data as of and for each of the fiscal years in the two-year period
ended December 31, 1997 and as of and for the three months ended March 31, 2000
and March 31, 2001 have been derived from our unaudited financial statements.
The unaudited consolidated financial statements for the three-month periods have
been prepared on a basis consistent with our audited consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of our consolidated financial position and consolidated results of
operations for these periods. The historical consolidated financial information
presents our results of operations and financial position as if we had been a
separate entity for all periods presented. The historical financial information
may not be indicative of our future performance and may not necessarily reflect
what our financial position and results of operations would have been if we had
been a separate stand-alone entity during the periods covered.

     The discontinuation of the diabetes businesses of our subsidiaries is one
of a number of events that will occur upon the closing of the split-off and
merger and related transactions that will have a significant impact on our
financial statements. Under the terms of the split-off and merger agreement and
related agreements, Inverness is obligated to capitalize us with $40 million in
net cash. Inverness is also obligated to assume or discharge all of the
third-party debt associated with our businesses and forgive all amounts due from
us to Inverness as of the closing date. The unaudited pro forma combined
financial statements reflect these transactions.

     At closing, Inverness expects to distribute to its stockholders one share
of our common stock for every five shares of Inverness common stock held. In
order for Inverness to do so, we will declare a stock split, to be effected as a
dividend. Accordingly, in addition to the presentation of historical earnings
per share information using for all periods the actual number of shares of
Innovations common stock outstanding as of the date of our incorporation, we
have also presented unaudited pro forma earnings per share reflecting the
planned distribution ratio and estimated stock split that would have been
necessary had the transactions contemplated in the split-off and merger
agreement and related agreements been completed on March 31, 2001.

     Our combined financial statements reflect the allocation of Inverness'
common expenditures. Such allocations have been made in accordance with Staff
Accounting Bulletin (SAB) No. 55, Allocation of Expenses and Related Disclosure
in Financial Statements of Subsidiaries, Divisions or Lesser Business Components
of Another Entity.

     When you read this selected financial data, it is important that you also
read the historical financial statement and related notes included in this
prospectus, as well as the section of this prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

                                       X-33
   144



                                                                        HISTORICAL
                                            -------------------------------------------------------------------
                                                                                                THREE MONTHS
                                                        YEAR ENDED DECEMBER 31,                ENDED MARCH 31,
                                            -----------------------------------------------   -----------------
                                             1996      1997      1998      1999      2000      2000      2001
                                            -------   -------   -------   -------   -------   -------   -------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                   
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net revenues..............................  $14,024   $50,606   $74,645   $79,294   $84,529   $20,952   $18,662
Cost of sales.............................   10,592    24,725    40,563    45,534    48,183    11,620    10,860
                                            -------   -------   -------   -------   -------   -------   -------
Gross profit..............................    3,432    25,881    34,082    33,760    36,346     9,332     7,802
                                            -------   -------   -------   -------   -------   -------   -------
Operating Expenses:
  Research and development................    6,011     7,001     2,869     1,428     1,359       362       299
  Selling, general and administrative.....    6,518    21,070    28,484    25,275    26,519     6,615     6,154
  Other operating expenses................       --        81     5,372        --        --        --        --
                                            -------   -------   -------   -------   -------   -------   -------
  Total operating expenses................   12,529    28,152    36,725    26,703    27,878     6,977     6,453
                                            -------   -------   -------   -------   -------   -------   -------
    Operating (loss) income...............   (9,097)   (2,271)   (2,643)    7,057     8,468     2,355     1,349
Interest expense, including amortization
  of original issue discount..............     (579)   (3,223)   (3,682)   (3,158)   (2,988)     (772)     (557)
Interest and other (expense) income,
  net.....................................        3       707      (721)     (567)     (389)      (52)      (84)
                                            -------   -------   -------   -------   -------   -------   -------
(Loss) income before minority interest....   (9,673)   (4,787)   (7,046)    3,332     5,091     1,531       708
Minority interest in Orgenics.............      133       139        89         1        --        --        --
                                            -------   -------   -------   -------   -------   -------   -------
Income (loss) before income taxes.........   (9,540)   (4,648)   (6,957)    3,333     5,091     1,531       708
Provision for income taxes................       --     1,456     2,103     2,793     2,909       992       579
                                            -------   -------   -------   -------   -------   -------   -------
Net (loss) income.........................  $(9,540)  $(6,104)  $(9,060)  $   540   $ 2,182   $   539   $   129
                                            =======   =======   =======   =======   =======   =======   =======
Basic net income (loss) per common and
  potential common share(1)
Basic and diluted.........................  $(9,540)  $(6,104)  $(9,060)  $   540   $ 2,182   $   539   $   129
                                            =======   =======   =======   =======   =======   =======   =======




                                                                           HISTORICAL
                                                   -----------------------------------------------------------
                                                                    DECEMBER 31,                     MARCH 31,
                                                   -----------------------------------------------   ---------
                                                    1996      1997      1998      1999      2000       2001
                                                   -------   -------   -------   -------   -------   ---------
                                                                         (IN THOUSANDS)
                                                                                   
BALANCE SHEET DATA:
Cash and cash equivalents........................    2,113     5,099     1,120       695     3,090      3,404
Working capital..................................   (2,226)   (1,882)   (3,924)   (1,092)   (2,224)    (2,082)
Total assets.....................................   17,518    67,663    89,771    90,092    89,541     90,656
Debt obligations(2)..............................    2,542    26,595    38,994    31,948    22,257     19,698
Total stockholders' equity.......................    3,053    18,442    28,932    34,953    41,812     44,936


---------------
(1) Computed as described in our historical financial statements and reflected
    notes included in this prospectus.

(2) Excludes amounts due to related parties.

                                       X-34
   145



                                                                       PRO FORMA(1)
                                            -------------------------------------------------------------------
                                                                                                THREE MONTHS
                                                                                                    ENDED
                                                        YEAR ENDED DECEMBER 31,                   MARCH 31,
                                            -----------------------------------------------   -----------------
                                             1996      1997      1998      1999      2000      2000      2001
                                            -------   -------   -------   -------   -------   -------   -------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                   
Pro Forma Consolidated Statement of
  Operations:
Net revenues..............................  $14,024   $50,606   $54,685   $50,584   $51,051   $13,455   $11,812
Cost of sales.............................   10,592    24,725    26,720    26,890    25,075     6,547     5,826
                                            -------   -------   -------   -------   -------   -------   -------
Gross profit..............................    3,432    25,881    27,965    23,694    25,976     6,908     5,986
                                            -------   -------   -------   -------   -------   -------   -------
Operating Expenses:
  Research and development................    5,853     6,210     2,322     1,395     1,360       362       299
  Selling, general and administrative.....    6,518    21,070    22,769    18,350    17,763     4,563     4,172
  Other operating expenses................       --        81     4,969        --        --        --        --
                                            -------   -------   -------   -------   -------   -------   -------
    Total operating expenses..............   12,371    27,361    30,060    19,745    19,123     4,925     4,471
                                            -------   -------   -------   -------   -------   -------   -------
      Operating (loss) income.............   (8,939)   (1,480)   (2,095)    3,949     6,853     1,983     1,515
Interest expense, including amortization
  of original issue discount Interest and
  other (expense) income, net.............        3       707      (740)     (563)     (388)      (53)      (79)
                                            -------   -------   -------   -------   -------   -------   -------
  (Loss) income before minority interest
    and discontinued operations...........   (8,936)     (773)   (2,835)    3,386     6,465     1,930     1,436
Minority interest in Orgenics.............      133       139        89         1        --        --        --
Income (loss) from discontinued
  operations..............................     (158)     (791)   (2,882)      183      (598)     (296)     (581)
                                            -------   -------   -------   -------   -------   -------   -------
  (Loss) income before income taxes.......   (8,961)   (1,425)   (5,628)    3,570     5,867     1,634       855
Provision for income taxes................       --     1,456     1,115     1,007     1,781       609       354
                                            -------   -------   -------   -------   -------   -------   -------
  Net (loss) income.......................  $(8,961)  $(2,881)  $(6,743)  $ 2,563   $ 4,086   $ 1,025   $   501
                                            =======   =======   =======   =======   =======   =======   =======
PRO FORMA (LOSS) INCOME FROM CONTINUING
  OPERATIONS PER COMMON SHARE -- BASIC AND
  DILUTED.................................  $ (9.23)  $ (1.31)  $ (1.58)  $  0.71   $  0.99   $  0.34   $  0.18
PRO FORMA (LOSS) INCOME FROM DISCONTINUED
  OPERATIONS PER COMMON SHARE -- BASIC AND
  DILUTED.................................     (.17)     (.49)    (1.18)     0.05     (0.13)    (0.08)    (0.10)
                                            -------   -------   -------   -------   -------   -------   -------
Net (loss) income per common and potential
  common share:(1)
  Basic and diluted.......................  $ (9.40)  $ (1.80)  $ (2.76)  $  0.76   $  0.86   $  0.26   $  0.08
                                            =======   =======   =======   =======   =======   =======   =======




                                                                      PRO FORMA
                                                              -------------------------
                                                              DECEMBER 31,    MARCH 31,
                                                                2000(3)        2001(4)
                                                              ------------    ---------
                                                                   (IN THOUSANDS)
                                                                        
Balance Sheet Data:
  Cash and cash equivalents.................................      3,071         40,000
  Working capital...........................................     16,090         44,721
  Total assets..............................................     75,774         93,276
  Debt obligations(2).......................................     12,830             --
  Total stockholders' equity................................     41,812         81,565


---------------
(1) Reflects the reclassification of diabetes operations as discontinued
    operations and elimination of third-party and related-party interest
    expense.

(2) Excludes amounts due to related parties.

(3) Reflects the reclassification of net diabetes assets as net assets of
    discontinued operations.

(4) Reflects the assumption of all third-party and related-party debt by
    Inverness, the contribution of $40 million of net cash by Inverness and the
    transfer of the diabetes operations of our subsidiaries to Inverness.

                                       X-35
   146

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     You should read the following discussion and analysis with the selected
historical consolidated financial data and consolidated financial statements,
including the notes to the financial statements, appearing in this prospectus.
The following discussion and analysis contains certain forward-looking
statements which are subject to risks, uncertainties and contingencies,
including those set forth under the headings "Risk Factors" and "Special
Statement Regarding Forward-Looking Statements," which could cause our actual
business, results of operations or financial condition to differ materially from
those expressed in, or implied by, those statements.

                                    GENERAL

     We are, and until the split-off will continue to be, a majority-owned
subsidiary of Inverness. Upon completion of the restructuring, we will operate
all of the women's health, nutritional supplements and clinical diagnostics
businesses of Inverness. As part of the merger of Inverness and Johnson &
Johnson, we will be split-off from Inverness and all of the shares of our common
stock held by Inverness will be delivered to Inverness' stockholders. At that
time we will become an independent, publicly owned company. The split-off will
not occur unless the merger is completed.

     As an independent company, we expect to incur additional legal, risk
management, tax, treasury, human resources, administrative and other expenses
that we did not experience as a subsidiary of Inverness. We also expect that
these expenses will initially constitute a higher percentage of our revenues as
we enhance our administrative and corporate overhead structure. The historical
consolidated financial information includes our results of operations and
financial position as if we had been an independent company operating the
women's health, nutritional supplements and clinical diagnostics businesses of
Inverness for all periods presented. The historical consolidated financial
information also includes the allocation of Inverness common expenditures.
However, generally accepted accounting principals require that the historical
consolidated financial information also include all revenues and costs
historically generated by any entity that was a subsidiary of any entity
transferred to Innovations as of the time of the split-off, even where such a
subsidiary will ultimately be transferred to Johnson & Johnson through the
merger. For this reason, the historical consolidated financial statements must
include all revenues and costs of Can-Am Care Corporation, a subsidiary of
Innovations until immediately prior to the split-off, even though Can-Am
operates a diabetes care products business that will be transferred to Inverness
immediately prior to the split-off and acquired by Johnson & Johnson in the
merger. For these and other reasons, the historical financial information likely
does not reflect what our financial position and results of operations would
have been if we were a separate stand-alone entity during the periods covered
and is likely not indicative of our future performance. In addition, unless and
until there has been an affirmative vote by the Inverness stockholders adopting
the split-off and merger agreement, we cannot report Can-Am's results as
discontinued operations in our historical financial statements. Accordingly, the
discussion that follows will include a discussion not only of the historical
financial statements for Innovations, but also the pro forma financial
statements that reflect our continuing operations. The basis of presentation for
the pro forma information is discussed beginning on page X-43.

                                       X-36
   147

                        HISTORICAL RESULTS OF OPERATIONS

RESULTS OF OPERATIONS AS A PERCENTAGE OF NET REVENUE

     The following table summarizes our consolidated financial statements of
income as a percentage of net revenue.



                                                                                    THREE MONTHS
                                                                                       ENDED
                                                      YEARS ENDED DECEMBER 31,       MARCH 31,
                                                     --------------------------    --------------
                                                      1998      1999      2000     2000     2001
                                                     ------    ------    ------    -----    -----
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                             
STATEMENT OF OPERATIONS DATA:
Net revenue........................................  100.0%    100.0%    100.0%    100.0%   100.0%
Cost of sales......................................   54.3      57.4      57.0      55.5     58.2
                                                     -----     -----     -----     -----    -----
Gross profit.......................................   45.7      42.6      43.0      44.5     41.8
                                                     -----     -----     -----     -----    -----
Operating expenses:
  Research and development.........................    3.8       1.8       1.6       1.7      1.6
  Selling, general and administrative..............   38.2      31.9      31.4      31.6     33.0
  Other expenses...................................    7.2        --        --        --       --
                                                     -----     -----     -----     -----    -----
  Total operating expenses.........................   49.2      33.7      33.0      33.3     34.6
                                                     -----     -----     -----     -----    -----
     Operating income (loss).......................   (3.5)      8.9      10.0      11.2      7.2
                                                     -----     -----     -----     -----    -----
Interest expense, including amortization of
  original issue discount..........................   (4.9)     (4.0)     (3.5)     (3.7)    (3.0)
Interest and other income (expense), net...........   (1.0)     (0.7)     (0.5)     (0.2)    (0.4)
Minority interest in Orgenics......................    0.1        --        --        --       --
                                                     -----     -----     -----     -----    -----
  (Loss) income before income taxes................   (9.3)      4.2       6.0       7.3      3.8
Provision for income taxes.........................    2.8       3.5       3.4       4.7      3.1
                                                     -----     -----     -----     -----    -----
  Net (loss) income................................  (12.1)%     0.7%      2.6%      2.6%     0.7%
                                                     =====     =====     =====     =====    =====


SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

     The following table sets forth our unaudited quarterly combined operating
results for each of the nine quarters ending March 31, 2001. We have prepared
this information on a basis consistent with our audited combined financial
statements. These quarterly results are not necessarily indicative of future
results of our operations. This information should be read in conjunction with
our consolidated financial statements and notes included in this prospectus.



                                                    1999                                    2000                     2001
                                    -------------------------------------   -------------------------------------   -------
                                     FIRST    SECOND     THIRD    FOURTH     FIRST    SECOND     THIRD    FOURTH     FIRST
                                    QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER
                                    -------   -------   -------   -------   -------   -------   -------   -------   -------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                         
Net revenue.......................  $18,866   $18,842   $19,813   $21,773   $20,952   $20,684   $22,072   $20,821   $18,662
Gross profit......................    8,188     7,934     8,127     9,512     9,332     9,049     9,260     8,705     7,802
Operating income..................      947     1,905     1,404     2,801     2,355     2,020     2,209     1,884     1,349
Net income (loss).................     (774)      533      (178)      959       539       619       586       438       129
Earnings (loss) per share -- basic
  and diluted(1)..................  $  (774)  $   533   $  (178)  $   959   $   539   $   619   $   586   $   438   $   129


---------------
(1) Basic and diluted earnings (loss) per share are computed as described in
    Note 2j of the "Notes to Combined Financial Statements".

                                       X-37
   148

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

     Net Revenues.  Net revenues in the three months ended March 31, 2001
decreased $2.3 million or 11% to $18.7 million from $21.0 million in the three
months ended March 31, 2000. The largest decrease was in the sales of our
nutritional supplements. Net sales of nutritional supplements decreased by $2.1
million to $3.2 million in the three months ended March 31, 2001 as compared to
$5.3 million in the three months ended March 31, 2000. Despite past sales and
marketing efforts, which were limited due to the size of Inverness, sales of our
nutritional supplements have declined each year since 1998. We anticipate that
sales of our nutritional supplements will continue to decline as a result of
strong competition and reduced spending on sales and marketing (see below).
Also, our subsidiary, Can-Am Care Corporation (Can-Am), which is a unit that
sells diabetes care products and is one of the units being acquired by Johnson &
Johnson as part of the merger, had a volume-related decrease in sales. Can-Am's
net sales decreased by $714,000 to $6.8 million in the three months ended March
31, 2001 as compared to $7.5 million in the three months ended March 31, 2000.
Net sales from our women's health products, primarily branded and private label
pregnancy and ovulation tests, were $6.0 million in the first quarter of 2001,
an increase of $439,000 or 8%, as compared to $5.6 million in the first quarter
of 2000. Our goal is to increase our market share of women's health products by
introducing new or improved products and business combinations. Net sales of the
clinical diagnostic products for the three months ended March 31, 2001 were $2.7
million, an increase of $88,000 or 3% from net sales of $2.6 million in the
three months ended March 31, 2000. Our clinical diagnostics products are
targeted at a niche market of small and medium sized decentralized laboratories
operating in the field of infectious disease. To the extent that trends or
changes in the health care industry favor economies of scale and centralized
laboratory testing, sales of our clinical diagnostic products could suffer.

     Gross Profit.  Total gross profit for the three months ended March 31, 2001
decreased $1.5 million or 16% to $7.8 million from $9.3 million in the three
months ended March 31, 2000. The decrease in gross profit was primarily due to
lower sales of nutritional supplements. Gross margin for the three months ended
March 31, 2001 was 42% as compared to 45% for the three months ended March 31,
2000. The decline in gross margin resulted primarily from lower sales of
nutritional supplements, which are higher margin products compared to our
women's health and clinical diagnostics products.

     Research and Development Expense.  Research and development expense for the
first quarter of 2001 decreased $63,000 or 17% to $299,000 from $362,000 in the
first quarter of 2000. Most of the research and development expense was related
to our clinical diagnostics business. We expect to significantly increase our
spending on new product development and to improve existing products.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense decreased $461,000 or 7% to $6.2 million for the first
quarter of 2001 from $6.6 million in the first quarter of 2000. The decrease was
primarily attributable to a reduction in selling and marketing expenses
associated with the sales of nutritional supplements. Selling, general and
administrative expense as a percentage of net revenues increased to 33% of net
sales for the three months ended March 31, 2001 from 32% of net sales for the
three months ended March 31, 2000.

     Interest Expense.  Interest expense decreased $215,000 to $557,000 in the
first quarter of 2001 from $772,000 in the first quarter of 2000. The decrease
in interest expense primarily resulted from a lower total average outstanding
debt balance during the first quarter of 2001.

     Other Expense, Net.  Other expense, net, includes interest income and other
income and expenses, primarily foreign exchange gains and losses. Interest
income increased by $37,000 to $43,000 in the three months ended March 31, 2001
from $6,000 in the three months ended March 31, 2000, primarily due to the
increase in cash balances. In the three months ended March 31, 2001, we
recognized $121,000 in realized and unrealized foreign exchange transaction
losses as compared to a loss of $53,000 related to foreign exchange transactions
in the three months ended March 31, 2000.

     Income Taxes.  In the first quarter of 2001, we recorded provisions of
$580,000 for income taxes compared to $992,000 in the first quarter of 2000. Our
effective tax rate is substantially higher than the

                                       X-38
   149

combined federal and statutory rate due to foreign and divisional losses for
which we have not recorded a tax benefit and the non-deductibility of goodwill
amortization associated with the 1998 acquisition of Can-Am (see Note 12 of the
"Notes to Combined Financial Statements").

     Net (Loss) Income.  Net income for the three months ended March 31, 2001
was $129,000 or $129 per basic and diluted common share as compared to net
income of 539,000 or $539 per basic and diluted common share for the three
months ended March 31,2000 (see Note 2j of the "Notes to Combined Financial
Statements").

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Net Revenues.  Net revenues in 2000 increased $5.2 million or 7% to $84.5
million from $79.3 million in 1999. The primary reason for the increase in
revenues was the increased sales of our women's health products, primarily
pregnancy tests in the United States. Net sales of the women's health products,
excluding nutritional supplements, were $21.7 million in 2000, an increase of
$3.2 million or 17% as compared to $18.5 million in 1999. Another major factor
was the increase in sales by Can-Am of a low-cost alternative electrochemical
blood glucose monitoring test strip, Excel(R) G, which we introduced in the
fourth quarter of 1999 for use with Glucometer Elite(R) meters sold by Bayer
Diagnostics. The aforementioned increases were partially offset by decreases in
the sales of our nutritional supplements and clinical diagnostic products. The
net sales of our nutritional supplements decreased by $2.1 million or 10% to
$18.9 million in 2000 compared to $21.0 million in 1999. Net sales of our
clinical diagnostics products in 2000 decreased $399,000 or 4% to $10.7 million
from $11.1 million in 1999.

     Gross Profit.  Gross profit for 2000 increased $2.5 million or 8% to $36.3
million from $33.8 million in 1999. The gross profit increased primarily as a
result of increased sales of pregnancy tests combined with reduced unit costs of
those tests. Gross profit on diabetes products increased by $228,000,
principally as a result of the increased sales of Excel G test strips. These
increases were partially offset by a lower gross profit on the sales of
nutritional supplements. Gross margin was 43% for both 1999 and 2000.

     Research and Development Expense.  Research and development expense
remained basically flat (decrease of $68,000 from 1999 to 2000) at $1.4 million
for both years. Most of the research and development expense was related to
clinical diagnostic products.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense increased $1.2 million or 5% to $26.5 million from $25.3
million in 1999. The increase in selling, general and administrative expense
resulted from higher marketing expenditures related to Excel G strips and
women's health products. Selling, general and administrative expense as a
percentage of net revenues decreased to 31% of net sales for 2000 from 32% of
net sales for 1999.

     Interest Expense.  Interest expense decreased $170,000 to $3.0 million in
2000 from $3.2 million in 1999. The decrease in interest expense primarily
resulted from a lower total average outstanding debt balance during 2000.

     Other Expense, Net.  Other expense, net, includes interest income and other
income and expenses, primarily foreign exchange gains and losses. Interest
income in 2000 decreased by $2,000 to $28,000 from $30,000 in 1999. The other
portions of other income and expense generally represent foreign currency
exchange gains and losses. In 2000, we recognized $389,000 in realized and
unrealized foreign exchange transaction losses as compared to $531,000 of such
losses in 1999.

     Income Taxes.  In 2000, we recorded provisions of $2.9 million for income
taxes compared to $2.8 million in 1999. Our effective tax rate is substantially
higher than the combined federal and statutory rate due to foreign and
divisional losses for which we have not recorded a tax benefit and the
non-deductibility of goodwill amortization associated with the 1998 acquisition
of Can-Am (see Note 12 of the "Notes to Combined Financial Statements").

     Net (Loss) Income.  Net income for 2000 was $2.2 million as compared to net
income of $540,000 for 1999. The basic and diluted earnings per common share for
2000 were $2,182 compared to a basic and

                                       X-39
   150

diluted earnings per common share of $540 for 1999 (see Note 2j of the "Notes to
Combined Financial Statements").

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

     Net Revenues.  Net revenues in 1999 increased $4.7 million or 6% to $79.3
million from $74.6 million in 1998. The largest increase came from Can-Am.
Can-Am's net sales increased by $9.1 million. Can-Am was acquired in February
1998 and therefore our results included only a partial year of Can-Am's sales in
1998. Also, in the fourth quarter of 1999, Can-Am introduced a new product,
Excel G(R) test strips, for use with Glucometer Elite(R) meters sold by Bayer
Diagnostics. Net sales from our women's health products, primarily branded and
private label pregnancy and ovulation tests, were $18.5 million in 1999, an
increase of $2.8 million or 18%, as compared to $15.7 million in 1998. Net sales
of nutritional supplements decreased by $1.8 million or 8% to $21.0 million in
1999 from $22.9 million in 1998. Net sales of the clinical diagnostic products
for 1999 were $11.1 million, a decrease of $4.8 million or 30% from net sales of
$15.9 million in 1998. The decrease in diagnostic product sales was primarily
due to our sale of the diagnostics business line of our wholly owned subsidiary
in Ireland, Cambridge Diagnostics Ireland, Ltd. (Cambridge Diagnostics), in
September 1998. Additionally, a decline in sales of our wholly owned subsidiary
in Israel, Orgenics Ltd. (Orgenics), accounted for $2.1 million of the decline
in clinical diagnostic product revenues. This was due primarily to a one-time
non-recurring sale of HIV test kits for $1.6 million during 1998.

     Gross Profit.  Gross profit for 1999 decreased $323,000 or 1% to $33.8
million from $34.1 million in 1998. The decrease in gross profit was primarily
due to lower sales of nutritional supplements and clinical diagnostic products.
Gross profit from the sales of nutritional supplements decreased by $2.6 million
or 18% to $12.1 million in 1999 from $14.7 million in 1998. Gross profit from
the sales of clinical diagnostics products decreased by $2.7 million or 31% to
$6.2 million in 1999 compared to $8.9 million in 1998. The decrease was
attributable to the sale of Cambridge Diagnostics' diagnostics business in
September 1998 and lower sales of Orgenics' products. These decreases were
partially offset by the gross profits on higher sales of diabetes products sold
by Can-Am, as well as an increase in sales of pregnancy and ovulation tests. The
gross profit from the sales of diabetes products sold by Can-Am increased by
$3.7 million or 58% to $10.1 million in 1999 compared to $6.4 million in 1998.
The gross profit from the sales of women's health products, primarily pregnancy
tests, increased by $771,000 or 20% to $4.6 million in 1999 compared to $3.8
million in 1998. Gross margin was 43% in 1999 compared to 46% in 1998. The
decline in gross margin primarily resulted from lower sales of the higher margin
nutritional supplements.

     Research and Development Expense.  Research and development expense for
1999 decreased $1.5 million or 50% to $1.4 million from $2.9 million in 1998.
The decrease was primarily due to our sale of the diagnostics business line of
Cambridge Diagnostics in September 1998 and a reduction in research and
development expenses of Orgenics' clinical diagnostics products.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense decreased $3.2 million or 11% to $25.3 million from $28.5
million in 1998. The decrease was primarily attributable to a reduction in
expenses associated with the clinical diagnostics business. Selling, general and
administrative expense as a percentage of net revenues decreased to 32% of net
sales for 1999 from 38% of net sales for 1998.

     Net Charge for Business Disposition, Asset Impairment and Restructuring
Activities.  There were no charges for business disposition, asset impairment or
restructuring activities in 1999. On September 30, 1998, we sold the clinical
diagnostics business of Cambridge Diagnostics to Trinity Biotech plc (Trinity)
for consideration of 555,731 shares of Inverness common stock, which were then
owned by Trinity, $230,000 in cash and other consideration valued at
approximately $43,000. We recorded a gain of approximately $1.2 million as a
result of the sale of the assets. In the fourth quarter of 1998, we also
recorded impairment and restructuring charges totaling $6.6 million reflecting
the impairment of certain assets and severance and related costs (see Note 7 of
the "Notes to Combined Financial Statements").

                                       X-40
   151

     Interest Expense.  Interest expense decreased $524,000 to $3.2 million in
1999 from $3.7 million in 1998. The decrease in interest expense primarily
resulted from a lower total average outstanding debt balance during 1999.

     Other Expense, Net.  Other expense, net, includes interest income and other
income and expenses, primarily foreign exchange gains and losses. Interest
income decreased by $124,000 to $30,000 in 1999 from $154,000 in 1998, primarily
due to the decrease in cash balances. In 1999, we recognized $531,000 in
realized and unrealized foreign exchange transaction losses as compared to a
gain of $21,000 related to foreign exchange transactions in 1998. In 1998,
Orgenics wrote off fixed assets amounting to $658,000.

     Income Taxes.  In 1999, we recorded provisions of $2.8 million for income
taxes compared to $2.1 million in 1998 Our effective tax rate is substantially
higher than the combined federal and statutory rate due to foreign and
divisional losses for which we have not recorded a tax benefit and the non-
deductibility of goodwill amortization associated with the 1998 acquisition of
Can-Am (see Note 12 of the "Notes to Combined Financial Statements").

     Net (Loss) Income.  Net income for 1999 was $540,000 or $540 per basic and
diluted common share as compared to a net loss of $9.1 million or $9,060 per
basic and diluted common share for 1998 (see Note 2j of the "Notes to Combined
Financial Statements").

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2000, we had cash and cash equivalents of $3.1 million, a
$2.4 million increase from December 31, 1999. We have historically funded our
business through operating cash flows and proceeds from borrowings. Cash
generated from our operating activities in 2000 was $11.2 million due largely to
net income of $8.3 million adjusted for noncash expenses, primarily amortization
of intangible assets. During 2000, we used cash of $837,000 for our investing
activities, consisting mostly of capital expenditures. During 2000, we used $7.8
million for financing activities. We made $9.7 million in principal repayments
on loans from Chase Manhattan Bank and for the refinancing of certain
subordinated notes. We had a working capital deficit of $2.2 million at December
31, 2000 compared to a deficit of $1.1 million at December 31, 1999.

     At March 31, 2001, we had cash and cash equivalents of $3.4 million, a
$314,000 increase from December 31, 2000. Cash generated from our operating
activities in the first quarter of 2001 was $2.2 million due largely to net
income of $1.3 million adjusted for noncash expenses, primarily amortization of
intangible assets. During the three months ended March 31, 2001, we used cash of
$387,000 to purchase property and equipment. During the three months ended March
31, 2001, we also used $2.1 million for financing activities. We made $2.5
million in principal repayments on loans from Chase Manhattan Bank and for the
refinancing of certain notes. We had a working capital deficit of $2.1 million
at March 31, 2001.

     In February 1998, we acquired Can-Am, a leading supplier of diabetes care
products, for a combination of cash, notes and shares of Inverness common stock.
At the time, we entered into a $42 million credit agreement with Chase Manhattan
Bank to fund the cash portion of the purchase price and to repay outstanding
indebtedness under a prior credit facility. The Chase credit agreement consists
of a $37 million term loan and a $5 million revolving line of credit. Borrowings
under the Chase credit agreement are secured by the capital stock of one of our
subsidiaries, our assets and the assets of certain of our subsidiaries. Our
subsidiary is required to make quarterly principal payments on the term portion
of the loan ranging from $1.2 million to $1.7 million through December 31, 2003.
Our subsidiary must also make mandatory prepayments on the term loan if it meets
certain cash flow thresholds, sells assets outside of the ordinary course of
business, issues or sells indebtedness or issues stock. During 2000, our
subsidiary made quarterly principal payments and mandatory prepayments totaling
$5.5 million. At December 31, 2000 and March 31, 2001, the entire balance of the
revolving line of credit was unused.

     As of December 31, 2000, we had approximately $23.3 million of foreign net
operating loss carryforwards. These losses are available to reduce foreign
taxable income in future years, if any. We have

                                       X-41
   152

recorded a valuation allowance against the portion of the deferred tax assets
related to foreign net operating losses and other foreign deferred tax assets to
reflect uncertainties that might affect the realization of the deferred tax
assets, as these assets can only be realized via profitable foreign operations.

     Based upon our operating plans, we believe that our existing capital
resources will be adequate to fund our operations and scheduled debt obligations
for at least the next 12 months. We may expand our research and development of,
and may pursue the acquisition of, new products and technologies, whether
through licensing arrangements, business acquisitions or otherwise. We cannot
assure you that additional capital will be available to finance such activities,
or, if available, that it will be available on acceptable terms. If we raise
additional funds by issuing equity securities, dilution to then existing
stockholders will result.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

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

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

     In May 2000, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 00-14, Accounting for Certain Sales Incentives, which is effective for
the quarter ended June 30, 2001. EITF Issue No. 00-14 establishes accounting and
reporting standards for the cost of certain sales incentives. Inverness offers
certain sales incentives that fall within the scope of EITF Issue No. 00-14,
such as coupons and free products, to some of its customers. The adoption of the
consensus will require Inverness to reclassify $3,250,000, $3,086,000 and
$1,762,000 in 2000, 1999 and 1998, respectively, from selling, general and
administrative expenses to net product sales. This reclassification will have no
impact on net income, and these adjustments are already reflected in our
historical consolidated financial statements.

     In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS No.
141 addresses changes in the financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16, Business Combinations and SFAS
No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises.
Effective July 1, 2001 all business combinations should be accounted for using
only the purchase method of accounting. Innovations does not believe the
adoption of this statement will have a material effect on its financial
position, results of operation or cash flows.

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     In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 addresses changes in the financial accounting and reporting
for acquired goodwill and other intangible assets. Effective January 1, 2002,
all existing acquired goodwill and other intangible assets will no longer be
amortized to expense, with early adoption required for all goodwill and other
intangible assets acquired subsequent to June 30, 2001. The statement also
provides specific guidance for determining and measuring impairment of all
goodwill and other intangible assets. Innovations recorded goodwill amortization
of approximately 3,182,000, 1,960,000, 1,717,000, 452,000 and 434,000 for the
years ended December 31, 1998, 1999, 2000 and the three months ended March 31,
2000 and 2001, respectively. Innovations has not yet made an assessment as to
whether the impairment measurements required by SFAS No. 142 will have an impact
on its financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

     Interest Rate Risk.  We are exposed to market risks from changes in
interest rates primarily through our investing and borrowing activities. In
addition, our ability to finance future acquisition transactions, research and
development and other capital expenditures may be impacted if we are not able to
obtain appropriate financing at acceptable rates. In order to manage interest
rate exposure we intend to invest our initial cash reserve, as well as cash from
future operations, in accordance with the same investment policy currently in
place at Inverness. That policy requires investment in approved instruments with
an initial maximum allowable maturity of 18 months and an average maturity of
our portfolio that should not exceed 6 months, with at least $500,000 cash
available at all times.

     Foreign Currency Risk.  We face exposure to movements in foreign currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse effect on our business, financial
condition and results of operation. For the three months ended March 31, 2001,
the net impact of foreign currency changes on our businesses was a loss of
$121,000. Historically, our primary exposures have been related to the
operations of our European and South American subsidiaries. The Euro was
introduced as a common currency for members of the European Monetary Union in
1999. We believe that in the near term the Euro will have minimal impact on
foreign exposure. We intend to hedge against fluctuations in the Euro if this
exposure becomes material. At March 31, 2001, the assets of our women's health,
nutritional supplements and clinical diagnostics businesses related to
non-dollar-denominated currencies amounted to approximately $9.3 million.

                        PRO FORMA RESULTS OF OPERATIONS

BASIS OF PRESENTATION

     The following management's discussion and analysis of financial condition
and results of operations refers to Innovations' unaudited pro forma combined
financial statements. The unaudited pro forma combined financial statements
reflect the following transactions, as described in Note 1 of the "Notes to
Combined Financial Statements":

     Unaudited pro forma statements of operations:

     - Amounts related to discontinued diabetes operations have been shown as a
       single line item in accordance with APB Opinion No. 30 (see "Notes to
       Combined Financial Statements" for summarized results from discontinued
       operations) and

     - All third-party and related-party interest expense pertaining to debt to
       be assumed or discharged by Johnson & Johnson has been eliminated. Total
       interest expense eliminated was $2,316,879,

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$2,022,974, $1,904,696, $486,305 and $372,524 in 1998, 1999, 2000 and the three
months ended March 31, 2000 and 2001, respectively.

     Unaudited pro forma balance sheets:

  December 31, 2000:

     - The balance sheet has been restated pursuant to APB Opinion No. 30 to
       present the net assets of the diabetes businesses as a single line item
       (see "Notes to Combined Financial Statements" for summarized net assets
       of discontinued operations).

  March 31, 2001:

     - Assets and liabilities relating to diabetes operations have been removed
       and shown as a transfer to Inverness via a reduction of additional
       paid-in capital (see "Notes to Combined Financial Statements" for
       summarized net assets of discontinued operations)

     - Cash has been increased to $40 million with an offsetting increase to
       additional paid-in-capital and

     - All third-party and related-party debt to be assumed or discharged by
       Inverness has been removed and shown as an increase to additional paid-in
       capital. Total debt eliminated was $18,831,044 at March 31, 2001.

RESULTS OF OPERATIONS AS A PERCENTAGE OF NET REVENUE

     The following table summarizes our pro forma combined financial statements
of operations as a percentage of net revenues.



                                                                                     THREE MONTHS
                                                                  YEARS ENDED            ENDED
                                                                 DECEMBER 31,          MARCH 31,
                                                             ---------------------   -------------
                                                             1998    1999    2000    2000    2001
                                                             -----   -----   -----   -----   -----
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                              
STATEMENT OF OPERATIONS DATA:
Net revenue................................................  100.0%  100.0%  100.0%  100.0%  100.0%
Cost of sales..............................................   48.9    53.2    49.1    48.7    49.3
                                                             -----   -----   -----   -----   -----
Gross profit...............................................   51.1    46.8    50.9    51.3    50.7
                                                             -----   -----   -----   -----   -----
Operating expenses:
  Research and development.................................    4.2     2.7     2.7     2.7     2.6
  Selling, general and administrative......................   41.6    36.3    34.8    33.9    35.3
  Other expenses...........................................    9.1      --      --      --      --
                                                             -----   -----   -----   -----   -----
  Total operating expenses.................................   54.9    39.0    37.5    36.6    37.9
                                                             -----   -----   -----   -----   -----
     Operating (loss) income...............................   (3.8)    7.8    13.4    14.7    12.8
Interest and other income (expense), net...................   (1.2)   (1.1)   (0.7)   (0.4)   (0.7)
                                                             -----   -----   -----   -----   -----
(Loss) income from continuing operations before income
  taxes....................................................   (5.0)    6.7    12.7    14.3    12.1
Provision for income taxes.................................    2.0     2.0     3.5     4.5     3.0
                                                             -----   -----   -----   -----   -----
(Loss) income from continuing operations...................   (7.0)    4.7     9.2     9.8     9.1
(Loss) income from discontinued operations.................   (5.3)    0.4    (1.2)   (2.2)   (4.9)
     Net (loss) income.....................................  (12.3)%   5.1%    8.0%    7.6%    4.2%
                                                             =====   =====   =====   =====   =====


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SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

     The following table sets forth our unaudited pro forma quarterly combined
operating results for each of the nine quarters ending March 31, 2001. We have
prepared this information on a basis consistent with our audited combined
financial statements. These quarterly results are not necessarily indicative of
future results of our operations. This information should be read in conjunction
with our combined financial statements and notes included in this prospectus.



                                           1999                                    2000                     2001
                           -------------------------------------   -------------------------------------   -------
                            FIRST    SECOND     THIRD    FOURTH     FIRST    SECOND     THIRD    FOURTH     FIRST
                           QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER   QUARTER
                           -------   -------   -------   -------   -------   -------   -------   -------   -------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                
Net revenue..............  $13,292   $11,900   $12,648   $12,743   $13,455   $12,743   $12,519   $12,334   $11,812
Gross profit.............    6,302     5,590     5,793     6,010     6,908     6,856     6,026     6,186     5,986
Operating income.........      454     1,308       937     1,249     1,983     1,952     1,327     1,591     1,515
Income (loss) from
  continuing
  operations.............       (1)    1,037       614       729     1,321     1,559       783     1,021     1,082
(Loss) income from
  discontinued
  operations.............     (276)       58      (285)      687      (296)     (449)      269      (122)     (581)
Net income (loss)........     (277)    1,095       329     1,416     1,025     1,110     1,052       899       501
Earnings (loss) per
  share -- basic and
  diluted(1).............  $ (0.09)  $  0.33   $  0.09   $  0.42   $  0.26   $  0.24   $  0.21   $  0.19   $  0.08


---------------
(1) Basic and diluted earnings (loss) per share are computed as described in
    Notes 1 and 2j of the "Notes to Combined Financial Statements".

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

     Net Revenues.  Net revenues in the three months ended March 31, 2001
decreased $1.7 million or 12% to $11.8 million from $13.5 million in the three
months ended March 31, 2000. The largest decrease was in the sales of our
nutritional supplements. Net sales of nutritional supplements decreased by $2.1
million to $3.2 million in the three months ended March 31, 2001 as compared to
$5.3 million in the three months ended March 31, 2000. The decrease in the sales
of nutritional supplements was partially offset by the increase in sales of our
women's health products, primarily branded and private label pregnancy and
ovulation tests which were $6.0 million in the first quarter of 2001, an
increase of $439,000 or 8%, as compared to $5.6 million in the first quarter of
2000. Net sales of the clinical diagnostic products for the three months ended
March 31, 2001 were $2.7 million, an increase of $88,000 or 3% from net sales of
$2.6 million in the three months ended March 31, 2000.

     Gross Profit.  Total gross profit for the three months ended March 31, 2001
decreased $922,000 or 13% to $6.0 million from $6.9 million in the three months
ended March 31, 2000. The decrease in gross profit was primarily due to lower
sales of nutritional supplements.

     Research and Development Expense.  Research and development expense for the
first quarter of 2001 decreased $63,000 or 17% to $299,000 from $362,000 in the
first quarter of 2000. Most of the research and development expense was related
to clinical diagnostic products.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense decreased $391,000 or 9% to $4.2 million for the first
quarter of 2001 from $4.6 million in the first quarter of 2000. The decrease was
primarily attributable to a reduction in selling and marketing expenses
associated with the sales of nutritional supplements. Selling, general and
administrative expense as a percentage of net revenues increased to 35% of net
sales for the three months ended March 31, 2001 from 34% of net sales for the
three months ended March 31, 2000.

     Other Expense, Net.  Other expense, net, includes interest income and other
income and expenses, primarily foreign exchange gains and losses. Interest
income increased by $37,000 to $43,000 in the three months ended March 31, 2001
from $6,000 in the three months ended March 31, 2000, primarily due to the
decrease in cash balances. In the three months ended March 31, 2001, we
recognized $121,000 in

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realized and unrealized foreign exchange transaction losses as compared to a
loss of $53,000 related to foreign exchange transactions in the three months
ended March 31, 2000.

     Income Taxes.  In the first quarter of 2001, we recorded provisions of
$354,000 for income taxes compared to $609,000 in the first quarter of 2000. Our
effective tax rate is substantially higher than the combined federal and
statutory rate due to foreign and divisional losses for which we have not
recorded a tax benefit and the non-deductibility of goodwill amortization
associated with the 1998 acquisition of Can-Am (see Note 12 of the "Notes to
Combined Financial Statements").

     (Loss) Income from Continuing Operations.  Income from continuing
operations was $1.1 million or $0.18 per basic and diluted common share for the
three months ended March 31, 2001 compared to income from continuing operations
of $1.3 million or $0.34 per basic and diluted common share for the three months
ended March 31, 2000. The decrease in income was due to lower income on sales of
nutritional supplements partially offset by increased income on sales of
pregnancy and ovulation tests.

     (Loss) Income from Discontinued Operations.  In the three months ended
March 31, 2001, we had a loss from discontinued operations of $581,000 compared
to a loss from discontinued operations of $296,000 in the three months ended
March 31, 2000. The discontinued operations are the diabetes-related segments
that are to be acquired by Johnson & Johnson but historically have been part of
entities to be transferred to us as part of the restructuring preceding the
split-off and merger.

     Net (Loss) Income.  Net income for the three months ended March 31, 2001
was $501,000 or $.08 per basic and diluted common share as compared to net
income of 1.0 million or $0.26 per basic and diluted common share for the three
months ended March 31,2000 (see Notes 1 and 2j of the "Notes to Combined
Financial Statements").

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Net Revenues.  Net revenues in 2000 increased $467,000 or 1% to $51.1
million from $50.6 million in 1999. The primary reason for the increase in
revenues was the increased sales of our women's health products, primarily
pregnancy tests in the United States. Net sales of the women's health products,
excluding nutritional supplements, were $21.7 million in 2000, an increase of
$3.2 million or 17% as compared to $18.5 million in 1999. The aforementioned
increase was partially offset by decreases in the sales of our nutritional
supplements and clinical diagnostic products. The net sales of our nutritional
supplements decreased by $2.1 million or 10% to $18.9 million in 2000 compared
to $21.0 million in 1999. Net sales of our clinical diagnostics products in 2000
decreased $399,000 or 4% to $10.7 million from $11.1 million in 1999.

     Gross Profit.  Total gross profit for 2000 increased $2.3 million or 10% to
$26.0 million from $23.7 million in 1999. Gross margin of net product sales was
51% in 2000 compared to 47% in 1999. The gross profit increased primarily as a
result of increased sales of pregnancy tests combined with reduced unit costs of
those tests. This increase was partially offset by a lower gross profit on the
sales of nutritional supplements.

     Research and Development Expense.  Research and development expense
remained basically flat (decrease of $36,000 from 1999 to 2000) at $1.4 million
for both years. Most of the research and development expense was related to
clinical diagnostic products.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense decreased $587,000 or 3% to $17.8 million from $18.3
million in 1999. The decrease in selling, general and administrative expense
resulted primarily from lower selling and marketing expenditures related to our
nutritional supplements. Selling, general and administrative expense as a
percentage of net revenues decreased to 35% of net sales for 2000 from 36% of
net sales for 1999.

     Other Expense, Net.  Other expense, net, includes interest income and other
income and expenses, primarily foreign exchange gains and losses. Interest
income in 2000 decreased by $3,000 to $27,000 from $30,000. The other portions
of other income and expense generally represent foreign currency exchange

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gains and losses. In 2000, we recognized $389,000 in realized and unrealized
foreign exchange transaction losses as compared to $531,000 of such losses in
1999.

     Income Taxes.  In 2000, we recorded provisions of $1.8 million for income
taxes compared to $1.0 million in 1999. Our effective tax rate is substantially
higher than the combined federal and statutory rate due to foreign and
divisional losses for which we have not recorded a tax benefit and the non-
deductibility of goodwill amortization associated with the 1998 acquisition of
Can-Am (see Note 12 of the "Notes to Combined Financial Statements").

     (Loss) Income from Continuing Operations.  Income from continuing
operations was $4.7 million or $0.99 per basic and diluted common share for 2000
compared to income from continuing operations of $2.4 million or $0.71 per basic
and diluted common share for 1999. The increase in income was due to greater
income on sales of pregnancy and ovulation tests partially offset by a decrease
in the income on nutritional supplements.

     (Loss) Income from Discontinued Operations.  In 2000, we had a loss from
discontinued operations of $598,000 compared to income from discontinued
operations of $183,000 in 1999. The discontinued operations are the diabetes
related segments that are to be acquired by Johnson & Johnson but historically
have been part of entities to be transferred to us as part of the restructuring
preceding the split-off and merger.

     Net (Loss) Income.  Net income for 2000 was $4.1 million as compared to net
income of $2.6 million for 1999. The basic and diluted earnings per common share
for 2000 were $0.86 compared to a basic and diluted earnings per common share of
$0.76 for 1999 (see Notes 1 and 2j of the "Notes to Combined Financial
Statements").

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

     Net Revenues.  Net revenues in 1999 decreased $4.1 million or 7% to $50.6
million from $54.7 million in 1998. Net sales of nutritional supplements
decreased by $1.8 million or 8% to $21.0 million in 1999 from $22.9 million in
1998. Net sales of the clinical diagnostic products for 1999 were $11.1 million,
a decrease of $4.8 million or 30% from net sales of $15.9 million in 1998. The
decrease in diagnostic product sales is primarily due to our sale of the
diagnostics business line of Cambridge Diagnostics, in September 1998.
Additionally, a decline in sales of our wholly owned subsidiary Orgenics
accounted for $2.1 million of the decline in clinical diagnostic product
revenues. This was due primarily to a one-time non-recurring sale of HIV test
kits for $1.6 million during 1998. Net sales from our women's health products,
primarily branded and private label pregnancy and ovulation tests, were $18.5
million in 1999, an increase of $2.8 million or 18%, as compared to $15.7
million in 1998.

     Gross Profit.  Total gross profit for 1999 decreased $4.3 million or 15% to
$23.7 million from $28.0 million in 1998. The decrease in gross profit was
primarily due to lower sales of nutritional supplements and clinical diagnostic
products. Gross profit from the sales of nutritional supplements decreased by
$2.6 million or 18% to $12.1 million in 1999 from $14.7 million in 1998. Gross
profit from the sales of clinical diagnostics products decreased by $2.7 million
or 31% to $6.2 million in 1999 compared to $8.9 million in 1998. The decrease
was attributable to the sale of Cambridge Diagnostics' diagnostics business in
September 1998 and lower sales of Orgenics' products. These decreases were
partially offset by the gross profits on increased sales of pregnancy and
ovulation tests. The gross profit from the sales of women's health products,
primarily pregnancy tests, increased by $771,000 or 20% to $4.6 million in 1999
compared to $3.8 million in 1998.

     Research and Development Expense.  Research and development expense for
1999 decreased $927,000 or 40% to $1.4 million from $2.3 million in 1998. The
decrease was primarily due to our sale of the diagnostics business line of
Cambridge Diagnostics in September 1998 and a reduction in research and
development expenses of Orgenics' clinical diagnostics products.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense decreased $4.4 million or 19% to $18.3 million from $22.7
million in 1998. The decrease was primarily attributable to

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a reduction in expenses associated with the clinical diagnostics business.
Selling, general and administrative expense as a percentage of net revenues
decreased to 36% of net sales for 1999 from 42% of net sales for 1998.

     Net Charge for Business Disposition, Asset Impairment and Restructuring
Activities.  There were no charges for business disposition, asset impairment or
restructuring activities in 1999. On September 30, 1998, we sold the clinical
diagnostics business of Cambridge Diagnostics to Trinity Biotech plc (Trinity)
for consideration of 555,731 shares of Inverness common stock, which were then
owned by Trinity, $230,000 in cash and other consideration valued at
approximately $43,000. We recorded a gain of approximately $1.2 million as a
result of the sale of the assets. In the fourth quarter of 1998, we recorded
impairment charges totaling $6.2 million reflecting the change in the fair value
of certain assets that were no longer expected to contribute to our
profitability.

     Other Expense, Net.  Other expense, net, includes interest income and other
income and expenses, primarily foreign exchange gains and losses. Interest
income decreased by $118,000 to $30,000 in 1999 from $148,000 in 1998, primarily
due to the decrease in cash balances. In 1999, we recognized $531,000 in
realized and unrealized foreign exchange transaction losses as compared to a
gain of $21,000 related to foreign exchange transactions in 1998. In 1998,
Orgenics wrote off fixed assets and other investments amounting to $838,000.

     Income Taxes.  In 1999, we recorded provisions of $1.0 million for income
taxes compared to $1.1 million in 1998. Our effective tax rate is substantially
higher than the combined federal and statutory rate due to foreign and
divisional losses for which we have not recorded a tax benefit and the
non-deductibility of goodwill amortization associated with the 1998 acquisition
of Can-Am (see Note 12 of the "Notes to Combined Financial Statements").

     (Loss) Income from Continuing Operations.  Income from continuing
operations was $2.4 million or $0.71 per basic and diluted common share for 1999
compared to a loss from continuing operations of $3.9 million or ($1.58) per
basic and diluted common share for 1998. The improvement was due to greater
income related to pregnancy and ovulation tests and a reduction in operating
costs associated with the clinical diagnostics business, partially offset by a
decrease in the income on nutritional supplements.

     (Loss) Income from Discontinued Operations.  In 1999, we had income from
discontinued operations of $183,000 compared to a loss from discontinued
operations of $2.9 million in 1998. The discontinued operations are the diabetes
related segments that are to be sold to Johnson & Johnson but historically have
been part of entities to be retained by us.

     Net (Loss) Income.  Net income for 1999 was $2.6 million or $0.76 per basic
and diluted common share as compared to a net loss of $6.7 million or ($2.76)
per basic and diluted common share for 1998 (see Notes 1 and 2j of the "Notes to
Combined Financial Statements").

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2000, we had cash and cash equivalents of $3.1 million, a
$2.4 million increase from December 31, 1999. We had working capital of $16.1
million at December 31, 2000.

     At March 31, 2001, we had net cash and cash equivalents on a pro forma
basis of $40.0 million. We had working capital of $44.7 million at March 31,
2001. Pursuant to the split-off and merger agreement and related agreements, we
will have $40.0 million in net cash upon the consummation of the split-off and
merger. In addition, at the completion of the split-off and merger, we will have
no third-party or related-party debt.

     Based upon our operating plans, we believe that our existing capital
resources will be adequate to fund our operations for at least the next 12
months. We may expand our research and development, and may pursue the
acquisition of new products and technologies, whether through licensing
arrangements, business acquisitions or otherwise. We cannot assure you that
additional capital will be available to finance such activities, or, if
available, that it will be available on acceptable terms. If additional funds
are raised by issuing equity securities, dilution to then existing stockholders
will result.
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                                    BUSINESS

     We are currently a majority-owned subsidiary of Inverness. After the
split-off, we will be an independent, publicly owned company. Except where
otherwise indicated, the discussions below and elsewhere in this prospectus
regarding our business and operations assume the completion of the restructuring
and the split-off.

OVERVIEW

     We develop, manufacture and sell products for the women's health market,
and, to a lesser extent, clinical diagnostic products for the infectious disease
market. Our self-test products for the women's health market include home
pregnancy detection tests and ovulation prediction tests. We also sell a line of
nutritional supplements targeted primarily at the women's health market. Our
clinical diagnostic products consist of test kits used by smaller laboratories,
small blood banks, physicians' offices and other patient point-of-care sites for
the detection of certain infectious diseases such as HIV, hepatitis A, B and C,
chlamydia, as well as the congenital and perinatal infections toxoplasmosis,
rubella, cytomegalovirus and herpes, commonly referred to collectively as TORCH.

DEVELOPMENT OF BUSINESS

     The history of our businesses began when Inverness was incorporated as
Selfcare, Inc. in Delaware on August 25, 1992 and acquired its predecessor
company, Superior Sensors, Inc., by merger on September 15, 1992. In 1994,
Inverness acquired Cambridge Diagnostic Ireland Ltd, an Irish corporation. In
1997, Inverness formed our wholly-owned subsidiary, Inverness Medical, Inc.
(formerly known as Selfcare Consumer Products, Inc.), for the sole purpose of
purchasing and selling acquired consumer products. These products included a
line of nutritional supplements to which Inverness acquired the U.S. rights in
1997. Also in 1997, Inverness acquired Orgenics Ltd., an Israeli corporation
that develops, manufactures and markets clinical diagnostics products for
infectious diseases. Effective May 11, 2000, Inverness changed its name to
Inverness Medical Technology, Inc.

     Our company was incorporated as New IMT Corporation in Delaware on May 11,
2001. We changed our name to Inverness Medical Innovations, Inc. on July 19,
2001. As part of the restructuring and split-off, we will acquire Inverness'
women's health, nutritional supplements and clinical diagnostics businesses and
will operate those businesses as a new, independent public company.

OUR PRODUCTS

  Women's Health

     Women's health is the second largest self-test market in the U.S. for
medical diagnostic products. In the women's health market, we manufacture and
market home pregnancy and ovulation prediction tests under our Inverness Medical
label and under various private labels. The U.S. market for over-the-counter
pregnancy and ovulation prediction products is estimated to be $278 million. We
are the largest supplier (measured in total units sold) of both pregnancy and
ovulation diagnostic self-test kits in the United States, accounting for
approximately one-third of total unit sales.

     Pregnancy Test Products -- We market our pregnancy self-test kits in both
stick and cassette versions. The stick version has an exposed wick which absorbs
urine when placed in the urine stream, while the cassette version requires the
user to first collect a urine sample in a cup and then use an enclosed dropper
to place the urine sample in the test well. Both versions employ identical
technology enabling the display of visual results in approximately three
minutes. We manufacture our pregnancy test kits at our facility in Galway,
Ireland and sell them over-the-counter through drug store chains, grocery chains
and mass merchandisers under their own store brand label as well as under our
own name. While sales of our own

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brand now account for 65% of our volume, we remain the largest supplier of
private label products to this segment.

     Ovulation Prediction Products -- We market our ovulation prediction
self-test kits in stick and cassette versions, each of which operates in a
manner similar to the comparable version of our pregnancy self-test kits. We
market our ovulation prediction test kits under our own name and under various
store brand labels of retail drugstore chains, grocery stores and mass
merchandisers. Our ovulation prediction test kit provides 24 to 48 hours notice
of when ovulation is likely to occur. By identifying the days when a woman is
most fertile, these products assist couples in their family planning. Clinically
accurate results are available in approximately three minutes. All of our
ovulation prediction tests are manufactured at our facility in Galway, Ireland.

  Nutritional Supplements

     We market a line of nutritional supplements through retail drug store
chains and mass merchandisers. In 1997, Inverness acquired the U.S. rights to a
line of nutritional supplements from American Home Products Corporation. This
product line includes the following products, which we target primarily at the
women's health market:

     - Stresstabs(R) (a B-complex vitamin with added antioxidants)

     - Ferro-Sequels(R) (a time release iron supplement)

     - Protegra(R) (an antioxidant vitamin and mineral supplement)

     - Posture(R) (a calcium supplement)

     - ALLBEE(R) (a line of B-complex vitamins) and

     - Z-BEC(R) (a zinc supplement with B-complex vitamins and added
       antioxidants).

     In subsequent years, Inverness strengthened this line by adding strategic
line extensions, adjusting tablet counts to enhance consumer value and
developing the Soy Care(TM) brand. Soy Care is a line of soy-based supplements
that we market to senior women. Also, in 1999 Inverness debuted the SmartCare(R)
program, which assists consumers in matching their health concerns to the
appropriate Inverness supplement products. SmartCare provides the supplement
line with a means of linking the various products, allowing for greater
efficiencies in advertising, promotion and merchandising. We intend to augment
this program with additional products as they are developed.

     Many companies in this market are substantially larger than we are and,
therefore, may possess greater resources for advertising and promotion.
Stresstabs, Ferro-Sequels, Posture, Protegra, ALLBEE and Z-BEC are registered
trademarks of Inverness Medical, Inc., the subsidiary through which we market
our nutritional supplement products.

  Clinical Diagnostics for Infectious Diseases

     We manufacture and market professional diagnostic products based on several
proprietary technological platforms through our wholly-owned subsidiary,
Orgenics Ltd., which is located in Yavne, Israel. These platforms are used to
detect a wide variety of infectious diseases, including HIV-1, HIV-2, hepatitis,
chlamydia and TORCH. The products are designed to enable small to medium-sized
laboratories to economically analyze low volumes of tests specimens.

     Our clinical diagnostic products are based on three primary platforms:
ImmunoComb(TM), DoubleCheck(TM) and ImmunoGold(TM). ImmunoComb is our main
platform and currently serves as the basis for 25 diagnostic products. The
platform is based upon a plastic "comb" with twelve projections upon which
antigens or antibodies are applied and which is inserted into a vessel
containing a patient's

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specimen. This manual testing platform provides the sensitivity, accuracy and
versatility of more expensive automated testing platforms at lower prices.
DoubleCheck is a single test device through which a specimen migrates to a
reaction zone where it filters through and subsequently binds to immobilized
antigens or antibodies. DoubleCheck produces results in less than 15 minutes.
ImmunoGold consists of a strip containing antigens or antibodies immobilized
along a line to which a pad containing gold conjugate is attached. When
rehydrated by the liquid specimen the gold particles migrate laterally along the
strip where they react with immobilized reagents to produce a sharp red line.
ImmunoGold produces results in about 5 minutes and has the advantages of not
requiring refrigerated storage or addition of reagents during the test
procedure. ImmunoComb, DoubleCheck and ImmunoGold are trademarks of Orgenics
Ltd.

INDUSTRY

     Women's Health.  The market for women's health self-test products is
comprised mostly of home pregnancy detection tests, which represent
approximately 90% of the market, and ovulation prediction tests, which represent
approximately 10% of the market. We believe that the market for ovulation
prediction products is growing steadily because of increased awareness of the
incidence of infertility, as well as a desire on the part of couples to plan
conception with more certainty. The pregnancy test products market is growing
also, but at a slower pace due to the relative maturity of the market.

     There are numerous pregnancy self-tests on the market, which are typically
urine-based tests and provide results in less than five minutes. Pregnancy
self-tests are sensitive enough to indicate pregnancy within one or two days of
a missed menstrual period. Determinations of fertility are generally made using
ovulation prediction tests, most notably those based on the luteinizing hormone.
Ovulation prediction urine-based tests are generally easy to use and are
becoming widely accepted by professional fertility care providers and the
general public.

     Nutritional Supplements.  The Dietary Supplement Information Bureau
estimates the total mass retail market for nutritional supplements at $5.7
billion in sales. Growth in the industry is driven by media commentary regarding
the quality and efficacy of nutritional supplements. Positive media attention
resulting from new scientific studies or announcements can spur rapid growth in
individual segments of the market, and also impact individual brands.
Conversely, news that challenges individual segments or products can have a
negative impact on the industry overall as well as on sales of the challenged
segments or products. These dramatic positive and negative changes generally
affect new products and new product segments. Well established market segments,
where competition is greater and media commentary less frequent, generally
experience relatively slow and stable growth. There has been little or no growth
in the overall nutritional supplements industry over the last year, as the
decline of the herbal supplement segment, which was extremely active in the
past, has offset the growth in particular new mineral and non-herbal
supplements. The resulting retailer reduction of shelf space for nutritional
supplements has forced many under-performing items out of distribution,
including several broad product lines.

     Clinical Diagnostics.  The clinical diagnostics market consists of products
designed to assist laboratories in analyzing human body fluids for markers of
human disease. This market can be divided based on customer, disease and
technology.

     Customers in this market can be divided into two increasingly polarized
market segments. One market segment consists of centralized laboratories that
increasingly benefit from computerization and automation. The second market
segment, which is our primary target, consists of small and medium-sized non-
centralized laboratories and testing locations, including small blood banks,
doctors' offices and some rapid response laboratories in larger medical centers.
These decentralized sites do not benefit from computerization or automation, do
not have state-of-the-art laboratory equipment and, particularly in the
developing world, may not be able to rely on refrigeration of test samples.

     Clinical diagnostics for infectious diseases represent approximately 20% of
the overall clinical diagnostics market. We believe that this market is growing
faster than other market segments due to the

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increasing incidence of certain diseases or groups of diseases, including viral
hepatitis, acquired immuno deficiency syndrome (AIDS), tuberculosis, as well as
chlamydia and other sexually transmitted diseases.

     We also believe there is a growing demand in the clinical diagnostics
market for fast, high-quality, inexpensive, self-contained diagnostic kits for
infectious diseases resulting in part from efforts in many nations to control
health care expenditures.

MARKETING AND SALES

     Women's Health Products.  We market and sell our women's health products
under our own brand names as well as under store brands. Our customers include
retail drug store chains, drug wholesalers, grocery retailers and mass
merchandisers in North America and Europe. Our three largest customers are
Walgreen Co., CVS Corporation and Rite Aid Corporation, each of which sells our
products under its own store brands.

     Nutritional Supplements.  We market and sell our nutritional supplements
under our own brand names to retail drug store chains, drug wholesalers, grocery
retailers and mass merchandisers in the United States and Canada. Our three
largest customers are Walgreen Co., Wal-Mart Stores, Inc. and McKesson
Corporation. Our rights to the trademarks Stresstabs, Ferro-Sequals, Posture,
Protegra, ALLBEE and Z-BEC are limited to use in North America, but we are not
restricted from marketing the formulations sold under those brand names in North
America under other brand names outside of North America.

     Clinical Diagnostics Products.  We have sales offices in Israel, France,
Russia, Brazil and Colombia which market our clinical diagnostics products to
smaller laboratories, blood banks, physicians' offices and other patient
point-of-care sites in more than 90 countries, principally in Europe, Latin
America, Africa and Asia. We are in the process of establishing additional sales
offices in Nigeria, Kenya and Argentina.

MANUFACTURING

     Women's Health Products.  We produce nearly all of our pregnancy detection
and ovulation prediction tests at our facility in Galway, Ireland. Our Galway
facility is an FDA registered establishment which employs modern production
techniques to produce consistent, high-quality components that are assembled
on-site and subsequently packaged by a third party in the United States. We
purchase a small number of low cost women's health products from third party
suppliers for distribution in Europe.

     Nutritional Supplements.  Our nutritional supplement products are
manufactured domestically under third party manufacturing contracts. All of our
nutritional supplement products other than Protegra, Ferro-Sequals and Gevrabon
(or approximately 80% of our sales volume of nutritional supplement products)
are manufactured by a single third party.

     Clinical Diagnostics Products.  Our clinical diagnostic products are
manufactured at our facility in Yavne, Israel. The Yavne manufacturing facility
is ISO 9001 and 9002 certified, as well as Good Manufacturing Practices
certified by the Israeli Ministry of Health.

RESEARCH AND DEVELOPMENT

     We intend to focus our research and development efforts on the development
of new products and enhanced features for our lines of women's health and
clinical diagnostics products, as well as the development of product lines
targeting new markets. Most of our research and development activities are
carried out in Galway, Ireland and Yavne, Israel. We supplement our internal
research and development efforts with third parties' efforts either through
co-development or licensing arrangements, or through product or technology
acquisitions. In connection with our co-development or licensing activities, we
may provide financial development assistance to these parties and may also
utilize our own research and development resources to design certain portions of
such products.

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FOREIGN OPERATIONS

     Our business relies heavily on our foreign operations. Our two
manufacturing facilities are both outside the United States, one in Galway,
Ireland and the other in Yavne, Israel. Although sales of our women's health
products are primarily in the United States, in 2000 roughly 7%, and in the
first quarter of 2001 roughly 4%, of these sales were outside the United States,
primarily in Europe and, to a much lesser extent, in Israel. Substantially all
of our sales of clinical diagnostic test kits are outside the United States,
with the largest percentage of sales attributable to our operations in France,
26% and Brazil, 16%.

COMPETITIVE POSITION

     General.  We have existing competitors, as well as a number of potential
new competitors, who have greater name recognition, and significantly greater
financial, technical and marketing resources than we do. These strengths may
allow them to devote greater resources than we can to the development, marketing
and sales of their products. These competitors may also engage in more extensive
research and development, undertake more far-reaching marketing campaigns and
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees and clients.

     We expect that industry forces will impact us and our competitors. Our
competitors will likely strive to improve their product offerings and price
competitiveness. We also expect our competitors to develop new strategic
relationships with providers, referral sources and payors, which could result in
increased competition. The introduction of new and enhanced services,
acquisitions and industry consolidation and the development of strategic
relationships by our competitors could cause a decline in sales or loss of
market acceptance of our products or price competition, or make our products
less attractive. We cannot assure you that we will be able to compete
successfully against current or future competitors or that competitive pressures
will not have a material adverse effect on our business, financial condition and
results of operations.

     Women's Health Products.  Competition in the pregnancy detection and
ovulation prediction market is intense. Our competitors in the United States are
numerous and include, among others, large medical and consumer products
companies as well as private label manufacturers. For consumer products
companies, competition principally centers around brand name recognition. For
private label manufacturers, competition is based primarily on the delivery of
products with substantially the same features and performance as brand name
products at lower prices. Many of our competitors have substantially greater
financial, production, marketing and distribution resources than we do. In the
women's health market, we believe that we have developed a significant market
penetration with our private label and branded pregnancy detection and ovulation
prediction tests. We believe that we can continue to compete effectively in the
women's health market based on our research and development capabilities,
advanced manufacturing expertise and established wholesale and retail
distribution networks. In addition, the possibility of patent disputes with
competitors holding foreign patent rights may limit or delay expansion
possibilities for our women's health products business in certain foreign
jurisdictions.

     Nutritional Supplements.  In the nutritional supplements industry,
competition is based principally upon brand name recognition, price, quality of
products, customer service and marketing support. There are numerous companies
in this industry selling products to retailers. A number of these companies,
particularly manufacturers of nationally advertised brand name products, are
substantially larger than us and have greater financial resources. We are within
the nutritional supplement market. Among our major competitors are American Home
Products, Pharmavite, Leiner Health Products, Royal Numico and SmithKline
Beecham. There are also several manufacturers that produce store brand
nutritional supplements with formulations very similar to those of nationally
marketed brands, including ours.

     Clinical Diagnostic Products.  The main competitors of our ImmunoComb
products are standard enzyme linked immuno sorbent assay, or ELISA, systems,
such as those produced by Organon, Inc., Bio-Rad, Abbott, Ortho, Roche and
others. ELISA tests are generally used by high-volume batch

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processors such as blood banks and other centralized laboratories. The primary
competitors of our rapid test platforms include multinational corporations with
much greater resources and more extensive sales networks than we have. These
companies tend to concentrate their efforts on sales of automated diagnostic
systems to centralized laboratories. Other competitors include Trinity Biotech,
Savyon, Gull Laboratories and SDS, which are smaller companies operating
primarily in our niche market. Some of these companies do not have the
international sales network or the number of products that we have.

PATENTS AND PROPRIETARY TECHNOLOGY; TRADEMARKS

     The medical products industry, including the diagnostic testing industry,
places considerable importance on obtaining patent and trade secret protection
for new technologies, products and processes. Our success will depend, in part,
on our ability to obtain patent protection for our products and manufacturing
processes to preserve our trade secrets and to avoid infringing the proprietary
rights of third parties.

     We hold certain patent rights and expect to seek patents in the future.
However, we cannot assure you as to the success or timeliness in obtaining any
such patents or as to the breadth or degree of protection that any such patents
might afford us. The patent position of medical products and diagnostic testing
firms is often highly uncertain and usually involves complex legal and factual
questions. There is a substantial backlog of patents at the United States Patent
and Trademark Office. No consistent policy has emerged regarding the breadth of
claims covered in medical product patents. Accordingly, we cannot assure you
that patent applications relating to our products or technology will result in
patents being issued, that, if issued, such patents will afford adequate
protection to our products or that our competitors will not be able to design
around such patents.

     The medical products industry, including the diagnostic testing industry,
historically has been characterized by extensive litigation regarding patents,
licenses and other intellectual property rights. We could and have incurred
substantial costs in defending ourselves against patent infringement claims and
in asserting such claims against others. To determine the priority of
inventions, we may also have to participate in interference proceedings declared
by the United States Patent and Trademark Office, which could also result in
substantial costs to us. If the outcome of any such litigation is adverse to us,
our business could be materially adversely affected.

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

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

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

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EMPLOYEES

     As of June 30, 2001, Inverness had 297 full-time employees (42 located in
the United States) who are expected to become our employees in conjunction with
the split-off. In addition, we utilize the services of a number of consultants
specializing in research and development in our targeted markets, regulatory
compliance, strategic planning, marketing and legal matters.

PROPERTIES

     Our principal corporate administrative office, together with the
administrative office of our U.S. businesses, will be housed in approximately
20,600 square feet of leased space located at 51 Sawyer Road, Waltham,
Massachusetts at a monthly rent of approximately $74,000. Inverness currently
subleases this space and we expect that Inverness will obtain the lessor's and
sublessor's approval to assign the sublease to us at the time of the split-off
and merger. That lease expires on May 30, 2003. For transitional purposes, we
have agreed to provide Johnson & Johnson with a limited license to occupy a
portion of our principal office for up to 12 months following the split-off and
merger. We also have leases to smaller facilities for office space in Brussels,
Belgium and Quebec, Canada. We believe that these facilities are adequate for
our operations in the foreseeable future.

     We have manufacturing operations in Ireland and Israel. Our facility in
Galway, Ireland consists of a 40,000 square foot space. We own half of the
Galway facility and lease the other half from a private developer under a lease
that expires in 2026. The Galway facility houses the manufacturing, warehousing
and research and development of our pregnancy detection and ovulation prediction
test products. Additionally, the Galway facility will for a limited period of
time continue to perform certain diabetes-related packaging work for Inverness
in accordance with our transition services agreement with Inverness. Aggregate
annual mortgage and lease payments for our Galway facility total approximately
$197,000.

     The FDA regulates companies that manufacture commercial medical devices and
requires that such companies manufacture such devices in a properly designed
environment. Our Galway facility is designed and constructed to comply with the
FDA's regulations and requirements necessary for approvals and commercial sales
within the United States. As required by the regulations, this facility has been
registered with the FDA, ensuring that it is in compliance prior to commercial
sales in the United States. A registered facility is required to submit to an
FDA inspection not less than once every two years. The Galway facility has
maintained ISO 9002 certification since August 1996.

     We also house administrative offices, development and manufacturing
operations of our clinical diagnostics business in a leased facility of
approximately 10,000 square feet in Yavne, Israel. The lease for this facility
expires in 2006 and carries rent of approximately $25,000 per month. The
facility includes a number of specialized features and equipment, including
environmentally controlled areas, customized production equipment, and
computerized systems for purchasing, inventory management and materials
tracking. Our Israeli subsidiary also maintains small sales offices in Paris,
France, Sao Paulo, Brazil, St. Petersburg, Russia and Bogota, Columbia, and is
the process of establishing additional sales offices in Nigeria, Kenya and
Argentina. We believe these facilities are adequate for our clinical diagnostics
business operations in the foreseeable future. Our Yavne facility is ISO 9001,
9002 and Good Manufacturing Practices certified.

     We have insurance coverage for the properties and equipment that we own or
lease.

REGULATION

     Our research, development and clinical programs, as well as our
manufacturing and marketing operations, are subject to extensive regulation by
numerous governmental authorities in the United States and other countries. Most
of our self-test products require governmental approvals for commercialization.
New products may require pre-clinical and clinical trials. Manufacturing and
marketing of many of our

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products are subject to the rigorous testing and approval process of the FDA and
corresponding foreign regulatory authorities. The regulatory process, which
includes pre-clinical and clinical testing of many of our products to establish
their safety and effectiveness, can take many years and require the expenditure
of substantial financial and other resources. Data obtained from pre-clinical
and clinical activities are susceptible to varying interpretations that could
delay, limit or prevent regulatory approval. In addition, delays or rejection
may be encountered based upon changes in, or additions to, regulatory policies
for device marketing authorization during the period of product development and
regulatory review. Delays in obtaining such approvals could adversely affect our
marketing of products developed and our ability to generate commercial product
revenues.

     In addition, we are required to meet regulatory requirements in countries
outside the United States, which can change rapidly with relatively short
notice, resulting in our products being banned in certain countries and an
associated loss of revenues and income. Foreign regulatory agencies can also
introduce test format changes which, if we do not quickly address, can result in
restrictions on sales of our products. Such changes are not uncommon due to
advances in basic research.

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

PRODUCT LIABILITY AND LIMITED INSURANCE COVERAGE

     The testing, manufacturing and marketing of medical diagnostic devices
entail an inherent risk of product liability claims. In addition, the marketing
of the nutritional supplements may cause us to be subjected to various product
liability claims, including, among others, claims that our nutritional
supplements have inadequate warnings concerning side effects and interactions
with other substances. Potential product liability claims may exceed the amount
of our insurance coverage or may be excluded from coverage under the terms of
the policy. We cannot be assured that existing insurance can be renewed at a
cost and level of coverage comparable to that presently in effect, if at all. In
the event that we are held liable for a claim, against which we are not
indemnified or for damages exceeding the limits of our insurance coverage, such
claim could have a material adverse effect on our business, financial condition
and results of operations.

LEGAL PROCEEDINGS

     In connection with the split-off, we have agreed to assume, to the extent
permitted by law and the terms of the liabilities, and indemnify Inverness for
all liabilities, whether or not pending at the time of the split-off, of the
businesses that were split-off from Inverness to form our company. Plaintiffs in
these matters may seek to add us as a defendant or substitute us a defendant in
place of Inverness, and we expect that any injunctive relief awarded in these
matters which affects our women's health, nutritional supplements or clinical
diagnostics businesses would ultimately apply to us. These liabilities include,
among other things, the following legal proceedings.

     Abbott Laboratories v. Selfcare, Inc. and Princeton Biomeditech
Corporation.  In April 1998, Abbott commenced a lawsuit in the United States
District Court for the District of Massachusetts (District Court) against
Inverness and Princeton BioMeditech Corporation (PBM), which manufactured
certain products for our businesses, asserting patent infringement arising from
Inverness' and PBM's manufacture, use and sale of products that Abbott claims
are covered by one or more of the claims of U.S. Patent

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Nos. 5,073,484 and 5,654,162 (the Pregnancy Test Patents), to which Abbott
asserts that it is the exclusive licensee. Abbott claims that certain of
Inverness' products relating to pregnancy detection and ovulation prediction
infringe the Pregnancy Test Patents. Abbott is seeking an order finding that
Inverness and PBM infringe the Pregnancy Test Patents, an order permanently
enjoining Inverness and PBM from infringing the Pregnancy Test Patents,
compensatory damages to be determined at trial, treble damages, costs,
prejudgment and post-judgment interest on Abbott's compensatory damages,
attorneys' fees and a recall of all of our existing products found to infringe
the Pregnancy Test Patents. On August 5, 1998, the court denied Abbott's motion
for a preliminary injunction. On March 31, 1999, the District Court granted a
motion by Inverness, PBM and PBM-Selfcare LLC (the LLC), the joint venture
between the two companies, filed to amend Inverness' counterclaim against
Abbott, asserting that Abbott is infringing U.S. Patent Nos. 5,559,041 (the 041
patent) and 5,728,587 (the 587 patent), which are owned by the LLC, and seeking
a declaration that Abbott infringes the patents and that Inverness is entitled
to permanent injunctive relief, money damages and attorneys' fees. On November
5, 1998, Abbott filed suit in the United States District Court for the Northern
District of Illinois seeking a declaratory judgment of non-infringement,
unenforceability and invalidity of the 041 patent and the 587 patent. The
Illinois court granted Inverness' motion to transfer the aforementioned Illinois
action to Massachusetts. Inverness and its co-defendant moved for summary
judgment on their defense that the Abbott patents are invalid, and on September
29, 2000, the court granted partial summary judgment, holding that certain key
claims in Abbott's patents are invalid as a matter of law. The court refused to
grant summary judgment on Abbott's claims of infringement or Inverness'
remaining claims of invalidity, which will now go forward to trial. As successor
to Inverness in this matter, we believe that we have strong defenses against
Abbott's claims and will continue to defend the case vigorously after the
split-off closes; however, a final ruling against us would have a material
adverse impact on our sales, operations or financial performance.

     Becton, Dickinson and Company v. Selfcare, Inc. et. al.  On January 3,
2000, Becton, Dickinson and Company (Becton Dickinson) filed suit against
Inverness in the U.S. District Court for the District of Delaware (Case No:
00-001) alleging that certain pregnancy and ovulation test kits sold by
Inverness infringe U.S. Patent Nos. 4,703,017 and 5,591,645. Inverness was
served with Becton Dickinson's complaint in April 2000 and filed its answer on
May 30, 2000. Becton Dickinson has since lost its rights to U.S. Patent No.
5,591,645 and is no longer asserting claims for infringement of that patent; the
case will now go forward to trial. While a final ruling against us, as successor
to Inverness, could have a material adverse impact on our sales, operations or
financial performance, we believe that we have strong defenses and intend to
defend this litigation vigorously.

     Cambridge Biotech Corporation and Cambridge Affiliate Corporation v. Ron
Zwanziger, Selfcare, Inc., Cambridge Diagnostics Ireland, Ltd., Trinity Biotech,
Plc and Pasteur Sanofi Diagnostics.  On January 22, 1999, Cambridge Biotech
Corporation (CBC) and Cambridge Affiliate Corporation (CAC) filed suit (Civil
Action No. 99-378) in the Middlesex County Massachusetts Superior Court against
Inverness, its president (and our Chief Executive Officer), Ron Zwanziger,
Cambridge Diagnostics Ireland, Ltd., Inverness' (and, after the split-off, our)
subsidiary in Ireland (Cambridge Diagnostics), Trinity Biotech plc (Trinity) and
Pasteur Sanofi Diagnostics (Pasteur). The complaint alleges, among other things,
that actions taken by Mr. Zwanziger as president of CAC in connection with the
sale by Cambridge Diagnostics of its diagnostics business to Trinity were not
properly authorized and that, as a result of the actions, CBC may lose the
benefit of valuable patent licenses from Pasteur. CBC's requested relief is to
have the CAC/Trinity manufacturing and sales agreements declared null and void,
the license between Pasteur and CBC declared to be in full force, to recover
damages allegedly caused by Inverness and Mr. Zwanziger and to recover damages
due to Pasteur's actions. CBC moved for a preliminary injunction, seeking to
enjoin Inverness, Cambridge Diagnostics, Mr. Zwanziger, and Trinity from acting
pursuant to the CAC/Trinity agreements and to enjoin Pasteur from terminating
its license agreements with CBC. Following a hearing on January 25, 1999, the
Court denied CBC's motion. Thereafter, Pasteur successfully moved for dismissal
on grounds that the issues between it and CBC should be litigated in France.
Trinity has moved for dismissal on grounds that the issues between it and CBC
should be litigated in Ireland or, in the alternative, should be arbitrated. The
Court denied Trinity's motion. The parties are currently

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conducting discovery. Inverness filed an answer denying the material allegations
of the complaint along with a counterclaim to declare its actions lawful and
valid and to redress harm that may result if the court invalidates the sale of
Cambridge Diagnostics' diagnostics business to Trinity, despite CBC's
representations to Inverness that it had the right to make such a sale. We have
agreed to assume Inverness' liabilities under this litigation after the
split-off. While a final ruling against Inverness, Mr. Zwanziger, or Cambridge
Diagnostics could have a material adverse impact on our sales, operations or
financial performance, we believe that we have strong defenses and intend to
defend this litigation vigorously.

     Intervention, Inc. v. Selfcare, Inc. and Companion Cases.  In May 1999,
Intervention, Inc., a California corporation, filed separate suits in California
Contra Costa County Superior Court against Inverness, four of our private label
customers and our major competitors and their private label customers alleging
that, under Section 17200 of the California Business and Professions Code, the
defendants' labeling on their home pregnancy tests is misleading as to the level
of accuracy under certain conditions. The plaintiff seeks restitution of profits
on behalf of the general public, injunctive relief and attorneys' fees.
Inverness is defending its private label customers under agreement and we have
agreed to assume this obligation upon closing of the split-off. The matter is
scheduled for trial in the fall of 2001. We believe that the actions are without
merit and intend to continue Inverness' vigorous defense against them. We do not
believe that an adverse ruling against us or the private label customers would
have a material adverse impact on our sales, operations or financial
performance.

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                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth certain available information regarding our
directors and executive officers immediately following the split-off. None of
our directors or executive officers will serve as directors or executive
officers of Inverness or Johnson & Johnson after the split-off.



NAME                                        AGE                         POSITION
----                                        ---                         --------
                                            
Directors and Executive Officers
Ron Zwanziger.............................  47    Chairman of the Board and Chief Executive Officer
David Scott, Ph.D. .......................  44    Director and Chief Scientific Officer
Anthony J. Bernardo.......................  49    President and Chief Operating Officer
Kenneth D. Legg, Ph.D. ...................  58    Executive Vice President
Jerry McAleer, Ph.D. .....................  46    Vice President, Research and Development
David Toohey..............................  44    Vice President, New Products
Duane L. James............................  41    Vice President, Finance and Treasurer
John Yonkin...............................  42    Vice President, U.S. Sales & Marketing
Doug Shaffer..............................  43    Vice President, U.S. Operations
Paul T. Hempel............................  52    General Counsel and Secretary
Ernest A. Carabillo, Jr. .................  63    Director
Carol R. Goldberg.........................  70    Director
Robert P. Khederian.......................  48    Director
John F. Levy..............................  54    Director
Peter Townsend............................  66    Director
Alfred M. Zeien...........................  71    Director


     RON ZWANZIGER, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.  Mr.
Zwanziger has served as President, Chief Executive Officer and Chairman of
Inverness since its inception. From 1981 to 1991, he was chairman and chief
executive officer of MediSense, a medical device company.

     DAVID SCOTT, PH.D., DIRECTOR AND CHIEF SCIENTIFIC OFFICER.  Dr. Scott
served as Managing Director of Inverness Medical Limited, a subsidiary of
Inverness, from June 1995 to July 1999, when he assumed the position of Chairman
of Inverness Medical Limited. Dr. Scott has been a member of the Innovations
board of directors since July 31, 2001 and is expected to be Chief Scientific
Officer of Innovations. Dr. Scott served as Managing Director of Great Alarm
Limited, a consulting company, from October 1993 to April 1995. Between October
1984 and September 1993, he held several positions at MediSense UK, most
recently as managing director where he was responsible for managing product
development, as well as the mass manufacture of one of its principal products,
ExacTech.

     ANTHONY J. BERNARDO, PRESIDENT AND CHIEF OPERATING OFFICER.  Mr. Bernardo
has served as Inverness' Vice President of New Business Development since April
2000. Prior to joining Inverness, Mr. Bernardo served as Vice President and
Senior Director of Operations for a division of Polaroid Corporation from April
1997. From 1991 to 1997, he held several executive management positions with
Dade International Inc., most recently as Vice President of Site Operations for
the Paramax Chemistry unit where he was responsible for the integration of the
in-vitro diagnostics business unit acquired from DuPont.

     KENNETH D. LEGG, PH.D., EXECUTIVE VICE PRESIDENT.  Dr. Legg joined
Inverness as Secretary and Vice President in charge of U.S. Operations in
November 1991, and was appointed its Executive Vice President in May 2000.

     JERRY MCALEER, PH.D., VICE PRESIDENT, RESEARCH AND DEVELOPMENT.  Dr.
McAleer joined Inverness as Director of Development of Inverness Medical Limited
in 1995 and headed the development of Inverness' electrochemical glucose strips.
In 1999, he became Vice President of Research and Development for

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Inverness and Inverness Medical Limited. Prior to joining Inverness, Dr. McAleer
held senior research and development positions at MediSense from 1985 to 1993
and more recently, at Ecossensors, Inc., an environmental research company,
where he was responsible for the development of electrochemically based assay
systems.

     DAVID TOOHEY, VICE PRESIDENT, NEW PRODUCTS.  David Toohey joined Inverness
in May 2001 with the understanding that he would serve as Chairman and Managing
Director of a yet to be formed entity focused on new product development. Mr.
Toohey is expected to serve in the same capacity for us, and until such an
entity is formed he will serve as our Vice President, New Products. Prior to
joining Inverness, Mr. Toohey served as Vice President of Operations at Boston
Scientific Corporation's Galway, Ireland facility, Boston Scientific's largest
and most complex manufacturing facility with 2500 employees. Between 1995 and
2001 he oversaw the growth of that facility from a 100 person start-up initially
as General Manager, later as Managing Director and finally as Vice President of
Operations. Prior to that time he held various executive positions at Bausch &
Lomb, Inc., Digital Equipment Corp. and Mars, Inc.

     DUANE L. JAMES, VICE PRESIDENT OF FINANCE AND TREASURER.  Mr. James served
as Inverness' Corporate Controller beginning in February 1996 and its Chief
Accounting Officer beginning in August 1998. He became Inverness' Vice President
of Finance and Treasurer in October 2000. From June 1991 to February 1996, he
held positions at Aquila Biopharmaceuticals, Inc. ranging from accounting
manager to corporate controller.

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

     DOUGLAS SHAFFER, VICE PRESIDENT, U.S. OPERATIONS.  Mr. Shaffer became
Inverness' Vice President, U.S. Operations in January 2001 where he oversees the
operations of Inverness' subsidiary Inverness Medical Inc. Prior to that he
served as Inverness' Controller, U.S. Operations since December 1996. Before
joining Inverness, Mr. Shaffer served as a division controller for several
different divisions of MKS Instruments, Inc., a leading producer of gas
management instrumentation.

     PAUL T. HEMPEL, GENERAL COUNSEL AND SECRETARY.  Mr. Hempel joined Inverness
on October 1, 2000 as General Counsel and Assistant Secretary. He was a founding
stockholder and managing director of Erickson Schaffer Peterson Hempel & Israel
PC from 1996 to 2000. Prior to 1996, Mr. Hempel was a partner and managed the
business practice at Bowditch & Dewey LLP.

     ERNEST A. CARABILLO, JR., DIRECTOR.  Mr. Carabillo has served on the board
of directors of Inverness since May 2000 and on the board of directors of
Innovations since May 30, 2001. He is the founder and president of EXPERTech
Associates, Inc., which provides regulatory, clinical and quality management
consulting services to medical device companies, where he has served as
president since 1990. He has also served in management positions at Baxter
Healthcare, C.R. Bard and the medical device/pharmaceutical division of Union
Carbide. Mr. Carabillo has served as the head of three different divisions of
the Food and Drug Administration and Department of Justice and as Associate
Director of Regulatory Affairs for the President's office of Drug Abuse Policy.

     CAROL R. GOLDBERG, DIRECTOR.  Mrs. Goldberg has served on the board of
directors of Inverness since August 1992 and on the board of directors of
Innovations since May 30, 2001. Since December 1989, she has served as president
of The AVCAR Group, Ltd., an investment and management consulting firm in
Boston, Massachusetts. Ms. Goldberg is a director of America Service Group,
Inc., a managed healthcare company, The Gillette Company, a consumer products
company, and Konover Property Trust, Inc., a real estate investment trust. Ms.
Goldberg is a member of our board's compensation committee.

     ROBERT P. KHEDERIAN, DIRECTOR.  Mr. Khederian has served on the board of
directors of Innovations since July 31, 2001. Mr. Khederian is the Chairman of
Belmont Capital, a venture capital firm he founded
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in 1996. From 1984 through 1996, he was founder and Chairman of Medical
Specialties Group, Inc., a nationwide distributor of medical products which was
acquired by Bain Capital. Since 1998, Mr. Khederian has also served as the
Managing Partner of Provident Capital and First Healthcare Partners, both of
which are investment banking firms based in Boston, Massachusetts. Mr. Khederian
is a member of our board's audit committee.

     JOHN F. LEVY, DIRECTOR.  Mr. Levy has served on the board of directors of
Inverness since August 1996 and on the board of directors of Innovations since
May 30, 2001. Since 1993, he has been an independent consultant. Mr. Levy served
as president and chief executive officer of Waban, Inc., a warehouse
merchandising company, from 1989 to 1993. Mr. Levy is a member of our board's
audit committee.

     PETER TOWNSEND, DIRECTOR.  Mr. Townsend has served on the board of
directors of Inverness since August 1996 and on the board of directors of
Innovations since May 30, 2001. From 1991 to 1995, when he retired, Mr. Townsend
served as chief executive officer and a director of Enviromed plc, a medical
products company currently known as Theratase plc. Mr. Townsend is a member of
our board's audit committee.

     ALFRED M. ZEIEN, DIRECTOR.  Mr. Zeien has served on the board of directors
of Innovations since July 31, 2001. From 1991 until his retirement in 1999, Mr.
Zeien served as Chairman of the Board and Chief Executive Officer of The
Gillette Company, a consumer products company. Mr. Zeien currently serves on the
boards of EMC Corporation, Massachusetts Mutual Life Insurance Company, Raytheon
Company, Polaroid Corporation and Bernard Technologies. Mr. Zeien is a member of
our board's compensation committee.

CLASSIFIED BOARD OF DIRECTORS

     Our board of directors is divided into three classes. --, will be the class
1 directors with an initial term expiring at our first annual stockholders
meeting for election of directors. --, will be the class 2 directors with an
initial term expiring at our second annual stockholders meeting for election of
directors. --, will be the class 3 directors with an initial term expiring at
the third annual stockholders meeting for the election of directors. After their
initial terms, directors will generally serve for three years.

COMMITTEES OF THE BOARD OF DIRECTORS

     Our board of directors has a compensation committee and an audit committee.
The compensation committee, consisting of Carol Goldberg and Alfred Zeien, makes
recommendations concerning salaries and incentive compensation for our employees
and consultants, establishes and approves salaries and incentive compensation
for certain senior officers and employees, and administers our stock option
plans. The audit committee, consisting of Robert Khederian, John Levy and Peter
Townsend, reviews the results and scope of the financial audit and other
services provided by our independent public accountants.

DIRECTOR COMPENSATION

     Employee directors are not entitled to cash compensation in their
capacities as directors. [We have not yet determined the cash compensation, if
any, to be paid to non-employee directors.] All of the directors are reimbursed
for their expenses incurred in connection with their attendance at board and
committee meetings. In addition, options and other awards may be granted to
directors in the sole discretion of the administrator of the 2001 Stock Option
and Incentive Plan.

EXECUTIVE COMPENSATION

     Set forth below is information regarding the compensation for fiscal year
2000 of our chief executive officer, while serving as the chief executive
officer of Inverness, and for our four other executive officers who received the
highest compensation during fiscal year 2000 as executive officers of Inverness,
collectively referred to as our "named executive officers". After the split-off,
all of the named executive

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officers will be our employees and their compensation as well as the
compensation of our other executive officers will be determined by our
compensation committee. We anticipate that the annual salary for each of the
named executive officers, as well as our other executive officers, will
initially be comparable to fiscal year 2000 salaries received by them. As
described in "Annual Fixed Bonuses," and "Executive Bonus Plan" below, Mr.
Zwanziger, Dr. Scott and Dr. McAleer are entitled to both annual fixed cash
bonuses and performance-based cash bonuses. We can not assure you, however, that
changes will not be made to the compensation practices and policies if our
compensation committee deems them appropriate.

     Summary Compensation Table.  The following summary compensation table
contains information regarding the compensation from Inverness for the last
three completed fiscal years for the named executive officers:



                                                                      LONG-TERM
                                                                     COMPENSATION
                                                     ANNUAL          ------------
                                                  COMPENSATION        SECURITIES
                                                -----------------     UNDERLYING      ALL OTHER
                                        YEAR     SALARY     BONUS     OPTIONS(1)     COMPENSATION
                                        ----    --------    -----    ------------    ------------
                                                                      
Ron Zwanziger.........................  2000    $350,000     --             --            --
  Chief Executive Officer and Chairman  1999     271,273     --        500,000(2)         --
                                        1998     193,536     --          6,491            --
David Scott(3)........................  2000     218,026     --             --            --
  Chief Scientific Officer              1999     193,040     --        250,000(2)         --
                                        1998     133,826     --        124,183(4)         --
Kenneth D. Legg, Ph.D. ...............  2000     203,066     --             --            --
  Executive Vice President              1999     180,980     --        150,000(2)         --
                                        1998     135,360     --         74,438(4)         --
Jerry McAleer, Ph.D.(3)...............  2000     189,588     --             --            --
  Vice President, R&D                   1999     175,337     --        200,000(2)         --
                                        1998     126,783     --        124,183(4)         --
John Yonkin...........................  2000     155,577     --          8,000            --
  Vice President, U.S. Sales &
     Marketing                          1999     136,667     --         12,000            --
                                        1998      95,000     --         23,019            --


---------------
(1) Upon closing of the split-off and merger, each option to acquire one share
    of Inverness common stock will be replaced with an option to purchase .20
    shares of our common stock and an option to purchase a number of shares of
    Johnson & Johnson common stock to be determined pursuant to the terms of the
    split-off and merger agreement.

(2) These options were granted on August 16, 1999 and were to become exercisable
    on August 15, 2006 subject to certain accelerated vesting provisions.
    Because the Company achieved certain market price goals these options vested
    in their entirety on December 31, 2000. The option exercise price for such
    options is $5.00.

(3) Salary paid in LStg and reported in U.S. dollars using the average exchange
    rate for each year.

(4) Of the options granted to Messrs. Scott, Legg and McAleer during 1998, each
    executive retains 70,000. The remaining options granted to those executives
    during 1998 have been cancelled.

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     Option Grants.  The following table sets forth certain information
concerning grants of stock options made to the named executive officers by
Inverness during fiscal year 2000:



                                                                                            POTENTIAL REALIZABLE
                                                                                              VALUE AT ASSUMED
                                                    PERCENT OF                                 ANNUAL RATES OF
                                    NUMBER OF      TOTAL OPTIONS                                 STOCK PRICE
                                   SECURITIES       GRANTED TO     EXERCISE                     APPRECIATION
                                   UNDERLYING      EMPLOYEES IN      PRICE     EXPIRATION   ---------------------
                                 OPTIONS GRANTED    FISCAL YEAR    PER SHARE    DATE(1)        5%          10%
                                 ---------------   -------------   ---------   ----------   ---------   ---------
                                                                                      
John Yonkin(2).................       6,000                         $3.4375      1/7/10      $12,971     $32,871
John Yonkin(3).................       2,000                         $ 6.875     3/20/10      $ 8,647     $21,914


---------------
(1) The exercisability of these options is accelerated upon the occurrence of a
    change of control (as defined in the 1996 Option Plan).

(2) These incentive stock options were granted by Inverness on January 7, 2000
    and are exercisable in four equal annual installments commencing on January
    7, 2001 at a price of $3.4375 per share, the closing market price of
    Inverness common stock on the grant date. Upon closing of the split-off and
    merger, these options will be replaced with fully-vested, non-qualified
    options to purchase 1,200 shares of our common stock and an option to
    purchase a number of shares of Johnson & Johnson common stock to be
    determined pursuant to the terms of the split-off and merger agreement.

(3) These incentive stock options were granted by Inverness on March 20, 2000
    and are exercisable in four equal annual installments commencing on March
    20, 2001 at a price of $6.875 per share, the closing market price of
    Inverness common stock on the grant date. Upon closing of the split-off and
    merger, these options will be replaced with fully-vested, non-qualified
    options to purchase 400 shares of our common stock and an option to purchase
    a number of shares of Johnson & Johnson common stock to be determined
    pursuant to the terms of the split-off and merger agreement.

     Year End Option Values.  The following table sets forth certain information
concerning exercises of stock options during fiscal year 2000 by each of the
named executive officers and the number and value of unexercised options held by
each of the named executive officers on December 31, 2000:

                      AGGREGATED OPTION EXERCISES IN LAST
                 FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES



                                                            NUMBER OF SHARES
                                                               UNDERLYING       VALUE OF UNEXERCISED
                                                            OPTIONS AT FISCAL   IN-THE-MONEY OPTIONS
                                  NUMBER OF                     YEAR-END        AT FISCAL YEAR-END(1)
                                   SHARES                   -----------------   ---------------------
                                 ACQUIRED ON     VALUE        EXERCISABLE/          EXERCISABLE/
NAME                              EXERCISE      REALIZED    UNEXERCISABLE(2)      UNEXERCISABLE(2)
----                             -----------   ----------   -----------------   ---------------------
                                                                    
Ron Zwanziger..................    300,000     $6,819,000     1,262,425/0          $49,158,830/$0
David Scott, Ph.D. ............     53,992      1,266,652   530,008/35,000      20,638,512/1,362,900
Kenneth D. Legg, Ph.D. ........         --             --   371,446/35,000      14,464,107/1,362,900
Jerry McAleer, Ph.D. ..........     45,000      1,036,890   376,500/35,000      14,660,910/1,362,900
John Yonkin....................         --             --    22,519/26,500        876,890/1,031,910


---------------
(1) Based on the fair market value of Inverness common stock as of December 29,
    2000 ($38.94 per share), the closing price of Inverness common stock as
    reported on the American Stock Exchange on such date, less the option
    exercise price, multiplied by the number of shares underlying the options.

(2) All options to acquire shares of Inverness common stock will become fully
    exercisable upon closing of the split-off and merger.

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CHANGE-IN-CONTROL ARRANGEMENTS

     There are no compensatory plans or arrangements with any named executive
officer in connection with a change in control of Innovations or a change in
such officer's responsibilities, except that the 2001 stock option and incentive
plan proposed for ratification by the Inverness stockholders along with their
consent and approval of the split-off and merger provides that in the event of a
"change of control" (as defined in the plan) of Innovations, all stock options
will automatically become fully exercisable and all other stock awards will
automatically become vested and non-forfeitable.

2001 STOCK OPTION AND INCENTIVE PLAN

     General.  We have adopted the 2001 stock option and incentive plan,
referred to as the stock option plan, which allows for the issuance of up to --
shares of common stock and other awards. Any shares forfeited from awards under
the stock option plan will also be available for future awards under the plan.
The stock option plan permits us to:

     - grant incentive stock options

     - grant non-qualified stock options

     - issue or sell common stock with vesting or other restrictions, or without
       restrictions

     - grant rights to receive common stock in the future with or without
       vesting

     - grant common stock upon the attainment of specified performance goals

     - grant deferred stock units and

     - grant dividend rights in respect of common stock.

     These grants may be made to officers, employees, non-employee directors,
consultants, advisors and other key persons of Innovations.

     Our board of directors or a committee of independent directors appointed by
the board, referred to as the administrator, will administer the stock option
plan. Subject to the provisions of the plan, the administrator may select the
individuals eligible to receive awards, determine or modify the terms and
conditions of the awards granted, accelerate the vesting schedule of any award
and generally administer and interpret the plan.

     The administrator may determine the exercise price of options granted under
the stock option plan, which may not be less than the fair market value of the
stock on the date of the option grant. Under present law, incentive stock
options and options intended to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code may not be granted at an exercise
price less than the fair market value of the common stock on the date of grant,
or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the voting power of
Innovations. Options granted under the plan will typically be subject to vesting
schedules, terminate ten years from the date of grant, may be exercised for
specified periods after the termination of the optionee's employment or other
service relationship with us, and will generally be non-transferable. Upon the
exercise of options, the option exercise price must be paid in full:

     - in cash or by certified or bank check or other instrument acceptable to
       the administrator

     - in the sole discretion of the administrator, by delivery of shares of
       common stock that have been owned by the optionee free of restrictions
       for at least six months and

     - by a broker under irrevocable instructions to the broker selling all or
       some of the underlying shares from the optionee.

     Upon certain events, including a merger, reorganization or consolidation,
the sale of all or substantially all of our assets or all of our outstanding
capital stock or a liquidation or other similar transaction, all outstanding
awards issued under the stock option plan will become fully vested and
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exercisable upon the closing of the transaction. The stock option plan and all
awards issued under the plan will terminate upon any of the transactions
described above, unless we and the other parties to such transactions have
agreed otherwise. All participants under the stock option plan will be
permitted, for a period of time to be determined by the administrator, to
exercise before any termination all awards held by them that are then
exercisable or will become exercisable upon the closing of the transaction.

     New Plan Benefits -- Restricted Stock Sale.  Pursuant to the Innovations
stock option plan, on August --, 2001, Innovations sold 1,168,191 shares of
restricted stock to Ron Zwanziger, Chairman and Chief Executive Officer of
Innovations, at a price of $9.13 per share. Mr. Zwanziger paid for the shares
using the proceeds of a five-year promissory note from Mr. Zwanziger to
Innovations. The note accrues interest which compounds annually at the rate of
4.99% per year. Both principal and interest are payable at the end of the
five-year term, unless repaid earlier. The promissory note is 75% non-recourse
as to principal and full recourse as to the remaining principal and all
interest. Two-thirds of these shares of restricted stock, or 778,794 shares,
vest in 36 equal monthly installments beginning on the last day of the calendar
month in which the split-off occurs. Vesting on these 778,794 shares will also
accelerate in the event of death, disability or actual or constructive
termination without cause. One-third of these shares of restricted stock, or
389,397 shares, vest in 48 equal monthly installments beginning on the last day
of the calendar month in which the split-off occurs. Any non-vested shares
forfeited by Mr. Zwanziger will be subject to repurchase by Innovations at cost.
If Inverness stockholders do not approve the Innovations stock option plan or
the Innovations executive bonus plan, all shares sold will be repurchased by
Innovations at cost.

     New Plan Benefits -- Option Grants.  Pursuant to the Innovations stock
option plan, on August --, 2001, Innovations granted options to purchase shares
of common stock to certain executive officers of Innovations. It is anticipated
that these options will be exercised within a few months after the split-off.
The following table sets forth certain information regarding these options.

                               NEW PLAN BENEFITS



                                                                NUMBER OF SHARES
                                                              ISSUABLE ON EXERCISE    EXERCISE
                     NAME AND POSITION                             OF OPTIONS          PRICE
                     -----------------                        --------------------    --------
                                                                                
David Scott, Ph.D. .........................................        399,381            $6.20
  Chief Scientific Officer
Jerry McAleer, Ph.D. .......................................        379,413            $6.20
  Vice President, Research and Development


     These options will expire on January 31, 2002. The exercise price of these
options may be paid using the proceeds of a five-year promissory note from the
optionee to Innovations. Each note will accrue interest which compounds annually
at the applicable federal rate for a five-year note for the month in which the
option is exercised. Both principal and interest will be payable at the end of
the five-year term, unless repaid earlier. The promissory note of each executive
will be 75% non-recourse as to principal and full recourse as to the remaining
principal and all interest. Upon exercise, the shares of common stock purchased
will vest in 36 equal monthly installments beginning on the last day of the
calendar month in which the option is exercised. Vesting on these shares will
also accelerate in the event of death, disability or actual or constructive
termination without cause. Upon termination of employment, any non-vested shares
will be subject to repurchase by Innovations at their then fair market value. In
the event that the executive has not purchased all of the shares underlying the
option by the expiration date, Innovations will grant the executive a new option
for the number, if any, of unpurchased shares underlying the original option.
This new option will have a ten-year term, will become exercisable in 36 equal
monthly installments and will have a per share exercise price equal to the
greater of the per share exercise price of the original option or the fair
market value of a share of Innovations common stock on the date of grant.
Exercisability of these options will accelerate in the event of death,
disability or actual or constructive termination without cause. The exercise
price of the new option may be paid using the proceeds of a five-year promissory
note which will have terms similar to those discussed above.

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     Innovations has also agreed to grant additional options to these executive
officers immediately following the split-off. The following table sets forth
certain information regarding these options.

                               NEW PLAN BENEFITS



                                                                NUMBER OF SHARES
                                                              ISSUABLE ON EXERCISE    EXERCISE
                            NAME                                   OF OPTIONS          PRICE
                            ----                              --------------------    --------
                                                                                
David Scott, Ph.D. .........................................        199,691            $15.00
Jerry McAleer, Ph.D. .......................................        189,706            $15.00


     These options will have a ten-year term and will become exercisable in 48
equal monthly installments. The exercise price of these options may be paid
using the proceeds of a five-year promissory note which will have terms similar
to those discussed above.

     If Inverness stockholders do not approve the Innovations stock option plan
or the Innovations executive bonus plan, the options granted on August --, 2001
will be canceled and the additional options will not be granted immediately
following the split-off.

ANNUAL FIXED BONUSES

     During the years 2001 through 2006, each of the following key executives
will receive, in addition to his base salary, the following bonus during the
month of January of the following year:



                                   ANNUAL FIXED BONUS    ANNUAL FIXED BONUS
KEY EXECUTIVE                            (2001)             (2002-2006)
-------------                      ------------------    ------------------
                                                   
Ron Zwanziger....................       $225,000              $550,000
David Scott......................         55,000               125,000
Jerry McAleer....................         50,000               120,000


EXECUTIVE BONUS PLAN

     Our board of directors has adopted the executive bonus plan, referred to as
the bonus plan. The bonus plan will be administered by our compensation
committee, which is composed of "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code. Three key executives, Ron
Zwanziger, David Scott and Jerry McAleer, are eligible to receive bonuses under
the bonus plan.

     The Inverness compensation committee has established certain stock price
targets, which may be adjusted to reflect stock splits. The key executives will
be eligible to receive the performance bonuses set forth in Table I below if our
stock achieves specified stock price targets. The key executives will be
eligible to receive the additional performance bonuses set forth in Table II
below if our stock achieves higher specified stock price targets. With respect
to each cash bonus listed in the tables below, each key executive will be
entitled to receive that bonus if the average closing price of our common stock
during any 30-day period exceeds:

     - the price per share target for a particular cash bonus on or prior to its
       target date or

     - any higher price per share target for any other cash bonus having a later
       target date on or prior to said later target date.

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   177

     At the end of each calendar year, our compensation committee will certify
in writing whether the price per share target has been achieved. If the price
per share target or targets have been achieved, bonuses earned will be paid in
cash in January of the following year pursuant to the following tables:

                                    TABLE I



                                                           MAXIMUM CASH BONUSES PAYABLE
                                                       IF PRICE PER SHARE TARGET IS ACHIEVED
                                             ---------------------------------------------------------
                                             TARGET PRICE
TARGET DATES                                  PER SHARE      MR. ZWANZIGER    DR. SCOTT    DR. MCALEER
------------                                 ------------    -------------    ---------    -----------
                                                                               
December 31, 2002..........................    $28.125        $2,400,000      $850,000      $800,000
December 31, 2003..........................      33.75         2,400,000       850,000       800,000
December 31, 2004..........................     39.375         2,400,000       850,000       800,000


                                    TABLE II



                                                           MAXIMUM CASH BONUSES PAYABLE
                                                       IF PRICE PER SHARE TARGET IS ACHIEVED
                                             ---------------------------------------------------------
                                             TARGET PRICE
TARGET DATES                                  PER SHARE      MR. ZWANZIGER    DR. SCOTT    DR. MCALEER
------------                                 ------------    -------------    ---------    -----------
                                                                               
December 31, 2002..........................    $ 33.75         $900,000       $$750,000     $725,000
December 31, 2003..........................      45.00          900,000        750,000       725,000
December 31, 2004..........................      56.25          900,000        750,000       725,000
December 31, 2005..........................      67.50          900,000        750,000       725,000


     Our compensation committee has the right to amend the plan, but any
amendment that would (i) increase the maximum bonus that might be payable to any
key executive, or (ii) establish different performance targets, is subject to
further stockholder approval in order for the bonus payments to the key
executives to constitute "performance-based compensation" under Section 162(m)
of the Internal Revenue Code.

2001 EMPLOYEE STOCK PURCHASE PLAN

     We have adopted the 2001 employee stock purchase plan, referred to as the
stock purchase plan, under which employees will be eligible to purchase shares
of our common stock at a discount through periodic payroll deductions. We
adopted the stock purchase plan in order to provide eligible employees the
opportunity to purchase our common stock, enhance our ability to attract and
retain highly qualified personnel, and better enable such persons to participate
in our long-term success and growth. Our board of directors will appoint an
administrator for the stock purchase plan. The stock purchase plan is intended
to meet the requirements of Section 423 of the Internal Revenue Code. After the
initial period, purchases will occur at the end of six month offering periods at
a purchase price equal to 85% of the market value of our common stock at either
the beginning of the offering period or the end of the offering period,
whichever is lower. The first offering period under the stock purchase plan will
begin on the first day of the month following the split-off and merger and will
end on August 31, 2002. Subsequent six-month offerings will begin on each March
1 and September 1. Participants may elect to have from 1% to 10% of their pay
withheld for purchase of common stock at the end of the offering period, up to a
maximum of $25,000 within any calendar year (valued at the beginning of each
offering period). We have reserved -- shares of common stock for issuance under
this stock purchase plan.

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                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH EXPERTECH ASSOCIATES, INC.

     Ernest J. Carabillo, Jr., one of our directors, is President and a major
shareholder (approximately 50%) of EXPERTech Associates, Inc., a regulatory and
quality systems consulting firm. EXPERTech has assisted Inverness, and its
subsidiary Inverness Medical Limited, on an "as required basis" since its
inception. EXPERTech's services have been rendered primarily in connection with
Inverness' diabetes products business, and at least 85% of such services were
rendered on behalf of Inverness Medical Limited, which will be acquired by
Johnson & Johnson through the merger. During fiscal year 2000, EXPERTech billed
Inverness and Inverness Medical Limited $576,098 for services rendered, and
through July 20, 2001 EXPERTech billed Inverness and Inverness Medical Limited
an additional $512,780.

PARTICIPATION IN PUBLIC OFFERING

     On November 27 and 28, 2000, Inverness sold a total of 3,500,000 shares of
its common stock pursuant to a Form S-3 Registration Statement filed with the
Securities and Exchange Commission on November 20, 2000. A total of nine
executive officers and significant employees of Inverness participated in that
public offering by selling a total of 640,000 shares of Inverness common stock
at $25.00 per share and receiving, after underwriting discounts and commissions,
aggregate consideration of $15,160,000. Seven of the participating executive
officers and significant employees are or expected to be executive officers and
significant employees of Innovations. Those persons (and the number of Inverness
shares sold by each) were Ron Zwanziger (300,000), Kenneth D. Legg (123,100),
Duane L. James (7,600), Jerry MacAleer (75,000), David Scott (90,000), Douglas
Shaffer (7,500) and John Yonkin (6,800).

PRIVATE PLACEMENT OF "UNITS"

     In June 2000, Inverness entered into an agreement pursuant to which it sold
units consisting of (1) a $25,000 one-year subordinated promissory note and (2)
a warrant to acquire 123 shares of Inverness common stock for the aggregate
purchase price of $19,349,195. The units were sold primarily for the purpose of
retiring Inverness' then outstanding $10,200,000 two-year subordinated
promissory notes and $7,500,000 subordinated revenue royalty notes. Among the
purchasers of the units were two of our current directors, John F. Levy and
Ernest A. Carabillo, Jr.

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                             PRINCIPAL STOCKHOLDERS

     The following table sets forth the amount of our common stock expected to
be beneficially owned by (i) each person or entity known by us to beneficially
own more than five percent of Inverness common stock, (ii) each of our
directors, (iii) each of our named executive officers and (iv) all of our
directors and executive officers as a group upon completion of the split-off.
Unless otherwise stated, our expected beneficial ownership is calculated based
upon beneficial ownership of Inverness common stock as of July 1, 2001. Because
all of the shares of our common stock held by Inverness will be issued to
stockholders of Inverness, the number of shares of our common stock shown below
to be owned beneficially by the persons or entities listed below will depend on
the number of shares of Inverness stock held by the person or entity at the time
of the split-off. We will be a majority-owned subsidiary of Inverness until the
split-off.

     In estimating the beneficial ownership of our common stock, we assumed that
the persons or entities listed in the table will receive .20 of a share of our
common stock for each share of Inverness common stock owned (in accordance with
the exchange ratio provided for by the split-off and merger agreement). We also
assumed that all options to purchase shares of Inverness common stock held as of
July 1, 2001 constitute beneficially owned shares of Inverness common stock
because all such options, if not already vested, will vest on the date of the
split-off.



                                                               AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                       BENEFICIAL OWNERSHIP(2)    PERCENT(3)
---------------------------------------                       -----------------------    ----------
                                                                                   
Ron Zwanziger...............................................                --(4)             --%
David Scott, Ph.D. .........................................                --                --%
Anthony J. Bernardo.........................................            11,954                 *
Kenneth D. Legg, Ph.D. .....................................           104,885                --%
Jerry McAleer, Ph.D. .......................................                --                --%
David Toohey................................................            10,000                 *
Duane L. James..............................................             8,547                 *
John Yonkin.................................................            16,487                 *
Doug Shaffer................................................             8,386                 *
Paul T. Hempel..............................................             5,811                 *
Ernest A. Carabillo, Jr. ...................................             5,550                 *
Carol R. Goldberg...........................................            48,574                 *
Robert P. Khederian.........................................            77,160(5)             --%
John F. Levy................................................           110,239                --%
Peter Townsend..............................................            10,285                 *
Alfred M. Zeien.............................................                 0                 *
All executive officers and directors (16 persons)...........                --                --%


---------------
 *  Represents less than 1%

(1) The address of each director or executive officer beneficially owning more
    than 5% of our common stock is c/o Innovations at our principal office.

(2) Includes the number of our shares that may be acquired by each listed
    individual pursuant to Inverness options or warrants held as of July 1, 2001
    and the subsequent exchange of Inverness shares, options and warrants for
    our shares, options and warrants pursuant to the merger agreement, in the
    following aggregate amounts: Mr. Zwanziger, 283,935 shares; Dr. Scott,
    137,183 shares; Mr. Bernardo, 10,054 shares; Dr. Legg, 88,572 shares; Dr.
    McAleer, 96,500 shares; Mr. Toohey, 10,000 shares; Mr. James, 8,183 shares;
    Mr. Yonkin, 13,830 shares; Mr. Shaffer, 8,221 shares; Mr. Hempel, 5,811
    shares; Mr. Carabillo, 5,550 shares; Ms. Goldberg, 27,348 shares; Mr. Levy,
    9,261 shares; and Mr. Townsend, 10,285 shares.

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(3) The number of shares outstanding used in calculating the percentage for each
    person, group or entity listed includes the number of shares underlying all
    Inverness options and warrants held by such person, group or entity because
    all such warrants or options are either currently exercisable or will become
    exercisable through the split-off and merger, but excludes shares of
    Inverness common stock underlying options, warrants or convertible
    securities held by any other person.

(4) Mr. Zwanziger disclaims beneficial ownership of (1) -- shares of our common
    stock owned by his spouse, (2) -- shares of our common stock held in trust
    for the benefit of his children where he, his spouse and an unrelated
    individual serve as co-trustees, and (3) -- shares of our common stock held
    in trust for the benefit of Mr. Zwanziger's children where his spouse is the
    sole trustee.

(5) Mr. Khederian disclaims beneficial ownership of a total of -- shares of our
    common stock held as custodian for his minor children.

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                    DESCRIPTION OF INNOVATIONS CAPITAL STOCK

     The following summary describes the material terms of our capital stock. To
fully understand the actual terms of our capital stock you should refer to our
certificate of incorporation and by-laws, forms of which are filed as exhibits
to the registration statement of which this prospectus is a part.

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

     Immediately after the split-off, our authorized capital stock will consist
of -- shares of common stock, par value $-- per share, and -- shares of
undesignated preferred stock, par value $-- per share, issuable in one or more
series designated by our board of directors. Based on the number of shares of
Inverness common stock outstanding at --, 2001 and assuming no other shares of
Inverness common stock are issued prior to the date of the split-off,
approximately -- shares of our common stock will be issued to the Inverness
stockholders on the date of the split-off. Other than -- shares of restricted
stock sold to an executive officer of Innovations prior to the split-off and --
shares of common stock that are expected to be issued to certain executive
officers of Innovations shortly after the split-off upon the exercise of
Innovations options granted prior to the split-off, those shares of our common
stock will be the only shares of our common stock issued and outstanding on the
date of the split-off, which shares will be held by approximately -- holders of
record. No shares of our preferred stock will be issued and outstanding on the
date of the split-off.

     In addition, based on the options and warrants to purchase Inverness common
stock outstanding at --, 2001, immediately after the split-off there will be
outstanding options to purchase -- shares of our common stock, all of which will
be immediately exercisable, and outstanding warrants to purchase -- shares of
our common stock, all of which will be immediately exercisable. Furthermore,
immediately following the split-off, options to purchase -- shares of our common
stock will be granted to certain of our executive officers.

COMMON STOCK

     Voting Rights.  The holders of our common stock have one vote per share.
Holders of our common stock are not entitled to vote cumulatively for the
election of directors. Generally, all matters to be voted on by stockholders
must be approved by a majority, or, in the case of the election of directors, by
a plurality, of the votes cast at a meeting at which a quorum is present, voting
together as a single class, subject to any voting rights granted to holders of
any then outstanding preferred stock.

     Dividends.  Holders of common stock will share ratably in any dividends
declared by our board of directors, subject to the preferential rights of any
preferred stock then outstanding. Dividends consisting of shares of common stock
may be paid to holders of shares of common stock.

     Other Rights.  Upon the liquidation, dissolution or winding up of our
company, all holders of common stock are entitled to share ratably in any assets
available for distribution to holders of shares of common stock, subject to the
preferential rights of any preferred stock then outstanding. No shares of common
stock are subject to redemption or have preemptive rights to purchase additional
shares of common stock.

PREFERRED STOCK

     Our certificate of incorporation provides that shares of preferred stock
may be issued from time to time in one or more series. Our board of directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. Our board of directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects, including preferred stock or rights to acquire preferred
stock in connection with implementing a shareholder rights plan. We have no
present plans to issue any shares of preferred stock. The ability of our board
of directors to issue preferred stock without stockholder

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approval could have the effect of delaying, deferring or preventing a change of
control of our company or the removal of existing management.

INDEMNIFICATION MATTERS

     We have entered into indemnification agreements with each of our directors
and certain of our executive officers. The form of indemnification agreement
provides that we will indemnify our directors and certain of our executive
officers for expenses incurred because of their status as a director or
executive officer, to the fullest extent permitted by Delaware law, our
certificate of incorporation and our by-laws.

     Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers shall
be, and in the discretion of our board of directors, non-officer employees may
be, indemnified by us to the fullest extent authorized by Delaware law, as it
now exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of us. Our
by-laws also provide for the advancement of expenses to directors and, in the
discretion of our board of directors, officers and non-officer employees. In
addition, our by-laws provide that the right of directors and officers to
indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any by-law, agreement,
vote of stockholders or otherwise. We also have directors' and officers'
insurance against certain liabilities. We believe that the indemnification
agreements, together with the limitation of liability and indemnification
provisions of our certificate of incorporation and by-laws and directors' and
officers' insurance will assist us in attracting and retaining qualified
individuals to serve as our directors and officers.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be provided to our directors or officers, or persons controlling our
company as described above, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable. At present,
there is no pending material litigation or proceeding involving any of our
directors, officers, employees or agents in which indemnification will be
required or permitted.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BY-LAWS THAT MAY HAVE
ANTI-TAKEOVER EFFECTS

     Certain provisions of our certificate of incorporation and by-laws
described below, as well as the ability of our board of directors to issue
shares of preferred stock and to set the voting rights, preferences and other
terms thereof, may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by our board of directors, including
takeovers which particular stockholders may deem to be in their best interests.
These provisions also could have the effect of discouraging open market
purchases of our common stock because they may be considered disadvantageous by
a stockholder who desires subsequent to such purchases to participate in a
business combination transaction with us or elect a new director to our board.

     Classified Board of Directors.  Our board of directors is divided into
three classes serving staggered three-year terms, with one-third of the board
being elected each year. Our classified board, together with certain other
provisions of our certificate of incorporation authorizing the board of
directors to fill vacant directorships or increase the size of the board, may
prevent a stockholder from removing, or delay the removal of, incumbent
directors and simultaneously gaining control of the board of directors by
filling vacancies created by such removal with its own nominees.

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     Director Vacancies and Removal.  Our certificate of incorporation provides
that vacancies in our board of directors shall be filled only by the affirmative
vote of a majority of the remaining directors. Our certificate of incorporation
provides that directors may be removed from office only with cause and only by
the affirmative vote of holders of at least seventy-five percent of the shares
then entitled to vote in an election of directors.

     No Stockholder Action by Written Consent.  Our certificate of incorporation
provides that any action required or permitted to be taken by our stockholders
at an annual or special meeting of stockholders must be effected at a duly
called meeting and may not be taken or effected by a written consent of
stockholders.

     Special Meetings of Stockholders.  Our certificate of incorporation and
by-laws provide that a special meeting of stockholders may be called only by our
board of directors. Our by-laws provide that only those matters included in the
notice of the special meeting may be considered or acted upon at that special
meeting unless otherwise provided by law.

     Advance Notice of Director Nominations and Stockholder Proposals.  Our
by-laws include advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders. For the first annual
meeting following the completion of the split-off, a stockholder's notice of a
director nomination or proposal will be timely if delivered to our corporate
secretary at our principal executive offices not later than the close of
business on the later of the 90th day prior to the scheduled date of such annual
meeting or the 10th day following the day on which we publicly announce the date
of such annual meeting.

     Amendment of the Certificate of Incorporation.  As required by Delaware
law, any amendment to our certificate of incorporation must first be approved by
a majority of our board of directors and, if required by law, thereafter
approved by a majority of the outstanding shares entitled to vote with respect
to such amendment, except that any amendment to the provisions relating to
stockholder action by written consent, directors, limitation of liability and
the amendment of our certificate of incorporation must be approved by not less
than seventy-five percent of the outstanding shares entitled to vote with
respect to such amendment.

     Amendment of By-laws.  Our certificate of incorporation and by-laws provide
that our by-laws may be amended or repealed by our board of directors or by the
stockholders. Such action by the board of directors requires the affirmative
vote of a majority of the directors then in office. Such action by the
stockholders requires the affirmative vote of at least seventy-five percent of
the shares present in person or represented by proxy at an annual meeting of
stockholders or a special meeting called for such purpose unless our board of
directors recommends that the stockholders approve such amendment or repeal at
such meeting, in which case such amendment or repeal only requires the
affirmative vote of a majority of the shares present in person or represented by
proxy at the meeting.

STATUTORY BUSINESS COMBINATION PROVISION

     Following the split-off, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly held Delaware corporation
from completing a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless:

     - before such person became an interested stockholder, the board of
       directors of the corporation approved the transaction in which the
       interested stockholder became an interested stockholder or approved the
       business combination

     - upon the closing of the transaction that resulted in the interested
       stockholder becoming such, the interested stockholder owned at least 85%
       of the voting stock of the corporation outstanding at the time the
       transaction commenced, excluding shares held by directors who are also
       officers of the corporation and shares held by employee stock plans or

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     - following the transaction in which such person became an interested
       stockholder, the business combination is approved by the board of
       directors of the corporation and authorized at a meeting of stockholders
       by the affirmative vote of the holders of at least two-thirds of the
       outstanding voting stock of the corporation not owned by the interested
       stockholder.

     The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock.

     The term "business combination" includes mergers, consolidations, asset
sales involving 10% or more of a corporation's assets and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of at least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contain any such exclusion.

TRADING ON THE AMERICAN STOCK EXCHANGE

     We have applied to have our common stock approved for listing on the
American Stock Exchange under the symbol "--."

NO PREEMPTIVE RIGHTS

     No holder of any class of our stock has any preemptive right to subscribe
for or purchase any kind or class of our securities.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for our common stock will be EquiServe
Trust Company.

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                     MATERIAL DIFFERENCES IN THE RIGHTS OF
                  OUR STOCKHOLDERS AND INVERNESS STOCKHOLDERS

     Both we and Inverness are corporations formed under and governed by the
laws of the State of Delaware. Accordingly, any differences in the rights of our
stockholders and Inverness' stockholders are based on the provisions set forth
in the certificate of incorporation and by-laws of each company. The material
differences between the rights of the stockholders of each company are described
below.

CAPITALIZATION

  Inverness

     Inverness is authorized to issue 75,000,000 shares of capital stock, of
which 70,000,000 shares are common stock, par value $0.001 per share, and
5,000,000 shares are preferred stock, par value $0.001 per share.

  Innovations

     We are authorized to issue -- shares of capital stock, of which -- shares
are common stock, par value $-- per share, and -- shares are preferred stock,
par value $-- per share.

NOTICE OF STOCKHOLDER ACTIONS

  Inverness

     In order to be timely, notice of a stockholder proposal, including one
relating to director nominations, must be delivered by the stockholder to the
Secretary of Inverness not later than 75 days nor more than 120 days prior to
the anniversary of the preceding year's annual meeting of stockholders, except
that if the date of the current year's annual meeting is advanced by more than
30 days prior to, or delayed by more than 60 days after, the anniversary of the
preceding year's annual meeting, the notice must be delivered not later than the
close of business on the later of the 75th day prior to the annual meeting or
the 15th day following the date on which the date of the current year's annual
meeting was first publicly announced in order to be timely.

  Innovations

     In order to be timely, notice of a stockholder proposal, including one
relating to director nominations, must be delivered by the stockholder to our
Secretary not later than 90 days nor more than 120 days prior to the anniversary
of the preceding year's annual meeting of stockholders, except that if the date
of the current year's annual meeting is advanced by more than 30 days prior to,
or delayed by more than 60 days after, the anniversary of the preceding year's
annual meeting, the notice must be delivered not later than the close of
business on the later of the 75th day prior to the annual meeting or the 10th
day following the date on which the date of the current year's annual meeting
was first publicly announced in order to be timely. In the event that the number
of directors to be elected to our board of directors at the annual meeting is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased board at least 85 days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice with respect to nominees for newly-created positions on our board of
directors created by the increase will be timely if delivered to our secretary
not later than the close of business on the 10th day following the day on which
the public announcement described above is first made.

AMENDMENTS TO CHARTER DOCUMENTS

  Inverness

     The affirmative vote of not less than two-thirds of the outstanding shares
entitled to vote thereon, and the affirmative vote of not less than two-thirds
of the outstanding shares of each class entitled to vote

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thereon as a class, is required to amend or repeal provisions relating to
stockholder action, directors, limitation of liability and amendment of the
certificate of incorporation.

  Innovations

     The affirmative vote of not less than 75% of the outstanding shares
entitled to vote thereon, and the affirmative vote of not less than 75% of the
outstanding shares of each class entitled to vote thereon as a class, is
required to amend or repeal provisions relating to stockholder action,
directors, limitation of liability, amendment of the by-laws by our stockholders
and amendment of the certificate of incorporation.

AMENDMENTS OF THE BY-LAWS

  Inverness

     Amendment or repeal of the Inverness by-laws by the stockholders of
Inverness requires the affirmative vote of at least two-thirds of the shares
present in person or represented by proxy at the stockholders' meeting voting as
a single class, unless the Inverness board of directors recommends that the
stockholders approve such amendment or repeal, in which case such amendment or
repeal only requires the affirmative vote of a majority of the shares present in
person or represented by proxy at the stockholders' meeting.

  Innovations

     Amendment or repeal of our by-laws by our stockholders requires the
affirmative vote of at least 75% of the shares present in person or represented
by proxy at the stockholders' meeting voting as a single class, unless our board
of directors recommends that the stockholders approve such amendment or repeal,
in which case such amendment or repeal only requires the affirmative vote of a
majority of the shares present in person or represented by proxy at the
shareholders' meeting.

                        SHARES ELIGIBLE FOR FUTURE SALE

     We estimate that -- shares of our common stock will be issued in the
split-off, based on the number of shares of Inverness common stock outstanding
on --, 2001 and the .20 ratio for the exchange of outstanding Inverness common
stock. All of these shares of common stock will be freely tradable without
restriction or further registration under the Securities Act, except to the
extent such shares are held by our "affiliates" (within the meaning of Rule 144
or Rule 145 promulgated under the Securities Act). Our affiliates will be
subject to the limitations of Rule 144 or Rule 145, as applicable, promulgated
under the Securities Act. In general, under Rule 144 as currently in effect,
persons who may be deemed our affiliates or affiliates of Inverness prior to the
split-off, as that term is defined in the Securities Act, would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of 1 percent of the then outstanding shares of our common stock
(approximately -- shares immediately after the split-off) or the average weekly
trading volume during the four calendar weeks preceding a sale by such person.
Sales under Rule 144 are also subject to certain provisions relating to the
manner and notice of sale and availability of current public information about
us. In general, under Rule 145 as currently in effect, our affiliates (which
generally is defined to include affiliates of Inverness prior to the split-off)
would also be subject to the above restrictions on sales of our common stock.

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                           MATERIAL TAX CONSEQUENCES

     The following discussion summarizes the material federal income tax
consequences of the split-off and the merger to holders of Inverness common
stock who are citizens or residents of the United States. This discussion does
not include tax consequences to Inverness stockholders entitled to special
treatment under the Internal Revenue Code, such as insurance companies, dealers
in securities, tax exempt organizations or foreign persons, or to Inverness
stockholders who acquired their shares of Inverness common stock pursuant to the
exercise of employee stock options or otherwise in compensatory transactions. In
addition, this discussion does not address any state, local or foreign tax
considerations and does not address any federal estate, gift, employment, excise
or other non-income tax considerations. This discussion is based upon provisions
of the Internal Revenue Code, regulations, administrative rulings and judicial
decisions presently in effect, all of which are subject to change (possibly with
retroactive effect) and to different interpretations. INVERNESS STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE SPLIT-OFF AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.

     Goodwin Procter LLP, counsel to Inverness, has provided to Inverness an
opinion letter regarding certain of the federal income tax consequences of the
split-off and merger. No ruling from the Internal Revenue Service has been or
will be sought with respect to any of the tax matters relating to the split-off
and merger. The conclusions of counsel in its opinion letter are based upon
certain assumptions and representations (including representations made by
Inverness and Johnson & Johnson) and are counsel's best legal judgment. The
opinion letter does not bind the IRS, any tax authority or any court.
Accordingly, there can be no assurance that the IRS will agree with the
conclusions set forth in the opinion letter, and it is possible that the IRS or
another tax authority could adopt a position contrary to one or all of those
conclusions and that a court could sustain that contrary position.

TWO SEPARATE TRANSACTIONS

     Counsel concludes in its opinion letter that the deemed redemption of a
portion of a stockholder's shares of Inverness common stock in exchange for
Innovations common stock in the split-off and the exchange of a portion of such
stockholder's shares of Inverness common stock for Johnson & Johnson common
stock in the merger will be two separate transactions for federal income tax
purposes.

THE SPLIT-OFF

     Counsel concludes in its opinion letter that, subject to certain
assumptions and representations, it is more likely than not that the split-off
qualifies, as to the Inverness stockholders, as a transaction described in
Section 355 of the Internal Revenue Code. For this purpose, the phrase "more
likely than not" means that if counsel's conclusion is challenged by the IRS,
counsel believes that there is a greater than 50% likelihood that counsel's
conclusion would be sustained by a court of law.

     If counsel is correct that the split-off qualifies, as to the Inverness
stockholders, as a transaction described in Section 355 of the Internal Revenue
Code, then:

     - an Inverness stockholder will not recognize any gain or loss when shares
       of its Inverness common stock are redeemed in exchange for Innovations
       common stock in the split-off

     - cash, if any, that an Inverness stockholder receives instead of a
       fractional share of Innovations common stock will be treated as received
       in exchange for that fractional share. The stockholder will recognize
       gain or loss to the extent of the difference between its tax basis in
       that fractional share and the cash that the stockholder receives for that
       fractional share. Provided that the stockholder holds the Innovations
       common stock that it receives in the split-off as a capital asset, the
       gain or loss will be capital gain or loss

     - an Inverness stockholder's tax basis in its Inverness common stock will
       be divided between the Innovations common stock that it receives in the
       split-off and the Johnson & Johnson common stock that it receives in the
       merger in proportion to the relative fair market values of such
                                       X-77
   188

       Innovations common stock and Johnson & Johnson common stock at the time
       that the split-off and merger occur and

     - an Inverness stockholder's holding period for the Innovations common
       stock that it receives in the split-off will include the stockholder's
       holding period for its Inverness common stock that is redeemed in the
       split-off, provided that the stockholder holds its Inverness common stock
       as a capital asset.

     Inverness stockholders should be aware that counsel's conclusion that the
split-off qualifies, as to the Inverness stockholders, as a transaction
described in Section 355 of the Internal Revenue Code is based on counsel's
interpretation of how various requirements of Section 355 of the Internal
Revenue Code apply to the split-off. According to counsel, with respect to some
of these interpretations there is no controlling legal authority, and no
published rulings or cases squarely address the application of Section 355 of
the Internal Revenue Code to a transaction identical to the split-off.

     If certain representations and assumptions relied upon by counsel in
rendering its opinion letter are inaccurate, or if the IRS successfully
challenges counsel's conclusions regarding the federal income tax treatment of
the split-off, then:

     - an Inverness stockholder will recognize gain or loss when shares of its
       Inverness common stock are redeemed in exchange for Innovations common
       stock in the split-off. Such gain or loss will be capital gain or loss if
       the stockholder holds its Inverness common stock as a capital asset

     - the amount of the gain or loss that an Inverness stockholder will
       recognize will be equal to the difference between its tax basis in its
       redeemed Inverness common stock and the fair market value of the
       Innovations common stock that the stockholder receives in the split-off.
       The stockholder's tax basis in its redeemed Inverness common stock will
       be a percentage of its tax basis in all of its Inverness stock. In
       general, that percentage will be equal to the percentage that the fair
       market value of the Innovations common stock that the stockholder
       receives in the split-off is of the fair market value of the total
       consideration that the stockholder receives in the split-off and merger

     - an Inverness stockholder's tax basis in the Innovations common stock that
       it receives in the split-off will be equal to the fair market value of
       that Innovations common stock and

     - an Inverness stockholder's holding period for the Innovations common
       stock that it receives in the split-off will begin on the day after the
       split-off occurs.

     Even if the split-off qualifies, as to the Inverness stockholders, as a
transaction described in Section 355 of the Internal Revenue Code, Inverness
stockholders should be aware that the split-off will be taxable to Inverness.
The amount of Inverness' taxable gain will depend on both the difference between
the fair market value of the women's health business assets and Inverness' tax
basis in those assets immediately before the pre-split-off restructuring, and on
the difference between the fair market value and tax basis of the Innovations
common stock after the restructuring but before the split-off. Under the tax
allocation agreement, Inverness is solely responsible for the payment of
Inverness' tax liability arising from the restructuring and the split-off and is
not entitled to reimbursement from Innovations or Johnson & Johnson.

THE MERGER

     Counsel also concludes in its opinion letter that, subject to certain
assumptions and representations, the merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. Accordingly:

     - an Inverness stockholder will not recognize any gain or loss when shares
       of its Inverness common stock are exchanged for Johnson & Johnson common
       stock in the merger

     - cash, if any, that an Inverness stockholder receives instead of a
       fractional share of Johnson & Johnson common stock will be treated as
       received in exchange for that fractional share. The

                                       X-78
   189

       stockholder will recognize gain or loss to the extent of the difference
       between its tax basis in that fractional share and the cash that the
       stockholder receives for that fractional share. Provided that the
       stockholder holds the Johnson & Johnson common stock that it receives in
       the merger as a capital asset, the gain or loss will be capital gain or
       loss

     - an Inverness stockholder's tax basis in the Johnson & Johnson common
       stock that it receives in the merger will equal its tax basis in the
       Inverness common stock that the stockholder exchanges in the merger for
       that Johnson & Johnson common stock and

     - an Inverness stockholder's holding period for the Johnson & Johnson
       common stock that it receives in the merger will include the
       stockholder's holding period for the Inverness common stock that the
       stockholder exchanges in the merger for that Johnson & Johnson common
       stock, provided that the stockholder holds its Inverness common stock as
       a capital asset.

     The foregoing discussion is only a summary of the material federal income
tax consequences of the split-off and merger and is included here for general
information only. The foregoing discussion may not address federal income tax
consequences relevant to an Inverness stockholder's particular circumstances.
INVERNESS STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE SPLIT-OFF AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX
LAWS.

                                       X-79
   190

                                 LEGAL MATTERS

     The validity of the common stock we are issuing will be passed upon for us
by Goodwin Procter LLP, Boston, Massachusetts. The owners and presidents of two
professional corporations which are partners in the firm of Goodwin Procter LLP
beneficially own an aggregate of approximately 50,142 shares of Inverness common
stock and 3,995 shares of Inverness common stock, respectively. Assuming these
professional corporations still own these shares as of the date of the
split-off, then, immediately following the split-off, they will own an aggregate
of approximately 10,028 shares of our common stock and 799 shares of our common
stock, respectively.

                                    EXPERTS

     The consolidated financial statements of Inverness Medical Innovations,
Inc. and subsidiaries as of December 31, 2000 and 1999, and for each of the
years in the three-year period ended December 31, 2000 included in this
prospectus and elsewhere in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing giving said
reports.

         ABOUT THIS PROSPECTUS AND WHERE YOU MAY FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-4 under the Securities Act of 1933, as amended, with respect
to the shares of common stock offered under this prospectus. This prospectus is
part of the registration statement. This prospectus does not contain all of the
information contained in the registration statement because we have omitted
parts of the registration statement in accordance with the rules and regulations
of the Securities and Exchange Commission. For further information, we refer you
to the registration statement, which you may read and copy at the public
reference facilities maintained by the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the Securities and Exchange Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may also obtain
copies at the prescribed rates from the Public Reference Section of the
Securities and Exchange Commission at its principal office in Washington, D.C.
You may call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information about public reference rooms. The Securities and Exchange
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants, including Inverness
Medical Innovations, Inc., that file electronically with the Securities and
Exchange Commission. You may access the Securities and Exchange Commission's web
site at http://www.sec.gov.

     After the split-off, we will be subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and we will be required to
file reports, proxy statements and other information with the Securities and
Exchange Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of these materials
can be obtained by mail from the Public Reference Section of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. We have applied for approval for
listing of our common stock on the American Stock Exchange under the symbol
"--."

                                       X-80
   191

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                         COMBINED FINANCIAL STATEMENTS

                               TABLE OF CONTENTS



                                                              PAGE
                                                              ----
                                                           
Report of Independent Public Accountants....................  XF-1
Combined Statements of Operations for the Years Ended
  December 31, 1998, 1999 and 2000 and the Three Months
  Ended March 31, 2000 and 2001 (unaudited).................  XF-2
Unaudited Pro Forma Combined Statements of Operations for
  the Years Ended December 31, 1998, 1999 and 2000 and the
  Three Months Ended March 31, 2000 and 2001................  XF-3
Combined Balance Sheets as of December 31, 1999 and 2000 and
  March 31, 2001 (unaudited)................................  XF-4
Unaudited Pro Forma Combined Balance Sheets as of December
  31, 2000 and March 31, 2001...............................  XF-5
Combined Statements of Stockholders' Equity and Net Parent
  Company Investment for the Years Ended December 31, 1998,
  1999 and 2000 and the Three Months Ended March 31, 2001
  (unaudited)...............................................  XF-6
Combined Statements of Cash Flows for the Years Ended
  December 31, 1998, 1999 and 2000 and the Three Months
  Ended March 31, 2000 and 2001 (unaudited).................  XF-7
Notes to Combined Financial Statements......................  XF-9


                                       XF-i
   192

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Inverness Medical Innovations, Inc.:

     We have audited the accompanying combined balance sheets of Inverness
Medical Innovations, Inc., (a Delaware corporation) a subsidiary of Inverness
Medical Technology, Inc., and subsidiaries as of December 31, 1999 and 2000, and
the related combined statements of operations, stockholders' equity and net
parent company investment and cash flows for each of the three years in the
period ended December 31, 2000. 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. 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, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Inverness Medical
Innovations, Inc. and subsidiaries as of December 31, 1999 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

                                          ARTHUR ANDERSEN LLP

Boston, Massachusetts
August 8, 2001

                                       XF-1
   193

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                       COMBINED STATEMENTS OF OPERATIONS



                                                                                    THREE MONTHS ENDED
                                              YEARS ENDED DECEMBER 31,                   MARCH 31,
                                       ---------------------------------------   -------------------------
                                          1998          1999          2000          2000          2001
                                       -----------   -----------   -----------   -----------   -----------
                                                                                 (UNAUDITED)   (UNAUDITED)
                                                                                
Net product sales....................  $74,645,142   $79,293,848   $84,529,140   $20,951,715   $18,661,909
Cost of sales........................   40,562,912    45,534,338    48,182,950    11,620,038    10,859,820
                                       -----------   -----------   -----------   -----------   -----------
  Gross profit.......................   34,082,230    33,759,510    36,346,190     9,331,677     7,802,089
                                       -----------   -----------   -----------   -----------   -----------
Operating expenses:
Research and development.............    2,869,363     1,427,690     1,359,500       361,891       298,791
Selling, general and
  administrative.....................   28,483,439    25,274,348    26,518,517     6,614,702     6,154,120
Net charge for business dispositions,
  asset impairments and restructuring
  activities (Note 7)................    5,372,337            --            --            --            --
                                       -----------   -----------   -----------   -----------   -----------
                                        36,725,139    26,702,038    27,878,017     6,976,593     6,452,911
                                       -----------   -----------   -----------   -----------   -----------
  Operating (loss) income............   (2,642,909)    7,057,472     8,468,173     2,355,084     1,349,178
Interest expense.....................   (3,682,291)   (3,158,086)   (2,988,149)     (771,994)     (557,041)
Other expense, net...................     (631,646)     (566,189)     (388,419)      (52,522)      (84,049)
                                       -----------   -----------   -----------   -----------   -----------
  (Loss) income before income
     taxes...........................   (6,956,846)    3,333,197     5,091,605     1,530,568       708,088
Provision for income taxes...........    2,102,833     2,793,493     2,909,783       991,743       579,554
                                       -----------   -----------   -----------   -----------   -----------
  Net (loss) income..................  $(9,059,679)  $   539,704   $ 2,181,821   $   538,825   $   128,534
                                       ===========   ===========   ===========   ===========   ===========
Net (loss) income per common share --
  Basic and diluted..................  $    (9,060)  $       540   $     2,182   $       539   $       129
                                       ===========   ===========   ===========   ===========   ===========
Weighted average shares --
  Basic and diluted..................        1,000         1,000         1,000         1,000         1,000
                                       ===========   ===========   ===========   ===========   ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-2
   194

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS



                                                                                   THREE MONTHS ENDED
                                             YEARS ENDED DECEMBER 31,                   MARCH 31,
                                      ---------------------------------------   -------------------------
                                         1998          1999          2000          2000          2001
                                      -----------   -----------   -----------   -----------   -----------
                                                                               
Net product sales...................  $54,684,972   $50,583,854   $51,050,574   $13,455,025   $11,811,933
Cost of sales.......................   26,719,991    26,890,187    25,074,536     6,546,599     5,825,969
                                      -----------   -----------   -----------   -----------   -----------
  Gross profit......................   27,964,981    23,693,667    25,976,038     6,908,426     5,985,964
                                      -----------   -----------   -----------   -----------   -----------
Operating expenses:
  Research and development..........    2,322,472     1,395,401     1,359,500       361,891       298,791
  Selling, general and
     administrative.................   22,769,187    18,349,671    17,763,109     4,563,118     4,172,398
  Net charge for business
     dispositions, asset impairments
     and restructuring activities
     (Note 7).......................    4,968,816            --            --            --            --
                                      -----------   -----------   -----------   -----------   -----------
                                       30,060,475    19,745,072    19,122,609     4,925,009     4,471,189
                                      -----------   -----------   -----------   -----------   -----------
  Operating (loss) income...........   (2,095,494)    3,948,595     6,853,429     1,983,417     1,514,775
Other expense, net..................     (650,365)     (562,298)     (387,884)      (53,383)      (78,744)
                                      -----------   -----------   -----------   -----------   -----------
  (Loss) income from continuing
     operations before income
     taxes..........................   (2,745,859)    3,386,297     6,465,545     1,930,034     1,436,031
Provision for income taxes..........    1,114,633     1,006,709     1,781,244       609,001       353,769
                                      -----------   -----------   -----------   -----------   -----------
  (Loss) income from continuing
     operations.....................   (3,860,492)    2,379,588     4,684,301     1,321,033     1,082,262
(Loss) income from discontinued
  operations (net of provision for
  income taxes of approximately
  $988,000, $1,787,000, $1,129,000,
  $383,000 and $226,000,
  respectively).....................   (2,882,308)      183,089      (597,784)     (295,900)     (581,203)
                                      -----------   -----------   -----------   -----------   -----------
  Net (loss) income.................  $(6,742,800)  $ 2,562,677   $ 4,086,517   $ 1,025,133   $   501,059
                                      ===========   ===========   ===========   ===========   ===========
Unaudited pro forma (loss) income
  from continuing operations per
  common share -- Basic and
  diluted...........................  $     (1.58)  $      0.71   $      0.99   $      0.34   $      0.18
Unaudited pro forma (loss) income
  from discontinued operations per
  common share -- Basic and
  diluted...........................        (1.18)         0.05         (0.13)        (0.08)        (0.10)
                                      -----------   -----------   -----------   -----------   -----------
Unaudited pro forma net (loss)
  income per common share -- Basic
  and diluted.......................  $     (2.76)  $      0.76   $      0.86   $      0.26   $      0.08
                                      ===========   ===========   ===========   ===========   ===========
Unaudited pro forma weighted average
  shares -- Basic...................    2,442,997     3,363,946     4,726,390     3,920,635     6,061,888
                                      ===========   ===========   ===========   ===========   ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-3
   195

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                            COMBINED BALANCE SHEETS



                                                              DECEMBER 31,
                                                        -------------------------    MARCH 31,
                                                           1999          2000          2001
                                                        -----------   -----------   -----------
                                                                                    (UNAUDITED)
                                                                           
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents...........................  $   695,080   $ 3,090,192   $ 3,404,397
  Accounts receivable, net of reserves of
     approximately $2,520,000 and $2,802,000 at
     December 31, 1999 and 2000, respectively, and
     $2,593,000 at March 31, 2001.....................   12,307,795    13,398,302    11,252,533
  Inventories.........................................    8,734,781     7,461,717     8,797,225
  Deferred tax asset..................................    1,365,637     2,259,908     2,259,908
  Prepaid expenses and other current assets...........      907,212       389,555       826,216
                                                        -----------   -----------   -----------
     Total current assets.............................   24,010,505    26,599,674    26,540,279
                                                        -----------   -----------   -----------
  Property, plant and equipment, net..................    3,212,459     3,182,600     3,131,000
  Goodwill, trademarks and other intangible assets,
     net..............................................   61,635,821    58,667,132    59,908,348
  Deferred financing costs and other assets, net......    1,233,498     1,091,499     1,075,953
                                                        -----------   -----------   -----------
                                                        $90,092,283   $89,540,905   $90,655,580
                                                        ===========   ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
AND NET PARENT COMPANY INVESTMENT
CURRENT LIABILITIES:
  Current portion of notes payable....................  $ 6,864,104   $ 8,850,888   $ 7,943,846
  Accounts payable....................................    8,003,258     7,423,880     7,084,074
  Accrued expenses and other current liabilities......    5,002,699     7,251,637     6,986,766
  Due to Inverness Medical Technology, Inc. and
     affiliated companies (Note 8(a)).................    5,232,865     5,297,327     6,608,054
                                                        -----------   -----------   -----------
     Total current liabilities........................   25,102,926    28,823,732    28,622,740
                                                        -----------   -----------   -----------
LONG-TERM LIABILITIES:
  Note payable to Inverness Medical Technology, Inc.
     (Note 8(b))......................................    4,043,609     4,208,274     4,057,315
  Deferred tax liability..............................      719,436     1,120,674     1,120,674
  Other long-term liabilities.........................      189,568       170,000       165,000
  Notes payable, net of current portion...............   25,083,728    13,406,175    11,754,153
                                                        -----------   -----------   -----------
     Total long-term liabilities......................   30,036,341    18,905,123    17,097,142
                                                        -----------   -----------   -----------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY AND NET PARENT COMPANY
  INVESTMENT:
  Common stock, $0.001 par value......................
     Authorized, issued and outstanding
       shares -- 1,000................................            1             1             1
  Additional paid-in capital..........................   48,592,560    51,151,077    53,226,077
  Net parent company investment.......................    3,994,757     3,693,975     3,714,267
  Accumulated deficit.................................  (18,250,540)  (13,798,883)  (13,190,596)
  Accumulated other comprehensive income..............      616,238       765,880     1,185,949
                                                        -----------   -----------   -----------
     Total stockholders' equity and net parent company
       investment.....................................   34,953,016    41,812,050    44,935,698
                                                        -----------   -----------   -----------
                                                        $90,092,283   $89,540,905   $90,655,580
                                                        ===========   ===========   ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-4
   196

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                  UNAUDITED PRO FORMA COMBINED BALANCE SHEETS



                                                              DECEMBER 31,     MARCH 31,
                                                                  2000           2001
                                                              ------------    -----------
                                                                        
                                         ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  3,071,477    $40,000,000
  Accounts receivable, net of reserves of approximately
     $1,742,000 at December 31, 2000 and $1,600,000 at March
     31, 2001...............................................     8,606,144      8,306,404
  Inventories...............................................     4,297,626      4,570,113
  Deferred tax asset........................................     1,539,489      1,539,489
  Prepaid expenses and other current assets.................       356,141        731,241
  Net assets of discontinued operations.....................    19,161,070             --
                                                              ------------    -----------
     Total current assets...................................    37,031,947     55,147,247
                                                              ------------    -----------
  Property, plant and equipment, net........................     3,122,681      2,997,372
  Goodwill, trademarks and other intangible assets, net.....    34,845,522     34,367,024
  Deferred financing costs and other assets, net............       773,526        764,450
                                                              ------------    -----------
                                                              $ 75,773,676    $93,276,093
                                                              ============    ===========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of notes payable..........................  $  5,309,666    $        --
  Accounts payable..........................................     5,418,893      4,345,885
  Accrued expenses and other current liabilities............     6,157,309      6,079,977
  Due to Inverness Medical Technology, Inc. and affiliated
     companies..............................................     4,056,323             --
                                                              ------------    -----------
     Total current liabilities..............................    20,942,191     10,425,862
                                                              ------------    -----------
LONG-TERM LIABILITIES:
  Note payable to Inverness Medical Technology, Inc.........     4,208,274             --
  Deferred tax liability....................................     1,120,674      1,120,674
  Other long-term liabilities...............................       170,000        165,000
  Notes payable, net of current portion.....................     7,520,487             --
                                                              ------------    -----------
     Total long-term liabilities............................    13,019,435      1,285,674
                                                              ------------    -----------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY:
  Common stock, $0.001 par value
     Authorized, issued and outstanding 5,976,451 shares at
       December 31, 2000 and 6,550,852 shares at March 31,
       2001.................................................         5,976          6,551
  Additional paid-in capital................................    54,839,077     93,562,653
  Accumulated deficit.......................................   (13,798,883)   (13,190,596)
  Accumulated other comprehensive income....................       765,880      1,185,949
                                                              ------------    -----------
     Total stockholders' equity.............................    41,812,050     81,564,557
                                                              ------------    -----------
                                                              $ 75,773,676    $93,276,093
                                                              ============    ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-5
   197

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                  COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
                       AND NET PARENT COMPANY INVESTMENT


                                                                                                         ACCUMULATED
                                         COMMON STOCK                                                       OTHER
                                     ---------------------   ADDITIONAL    NET PARENT                   COMPREHENSIVE
                                      NUMBER      $0.001       PAID-IN       COMPANY     ACCUMULATED       (LOSS)
                                     OF SHARES   PAR VALUE     CAPITAL     INVESTMENT      DEFICIT         INCOME
                                     ---------   ---------   -----------   -----------   ------------   -------------
                                                                                      
BALANCE, DECEMBER 31, 1997.........    1,000        $1       $29,870,146   $   895,693   $(12,301,235)   $  (22,620)
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc. .........       --        --         2,037,543            --             --            --
Capital contribution from Inverness
  related to acquisition of Can-Am
  Care Corporation.................       --        --        12,598,434            --             --            --
Capital contribution from Inverness
  related to acquisition of
  minority interest in Orgenics,
  Ltd. ............................       --        --            94,001            --             --            --
Capital contribution from Inverness
  related to acquisition of Core
  Immuno-Assay technology..........       --        --                --     5,037,132             --            --
Net cash distributed to
  Inverness........................       --        --                --       (80,274)            --            --
Changes in cumulative translation
  adjustment.......................       --        --                --            --             --      (137,226)
Net loss...........................       --        --                --    (1,007,524)    (8,052,155)           --
                                       -----        --       -----------   -----------   ------------    ----------
  Total comprehensive loss.........
BALANCE, DECEMBER 31, 1998.........    1,000         1        44,600,124     4,845,027    (20,353,390)     (159,846)
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc. .........       --        --         2,796,851            --             --            --
Capital contribution from Inverness
  related to transfer of Women's
  Health division..................       --        --         1,151,326    (1,151,326)            --            --
Capital contribution from Inverness
  related to acquisition of
  minority interest in Orgenics,
  Ltd. ............................       --        --            44,259            --             --            --
Net cash contributed by
  Inverness........................       --        --                --     1,864,202             --            --
Changes in cumulative translation
  adjustment.......................       --        --                --            --             --       776,084
Net (loss) income..................       --        --                --    (1,563,146)     2,102,850            --
                                       -----        --       -----------   -----------   ------------    ----------
  Total comprehensive income.......
BALANCE, DECEMBER 31, 1999.........    1,000         1        48,592,560     3,994,757    (18,250,540)      616,238
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc. .........       --        --         2,558,517            --             --            --
Net cash contributed by
  Inverness........................       --        --                --     1,969,054             --            --
Changes in cumulative translation
  adjustment.......................       --        --                --            --             --       149,642
Net (loss) income..................       --        --                --    (2,269,836)     4,451,657            --
                                       -----        --       -----------   -----------   ------------    ----------
  Total comprehensive income.......
BALANCE, DECEMBER 31, 2000.........    1,000         1        51,151,077     3,693,975    (13,798,883)      765,880
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc.
  (unaudited)......................       --        --            75,000            --             --            --
Capital contribution from Inverness
  related to contingent payment to
  former Can-Am shareholders
  (unaudited)......................       --        --         2,000,000            --             --            --
Net cash contributed by Inverness
  (unaudited)......................       --        --                --       500,045             --            --
Changes in cumulative translation
  adjustment (unaudited)...........       --        --                --            --             --       420,069
Net (loss) income (unaudited)......       --        --                --      (479,753)       608,287            --
                                       -----        --       -----------   -----------   ------------    ----------
  Total comprehensive income
    (unaudited)....................
BALANCE, MARCH 31, 2001
  (unaudited)......................    1,000        $1       $53,226,077   $ 3,714,267   $(13,190,596)   $1,185,949
                                       =====        ==       ===========   ===========   ============    ==========



                                         TOTAL       COMPREHENSIVE
                                     STOCKHOLDERS'      (LOSS)
                                        EQUITY          INCOME
                                     -------------   -------------
                                               
BALANCE, DECEMBER 31, 1997.........   $18,441,985     $        --
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc. .........     2,037,543              --
Capital contribution from Inverness
  related to acquisition of Can-Am
  Care Corporation.................    12,598,434              --
Capital contribution from Inverness
  related to acquisition of
  minority interest in Orgenics,
  Ltd. ............................        94,001              --
Capital contribution from Inverness
  related to acquisition of Core
  Immuno-Assay technology..........     5,037,132              --
Net cash distributed to
  Inverness........................       (80,274)             --
Changes in cumulative translation
  adjustment.......................      (137,226)       (137,226)
Net loss...........................    (9,059,679)     (9,059,679)
                                      -----------     -----------
  Total comprehensive loss.........                    (9,196,905)
                                                      ===========
BALANCE, DECEMBER 31, 1998.........    28,931,916
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc. .........     2,796,851              --
Capital contribution from Inverness
  related to transfer of Women's
  Health division..................            --              --
Capital contribution from Inverness
  related to acquisition of
  minority interest in Orgenics,
  Ltd. ............................        44,259              --
Net cash contributed by
  Inverness........................     1,864,202              --
Changes in cumulative translation
  adjustment.......................       776,084         776,084
Net (loss) income..................       539,704         539,704
                                      -----------     -----------
  Total comprehensive income.......                     1,315,788
                                                      ===========
BALANCE, DECEMBER 31, 1999.........    34,953,016
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc. .........     2,558,517              --
Net cash contributed by
  Inverness........................     1,969,054              --
Changes in cumulative translation
  adjustment.......................       149,642         149,642
Net (loss) income..................     2,181,821       2,181,821
                                      -----------     -----------
  Total comprehensive income.......                     2,331,463
                                                      ===========
BALANCE, DECEMBER 31, 2000.........    41,812,050
Capital contribution from Inverness
  related to income taxes for
  Inverness Medical, Inc.
  (unaudited)......................        75,000              --
Capital contribution from Inverness
  related to contingent payment to
  former Can-Am shareholders
  (unaudited)......................     2,000,000              --
Net cash contributed by Inverness
  (unaudited)......................       500,045              --
Changes in cumulative translation
  adjustment (unaudited)...........       420,069         420,069
Net (loss) income (unaudited)......       128,534         128,534
                                      -----------     -----------
  Total comprehensive income
    (unaudited)....................                   $   548,603
                                                      ===========
BALANCE, MARCH 31, 2001
  (unaudited)......................   $44,935,698
                                      ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-6
   198

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                       COMBINED STATEMENTS OF CASH FLOWS



                                                                                          THREE MONTHS ENDED
                                                    YEARS ENDED DECEMBER 31,                   MARCH 31,
                                            ----------------------------------------   -------------------------
                                                1998          1999          2000          2000          2001
                                            ------------   -----------   -----------   -----------   -----------
                                                                                        UNAUDITED     UNAUDITED
                                                                                      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.........................  $ (9,059,679)  $   539,704   $ 2,181,821   $   538,825   $   128,534
Adjustments to reconcile net (loss) income
  to net cash provided by operating
  activities:
  Noncash portion of net charge on
    business dispositions, asset
    impairments and restructuring
    activities............................     5,119,713            --            --            --            --
  Loss on disposal of property, plant and
    equipment.............................       838,000        20,218            --            --            --
  Amortization of deferred revenue........       (56,667)           --            --            --            --
  Depreciation and amortization...........     6,954,372     4,187,299     4,043,281     1,036,662     1,097,645
  Deferred income taxes...................      (234,392)       (7,180)     (493,033)           --            --
  Capital contribution from Inverness
    related to income taxes for Inverness
    Medical, Inc. ........................     2,037,543     2,796,851     2,558,517       415,000        75,000
  Other noncash gains.....................       (75,019)         (538)           --            --            --
  Changes in current assets and
    liabilities, net of acquisitions:
    Accounts receivable, net..............      (721,954)   (1,989,052)   (1,167,203)     (735,452)    1,951,548
    Inventories...........................       662,767    (1,281,232)    1,258,240    (1,836,134)   (1,435,478)
    Prepaid expenses and other current
      assets..............................        39,579       (72,870)      843,191        34,799      (350,753)
    Accounts payable......................    (1,779,867)      341,203      (539,935)    1,035,433      (179,530)
    Due to Inverness and affiliated
      companies...........................    (5,246,069)    2,264,643       229,127        (5,102)    1,159,768
    Accrued expenses and other current
      liabilities.........................     1,762,964    (1,121,805)    2,283,153     1,875,350      (217,594)
                                            ------------   -----------   -----------   -----------   -----------
  Net cash provided by operating
    activities............................       241,291     5,677,241    11,197,159     2,359,381     2,229,140
                                            ------------   -----------   -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
  equipment...............................      (555,265)   (1,526,246)     (840,350)     (170,376)     (386,549)
(Increase) decrease in other assets.......      (210,395)          (18)        3,569         3,300            --
Cash paid for purchase of Can-Am Care
  Corporation.............................   (15,317,628)           --            --            --            --
                                            ------------   -----------   -----------   -----------   -----------
  Net cash used in investing activities...   (16,083,288)   (1,526,264)     (836,781)     (167,076)     (386,549)
                                            ------------   -----------   -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for deferred financing costs....    (1,224,609)           --      (103,750)     (103,750)      (47,524)
Proceeds from borrowings under notes
  payable.................................    41,196,381       873,381        12,000        12,000            --
Repayments of notes payable...............   (28,040,527)   (7,775,410)   (9,701,279)   (2,445,265)   (2,531,219)
Contribution (to) from Inverness, net.....       (80,274)    1,864,202     1,969,054       673,993       500,045
                                            ------------   -----------   -----------   -----------   -----------
  Net cash provided by (used in) financing
    activities............................    11,850,971    (5,037,827)   (7,823,975)   (1,863,022)   (2,078,698)
                                            ------------   -----------   -----------   -----------   -----------
FOREIGN EXCHANGE EFFECT ON CASH AND CASH
  EQUIVALENTS.............................        12,129       461,986      (141,291)      107,166       550,312
                                            ------------   -----------   -----------   -----------   -----------
NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS.............................    (3,978,897)     (424,864)    2,395,112       436,449       314,205
CASH AND CASH EQUIVALENTS, BEGINNING OF
  YEAR....................................     5,098,841     1,119,944       695,080       695,080     3,090,192
                                            ------------   -----------   -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, END OF YEAR....  $  1,119,944   $   695,080   $ 3,090,192   $ 1,131,529   $ 3,404,397
                                            ============   ===========   ===========   ===========   ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-7
   199

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                       COMBINED STATEMENTS OF CASH FLOWS
                                  (CONTINUED)



                                                                                          THREE MONTHS ENDED
                                                      YEAR ENDED DECEMBER 31,                 MARCH 31,
                                               --------------------------------------   ----------------------
                                                   1998          1999         2000        2000        2001
                                               ------------   ----------   ----------   --------   -----------
                                                                                    
SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION:
Cash Paid For
  Interest...................................  $  2,801,486   $3,020,608   $2,630,666   $649,907   $   411,495
                                               ============   ==========   ==========   ========   ===========
  Income taxes...............................  $    192,950   $   71,926   $   30,000   $ 10,000   $     5,000
                                               ============   ==========   ==========   ========   ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
  AND FINANCING ACTIVITIES:
On February 18, 1998, Innovations acquired
  Can-Am Care Corporation:
     Accounts receivable.....................  $  2,812,000   $       --   $       --   $     --   $        --
     Inventories.............................     3,766,000           --           --         --            --
     Other current assets....................       313,000           --           --         --            --
     Property, plant and equipment...........        32,000           --           --         --            --
     Goodwill................................    26,916,062           --           --         --     2,000,000
     Cash paid for acquisition...............   (15,317,628)          --           --         --    (2,000,000)
                                               ------------   ----------   ----------   --------   -----------
       Noncash consideration paid............    18,521,434           --           --         --            --
     Assumed accounts payable................    (5,923,000)          --           --         --            --
     Note payable to Can-Am shareholders by
       Inverness.............................    (2,000,000)          --           --         --            --
                                               ------------   ----------   ----------   --------   -----------
     Issuance of common stock by Inverness...  $(10,598,434)  $       --   $       --   $     --   $        --
                                               ============   ==========   ==========   ========   ===========
Shares Issued by Inverness in Connection with
  Purchase of Core Immuno-Assay Technology...  $  4,565,778   $       --   $       --   $     --   $        --
                                               ============   ==========   ==========   ========   ===========
Capital contribution from Inverness related
  to acquisition of minority interest in
  Orgenics, Ltd..............................  $     94,001   $       --   $   44,259   $     --   $        --
                                               ============   ==========   ==========   ========   ===========
Capital contribution from Inverness related
  to transfer of Women's Health division.....  $         --   $1,151,326   $       --   $     --   $        --
                                               ============   ==========   ==========   ========   ===========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       XF-8
   200

              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)

                               DECEMBER 31, 2000

(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

     On May 23, 2001, Inverness Medical Technology, Inc. (Inverness) entered
into an Agreement and Plan of Split-Off and Merger (the Agreement) pursuant to
which Johnson & Johnson (Johnson & Johnson) will acquire Inverness' diabetes
care products business and Inverness will simultaneously split-off its women's
health, nutritional supplements and clinical diagnostics businesses as part of
an independent, publicly owned company. As a part of the transaction, Inverness
will restructure its operations, so that all non-diabetes businesses (women's
health, nutritional supplements and clinical diagnostics) will be held by a
subsidiary, Inverness Medical Innovations, Inc. (Innovations or the Company). At
the closing of the transaction, all of the shares of Innovations common stock
held by Inverness will be split-off from Inverness in a pro rata distribution to
Inverness stockholders and Inverness will merge with and become a wholly-owned
subsidiary of Johnson & Johnson.

     Innovations was incorporated on May 11, 2001 for the purpose of receiving
Inverness' contribution of its women's health, nutritional supplements and
clinical diagnostics businesses in connection with the transactions described in
the Agreement and related agreements. Innovations' combined financial statements
consist of Inverness subsidiaries and businesses that are to be initially
contributed to Innovations for all periods presented as if such subsidiaries and
businesses were historically organized in a manner consistent with the
restructuring set forth in the Agreement and related agreements. The primary
subsidiaries and businesses that comprise the combined entity are as follows:

     - Inverness Medical, Inc. (IMI), a U.S. corporation, and its wholly owned
       subsidiary, Can-Am Care Corporation (Can-Am), a U.S. corporation

     - Cambridge Diagnostics Ireland Ltd. (CDIL), an Irish corporation

     - Orgenics, Ltd. (Orgenics), an Israeli corporation

     - The women's health business of Inverness Medical Europe GmbH (IME), a
       German corporation

     - Inverness Medical Benelux Bvba (IMB), a Belgian corporation

     - The women's health assets held by Inverness, plus allocations to
       Innovations of Inverness common expenditures

     - Jmar Ames, Inc. (Jmar), a majority owned U.S. corporation, for the period
       prior to its bankruptcy and liquidation

     Innovations has combined the financial statements of the individual legal
entities, along with the assets, liabilities, revenues and expenses of the
businesses, in a manner consistent with consolidated financial statements. All
material intercompany transactions have been eliminated. Amounts due to or due
from Inverness and Inverness subsidiaries that are not part of Innovations are
reflected as amounts due to or from affiliates (see below and Note 8).
Innovations' equity accounts reflect the par value of Innovations' stock at the
date of incorporation, the historical equity accounts of the legal entities that
comprise Innovations and a "Net Parent Company Investment" representing the net
assets of the businesses that will be contributed to Innovations.

     Pursuant to the Agreement and related agreements, Innovations will transfer
to Inverness those entities or businesses that conduct business in the diabetes
segment, principally the Can-Am subsidiary of IMI and the diabetes business of
IMB. Because Inverness has solicited a shareholder vote for the transactions
contemplated by the Agreement, including the restructuring of its subsidiaries'
businesses, Innovations cannot present the historical diabetes operations of its
subsidiaries as discontinued operations

                                       XF-9
   201
              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

in the historical combined financial statements under Accounting Principles
Board (APB) 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, unless or until the shareholders
vote in favor of the transaction.

     The discontinuation of the diabetes businesses is one of a number of
transactions that will occur upon the closing of transactions set forth in the
Agreement that will have a significant impact on Innovation's financial
statements. Under the terms of the Agreement and related agreements, Inverness
is obligated to capitalize Innovations with $40 million in net cash. Inverness
is also obligated to assume or discharge all of Innovations' third-party and
related party debt. The unaudited pro forma combined financial statements
reflect these transactions as follows:

     Unaudited pro forma statements of operations:

     - Amounts related to discontinued diabetes operations have been shown as a
       single line item in accordance with APB Opinion No. 30 (see Note 15 for
       summarized results from discontinued operations) and

     - All third-party and related-party interest expense pertaining to debt to
       be assumed or discharged by Inverness has been eliminated. Total interest
       expense eliminated was $2,316,879, $2,022,974, $1,904,696, $486,305 and
       $372,524 in 1998, 1999, 2000 and the three months ended March 31, 2000
       and 2001, respectively.

     Unaudited pro forma balance sheets:

  December 31, 2000:

     - The balance sheet has been restated pursuant to APB Opinion No. 30 to
       present the net assets of the diabetes businesses as a single line item
       (see Note 15 for summarized net assets of discontinued operations).

  March 31, 2001:

     - Assets and liabilities relating to diabetes operations have been removed
       and shown as a distribution to Inverness via a reduction of additional
       paid-in capital (see Note 15 for summarized net assets of discontinued
       operations)

     - Cash has been increased to $40 million with an offsetting increase to
       additional paid-in capital and

     - All third-party and related-party debt to be assumed or discharged by
       Inverness has been removed and shown as an increase to additional paid-in
       capital. Total debt eliminated was $18,831,044 at March 31, 2001.

     At closing, Inverness expects to distribute to its stockholders one
Innovations share for every five Inverness shares held. In order for Inverness
to do so, Innovations will declare a stock split, to be effected as a dividend.
Accordingly, in addition to the presentation of historical earnings per share
information using for all periods the actual number of shares of Innovations
common stock outstanding as of the date of its incorporation, Innovations has
also presented unaudited pro forma earnings per share reflecting the planned
distribution ratio and estimated stock split that would have been necessary had
the transactions contemplated in the Agreement and related agreements been
completed on March 31, 2001.

     Innovations' combined financial statements reflect the allocation of
Inverness' common expenditures. Such allocations have been made in accordance
with Staff Accounting Bulletin (SAB) No. 55, Allocation of Expenses and Related
Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business
Components of Another Entity.
                                      XF-10
   202
              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     Costs that are clearly identifiable as being applicable to an Innovations
subsidiary or business have been allocated to Innovations. The most significant
costs included in this category include salary and benefits of certain employees
and legal and other professional fees. Costs of centralized departments that
serve all operations have been allocated using relevant allocation measures,
such as estimated percentage of time worked for salary and benefits of certain
employees and square feet occupied for occupancy costs in shared facilities.
Costs associated with corporate-level activities, such as executive salary and
benefits and investor relations, have not been allocated to Innovations.
Innovations will incur such costs in the future as a standalone company. As
discussed more thoroughly in Note 2g and 11, Innovations accounts for income
taxes using the separate return method, pursuant to Statement of Financial
Accounting Standard (SFAS) No. 109, Accounting for Income Taxes. Inverness has
historically charged interest on loans made to its subsidiaries. Accordingly,
Innovations' combined statements of operations reflect interest expense on
amounts due to entities not included in Innovations' combined historical
financial statements (primarily to Inverness) (see Note 8). Interest expense
also reflects amounts recorded on third-party notes payable when such notes
relate specifically to Innovations' operations. Interest expense does not
include amounts recorded on general corporate borrowings of Inverness.
Innovations believes that the allocation methods described herein are reasonable
and fairly reflect its financial position and results of operations.

     As part of the Agreement and related agreements, all Inverness options and
warrants will be split such that all holders will receive an Inverness option or
warrant and an Innovations option or warrant. The option or warrant split will
be accomplished in such a manner that the aggregate intrinsic value of the two
options or warrants will equal the intrinsic value of the Inverness option or
warrant before the split. The option or warrant split also requires that the
ratio of intrinsic value to market value for each option or warrant be the same.
Concurrent with the option split, Innovations' Board of Directors will exercise
its ability to (1) accelerate the vesting for all Innovations options and (2)
extend the period of exercisability for existing Inverness employees that will
not become Innovations employees. Such action is deemed to be award
modifications pursuant to Financial Accounting Standards Board (FASB)
Interpretation (FIN) No. 44, Accounting for Certain Transactions Involving Stock
Compensation. Under FIN No. 44, Innovations will measure compensation at the
date of the award modifications based on the intrinsic value of the option and
will recognize such compensation if, absent the modifications, the award would
have been forfeited pursuant to the award's original terms. For Inverness
employees who will not become employees of Innovations, the recognition of this
charge will be immediate and may be significant. Innovations is not yet able to
estimate the amount of this charge.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles 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. Actual results could differ from those estimates.

  (b) Foreign Currencies

     Innovations follows the provisions of SFAS No. 52, Foreign Currency
Translation. All assets and liabilities of Innovations' foreign subsidiaries are
translated into U.S. dollars using the exchange rate at each balance sheet date
while income and expense accounts are translated using the average rates of
exchange during each period. Cumulative translation gains or losses on deemed
permanent intercompany investments are reflected as a separate component of
stockholders' equity. Foreign currency exchange transaction gains (losses) of
approximately $21,000, $(531,000) and $(389,000) in 1998, 1999 and 2000,

                                      XF-11
   203
              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

respectively, and approximately $(53,000) and $(122,000) for the three months
ended March 31, 2000 and 2001, respectively, are reflected as a component of
interest income and other (expense), net, in the accompanying combined
statements of operations.

  (c) Cash and Cash Equivalents

     Innovations considers all highly liquid investments purchased with original
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash equivalents consisted of money market funds as of December 31,
1999 and 2000 and March 31, 2001.

  (d) Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or
market.

  (e) Depreciation and Amortization

     Innovations records property, plant and equipment at historical cost.
Depreciation and amortization are computed using the straight-line method based
on the following estimated useful lives of the related assets: machinery,
laboratory equipment and tooling (3-16 years), buildings (20 years), leasehold
improvements (lesser of term of lease or useful life of asset), furniture and
fixtures (3-10 years) and computer equipment (1-6 years).

  (f) Goodwill, Trademarks and Other Intangible Assets

     Innovations is amortizing its goodwill and trademarks related to the
acquisitions of certain nutritional supplement lines and Can-Am using the
straight-line method over their estimated useful lives of 25 years. The
intangible asset pertaining to Innovations' acquired core immuno-assay
technology (used in the women's health business) is being amortized over 15
years. Innovations recorded amortization expense of approximately $4,415,000,
$3,095,000, $2,966,000, $754,000 and $759,000 in 1998, 1999, 2000, and the three
months ended March 31, 2000 and 2001, respectively, related to goodwill,
trademarks and other intangible assets. This amortization expense is allocated
to research and development and general and administrative expenses in the
accompanying combined statements of operations.

     Innovations periodically examines the carrying value of its long-lived and
intangible assets to determine whether there are any impairment losses. If
indicators of impairment were present in long-lived and intangible assets used
in operations and undiscounted future cash flows were not expected to be
sufficient to recover the assets' carrying amount, an impairment loss would be
charged to expense in the period identified based on the fair value of the
asset. During 1998, Innovations recorded an impairment charge associated with
certain goodwill and trademarks pertaining to a specific nutritional supplement,
the goodwill associated with Orgenics and certain other long-lived assets held
by CDIL (see Note 7). Innovations believes that the remaining carrying value of
these assets were realizable as of December 31, 1999 and 2000 and March 31,
2001.

  (g) Income Taxes

     Innovations provides for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. Innovations' income tax provisions
mainly represent those recorded by its U.S. subsidiary, IMI. Most of
Innovations' foreign subsidiaries have been in net loss positions and,
accordingly, have paid virtually no income taxes in their jurisdictions. For
federal and some state income tax filing purposes, the results of IMI's
operations are consolidated with Inverness. IMI has stand-alone tax filing
responsibilities in some states. The tax accounts of Innovations have been
computed using the separate return method. Accordingly, a deferred tax asset or
liability is determined based on the difference between

                                      XF-12
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

the financial statement and tax bases of assets and liabilities, as measured by
the enacted tax rates expected to be in effect when these differences reverse.
Innovations' primary temporary differences which give rise to the deferred tax
asset and liability are nondeductible reserves and accruals and different lives
assigned to the goodwill and trademarks (see Note 11).

  (h) Revenue Recognition

     Innovations' revenues are derived from product sales. Product revenue is
recognized upon shipment to customers, at which time title is transferred, less
a reserve for estimated product returns and allowances. The Securities and
Exchange Commission issued SAB No. 101, Revenue Recognition, in December 1999,
which sets forth provisions for revenue recognition on multiple-element
arrangements and acceptance and delivery criteria, among other items. The
adoption of SAB No. 101 did not have a material impact on Innovations' operating
results.

  (i) Employee Stock Compensation Arrangements

     Innovations has adopted an employee stock option plan. Innovations will
account for its employee stock compensation arrangements under the provisions of
APB Opinion No. 25, Accounting for Stock Issued to Employees, and FIN No. 44.
Innovations will use the disclosure-only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation.

  (j) Net Earnings (Loss) per Common Share

     Net earnings (loss) per common share, computed in accordance with SFAS No.
128, Earnings per Share, is based upon the actual number of common shares issued
upon incorporation of Innovations, for all periods presented. As discussed in
Note 1, unaudited pro forma earnings per share was computed assuming the
consummation of a planned distribution ratio and stock split. There were no
dilutive securities outstanding during 1998, 1999, 2000 and the three months
ended March 31, 2000 and 2001.

  (k) Postretirement Benefits

     Innovations does not have any obligations for postretirement or
postemployment benefits, as defined by SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, as it does not currently offer such
benefits. However, its subsidiary, Orgenics, does provide certain severance
benefits (see Note 10(g)).

  (l) Concentration of Credit Risk

     Financial instruments that potentially subject Innovations to concentration
of credit risk primarily consist of cash and cash equivalents and accounts
receivable. Innovations invests its excess cash primarily in high quality
securities and limits the amount of credit exposure to any one financial
institution. Innovations does not require collateral or other securities to
support customer receivables; however, it performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses.

     Innovations had the following significant customers:



                                                                                     THREE MONTHS
                                                   YEAR ENDED DECEMBER 31,         ENDED MARCH 31,
                                                -----------------------------      ----------------
                                                1998      1999        2000         2000       2001
                                                ----      ----      ---------      -----      -----
                                                                               
Net revenues --
  Customer A..................................   --        --          10%          --         10%
  Customer B..................................   --        10%         10%          12%        11%


                                      XF-13
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)



                                                 DECEMBER 31,
                                                --------------      MARCH 31,
                                                1999      2000        2001
                                                ----      ----      ---------
                                                                              
Gross Accounts Receivable --
  Customer A..................................   --        12%          9%
  Customer B..................................   14%        6%          9%


     Innovations has no significant off-balance-sheet or other concentration of
credit risks such as foreign exchange contracts, option contracts or other
foreign hedging arrangements. See Note 12 for financial information by
geographic area and business segment.

  (m) Financial Instruments and Fair Value of Financial Instruments

     Innovations' financial instruments consist of cash equivalents, accounts
receivable and debt. The estimated fair value of these financial instruments
approximates their carrying value at December 31, 1999 and 2000, and March 31,
2001. The estimated fair values have been determined through information
obtained from market sources and Innovations does not have any material
derivative or other financial instruments.

  (n) Recent Accounting Pronouncements

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. As amended by SFAS No. 137 in June 1999, the
statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which is a
significant amendment to SFAS No. 133. SFAS No. 133 and its amendments establish
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively, the
derivatives) and for hedging activities. The Emerging Issues Task Force (EITF)
has also issued a number of derivative-related tentative and final consensus.
The adoption of these statements did not have a material impact on Innovations'
combined financial position or results of operations.

     In May 2000, the EITF reached a consensus on Issue No. 00-14, Accounting
for Certain Sales Incentives, which is effective for the quarter ended December
15, 2001. EITF Issue No. 00-14 establishes accounting and reporting standards
for the cost of certain sales incentives. Innovations offers certain sales
incentives that fall within the scope of EITF Issue No. 00-14, such as coupons
and free products, to some of its customers. Innovations adopted this consensus
in 2001, resulting in reclassifications of approximately $1,860,000, $3,288,000,
$3,447,000, $609,000 and $680,000 in 1998, 1999, 2000, and the three months
ended March 31, 2000 and 2001, respectively, from selling, general and
administrative expenses to net product sales.

     In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS No.
141 addresses changes in the financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16, Business Combinations, and SFAS
No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises.
Effective July 1, 2001, all business combinations should be accounted for using
only the purchase method of accounting. Innovations does not believe the
adoption of this statement will have a material effect on its financial
position, results of operations or cash flows.

     In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 addresses changes in the financial accounting and reporting
for acquired goodwill and other intangible assets with indefinite lives.
Effective January 1, 2002, all existing acquired goodwill and other intangible
assets with indefinite lives will no longer be amortized to expense, with early
adoption required for all goodwill and other intangible assets with indefinite
lives acquired subsequent to June 30, 2001. The statement also provides specific
guidance for determining and measuring impairment of all goodwill and other
intangible assets. Innovations recorded goodwill amortization of approximately
3,182,000, 1,960,000, 1,717,000, 452,000 and 434,000 for the years ended
December 31, 1998, 1999, 2000, and the three months

                                      XF-14
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

ended March 31, 2000 and 2001, respectively. Innovations has not yet made an
assessment as to whether the required impairment measurements required by SFAS
No. 142 will have an impact on its financial statements.

(3) OTHER BALANCE SHEET INFORMATION

     Components of other selected captions in the Combined Balance Sheets
consisted of:



                                                       DECEMBER 31,
                                                 ------------------------    MARCH 31,
                                                    1999          2000          2001
                                                 ----------    ----------    ----------
                                                                    
INVENTORIES:
Raw materials..................................  $1,851,230    $2,205,402    $2,738,857
Work-in-process................................     181,029       204,579       182,922
Finished goods.................................   6,702,522     5,051,736     5,875,446
                                                 ----------    ----------    ----------
                                                 $8,734,781    $7,461,717    $8,797,225
                                                 ==========    ==========    ==========
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Machinery, laboratory equipment and tooling....  $3,546,981    $3,706,142    $3,838,506
Buildings......................................     672,061       628,812       585,826
Leasehold improvements.........................     618,778       674,490       641,659
Furniture and fixtures.........................     389,460       660,743       650,399
Computer equipment.............................   1,159,953     1,472,676     1,518,515
                                                 ----------    ----------    ----------
                                                  6,387,233     7,142,863     7,234,905
Less: Accumulated depreciation and
  amortization.................................   3,174,774     3,960,263     4,103,905
                                                 ----------    ----------    ----------
                                                 $3,212,459    $3,182,600    $3,131,000
                                                 ==========    ==========    ==========




                                                     DECEMBER 31,
                                              --------------------------     MARCH 31,
                                                 1999           2000           2001
                                              -----------    -----------    -----------
                                                                   
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE
  ASSETS:
Goodwill....................................  $45,322,469    $45,322,469    $47,322,469
Trademarks..................................   21,059,405     21,059,405     21,059,405
Other intangible assets.....................    5,757,465      5,757,465      5,757,465
                                              -----------    -----------    -----------
                                               72,139,339     72,139,339     74,139,339
Less: Accumulated amortization..............   10,503,518     13,472,207     14,230,991
                                              -----------    -----------    -----------
                                              $61,635,821    $58,667,132    $59,908,348
                                              ===========    ===========    ===========
ACCRUED EXPENSES AND OTHER CURRENT
  LIABILITIES:
Compensation and compensation-related.......  $   843,389    $ 1,585,481    $ 1,117,915
Professional fees...........................      336,923        869,283        853,484
Advertising and marketing...................    1,828,928      2,755,762      2,634,239
Accrued royalties...........................      742,699        475,058        864,132
Other.......................................    1,250,760      1,566,053      1,516,996
                                              -----------    -----------    -----------
                                              $ 5,002,699    $ 7,251,637    $ 6,986,766
                                              ===========    ===========    ===========


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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(4) ACQUISITION AND FINANCING OF CAN-AM

  (a) Can-Am Acquisition

     On February 18, 1998, Innovations purchased all of Can-Am's outstanding
stock and entered into a bank lending agreement (see Note 4(b)). The aggregate
purchase price of approximately $27,900,000 consisted of $13,600,000 in cash,
1,108,333 shares of Inverness common stock with a fair value of $10,600,000, a
$2,000,000 subordinated note payable by Inverness to former Can-Am shareholders
and closing costs of approximately $1,700,000. The aggregate purchase price was
allocated to the acquired assets and assumed liabilities approximately as
follows:


                                                           
Accounts receivable.........................................  $ 2,812,000
Inventory...................................................    3,766,000
Other current assets........................................      313,000
Fixed assets................................................       32,000
Goodwill....................................................   26,900,000
Liabilities assumed.........................................   (5,923,000)
                                                              -----------
                                                              $27,900,000
                                                              ===========


     In connection with the purchase of Can-Am, Can-Am's shareholders granted a
right of first refusal to Inverness to purchase the assets or stock of an entity
under the common control of the Can-Am shareholders and A.M.G. Medical, Inc.
(AMG). AMG historically performed certain administrative, management and
manufacturing functions for Can-Am and, concurrent with the purchase of Can-Am,
Can-Am and AMG entered into formal management services and supply agreements.
Under the terms of the management services agreement, AMG agreed to continue
providing such administrative and management services to Can-Am on an
arm's-length basis. The management services agreement provides a mechanism to
adjust charges for services based on the needs of Can-Am and an arbitration
provision in the event the parties cannot agree on such charges. Under the terms
of the supply agreement, Can-Am must purchase 100% of its requirements for
monolet compatible lancets from AMG unless AMG is unable to meet Can-Am's
requirements.

     Innovations recorded amounts owed of approximately $1,397,000, $616,000 and
$1,304,000 at December 31, 1999 and 2000 and March 31, 2001, respectively, under
these agreements. Further, Can-Am's president entered into an employment
agreement with Inverness to continue serving Inverness and Innovations for three
years at an annual salary of $150,000, which expired in February 2001.

     The principal amount of the promissory note issued by Inverness was subject
to adjustment based on the performance of Inverness common stock within 90
trading days prior to the maturity of such note. Subsequent to December 31,
2000, Inverness computed the value of this contingent payment to be $2,000,000,
which Innovations recorded as additional goodwill contributed by Inverness.
Inverness paid the entire $4,000,000 balance of the promissory note in February
2001.

  (b) Financing

     Concurrent with the acquisition of Can-Am, IMI entered into a $42,000,000
credit agreement (IMI Credit Agreement) with a bank; Inverness is the guarantor
of all obligations due under the IMI Credit Agreement. The IMI Credit Agreement
consists of a $37,000,000 term loan and a $5,000,000 revolving line of credit.
Of the proceeds from this term loan, IMI used $32,000,000 to finance the cash
portion of the Can-Am purchase price and refinance the then existing bank debt
that resulted from the earlier acquisition of certain nutritional supplement
lines. The remaining $5,000,000 was used for working capital purposes.

                                      XF-16
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     The term loan and revolving line of credit allow IMI to borrow funds at
varying rates, including options to borrow at an alternate base rate, as
defined, plus a spread from 0.50% to 2.00%, or the London Interbank Offered Rate
(LIBOR) (6.71% at December 31, 2000) plus a spread from 2.00% to 3.50%. The
spreads depend on IMI's ratio of senior-funded debt to earnings before interest
expense, taxes, depreciation and amortization (EBITDA). Borrowings are secured
by IMI's stock and the assets of IMI and Can-Am. Inverness's guarantee is
secured by certain of Inverness and its other subsidiaries' assets. Borrowings
under the revolving line of credit are based on certain percentages of eligible
assets, as defined. IMI is required to pay an annual fee of 0.375% for the
unused portion of the revolving line of credit. At December 31, 2000, there was
no outstanding balance under the revolving line of credit. The revolving line of
credit expires on February 18, 2002. IMI is required to make quarterly principal
payments against the term loan ranging from $1,200,000 to $1,700,000 through
December 31, 2003, with payments of $1,433,333 that began on June 30, 1998. IMI
must also make mandatory prepayments on the term loan if it meets certain cash
flow thresholds, sells assets not in the ordinary course of business, issues or
sells indebtedness or issues stock, as defined. At December 31, 2000, IMI
estimates that it will make such mandatory prepayments in the amount of
approximately $1,056,000 in 2001.

     The IMI Credit Agreement requires compliance with various financial and
nonfinancial covenants for both IMI and Inverness. The primary financial
covenants pertain to, among other things, interest coverage, debt services
coverage, leverage and EBITDA. Both IMI and Inverness were in compliance with
such covenants at December 31, 2000 and March 31, 2001.

     As discussed in Note 1, upon the closing of the transactions contemplated
in the Agreement and related agreements, Inverness will assume or discharge all
third-party debt of Innovations and its subsidiaries, including the IMI Credit
Agreement.

(5) TRANSACTIONS BETWEEN CDIL AND CAMBRIDGE AFFILIATE CORPORATION

     Concurrent with Inverness' 1994 acquisition of CDIL, CDIL entered into a
series of agreements with Cambridge Affiliate Corporation (Cambridge Affiliate).
Cambridge Affiliate is 49%-owned by Inverness and 51%-owned by the successor
corporation of the company that sold CDIL to Inverness in 1994. Cambridge
Affiliate was formed to allow CDIL access to certain non-assignable
technologies, pursuant to the terms of the 1994 acquisition. CDIL accounts for
its investment in Cambridge Affiliate under the equity method. Under the terms
of the agreements mentioned above, CDIL manufactured and sold products on behalf
of and managed the affairs of Cambridge Affiliate. During 1998, CDIL paid
royalties of $62,000 and earned total sales, manufacturing and management fees
of $2,211,000 under the terms of these agreements. Following the disposition of
certain assets pertaining to its infectious disease diagnostic business and
subsequent reorganizations in 1998 (see Note 7(b)), CDIL has not conducted and
will not conduct any significant business with Cambridge Affiliate.

                                      XF-17
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(6) TRANSFER OF WOMEN'S HEALTH DIVISION

     Effective January 1, 1999, Inverness contributed its Women's Health (WH)
division to IMI. The transfer of WH's net assets of approximately $1,151,000 was
accounted for at book value as a capital contribution to IMI by agreement
between the parties. The contribution of assets and liabilities was as follows:


                                                           
Accounts receivable, net....................................  $ 2,650,000
Inventories.................................................      472,000
Other current assets........................................       20,000
Property, plant and equipment, net..........................      390,000
Accounts payable............................................   (1,584,000)
Accrued expenses............................................     (797,000)
                                                              -----------
Total contribution..........................................  $ 1,151,000
                                                              ===========


(7) NET CHARGE FOR BUSINESS DISPOSITIONS, ASSET IMPAIRMENTS AND RESTRUCTURING
    ACTIVITIES

     The components of the net charge for business dispositions, asset
impairments and restructuring activities in 1998 are as follows:


                                                           
Bankruptcy of majority-owned subsidiary.....................  $   (64,408)
Gain on sale of CDIL product line...........................   (1,232,492)
Asset impairments and restructuring activities at CDIL......      810,486
Impairment of Orgenics' goodwill............................    5,000,000
Impairment of intangible assets relating to certain
  nutritional supplement lines..............................      858,751
                                                              -----------
                                                              $ 5,372,337
                                                              ===========


  (a) Bankruptcy of Majority-Owned Subsidiary

     As of December 31, 1998, Inverness owned a 61.7% interest in Jmar, a
distributor of certain consumer products. In December 1998, the Jmar Board of
Directors (with Inverness' approval) voted to file for Chapter 7 bankruptcy. In
February 1999, the bankruptcy petition was filed. Innovations recorded income of
approximately $64,000 in 1998, representing the extinguishment of certain Jmar
liabilities, net of assets written-off.

  (b) Sale of CDIL Product Line

     On September 30, 1998, CDIL signed an agreement with Trinity Biotech, Ltd.
(Trinity) whereby CDIL agreed to sell certain assets pertaining to its
infectious disease diagnostic business, primarily inventories, equipment and its
ongoing business. In return for these assets, CDIL received consideration of
approximately $2,300,000 consisting of 555,731 shares of Inverness common stock,
300,000 shares of Theratase plc stock and $230,000 in cash. Innovations recorded
a gain on the sale of the business of approximately $1,232,000 in 1998.

     After the sale of these assets, Innovations reorganized the remaining
business conducted by CDIL during the fourth quarter of 1998. As a result of
this strategic reorganization, CDIL's activities consist of manufacturing
certain consumer products for other Innovations subsidiaries, primarily IMI.
CDIL's activities no longer include the manufacture of disease diagnostic
products for unrelated customers. In connection with this strategic
reorganization, CDIL incurred expenses of approximately $268,000

                                      XF-18
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

pertaining to severance, outplacement and related obligations, of which $69,000
and $199,000 were paid during 1998 and 1999, respectively. CDIL also wrote off
the net book value of certain fixed assets and leasehold improvements relating
to the discontinued activities for which it has no alternative future use. The
total asset impairment charge was approximately $437,000. The balance of this
charge relates to legal and advisory fees related to the reorganization.

  (c) Impairment of Orgenics' Goodwill

     During the fourth quarter of 1998, Innovations determined that Orgenics'
goodwill had suffered an impairment of value (see Note 2(f)). Orgenics'
declining financial performance and short-term outlook (both earnings and gross
cash flows) suggested that impairment had occurred. Innovations performed an
impairment test using a discounted future cash flow model and recorded an
impairment charge of $5,000,000 in 1998, which fully eliminated the Orgenics'
goodwill balance.

  (d) Impairment of Intangible Assets Related to Certain Nutritional Supplement
Lines

     Goodwill and trademarks acquired in connection with the purchase of the
nutritional supplement lines are being amortized over 25 years. During 1998,
Innovations recorded an impairment charge of approximately $859,000 relating to
the intangible assets of one discontinued nutritional supplement line (see Note
2(f)). The impairment charge represents the remaining net book value of the
goodwill and trademark values assigned to this product line.

(8) RELATED PARTY TRANSACTIONS

  (a) Due to Inverness and Affiliated Companies

     The amounts for "Due to Inverness and affiliated companies" are comprised
of the following:



                                                       DECEMBER 31,
                                                 ------------------------    MARCH 31,
                                                    1999          2000          2001
                                                 ----------    ----------    ----------
                                                                    
Due to Inverness...............................  $2,767,857    $3,295,182    $4,324,918
Due to IME, an Inverness subsidiary............   1,016,871       913,022       785,320
Due to Inverness Medical Limited (IML), an
  Inverness subsidiary.........................   1,448,137     1,089,123     1,497,816
                                                 ----------    ----------    ----------
                                                 $5,232,865    $5,297,327    $6,608,054
                                                 ==========    ==========    ==========


     The amounts "Due to Inverness" and "Due to IME" mostly represent funding,
net of repayments, from the respective affiliated entities to Innovations
entities or businesses. The amount due to IML relates to product purchases.
Innovations purchased products from IML in Scotland totaling approximately
$1,256,202, $3,215,106, $1,626,000 and $880,000 in 1999, 2000, and the three
months ended March 31, 2000 and 2001, respectively. There were no products
purchased from IML during 1998.

     The combined statements of operations include expenses, which are allocated
to IMI by Inverness. These allocations include, among other things, support
services such as financial, computer, legal, sales, marketing, customer support
and accounting, as well as rent and administrative costs (see Note 1). IMI
recorded expenses of approximately $2,443,000, $4,176,000, $3,976,000,
$1,027,000 and $1,071,000 relating to these allocations in 1998, 1999, 2000 and
the three months ended March 31, 2000 and 2001, respectively, which it believes
approximates arm's-length costs. The allocated expenses, which are included

                                      XF-19
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

in the respective captions in the accompanying combined statements of
operations, are made up of the following:



                                                                            THREE MONTHS ENDED
                                         YEARS ENDED DECEMBER 31,                MARCH 31,
                                   ------------------------------------   -----------------------
                                      1998         1999         2000         2000         2001
                                   ----------   ----------   ----------   ----------   ----------
                                                                        
Cost of sales....................  $   85,000   $  200,000   $  261,000   $   62,000   $   85,000
Selling, general and
  administrative.................   2,266,000    3,860,000    3,678,000      935,000      976,000
Research and development.........      92,000      116,000       37,000       30,000       10,000
                                   ----------   ----------   ----------   ----------   ----------
  Total allocated expenses.......  $2,443,000   $4,176,000   $3,976,000   $1,027,000   $1,071,000
                                   ==========   ==========   ==========   ==========   ==========


     At December 31, 1999 and 2000 and March 31, 2001, IMI owed Inverness
approximately $535,000, $1,802,000 (including a dividend payable of $1,187,000;
see Note 11) and $2,316,000, respectively, relating to Inverness services and
expenses, which are included in the amounts for "Due to Inverness".

  (b) Notes Payable to Inverness

     On February 19, 1997, in connection with the purchase of the nutritional
supplement product line from American Home Products, IMI borrowed $2,000,000
from Inverness. Interest is payable at an annual rate of 6.5%. Interest expense
on this note was $129,000, $130,000, $130,000, $32,000 and $32,000 during 1998,
1999, 2000, and the three months ended March 31, 2000 and 2001, respectively.
This note is subordinate to all bank debt and cannot be repaid until all bank
debt is repaid in December 2003.

     At December 31, 1999 and 2000 and March 31, 2001, CDIL had note payable
balances plus accrued interest totaling $2,044,000, $2,208,000 and $2,057,000,
respectively, due to Inverness under a note payable agreement dated July 1,
1997. Interest is accrued at an annual rate of 9%. Interest expense on this note
was $180,000, $119,000, $165,000, $31,000 and $49,000 during 1998, 1999, 2000,
and the three months ended March 31, 2000 and 2001, respectively. This note is
subordinate to all bank debt and cannot be repaid until all bank debt is repaid.

  (c) Transition Services Agreement with Inverness

     Prior to the closing of the Agreement, Inverness and Innovations will enter
into a transition services agreement (the Transition Services Agreement),
whereby each party will provide transition services to the other for an
agreed-upon period of time and service fee. Transition services will include,
but will not be limited to, operational services provided by IMI and CDIL to
Inverness related to certain diabetes products and by IME to Innovations related
to women's health products.

                                      XF-20
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(9) NOTES PAYABLE

     Innovations had the following debt outstanding:



                                                     DECEMBER 31,
                                              --------------------------     MARCH 31,
                                                 1999           2000           2001
                                              -----------    -----------    -----------
                                                                   
Term loan -- IMI (Note 4(b))................  $26,500,000    $21,023,862    $18,789,362
Revolving line of credit -- IMI (Note
  4(b)).....................................    3,226,050             --             --
Bank debt -- Orgenics.......................    1,716,000        868,000        621,000
Mortgage loan...............................      505,782        365,201        287,637
                                              -----------    -----------    -----------
                                               31,947,832     22,257,063     19,697,999
Less: Current portion.......................    6,864,104      8,850,888      7,943,846
                                              -----------    -----------    -----------
                                              $25,083,728    $13,406,175    $11,754,153
                                              ===========    ===========    ===========


     As discussed in Note 1, upon the closing of the transaction contemplated in
the Agreement and related agreements, Inverness will assume or discharge all
third-party debt outstanding, as reflected in the accompanying unaudited pro
forma balance sheet as of March 31, 2001. Each of the debt instruments listed is
discussed in the notes to the combined financial statements as referenced,
except for the following:

  (a) Bank Debt -- Orgenics

     The outstanding balance of Orgenics' bank debt is collateralized by certain
of Orgenics' assets. The notes bear interest at rates ranging from 5.6% to 8.6%
and are payable monthly through 2002.

  (b) Mortgage Loan

     During 1999, CDIL financed the purchase of one of its manufacturing
buildings through a mortgage loan (the CDIL Mortgage) with the seller. The
outstanding balance of the CDIL Mortgage is collateralized by the building. The
CDIL Mortgage bears interest at 6% and is payable semiannually through 2003.

  (c) Maturities of Long-term Debt

     Maturities of long-term debt and obligations at December 31, 2000 are as
follows:


                                                           
2001........................................................  $ 8,850,888
2002........................................................    6,313,935
2003........................................................    7,092,240
                                                              -----------
                                                              $22,257,063
                                                              ===========


                                      XF-21
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             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(10) COMMITMENTS AND CONTINGENCIES

  (a) Operating Leases

     Innovations has operating lease commitments for certain of its facilities
and equipment that expire through 2026. The following schedule outlines future
minimum annual rental payments under these leases at December 31, 2000:


                                                           
2001........................................................  $  558,000
2002........................................................     565,000
2003........................................................     383,000
2004........................................................     270,000
2005........................................................     270,000
Thereafter..................................................   1,922,000
                                                              ----------
                                                              $3,968,000
                                                              ==========


     Rent expense relating to these operating leases was approximately $775,000,
$688,000, $610,000, $169,000 and $155,000 in 1998, 1999, 2000, and the three
months ended March 31, 2000 and 2001, respectively.

  (b) Industrial Development Authority of Ireland Grants

     Prior to the acquisition of CDIL, CDIL received certain grants from the
Industrial Development Authority of Ireland (the IDA). As a condition to
retaining the grants, the IDA requires CDIL to maintain a certain number of
employees in Ireland. The IDA also prohibits CDIL from disposing of assets or
terminating business activities that were funded by the grants within 10 years
of such grants. Due to the sale of its infectious disease diagnostic business
(see Note 7(b)), CDIL may not be in compliance with the IDA requirements. As a
result, the IDA could require CDIL to repay capital expenditure and revenue
grants totaling 307,770 Irish pounds (approximately $368,000 at December 31,
2000). The IDA historically has not pursued its right to recoup these grants
from CDIL and, as of December 31, 2000, CDIL management believes that the IDA is
unlikely to do so, provided that CDIL does not terminate its operations in
Ireland. Accordingly, as management believes that repayment is not probable,
CDIL has not provided for a potential liability for the repayment of these
grants. If the IDA did pursue its rights to recoup these grants, it would not
have a material adverse effect on Innovations or CDIL.

  (c) Legal Proceedings

     Because of the nature of its business, Innovations may from time to time be
subject to consumer product claims or various other lawsuits arising in the
ordinary course of its business and expects that this will continue to be the
case in the future. These lawsuits generally seek damages, sometimes in
substantial amounts, for personal injuries or other commercial claims. As part
of the Agreement and related agreements, Inverness will retain liability arising
from litigation pertaining to diabetes-related matters and Innovations will
assume liabilities relating to the following legal proceedings:

     On January 3, 2000, Becton, Dickinson and Company (Becton Dickinson) (see
Note 10(e)) filed suit against Inverness alleging that certain pregnancy and
ovulation test kits sold by Innovations infringe two U.S. patents. Becton
Dickinson has since lost its rights to one of the two U.S. patents and is no
longer asserting claims for infringement of that patent. The case is now going
forward to trial. While a final ruling against Innovations, as successor to
Inverness, could have a material adverse impact on its sales, operations or
financial performance, Innovations believes that it has strong defenses and
intends to defend this litigation vigorously.

                                      XF-22
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             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     In April 1998, Abbott Laboratories (Abbott) commenced a patent infringement
lawsuit against Inverness and Princeton BioMeditech Corporation (PBM) (see Note
10(d)). Abbott claims that certain of Inverness' pregnancy detection and
ovulation prediction products infringe patents that Abbott claims to have rights
to in the United States. Abbott is seeking an order finding that Inverness and
PBM infringe the patents and enjoining such infringement, reimbursement of
certain damages and a recall of all of Inverness' existing products found to
infringe such patents. Inverness and PBM moved for summary judgment on their
defense that the Abbott patents are invalid, and the court granted partial
summary judgment, holding that certain key claims in Abbott's patents are
invalid as a matter of law. The court refused to grant summary judgment on
Abbott's claims of infringement or Inverness' remaining claims of invalidity,
which will now go forward to trial. As a successor to Inverness, Innovations
believes that Abbott's claims will be proven to be without merit and will
continue to defend the case vigorously. A final ruling of this suit against
Innovations could have a material adverse impact on Innovations' sales,
operations or financial performance.

     In May 1999, Intervention, Inc., a California corporation, filed separate
suits against Inverness and certain of its private label customers and
competitors alleging that the defendants' labeling on their home pregnancy tests
is misleading as to the level of accuracy under certain conditions. The
plaintiff seeks restitution of profits on behalf of the general public,
injunctive relief and attorneys' fees. Inverness is defending its private label
customers under its agreements with these customers and Innovations has agreed
to assume this obligation upon closing of the split-off and merger. The matter
is scheduled for trial in the fall of 2001. Innovations believes that the
actions are without merit and intends to continue Inverness' vigorous defense.
Innovations does not believe that an adverse ruling against it would have a
material adverse impact on its sales, operations or financial performance.

     On January 22, 1999, in connection with CDIL's sale of its infectious
disease business (see Note 7(b)), Cambridge Biotech Corporation (CBC) and
Cambridge Affiliate (see Note 5) filed suit against Inverness, Inverness' chief
executive officer, CDIL, Trinity and Pasteur Sanofi Diagnostic (Pasteur)
alleging, among other things, that the sale of the business was not properly
authorized and, as a result, CBC may lose the benefit of certain patent licenses
from Pasteur. CBC is requesting that the sale agreement be declared null and
void, the license between Pasteur and CBC be declared to be in full force and
that it be awarded damages caused by the actions of Inverness, its chief
executive officer and Pasteur. On January 25, 1999, the Court denied CBC's
motion. The parties are currently conducting discovery. Inverness filed an
answer denying the material allegations of the complaint along with a
counterclaim to declare its actions lawful and valid and to redress harm that
may result if the court invalidates the sale of CDIL's diagnostics business to
Trinity, despite CBC's representations to Inverness that it had the right to
make such a sale. Innovations has agreed to assume Inverness' liabilities under
this litigation after the closing of the split-off and merger. While a final
ruling against Inverness or CDIL could have a material adverse impact on its
sales, operations or financial performance, Innovations believes that it has
strong defenses and intends to defend the action vigorously.

  (d) Agreement with PBM

     On August 6, 1997, Innovations and PBM, along with wholly owned
subsidiaries of each, formed a limited liability company, PBM-Selfcare LLC (the
LLC), in which each party owns a 50% interest, and entered into a joint venture
and a series of related technology transfer and licensing agreements to develop
a comprehensive strategy to commercially exploit products and related
intellectual property in the area of pregnancy detection and ovulation
prediction (collectively, the Joint Venture Agreement). Under the Joint Venture
Agreement, PBM contributed intellectual property and Innovations agreed to fund
up to $2,000,000 on an as-needed basis to cover expenses incurred by the LLC in
enforcing the rights of the LLC in the intellectual property. To date,
Innovations has not incurred material costs pursuant to the Joint Venture
Agreement.
                                      XF-23
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             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  (e) License Agreements with Becton Dickinson

     Innovations entered into two women's health-related patent license
agreements with Becton Dickinson, effective from April 1, 1998 until the date on
which the last of the patents expire. The agreements grant Innovations the right
to manufacture and sell products incorporating certain patented technology as
set forth in the agreement. Innovations was to pay royalties on the net sales of
products incorporating the licensed technology at a rate of 6% until December
31, 1998, 6.25% on the first $108,000,000 of net sales beginning January 1,
1999, and 5.25% thereafter, extending through the expiration of the patents.
During 1999 and 2000, Innovations paid royalties of approximately $1,001,000 and
$576,000, respectively, under this agreement and had approximately $416,000
accrued at December 31, 2000. In December 1999, Innovations gave Becton
Dickinson a written notice to terminate these license agreements effective
January 1, 2000, prior to the expiration of the patents. As a result of this
early termination, Becton Dickinson has filed suit against Innovations (see Note
10(c)).

  (f) Orgenics Royalty Commitment

     Orgenics has received funding under programs sponsored by the Chief
Scientist of the Ministry of Industry and Commerce of Israel (the Chief
Scientist) for the support of its research and development projects. In the
event that development of the products in which the Chief Scientist participates
is successful, Orgenics will be obligated to pay royalties at the rate of 2.0%
to 3.5% of the sales of products developed with funds provided by the Chief
Scientist, up to an amount equal to 100% of the Chief Scientist's research and
development grants to such projects. The balance of the maximum contingent
royalty as of December 31, 2000 and March 31, 2001 was approximately $2,200,000.
Orgenics does not have any liability to the State of Israel for amounts received
in support of unsuccessful programs or unsaleable products. During 1998, 1999,
2000, and the three months ended March 31, 2000 and 2001, Orgenics paid
approximately $170,000, $196,000, $206,000, $43,000 and $44,000, respectively,
in royalties to the Chief Scientist.

  (g) Orgenics Severance Obligations

     Israeli law provides that employers have certain severance obligations to
employees in Israel. Orgenics' liability for severance pay pursuant to such law
is provided by managers' insurance policies and by severance pay funds.
Severance expenses were approximately $166,000, $156,000, $68,000, $33,000 and
$48,000 in 1998, 1999, 2000, and the three months ended March 31, 2000 and 2001,
respectively. The balance of accrued severance was approximately $170,000 and
$165,000 at December 31, 2000 and March 31, 2001, respectively.

     France has a government-run mandatory pension plan to which contributions
are made monthly by both the employee and employer based on the employee's gross
monthly salary. Orgenics' liability for its employees in France is fully covered
by these contributions. In addition, pursuant to industry employment agreements,
a lump-sum severance is payable upon retirement to employees still in the
service of Orgenics' French subsidiary at the date of retirement. There were no
such obligations outstanding as of December 31, 2000 and March 31, 2001.

  (h) Purchase Agreement with Kendall Sherwood

     Can-Am has an exclusive purchase agreement with Kendall Sherwood, a syringe
and a lancet manufacturer, through the year 2002. Pursuant to the terms of the
agreement and associated amendments, Can-Am has minimum purchase commitments of
$9,777,000 and $10,948,000 in 2001 and 2002, respectively. Can-Am did not meet
the minimum purchase requirements during 2000, but received a waiver from
Kendall Sherwood.

                                      XF-24
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(11) STOCKHOLDERS' EQUITY

  (a) Stock Options

     In 2001, subject to Inverness stockholder approval, Innovations adopted the
2001 Stock Option and Incentive Plan (the 2001 Plan) which will allow for the
issuance of -- shares of common stock and other awards. The 2001 Plan would be
administered by a compensation committee in order to select the individuals
eligible to receive awards, determine or modify the terms and conditions of the
awards granted, accelerate the vesting schedule of any award and generally
administer and interpret the 2001 Plan. The key terms of the 2001 Plan permit
the granting of incentive stock options or nonqualified stock options with a
term of up to ten years and the granting of stock appreciation rights,
restricted stock awards, unrestricted stock awards, performance share awards and
dividend equivalent rights. The 2001 Plan also provides for option grants to
nonemployee directors and automatic vesting acceleration of all options and
stock appreciation rights upon a change in control, as will be defined by the
2001 Plan.

     In the following three paragraphs, all amounts pertaining to shares and
share prices, for both the restricted stock sale and option grants, have been
presented on an unaudited pro forma basis, assuming the estimated stock split
described in Note 1.

     On July 31, 2001 Innovations agreed to sell its Chief Executive Officer
1,168,191 shares of restricted common stock at a price of $9.13 per share.
Two-thirds of the restricted stock will vest ratably over 36 months, the
remaining one-third will vest ratably over 48 months. The Chief Executive
Officer will pay for the restricted stock using the proceeds of a five-year
promissory note which, for accounting purposes, will be treated as a
non-recourse note. The note will bear interest at an annual rate of 4.99%; all
interest will be full recourse. In certain circumstances, Innovations may
repurchase unvested shares at cost. Innovations will account for this
arrangement under EITF Issue No. 95-19 Accounting for Stock Compensation
Arrangements with Employee Loan Features under APB Opinion No. 25. (EITF 95-19).

     Innovations has also agreed to grant options to purchase 778,794 shares of
common stock at an exercise price of $6.20 per share to two other key executive
officers. The options expire on January 31, 2002 and permit exercise for cash or
with proceeds from a promissory note which, for accounting purposes, would be
treated as a non-recourse note. The notes would bear interest at the applicable
federal rate for a five-year note in effect during the month of exercise; all
interest would be full recourse. Shares issued upon exercise would vest ratably
over 36 months. Under certain circumstances, Innovations may repurchase unvested
shares at the then fair value. In the event that the executives exercise part,
but not all, of the option prior to expiration of such options, Innovations will
grant a new option with an exercise price of the greater of the then fair value
or that of the original option for the number of unexercised shares from the
original option. Innovations will account for this arrangement under EITF 95-16,
FASB Interpretation No. 44 Accounting for Certain Transactions Involving Stock
Compensation and EITF Issue No. 00-23 Issues Related to Accounting for Stock
Compensation under APB Opinion No. 25 and FASB Interpretation No. 44.

     Innovations has also agreed to grant immediately after the effective date
of the split-off options to purchase an additional 389,397 shares of common
stock to these key executive officers. These options will become exercisable
ratably over four years and will have a life of 10 years. The exercise price
will be $15.00 per share. The options will permit exercise for cash or with
proceeds from a promissory note which will contain terms that are substantially
the same as those described above.

  (b) Employee Stock Purchase Plan

     In 2001 Innovations adopted the 2001 Employee Stock Purchase Plan (the 2001
Stock Purchase Plan) under which eligible employees will be allowed to purchase
shares of Innovations common stock at a discount through periodic payroll
deductions. Purchases may occur at the end of six month offering periods

                                      XF-25
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

at a purchase price equal to 85% of the market value of Innovations common stock
at either the beginning or end of the offering period, whichever is lower.
Innovations may issue up to -- shares of common stock for issuance under this
plan.

  (c) Executive Bonus Plan

     In 2001, Innovations adopted, subject to Inverness stockholder approval,
the Executive Bonus Plan pursuant to which certain key executives of Innovations
may be entitled to receive annual cash bonuses if shares of Innovations common
stock attain certain targeted prices per share. Performance determinations will
be made at the end of each calendar year. Payments under the Executive Bonus
Plan, if any, will be paid in cash in January of the following year. The maximum
amount that may be earned under the Executive Bonus Plan is $21,650,000.

(12) INCOME TAXES

     Innovations' income tax provisions mainly represent those recorded by its
U.S. subsidiary, IMI. For federal and some state income tax filing purposes, the
results of IMI's operations are consolidated with Inverness. IMI has stand-alone
tax filing responsibilities in some states. The tax accounts maintained by IMI
and other Innovations subsidiaries have been computed using the separate return
method. To date, Inverness has been in a net loss position and, accordingly, has
paid virtually no income taxes in any jurisdiction. IMI has a tax sharing
agreement with Inverness, under which Inverness agreed to pay all of IMI's tax
liabilities (or offset these liabilities via Inverness' net operating loss
carryforwards) until IMI's cumulative taxable income (beginning January 1, 1998)
exceeds $15,500,000. Once IMI's cumulative taxable income passes this threshold,
IMI is required to pay a dividend to Inverness equal to 40% of the amount that
exceeds the threshold. During 2000, IMI surpassed the threshold and IMI has
accrued a dividend to Inverness of approximately $1,187,000. Pursuant to this
agreement, IMI records a capital contribution from Inverness for taxes paid by
Inverness or offset via Inverness' net operating loss carryforward.

     The Company provides for income taxes in accordance with the provisions of
SFAS No. 109. Accordingly, a deferred tax asset or liability is determined based
on the difference between the financial statement and tax bases of assets and
liabilities, as measured by the enacted tax rates expected to be in effect when
these differences reverse. The Company's primary temporary differences that give
rise to the deferred asset and liability are nondeductible reserves and accruals
and different lives assigned to the goodwill and trademarks. The income tax
effect of these temporary differences are as follows:



                                                                  DECEMBER 31,
                                                           ---------------------------
                                                               1999           2000
                                                           ------------    -----------
                                                                     
Current deferred tax assets:
  Net operating loss (NOL) carryforwards.................  $  4,242,018    $ 4,703,240
  Nondeductible accruals.................................     1,557,797      2,474,120
  Other temporary differences............................       107,840         85,788
  Valuation allowance....................................    (4,542,018)    (5,003,240)
                                                           ------------    -----------
                                                              1,365,637      2,259,908
Long-term deferred tax liabilities:
  Difference between book and tax bases of intangibles...       719,436      1,120,674
                                                           ------------    -----------
Net deferred tax asset...................................  $    646,201    $ 1,139,234
                                                           ============    ===========


     At December 31, 2000, Innovations has available foreign net operating loss
carryforwards of approximately $23,322,000 to reduce future foreign taxable
income, if any. These carryforwards are subject

                                      XF-26
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

to review and possible adjustment by the appropriate taxing authorities. The
valuation allowance related to Innovations' net operating losses and other
foreign deferred tax assets is due to uncertainty surrounding their
realizeability, as these assets can only be realized via profitable foreign
operations.

     The following tables present the components of Innovations' provision for
income taxes and a reconciliation from the statutory tax rate to Innovations'
effective tax rate:



                                                    1998          1999          2000
                                                 ----------    ----------    ----------
                                                                    
Current --
  Federal......................................  $1,435,439    $2,215,149    $2,533,692
  State........................................     640,945       683,910       851,125
  Foreign......................................     260,841       (98,386)       18,000
                                                 ----------    ----------    ----------
                                                  2,337,225     2,800,673     3,402,817
                                                 ----------    ----------    ----------
Deferred --
  Federal......................................    (178,725)       (5,486)     (377,165)
  State........................................     (55,667)       (1,694)     (115,868)
                                                 ----------    ----------    ----------
                                                   (234,392)       (7,180)     (493,033)
                                                 ----------    ----------    ----------
Total tax provision............................  $2,102,833    $2,793,493    $2,909,784
                                                 ==========    ==========    ==========


     The 1998 tax provision included foreign taxes of approximately $261,000, of
which $214,000 represented capital gains taxes due in Ireland upon the business
disposition described in Note 7(b).



                                                                            THREE MONTHS
                                                         YEAR ENDED            ENDED
                                                        DECEMBER 31,         MARCH 31,
                                                    --------------------    ------------
                                                    1998    1999    2000    2000    2001
                                                    ----    ----    ----    ----    ----
                                                                     
Statutory rate....................................  (34)%    34%     34%     34%     34%
Foreign and divisional losses not benefited.......   20      22      10      11      23
Rate differential on foreign losses...............   --      --      (6)     (8)    (10)
State income taxes, net of federal benefit........    4      10       7       6       9
Non-deductible goodwill...........................   39      11       6       8      13
Other.............................................    1       7       6      14      13
                                                    ---      --      --      --     ---
                                                     30%     84%     57%     65%     82%
                                                    ===      ==      ==      ==     ===


(13) FINANCIAL INFORMATION BY SEGMENT

     Under SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. Innovations' chief operating
decision making group is composed of the chief executive officer and members of
senior management. Innovations' reportable operating segments are Diabetes
(comprised of the historical diabetes care products businesses of Innovations'
subsidiaries), Women's Health (including the nutritional supplements business),
Clinical Diagnostics and Other.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Innovations evaluates
performance based on EBITDA. Revenues are attributed to

                                      XF-27
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

geographic areas based on where the customer is located. Segment information for
the years ended December 31, 1998, 1999, 2000, and the three months ended March
31, 2000 and 2001 is as follows:



                                                  WOMEN'S      CLINICAL
                                   DIABETES       HEALTH      DIAGNOSTICS      OTHER         TOTAL
                                  -----------   -----------   -----------   -----------   -----------
                                                                           
1998
Net product sales to external
  customers.....................  $19,604,667   $38,569,362   $15,852,391   $   618,722   $74,645,142
EBITDA..........................      775,900     8,457,622       937,193    (1,161,595)    9,009,120
Depreciation and amortization...    1,018,954     1,901,075     3,498,170       536,173     6,954,372
Interest income:
  External......................        6,360        44,534       103,238            --       154,132
Interest expense:
  External......................    1,368,050     1,705,981       241,000        56,951     3,371,982
  To Inverness..................       90,155       220,154            --            --       310,309
                                  -----------   -----------   -----------   -----------   -----------
  Total interest expense........    1,458,205     1,926,135       241,000        56,951     3,682,291
Provision for income taxes......      988,200       853,792       260,841            --     2,102,833
Net charge on business
  dispositions, asset
  impairments and restructuring
  activities....................           --       858,751     4,577,994       (64,408)    5,372,337
Assets..........................   32,163,480    46,582,536     6,301,200     4,723,255    89,770,471
Expenditures for property, plant
  and equipment.................       35,068       122,497       238,931       158,769       555,265

1999
Net product sales to external
  customers.....................  $28,694,439   $39,518,146   $11,079,702   $     1,561   $79,293,848
EBITDA..........................    4,354,578     6,146,997       902,006      (727,092)   10,676,489
Depreciation and amortization...    1,123,247     2,124,388       545,379       394,285     4,187,299
Interest income:
  External......................          332        10,417        15,000            --        25,749
Interest expense:
  External......................    1,135,112     1,518,055       252,000          (457)    2,904,710
  To Inverness..................           --       192,973            --        60,403       253,376
                                  -----------   -----------   -----------   -----------   -----------
  Total interest expense........    1,135,112     1,711,028       252,000        59,946     3,158,086
Provision for income taxes......    1,786,784       956,709        50,000            --     2,793,493
Assets..........................   35,555,719    44,585,518     5,698,263     4,252,783    90,092,283
Expenditures for property, plant
  and equipment.................       50,147     1,317,709       127,000        31,390     1,526,246

2000
Net product sales to external
  customers.....................  $33,211,109   $40,612,891   $10,681,000   $    24,140   $84,529,140
EBITDA..........................    2,448,363     9,690,493     1,239,000    (1,254,821)   12,123,035
Depreciation and amortization...    1,144,171     2,121,718       398,000       379,392     4,043,281


                                      XF-28
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              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)



                                                  WOMEN'S      CLINICAL
                                   DIABETES       HEALTH      DIAGNOSTICS      OTHER         TOTAL
                                  -----------   -----------   -----------   -----------   -----------
                                                                           
Interest income:
  External......................          868        12,442        15,000            --        28,310
Interest expense:
  External......................    1,083,453     1,344,675       265,000            --     2,693,128
  To Inverness..................           --       130,356            --       164,665       295,021
                                  -----------   -----------   -----------   -----------   -----------
  Total interest expense........    1,083,453     1,475,031       265,000       164,665     2,988,149
Provision for income taxes......    1,128,540     1,763,244        18,000            --     2,909,784
Assets..........................   32,727,300    46,440,591     6,423,591     3,949,423    89,540,905
Expenditures for property, plant
  and equipment.................       16,179       500,657       246,000        77,514       840,350

THREE MONTHS ENDED MARCH 31,
  2000
Net product sales to external
  customers.....................  $ 7,496,690   $10,888,025   $ 2,567,000   $        --   $20,951,715
EBITDA..........................      572,824     2,936,569        26,000      (196,169)    3,339,224
Depreciation and amortization...      286,979       521,528       133,000        95,155     1,036,662
Interest income:
  External......................          122           602         5,000            --         5,724
Interest expense:
  External......................      287,095       362,765        59,000            --       708,860
  To Inverness..................           --        32,411            --        30,723        63,134
                                  -----------   -----------   -----------   -----------   -----------
  Total interest expense........      287,095       395,176        59,000        30,723       771,994
Provision for income taxes......      382,742       598,001        11,000            --       991,743
Assets..........................   35,549,425    46,809,470     5,604,526     4,173,542    92,136,963
Expenditures for property, plant
  and equipment.................           --       147,400        15,000         7,976       170,376
THREE MONTHS ENDED MARCH 31,
  2001
Net product sales to external
  customers.....................  $ 6,814,542   $ 9,192,367   $ 2,655,000   $        --   $18,661,909
EBITDA..........................       43,907     2,535,287       118,000      (334,420)    2,362,774
Depreciation and amortization...      299,452       536,450       115,000       146,743     1,097,645
Interest income:
  External......................           27        39,538            --         3,000        42,565
Interest expense:
  External......................      184,517       227,113            --        64,000       475,630
  To Inverness..................           --        32,055            --        49,356        81,411
                                  -----------   -----------   -----------   -----------   -----------
  Total interest expense........      184,517       259,168            --       113,356       557,041
Income taxes....................      225,785       352,769         1,000            --       579,554
Assets..........................   33,814,020    47,455,050     5,477,208     3,909,302    90,655,580
Expenditures for property, plant
  and equipment.................        6,118       259,299       102,000        19,132       386,549


                                      XF-29
   221
              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)



                                                                               THREE MONTHS ENDED
                                          YEAR ENDED DECEMBER 31,                   MARCH 31,
                                  ---------------------------------------   -------------------------
                                     1998          1999          2000          2000          2001
                                  -----------   -----------   -----------   -----------   -----------
                                                                           
RECONCILIATION OF EBITDA TO NET
  (LOSS) INCOME
EBITDA..........................  $ 9,009,120   $10,676,489   $12,123,035   $ 3,339,224   $ 2,362,774
Depreciation and amortization
  expense.......................   (6,954,372)   (4,187,299)   (4,043,281)   (1,036,662)   (1,097,645)
Interest expense................   (3,682,291)   (3,158,086)   (2,988,149)     (771,994)     (557,041)
Income taxes....................   (2,102,833)   (2,793,493)   (2,909,784)     (991,743)     (579,554)
Other noncash items.............   (5,329,303)        2,093            --            --            --
                                  -----------   -----------   -----------   -----------   -----------
  Net (loss) income.............  $(9,059,679)  $   539,704   $ 2,181,821   $   538,825   $   128,534
                                  ===========   ===========   ===========   ===========   ===========
REVENUE BY GEOGRAPHIC AREA
United States...................  $57,421,719   $66,301,776   $71,650,682   $17,876,175   $15,638,825
France..........................    4,362,890     3,247,000     2,778,000       789,000       734,000
Other...........................   12,860,533     9,745,072    10,100,458     2,286,540     2,289,084
                                  -----------   -----------   -----------   -----------   -----------
                                  $74,645,142   $79,293,848   $84,529,140   $20,951,715   $18,661,909
                                  ===========   ===========   ===========   ===========   ===========




                                                               DECEMBER 31,
                                                         ------------------------    MARCH 31,
                                                            1999          2000          2001
                                                         ----------    ----------    ----------
                                                                            
LONG-LIVED TANGIBLE ASSETS BY GEOGRAPHIC AREA
Ireland................................................  $1,396,123    $1,568,506    $1,555,844
Israel.................................................   1,164,000     1,135,000     1,161,750
United States..........................................     480,300       345,331       291,467
Other..................................................     172,036       133,763       121,939
                                                         ----------    ----------    ----------
                                                         $3,212,459    $3,182,600    $3,131,000
                                                         ==========    ==========    ==========


(14) VALUATION AND QUALIFYING ACCOUNTS

     The Company has established reserves against accounts receivable for
doubtful accounts, product returns, discounts and other allowances. The activity
in the table below includes all accounts receivable reserves. Provisions for
doubtful accounts are recorded as a component of selling, general and
administrative expenses. Provisions for returns, discounts and other allowances
are charged against net product sales. The following table sets forth activity
in the Company's accounts receivable reserve account:



                                  BALANCE AT                       AMOUNTS         BALANCE AT
                                 BEGINNING OF                      CHARGED           END OF
                                    PERIOD       PROVISION     AGAINST RESERVES      PERIOD
                                 ------------    ----------    ----------------    ----------
                                                                       
Year ended December 31, 1998...   $1,550,469     $3,431,024      $(3,044,635)      $1,936,858
Year ended December 31, 1999...    1,936,858      8,742,899       (8,159,587)       2,520,170
Year ended December 31, 2000...    2,520,170      7,602,943       (7,320,930)       2,802,183
Three months ended March 31,
  2001.........................    2,802,183      1,942,849       (2,152,096)       2,592,936


(15) DISCONTINUED OPERATIONS (UNAUDITED)

     Pursuant to the Agreement and related agreements, Innovations will transfer
to Inverness those entities or businesses that conduct business in the diabetes
segment, principally the Can-Am subsidiary of IMI and the diabetes business of
IMB. As discussed in Note 1, the accompanying unaudited pro forma

                                      XF-30
   222
              INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

financial statements reflect the transfer of the diabetes businesses by
Innovations as discontinued operations.

     The net assets of the discontinued operations in the accompanying unaudited
pro forma balance sheets are composed of the following:



                                                        DECEMBER 31, 2000    MARCH 31, 2001
                                                        -----------------    --------------
                                                                       
Current assets........................................    $  8,853,747        $  8,096,639
Property, plant and equipment, net....................          59,919             133,628
Other non-current assets..............................      24,139,583          25,852,827
                                                          ------------        ------------
                                                            33,053,249          34,083,094
                                                          ------------        ------------
Current liabilities...................................      (8,006,491)         (9,345,402)
Long-term liabilities.................................      (5,885,688)         (5,322,361)
                                                          ------------        ------------
                                                           (13,892,179)        (14,667,763)
                                                          ------------        ------------
Net assets of discontinued operations.................    $ 19,161,070        $ 19,415,331
                                                          ============        ============


     The accompanying unaudited pro forma statements of operations include
(losses) income from discontinued operations as follows:



                                         DECEMBER 31,                        MARCH 31,
                            ---------------------------------------   -----------------------
                               1998          1999          2000          2000         2001
                            -----------   -----------   -----------   ----------   ----------
                                                                    
Net product sales.........   19,960,170    28,709,993    33,478,566    7,496,691    6,849,976
Cost of sales.............   13,842,920    18,644,151    23,108,414    5,073,439    5,033,851
                            -----------   -----------   -----------   ----------   ----------
     Gross profit.........    6,117,250    10,065,842    10,370,152    2,423,252    1,816,125
Operating expenses........    6,664,664     6,956,967     8,755,407    2,051,582    1,981,722
                            -----------   -----------   -----------   ----------   ----------
     Operating (loss)
       income.............     (547,414)    3,108,875     1,614,745      371,670     (165,597)
Other expenses, net.......   (1,346,694)   (1,139,002)   (1,083,989)    (284,828)    (189,821)
                            -----------   -----------   -----------   ----------   ----------
     (Loss) income before
       income taxes.......   (1,894,108)    1,969,873       530,756       86,842     (355,418)
Provision for income
  taxes...................      988,200     1,786,784     1,128,540      382,742      225,785
                            -----------   -----------   -----------   ----------   ----------
     Net (loss) income
       from discontinued
       operations.........  $(2,882,308)  $   183,089   $  (597,784)  $ (295,900)  $ (581,203)
                            ===========   ===========   ===========   ==========   ==========


                                      XF-31
   223

     Until 25 days after the date of the split-off all dealers effecting
transactions in the registered securities, whether or not participating in this
distribution, may be required to deliver a prospectus.

     No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

                      INVERNESS MEDICAL INNOVATIONS, INC.
   224

                                                                         ANNEX 1

                   AGREEMENT AND PLAN OF SPLIT-OFF AND MERGER

                            DATED AS OF MAY 23, 2001

                                     AMONG

                               JOHNSON & JOHNSON,

                           SUNRISE ACQUISITION CORP.

                                      AND

                       INVERNESS MEDICAL TECHNOLOGY, INC.
   225

                               TABLE OF CONTENTS



                                                                             PAGE
                                                                             ----
                                                                       
                                    ARTICLE I
                          THE SPLIT-OFF AND THE MERGER
SECTION 1.01.  The Merger..................................................    2
SECTION 1.02.  Closing.....................................................    2
SECTION 1.03.  Effective Time..............................................    2
SECTION 1.04.  Effects of the Merger.......................................    2
SECTION 1.05.  Certificate of Incorporation and By-laws....................    2
SECTION 1.06.  Directors...................................................    2
SECTION 1.07.  Officers....................................................    2

                                   ARTICLE II

                     EFFECT OF THE SPLIT-OFF AND THE MERGER
                           ON THE CAPITAL STOCK OF THE
               CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01.  Effect on Capital Stock.....................................    3
SECTION 2.02.  Exchange of Certificates....................................    3

                                   ARTICLE III

                              RELATED TRANSACTIONS
SECTION 3.01.  Reorganization Agreements...................................    6
SECTION 3.02.  Ancillary Agreements........................................    6
SECTION 3.03.  Restructuring of Assets and Assumption of Liabilities.......    7

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES
SECTION 4.01.  Representations and Warranties of the Company...............    7
SECTION 4.02.  Representations and Warranties of Parent and Sub............   22

                                    ARTICLE V

                    COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01.  Conduct of Business.........................................   25
SECTION 5.02.  No Solicitation.............................................   28

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS
SECTION 6.01.  Preparation of the Parent Form S-4, the Newco Form S-4, the
               Form 8-A and the Parent Proxy Statement; Stockholders'
               Meeting.....................................................   30
SECTION 6.02.  Access to Information; Confidentiality......................   31
SECTION 6.03.  Commercially Reasonable Efforts.............................   31
SECTION 6.04.  Sunrise Options; Sunrise Warrants...........................   32
SECTION 6.05.  Indemnification, Exculpation and Insurance..................   33
SECTION 6.06.  Fees and Expenses...........................................   34
SECTION 6.07.  Public Announcements........................................   35
SECTION 6.08.  Affiliates..................................................   35
SECTION 6.09.  Securities Listings.........................................   35
SECTION 6.10.  Tax Treatment...............................................   35
SECTION 6.11.  Stockholder Litigation......................................   36


                                       1-i
   226



                                                                             PAGE
                                                                             ----
                                                                       
SECTION 6.12.  Employee Matters............................................   36
SECTION 6.13.  Restructuring Agreement.....................................   36

                                   ARTICLE VII

                              CONDITIONS PRECEDENT
SECTION 7.01.  Conditions to Each Party's Obligation to Effect the
               Split-Off and the Merger....................................   37
SECTION 7.02.  Conditions to Obligations of Parent and Sub.................   37
SECTION 7.03.  Conditions to Obligation of the Company.....................   38
SECTION 7.04.  Frustration of Closing Conditions...........................   39

                                  ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01.  Termination.................................................   39
SECTION 8.02.  Effect of Termination.......................................   40
SECTION 8.03.  Amendment...................................................   40
SECTION 8.04.  Extension; Waiver...........................................   40

                                   ARTICLE IX

                               GENERAL PROVISIONS
SECTION 9.01.  Nonsurvival of Representations and Warranties...............   40
SECTION 9.02.  Notices.....................................................   40
SECTION 9.03.  Definitions.................................................   41
SECTION 9.04.  Interpretation..............................................   42
SECTION 9.05.  Counterparts................................................   43
SECTION 9.06.  Entire Agreement; No Third-Party Beneficiaries..............   43
SECTION 9.07.  Governing Law...............................................   43
SECTION 9.08.  Assignment..................................................   43
SECTION 9.09.  Specific Enforcement........................................   43
SECTION 9.10.  Severability................................................   43
Appendix  Index of Defined Terms
Exhibit A  Form of Affiliate Letter
Annex A  Form of Restructuring Agreement
Annex B  Form of Tax Allocation Agreement
Annex C  Form of Post-Closing Covenants Agreement
Annex D  Form of License Agreement
Annex E  Form of Settlement Agreement and Release of Claims


                                       1-ii
   227

     AGREEMENT AND PLAN OF SPLIT-OFF AND MERGER (this "Agreement") dated as of
May 23, 2001, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"),
SUNRISE ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and INVERNESS MEDICAL TECHNOLOGY, INC., a Delaware
corporation (the "Company").

     WHEREAS Parent and Company wish to effect Parent's acquisition of the
Sunrise Business of the Company through a merger of the Company with Sub (the
"Merger") on the terms and conditions set forth herein;

     WHEREAS the Board of Directors of the Company has approved an Agreement and
Plan of Restructuring in the form of Annex A attached hereto with such changes
as may be permitted under Section 6.13 (the "Restructuring Agreement"), which
will be entered into prior to the Effective Time (as defined in Section 1.03),
pursuant to which, prior to the Effective Time, (a) all the assets of the
Company primarily related to the Clinical Diagnostics Business, the Nutritional
Supplements Business and the Women's Health Business (each as defined in the
Restructuring Agreement) will be transferred to a wholly owned subsidiary of the
Company ("Newco") or one or more of Newco's subsidiaries and (b) Newco or one or
more of the Subsidiaries will assume the Assumed Liabilities (as defined in the
Restructuring Agreement);

     WHEREAS upon the Split-Off (as defined below) it is intended that the
Company will own only the Sunrise Business;

     WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, the holders of shares of common stock, par
value $.001 per share, of the Company ("Company Common Stock") will receive a
distribution of all the shares of common stock, par value $.001 per share, of
Newco ("Newco Common Stock") in consideration for the redemption of a portion of
their shares of Company Common Stock (the "Split-Off");

     WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time Sub will merge with and into the Company and
each issued and outstanding share of Company Common Stock, other than Company
Common Stock owned by Parent, Sub or the Company, will be converted into the
right to receive (a) shares of common stock, par value $1.00 per share, of
Parent ("Parent Common Stock") and (b) shares of Newco Common Stock;

     WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable this Agreement and the transactions
contemplated hereby, and the sole stockholder of Sub has approved this Agreement
and the transactions contemplated hereby;

     WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, certain Company executives have entered into separate consulting and
non-competition agreements with Parent (collectively, the "Non-Competition
Agreements");

     WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and the Company will enter into a stock option agreement (the
"Option Agreement"), pursuant to which the Company will grant Parent the option
to purchase shares of Company Common Stock, upon the terms and subject to the
conditions set forth therein;

     WHEREAS, for Federal income tax purposes, it is intended (a) by the Company
that the distribution of Newco Common Stock in connection with the transactions
contemplated by this Agreement shall qualify, as to the stockholders of the
Company, as a transaction described in Section 355 of the Internal Revenue Code
of 1986, as amended (the "Code") (it being understood and agreed that such
qualification shall not be a condition to the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements and that
Parent shall have no obligation to cause such distribution to so qualify) and
(b) by the parties that (i) the Merger shall qualify as a "reorganization"

                                       1-1
   228

within the meaning of Section 368(a) of the Code, as amended (the "Code") and
(ii) this Agreement constitutes a plan of reorganization; and

     WHEREAS Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Split-Off and the Merger.

     NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:

                                   ARTICLE I

                          THE SPLIT-OFF AND THE MERGER

     SECTION 1.01. The Merger.  Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time. Following the Effective Time, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.

     SECTION 1.02. Closing.  The closing of the Split-Off and the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than those
conditions that by their terms are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions), at the offices of Goodwin
Procter LLP, 53 State Street, Boston, MA 02109, unless another time, date or
place is agreed to in writing by the parties hereto. The date on which the
Closing occurs is referred to in this Agreement as the "Closing Date".

     SECTION 1.03. Effective Time.  Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and, as soon as practicable on or after the Closing Date,
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such other time, if
any, as Parent and the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time").

     SECTION 1.04. Effects of the Merger.  The Merger shall have the effects set
forth in Section 259 of the DGCL.

     SECTION 1.05. Certificate of Incorporation and By-laws.  (a) The Amended
and Restated Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, except that the first sentence of
paragraph 1 thereof shall be amended to read in its entirety as follows: "The
name of the Corporation is Sunrise Acquisition Corp." Notwithstanding any
provisions herein to the contrary, Parent may cause the Certificate of
Incorporation of Sub to be amended to increase the number of shares of
authorized capital stock.

     (b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.

     SECTION 1.06. Directors.  The directors of Sub immediately prior to the
effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

     SECTION 1.07. Officers.  The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

                                       1-2
   229

                                   ARTICLE II

                     EFFECT OF THE SPLIT-OFF AND THE MERGER
                          ON THE CAPITAL STOCK OF THE
               CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

     SECTION 2.01. Effect on Capital Stock.  As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:

          (a) Capital Stock of Sub.  Each issued and outstanding share of
     capital stock of Sub shall be converted into and become one validly issued,
     fully paid and nonassessable share of common stock, par value $.001 per
     share, of the Surviving Corporation.

          (b) Cancellation of Treasury Stock and Parent-Owned Stock.  Each share
     of Company Common Stock that is owned by the Company as treasury stock, or
     by Parent or Sub, shall automatically be canceled and retired and shall
     cease to exist, and no consideration shall be delivered in exchange
     therefor.

          (c) Conversion of Company Common Stock.  Subject to Section 2.02(e),
     each issued and outstanding share of Company Common Stock (other than
     shares to be canceled in accordance with Section 2.01(b)) shall be
     converted into the right to receive (x) from the Company, 0.20 (the "Newco
     Exchange Ratio") of a validly issued, fully paid and nonassessable shares
     of Newco Common Stock (the "Split-Off Consideration") and (y) from Parent,
     a number of validly issued, fully paid and nonassessable share of Parent
     Common Stock equal to the Parent Exchange Ratio (the "Merger
     Consideration"). The Split-Off Consideration and the Merger Consideration
     are collectively referred to as the "Closing Consideration". For purposes
     of this Agreement, "Parent Exchange Ratio" means the quotient (rounded to
     the nearest 1/10,000) determined by dividing $35.00 by the average (rounded
     to the nearest 1/10,000) of the volume weighted averages (rounded to the
     nearest 1/10,000) of the trading prices of Parent Common Stock on the New
     York Stock Exchange (the "NYSE"), as reported by Bloomberg Financial
     Markets (or such other source to which Parent and the Company may agree),
     for each of the 20 consecutive trading days ending with the third trading
     day immediately preceding the Effective Time. As of the Effective Time, all
     such shares of Company Common Stock shall no longer be outstanding and
     shall automatically be canceled and retired and shall cease to exist, and
     each holder of a certificate which immediately prior to the Effective Time
     represented any such shares of Company Common Stock (each, a "Certificate")
     shall cease to have any rights with respect thereto, except the right to
     receive the Closing Consideration, any dividends or other distributions to
     which such holder is entitled pursuant to Section 2.02(c) and any cash in
     lieu of fractional shares of Parent Common Stock and Newco Common Stock to
     be issued or paid in consideration therefor upon surrender of such
     Certificate in accordance with Section 2.02(e), without interest.
     Notwithstanding the foregoing, if between the date of this Agreement and
     the Effective Time (i) the outstanding shares of Parent Common Stock shall
     have been changed into a different number of shares or a different class,
     by reason of the occurrence of any stock dividend, subdivision,
     reclassification, recapitalization, split, combination, exchange of shares
     or similar transaction or (ii) Parent shall have established the record
     date for such a change and such record date occurs prior to the Effective
     Time, the Parent Exchange Ratio shall be appropriately adjusted to reflect
     such stock dividend, subdivision, reclassification, recapitalization,
     split, combination, exchange of shares or similar transaction.

     SECTION 2.02. Exchange of Certificates.  (a) Exchange Agent.  As of the
Effective Time (i) the Company shall deposit with EquiServe Trust Company or
such other bank or trust company of similar size as may be designated by the
Company and Parent (the "Exchange Agent"), for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates representing the shares of Newco Common
Stock issuable pursuant to Section 2.01 in exchange for outstanding shares of
Company Common Stock and the Company and Newco shall deposit any dividends or
distributions with respect thereto with a record date after the

                                       1-3
   230

Effective Time and an amount of cash representing any cash payments in lieu of
any fractional shares of Newco Common Stock determined in accordance with
Section 2.02(e) and (ii) Parent shall deposit with the Exchange Agent, for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock issuable pursuant to Section 2.01
in exchange for outstanding shares of Company Common Stock, together with any
dividends or distributions with respect thereto with a record date after the
Effective Time and an amount of cash representing any cash payments in lieu of
any fractional shares of Parent Common Stock determined in accordance with
Section 2.02(e) (such shares of Newco Common Stock and Parent Common Stock,
together with the amounts of cash described above, are collectively referred to
as the "Exchange Fund"). The Exchange Agent shall be required to keep all cash
deposited by the Company and Newco, on the one hand, and all cash deposited by
Parent, on the other hand, pursuant to this Section 2.02 in separate accounts.

     (b) Exchange Procedures.  As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a Certificate whose shares were converted into the right to receive
the Closing Consideration pursuant to Section 2.01(c) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
surrendering the Certificates in exchange for certificates representing the
Closing Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock and a certificate representing that number of whole shares
of Newco Common Stock that such holder has the right to receive pursuant to the
provisions of this Article II after taking into account all the shares of
Company Common Stock then held by such holder under all such Certificates so
surrendered, cash in lieu of fractional shares of Parent Common Stock and Newco
Common Stock to which such holder is entitled pursuant to Section 2.02(e) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.02(c), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock and a
certificate representing the proper number of shares of Newco Common Stock may
be issued to a person other than the person in whose name the Certificate so
surrendered is registered, if, upon presentation to the Exchange Agent, such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of Parent Common Stock and
Newco Common Stock to a person other than the registered holder of such
Certificate or establish to the reasonable satisfaction of Parent that such tax
has been paid or is not applicable. No interest will be paid or will accrue on
any cash payable to holders of Certificates pursuant to Section 2.02(c) or
2.02(e).

     (c) Distributions with Respect to Unexchanged Shares.  No dividends or
other distributions with respect to Parent Common Stock or Newco Common Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock and
Newco Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.02(e),
in each case, until the holder of record of such Certificate shall surrender
such Certificate in accordance with this Article II. Following surrender of any
such Certificate, there shall be paid to the record holder of the certificate
representing whole shares of Parent Common Stock and the certificate
representing whole shares of Newco Common Stock distributed in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock and a
fractional share of Newco Common Stock to which such holder is entitled pursuant
to Section 2.02(e) (such amount to be paid out of the appropriate accounts in
the Exchange Fund) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock and to such whole shares of Newco Common Stock
(such amount to be paid out of the appropriate accounts

                                       1-4
   231

in the Exchange Fund) and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to such surrender and a payment date subsequent to such surrender payable
with respect to such whole shares of Parent Common Stock and such whole shares
of Newco Common Stock (such amount to be paid by Parent or Newco, as
applicable).

     (d) No Further Ownership Rights in Company Common Stock.  All shares of
Parent Common Stock and Newco Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to Section 2.02(c) or 2.02(e)) shall be deemed
to have been issued (and paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock previously represented by such Certificates,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II.

     (e) No Fractional Shares.  (i) No certificates or scrip representing
fractional shares of Parent Common Stock or fractional shares of Newco Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution of Parent or Newco, as applicable, shall relate to such
fractional share interests and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent or Newco,
as applicable.

     (ii) In lieu of such fractional share interests, each former holder of
Company Common Stock as of the Effective Time shall be entitled to receive from
Parent or the Company, as applicable, an amount in cash equal to the product
obtained by multiplying (A) the fractional share interest in Parent Common Stock
and the fractional share interest in Newco Common Stock to which such former
holder (after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) (x) in the
case of Parent Common Stock, the per share closing price of Parent Common Stock
on the Closing Date, as reported on the NYSE Composite Transactions Tape, and
(y) in the case of Newco Common Stock, the per share closing price of Newco
Common Stock, as reported on a national securities exchange or The Nasdaq
National Market ("Nasdaq"), as the case may be, on the first full trading day
following the Effective Time. Cash payments are being made to holders of Company
Common Stock in lieu of fractional shares of Newco Common Stock and Parent
Common Stock for the purpose of saving Newco and Parent the expense and
inconvenience of issuing and transferring fractional shares. Such cash payments
do not represent separately bargained-for consideration.

     (f) Termination of Exchange Fund.  Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for 18 months after the
Effective Time shall be delivered (x) in the case of shares of Newco Common
Stock and cash deposited in the Exchange Fund by the Company or Newco, to Newco
and (y) in the case of shares of Parent Common Stock and cash deposited in the
Exchange Fund by Parent, to Parent, in each case upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter (A) look only to Newco for, and Newco shall remain liable for,
payment of their claim for Split-Off Consideration, any cash in lieu of
fractional shares of Newco Common Stock and any dividends or distributions with
respect to Newco Common Stock and (B) look only to Parent for, and Parent shall
remain liable for, payment of their claim for Merger Consideration, any cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock, in each case in accordance
with this Article II. If any Certificates shall not have been surrendered prior
to two years after the Effective Time (or immediately prior to such earlier date
on which any Closing Consideration would otherwise escheat to or became the
property of any Governmental Entity), any such Closing Consideration in respect
thereof shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation (with respect to any remaining Merger Consideration
and cash related thereto) and the property of Newco (with respect to any
remaining Split-Off Consideration and cash related thereto), free and clear of
all claims or interest of any person previously entitled thereto.

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     (g) No Liability.  None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock or
Newco Common Stock (or dividends or distributions with respect thereto) or cash
in lieu of fractional shares of Parent Common Stock or Newco Common Stock or
cash from the Exchange Fund, in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

     (h) Investment of Exchange Fund.  The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent and Newco on a pro rata basis based upon the amount of cash deposited
into the Exchange Fund by Parent, on the one hand, and the Company and Newco, on
the other hand.

     (i) Lost Certificates.  If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent or
the Company, the posting by such person of a bond in such reasonable amount as
Parent or the Company may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Closing
Consideration and any cash in lieu of fractional shares and unpaid dividends and
distributions on shares of Parent Common Stock and Newco Common Stock
deliverable in respect thereof, in each case pursuant to this Agreement.

     (j) Withholding Rights.  The Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code,
or under any provision of state, local or foreign tax law. To the extent that
amounts are so withheld and paid over to the appropriate taxing authority, the
Exchange Agent will be treated as though it withheld an appropriate amount of
the type of consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock, sold such consideration for an amount of cash
equal to the fair market value of such consideration at the time of such deemed
sale and paid such cash proceeds to the appropriate taxing authority.

                                  ARTICLE III

                              RELATED TRANSACTIONS

     SECTION 3.01. Reorganization Agreements.  Prior to the Effective Time, the
Company shall (a) execute and deliver the Restructuring Agreement, the Tax
Allocation Agreement in the form of Annex B attached hereto with such changes as
may be mutually agreed upon by the Company and Parent (the "Tax Allocation
Agreement"), the Post-Closing Covenants Agreement in the form of Annex C
attached hereto with such changes as may be mutually agreed upon by the Company
and Parent (the "Post-Closing Covenants Agreement"), the License Agreement in
the form of Annex D attached hereto with such changes as may be mutually agreed
upon by the Company and Parent (the "License Agreement") and the Settlement
Agreement and Release of Claims in the form of Annex E attached hereto with such
changes as may be mutually agreed upon by the Company and Parent (the
"Settlement Agreement"), (b) cause Newco to execute and deliver the
Restructuring Agreement, the Tax Allocation Agreement, the Post-Closing
Covenants Agreement, the License Agreement and the Settlement Agreement and (c)
cause certain of the Company's subsidiaries (as mutually determined by Parent
and the Company) that are necessary to effect the Restructuring to execute and
deliver the Restructuring Agreement and each such subsidiary that Parent shall
reasonably designate to execute and deliver the Post-Closing Covenants
Agreement. Prior to the Effective Time, Parent shall (x) execute and deliver the
Tax Allocation Agreement, the Post-Closing Covenants Agreement and the
Settlement Agreement and (y) cause LifeScan, Inc. to execute and deliver the
Settlement Agreement.

     SECTION 3.02. Ancillary Agreements.  Prior to the Effective Time, Parent
and the Company shall, and the Company shall cause Newco (and, if applicable,
one or more of Newco subsidiaries) to, execute

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and deliver the Ancillary Agreements (as defined in the Restructuring Agreement,
and, together with this Agreement, the Option Agreement, the Restructuring
Agreement, the Tax Allocation Agreement, the Post-Closing Covenants Agreement
and the License Agreement, the "Transaction Agreements") (other than the
Transition Services Agreement). For purposes of this Agreement, the Transition
Services Agreement (as defined in the Restructuring Agreement) shall not be
included in the definitions of "Ancillary Agreements" and "Transaction
Agreements". The parties shall use commercially reasonable efforts to cause the
Transition Services Agreement to be executed and delivered prior to the
Effective Time.

     SECTION 3.03. Restructuring of Assets and Assumption of
Liabilities.  Immediately prior to the Effective Time and pursuant to the terms
of the Restructuring Agreement, the Company and its subsidiaries shall
consummate the Restructuring upon the terms and subject to the conditions set
forth in the Restructuring Agreement.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     SECTION 4.01. Representations and Warranties of the Company.  Except as (i)
disclosed or set forth in the Company SEC Documents filed and publicly available
prior to the date of this Agreement (the "Filed Company SEC Documents") or (ii)
disclosed or set forth on the disclosure schedule (with specific reference to
the particular subsection of this Agreement to which the information set forth
in such disclosure schedule relates; provided, however, that an item included on
the disclosure schedule with respect to any subsection of this Section 4.01
shall be deemed to relate to each other subsection of this Section 4.01 to the
extent such relationship is reasonably apparent) delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Sub as follows:

          (a)  Organization, Standing and Corporate Power.  Each of the Company
     and its subsidiaries is duly organized, validly existing and in good
     standing under the laws of the jurisdiction of its organization and has all
     requisite power and authority to own, lease or otherwise hold and operate
     its properties and other assets and to carry on its business as presently
     conducted. Each of the Company and its subsidiaries is duly qualified or
     licensed to do business and is in good standing in each jurisdiction in
     which the nature of its business or the ownership, leasing or operation of
     its properties or other assets makes such qualification or licensing
     necessary, other than in such jurisdictions where the failure to be so
     qualified or licensed individually or in the aggregate has not had and is
     not reasonably be expected to have a Material Adverse Effect. The Company
     has delivered to Parent prior to the execution of this Agreement true and
     correct copies of its Amended and Restated Certificate of Incorporation
     (the "Company Certificate") and Amended and Restated By-laws (the "Company
     By-laws"), in each case as amended through the date hereof. The Company has
     made available to Parent and its representatives true and complete copies
     of the minutes of all meetings of the stockholders of the Company and each
     of its subsidiaries, the Board of Directors of the Company and each of its
     subsidiaries and the committees of each of such Board of Directors, in each
     case held since January 1, 1999.

          (b) Subsidiaries.  As of the date of this Agreement, Section 4.01(b)
     of the Company Disclosure Schedule contains a true and complete list of all
     the Company's subsidiaries (whether or not such subsidiaries are engaged in
     the Sunrise Business). All the outstanding shares of capital stock or other
     voting securities or equity interests of each subsidiary of the Company are
     owned by the Company, by another wholly owned subsidiary of the Company or
     by the Company and another wholly owned subsidiary of the Company, free and
     clear of all pledges, claims, liens, charges, encumbrances and security
     interests of any kind or nature whatsoever (collectively, "Liens"), and are
     duly authorized, validly issued, fully paid and nonassessable.

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          (c) Capital Structure.  The authorized capital stock of the Company
     consists of 40,000,000 shares of Company Common Stock and 5,000,000 shares
     of preferred stock, par value $.001 per share ("Preferred Stock"). At the
     close of business on May 17, 2001, (i) 32,249,698 shares of Company Common
     Stock were issued and outstanding, (ii) 743,678 shares of Company Common
     Stock were held by the Company in its treasury, (iii) 4,624,969 shares of
     Company Common Stock were reserved for issuance pursuant to the Company's
     1992 Stock Plan, 1994 Incentive and Non-Qualified Stock Option Plan,
     Amended and Restated 1996 Stock Option, Grant Plan, 2000 Stock Option and
     Grant Plan, the INOMET, Inc. 1990 Incentive and Stock Option Plan, the
     INOMET, Inc. 1991 Incentive and Stock Option, the Integ Incorporated 1994
     Long-Term Incentive and Stock Option Plan and the Integ Incorporation 1996
     Director's Stock Option Plan (such plans, collectively, the "Company Stock
     Plans") (of which 4,511,235 shares of Company Common Stock were subject to
     outstanding options to purchase shares of Company Common Stock granted
     under the Company Stock Plans and 650,000 shares of Company Common Stock
     were subject to outstanding options to purchase shares of Company Common
     Stock granted outside the Company Stock Plans (the "Non-Plan Stock
     Options") (collectively, "Stock Options")), (iv) 575,663 shares of Company
     Common Stock were reserved for issuance pursuant to the Employee Stock
     Purchase Plan (the "Company ESPP"), of which as of the date of this
     Agreement the Company expects that approximately 25,000 shares of Company
     Common Stock will be subject to outstanding purchase rights under the
     Company ESPP on June 30, 2001, (v) warrants to acquire 692,399 shares of
     Company Common Stock from the Company pursuant to the warrant agreements
     set forth on Section 4.01(c) of the Company Disclosure Schedule (the
     "Warrants") were outstanding and (vi) no shares of Preferred Stock were
     issued and outstanding or were held by the Company as treasury shares.
     Except as set forth above in this Section 4.01(c), at the close of business
     on May 17, 2001, no shares of capital stock or other voting securities or
     equity interest of the Company were issued, reserved for issuance or
     outstanding. Except as set forth above in this Section 4.01(c), there are
     no outstanding stock appreciation rights, rights to receive shares of
     Company Common Stock on a deferred basis or other rights that are linked to
     the value of Company Common Stock, granted under the Company Stock Plans,
     the Warrants, the Company ESPP or otherwise. Section 4.01(c) of the Company
     Disclosure Schedule sets forth a complete and accurate list, as of May 17,
     2001, of all outstanding Warrants, Stock Options or other rights to
     purchase or receive Company Common Stock granted under the Company Stock
     Plans or otherwise, the number of shares of Company Common Stock subject
     thereto, the grant dates, expiration dates and exercise prices thereof and
     the names of the holders thereof. No stock option agreement evidencing the
     grant of Stock Options pursuant to any Company Stock Plan provides
     additional or more favorable benefits in any material respect to the holder
     of such Stock Options than the benefits provided under the applicable
     Company Stock Plans. Attached as an exhibit to Section 4.01(c) of the
     Company Disclosure Schedule are true and complete copies of all stock
     option agreements pursuant to which Non-Plan Stock Options have been
     issued. All outstanding shares of capital stock of the Company are, and all
     shares that may be issued pursuant to the Company Stock Plans, the Non-Plan
     Stock Options, the Warrants or the Company ESPP will be, when issued in
     accordance with the terms thereof, duly authorized, validly issued, fully
     paid and nonassessable and not subject to preemptive rights. There are no
     bonds, debentures, notes or other indebtedness of the Company having the
     right to vote (or convertible into, or exchangeable for, securities having
     the right to vote) on any matters on which stockholders of the Company may
     vote. Except as set forth above in this Section 4.01(c) or resulting from
     the issuance of shares of Company Common Stock pursuant to Stock Options or
     the Warrants outstanding as of the date hereof or rights that may have
     arisen under the Company ESPP, (x) there are not issued, reserved for
     issuance or outstanding (A) any shares of capital stock or other voting
     securities or equity interests of the Company, (B) any securities of the
     Company convertible into or exchangeable or exercisable for shares of
     capital stock or other voting securities or equity interests of the Company
     or (C) any warrants, calls, options or other rights to acquire from the
     Company or any of its subsidiaries, or any obligation of the Company or any
     of its subsidiaries to issue, any capital stock, voting securities, equity
     interests or securities convertible into or exchangeable or exercisable for
     capital stock, voting securities or equity interests of the Company and (y)
     there are not any outstanding obligations of the Company or any of its
     subsidiaries to

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     repurchase, redeem or otherwise acquire any such securities or to issue,
     deliver or sell, or cause to be issued, delivered or sold, any such
     securities. None of the Company or any of its subsidiaries is a party to
     any voting agreement with respect to the voting of any such securities.
     There are no outstanding (1) securities of the Company or any of its
     subsidiaries convertible into or exchangeable or exercisable for shares of
     capital stock or other voting securities or equity interests in any
     subsidiary of the Company, (2) warrants, calls, options or other rights to
     acquire from the Company or any of its subsidiaries, and no obligation of
     the Company or any of its subsidiaries to issue, any capital stock, or
     other voting securities or equity interests in, or any securities
     convertible into or exchangeable or exercisable for any capital stock, or
     other voting securities or equity interests in, any subsidiary of the
     Company or (3) obligations of the Company or any of its subsidiaries to
     repurchase, redeem or otherwise acquire any such outstanding securities of
     any subsidiary of the Company or to issue, deliver or sell, or cause to be
     issued, delivered or sold, any such securities.

          (d) Authority; Noncontravention.  The Company has the requisite power
     and authority to enter into each Transaction Agreement to which it is or
     will be a party and to consummate the transactions contemplated thereby,
     subject, in the case of the consummation of the Merger by the Company, to
     receipt of the Stockholder Approval. Each of the Company's subsidiaries
     has, or prior to the execution and delivery of the Restructuring Agreement
     will have, the requisite corporate power and authority to enter into each
     Transaction Agreement to which it is or will be a party and to consummate
     the transactions contemplated thereby. The execution and delivery by the
     Company of each Transaction Agreement to which it is or will be a party and
     the consummation by the Company of the transactions contemplated thereby
     have been duly authorized by all necessary corporate action on the part of
     the Company and no other corporate proceedings on the part of the Company
     are necessary to authorize such Transaction Agreements or to consummate the
     transactions contemplated thereby, subject, in the case of the consummation
     of the Merger, to receipt of the Stockholder Approval. The execution and
     delivery by each of the Company's subsidiaries of the Transaction
     Agreements to which it is or will be a party and the consummation by it of
     the transactions contemplated thereby have been, or prior to the execution
     and delivery of the Restructuring Agreement will be, duly authorized by all
     necessary action on the part of such entity and no other proceedings on the
     part of such entity are or will be necessary to authorize the Transaction
     Agreements or to consummate the transactions contemplated thereby. This
     Agreement has been duly executed and delivered by the Company and, assuming
     the due authorization, execution and delivery by each of the other parties
     hereto, constitutes a legal, valid and binding obligation of the Company,
     enforceable against the Company in accordance with its terms. Each
     Transaction Agreement (other than this Agreement) to which the Company or
     any of its subsidiaries will be a party will, when executed and delivered
     by such entity, and, assuming the due authorization, execution and delivery
     by Parent, constitute a legal, valid and binding obligation of such entity,
     enforceable against such entity in accordance with its terms. The Board of
     Directors of the Company, at a meeting duly called and held at which all
     directors of the Company were present, duly and unanimously adopted
     resolutions (i) approving and declaring advisable this Agreement and each
     other Transaction Agreement, the Merger and the other transactions
     contemplated hereby and thereby, (ii) declaring that it is in the best
     interests of the stockholders of the Company that the Company enter into
     this Agreement and consummate the Merger and the other transactions
     contemplated hereby on the terms and subject to the conditions set forth in
     this Agreement, (iii) declaring that it is in the best interest of the
     stockholders of the Company that each of the Company and its subsidiaries
     enter into each other Transaction Agreement to which it is a party and
     consummate the transactions contemplated thereby on the terms and subject
     to the conditions set forth therein, (iv) directing that this Agreement be
     submitted to a vote at a meeting of the stockholders of the Company and (v)
     recommending that the stockholders of the Company adopt this Agreement. The
     execution and delivery by each of the Company and its subsidiaries of the
     Transaction Agreements to which it is or will be a party do not, and the
     consummation of the transactions contemplated thereby and compliance with
     the provisions thereof will not, conflict with, or result in any violation
     or breach of, or default (with or without notice or lapse of time, or both)
     under, or give rise to a right of termination, cancellation or acceleration
     of any obligation or to loss of

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     a benefit under, or result in the creation of any Lien in or upon any of
     the properties or assets of the Company or any of its subsidiaries under,
     (x) the Company Certificate or Company By-laws or the Certificate of
     Incorporation or by-laws (or similar organizational documents) of any of
     its subsidiaries, (y) any loan or credit agreement, bond, debenture, note,
     mortgage, indenture, lease or other contract, agreement, obligation,
     commitment, arrangement, understanding, instrument, permit or license,
     whether oral or written (excluding any such items between the Company or
     any of its subsidiaries, on the one hand, and Parent or any of its
     Affiliates, on the other hand) (each, including all amendments thereto, a
     "Contract"), to which the Company or any of its subsidiaries is a party or
     any of their respective properties or other assets is subject or (z)
     subject to the governmental filings and other matters referred to in the
     following sentence, any (A) statute, law, ordinance, rule or regulation or
     (B) order, writ, injunction, decree, judgment or stipulation, in each case
     applicable to the Company or any of its subsidiaries or their respective
     properties or other assets, other than, in the case of clauses (y) and (z),
     any such conflicts, violations, breaches, defaults, rights, losses or Liens
     that individually or in the aggregate have not had and are not reasonably
     expected to have a Material Adverse Effect. No consent, approval, order or
     authorization of, action by or in respect of, or registration, declaration
     or filing with, any Federal, state, local or foreign government, any court,
     administrative, regulatory or other governmental agency, commission or
     authority or any non-governmental self-regulatory agency, commission or
     authority (each, a "Governmental Entity") is required by or with respect to
     the Company or any of its subsidiaries in connection with the execution and
     delivery of this Agreement by the Company or the execution and delivery of
     the other Transaction Agreements by the Company or any of its subsidiaries
     or the consummation of the transactions contemplated hereby or thereby,
     except for (1) the filing of a premerger notification and report form by
     the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
     as amended (the "HSR Act"), or any other applicable competition, merger
     control, antitrust or similar law or regulation, (2) the filing with the
     Securities and Exchange Commission (the "SEC") of (A) a proxy statement
     relating to the adoption by the stockholders of the Company of this
     Agreement (as amended or supplemented from time to time, the "Proxy
     Statement"), (B) a registration statement on Form S-4 to be filed with the
     SEC by Newco in connection with the distribution of Newco Common Stock in
     the Split-Off (as amended or supplemented from time to time, the "Newco
     Form S-4"), (C) a registration statement on Form 8-A under the Securities
     Exchange Act of 1934, as amended (the "Exchange Act"), in connection with
     the distribution of Newco Common Stock in the Split-Off (the "Form 8-A")
     and (D) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
     Exchange Act, as may be required in connection with this Agreement, the
     other Transaction Agreements and the transactions contemplated hereby or
     thereby, (3) the filing of the Certificate of Merger with the Secretary of
     State of the State of Delaware and appropriate documents with the relevant
     authorities of other states in which the Company is qualified to do
     business, (4) such filings with and approvals of a national securities
     exchange or Nasdaq to permit the shares of Newco Common Stock that are to
     be distributed in the Split-Off to be approved for listing on such national
     securities exchange, or approved for quotation on Nasdaq, as the case may
     be, in either case subject to official notice of issuance and (5) such
     other consents, approvals, orders, authorizations, registrations,
     declarations and filings the failure of which to be obtained or made
     individually or in the aggregate has not had and are not reasonably
     expected to have a Material Adverse Effect.

          (e) Company SEC Documents.  The Company has filed all reports,
     schedules, forms, statements and other documents (including exhibits and
     other information incorporated therein) with the SEC required to be filed
     by the Company since January 1, 1999 (together with all voluntary filings
     made by the Company with the SEC during such time period, the "Company SEC
     Documents"). As of their respective dates, the Company SEC Documents
     complied in all material respects with the requirements of the Securities
     Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the
     case may be, and the rules and regulations of the SEC promulgated
     thereunder applicable to such Company SEC Documents, and except to the
     extent that information contained in any Company SEC Document has been
     revised, superseded or updated by a later-filed Company SEC Document, none
     of the Company SEC Documents contains any untrue statement of a material
     fact or omits to

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     state a material fact required to be stated therein or necessary in order
     to make the statements therein, in light of the circumstances under which
     they were made, not misleading. The financial statements of the Company
     included in the Company SEC Documents comply as to form in all material
     respects with applicable accounting requirements and the published rules
     and regulations of the SEC with respect thereto, have been prepared in
     accordance with generally accepted accounting principles in the United
     States ("GAAP") (except, in the case of unaudited statements, as permitted
     by Form 10-Q of the SEC) applied on a consistent basis during the periods
     involved (except as may be indicated in the notes thereto) and fairly
     present the financial position of the Company and its consolidated
     subsidiaries as of the dates thereof and the consolidated results of their
     operations and cash flows for the periods then ended (subject, in the case
     of unaudited statements, to normal year-end audit adjustments). Except as
     set forth in the financial statements set forth in the Company's Form 10-K
     for the year ended December 31, 2000, or in the most recent financial
     statements included in the Filed Company SEC Documents and except for
     liabilities or obligations incurred in connection with this Agreement or
     any of the other Transaction Agreements, neither the Company nor any of its
     subsidiaries has any liabilities or obligations (other than to Parent or
     any of its Affiliates) of any nature (whether accrued, absolute, contingent
     or otherwise) which, individually or in the aggregate, have had or are
     reasonably expected to have a Material Adverse Effect.

          (f) Information Supplied.  None of the information supplied or to be
     supplied by the Company specifically for inclusion or incorporation by
     reference in (i) each of the Newco Form S-4 and the Parent Form S-4 will,
     at the time it is filed with the SEC, at any time it is amended or
     supplemented and at the time it becomes effective under the Securities Act,
     contain any untrue statement of a material fact or omit to state any
     material fact required to be stated therein or necessary to make the
     statements therein, in light of the circumstances under which they are
     made, not misleading or (ii) the Proxy Statement will, at the date the
     Proxy Statement is first mailed to the Company's stockholders and at the
     time of the Stockholders' Meeting, contain any untrue statement of a
     material fact or omit to state any material fact required to be stated
     therein or necessary in order to make the statements therein, in light of
     the circumstances under which they are made, not misleading, except that no
     representation or warranty is made by the Company with respect to
     statements made or incorporated by reference therein based on information
     supplied by Parent or Sub specifically for inclusion or incorporation by
     reference in such documents. The Proxy Statement will comply as to form in
     all material respects with the requirements of the Exchange Act and the
     rules and regulations thereunder. The Newco Form S-4 will comply as to form
     in all material respects with the requirements of the Securities Act and
     the rules and regulations thereunder.

          (g) Inverness Medical Limited Financial Statements.  Section 4.01(g)
     of the Company Disclosure Schedule sets forth for Inverness Medical Limited
     ("IML") (x) (i) the audited balance sheet as of December 31, 1999 (the
     "Audited IML Balance Sheet") and (ii) an audited statement of operations
     and an audited statement of cash flows for the year ended December 31, 1999
     (together, the "Audited IML Financial Statements"), together with the
     report of IML's independent accountants thereon, and (y) (i) the unaudited
     balance sheet as of March 31, 2001 (the "Interim IML Balance Sheet") and
     (ii) an unaudited statement of operations and an unaudited statement of
     cash flows for the three months ended, March 31, 2001 (together, the
     "Interim IML Financial Statements") and (z) (i) the unaudited balance sheet
     as of December 31, 2000 (the "Unaudited IML Balance Sheet") and (ii) an
     unaudited statement of operations and an unaudited statement of cash flows
     for the year ended December 31, 2000 (together, the "Unaudited IML
     Financial Statements"). There has been no material change in the financial
     position of IML since March 31, 2001. Each of the Audited IML Balance
     Sheet, the Interim IML Balance Sheet and the Unaudited IML Balance Sheet
     (including any related notes and schedules) fairly presents in all material
     respects the financial position of IML as of its date, and each of the
     statements of operations and statements of cash flows included in the
     Audited IML Financial Statements and the Unaudited IML Financial Statements
     (including any related notes and schedules) fairly presents in all material
     respects the results of operations and cash flows, as the case may be, of
     IML for the periods set forth therein (subject in the case of unaudited
     statements to normal year end adjustments) (i) in the case of the

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     Audited IML Balance Sheet and the Audited IML Financial Statements, in
     accordance with accounting principles generally accepted in the United
     Kingdom applied on a consistent basis, and (ii) in the case of the
     Unaudited IML Balance Sheet, the Unaudited IML Financial Statements, the
     Interim IML Balance Sheet and the Interim IML Financial Statements, in
     accordance with GAAP. All of the adjustments necessary to convert in all
     material respects the Audited IML Balance Sheet and the Audited IML
     Financial Statements into GAAP have been recorded in the appropriate
     periods on the books and records of the Company, and after the application
     of such adjustments all the financial statements referred to in this
     Section 4.01(i) have been prepared on a consistent basis.

          (h) Absence of Certain Changes or Events.  Except (i) for liabilities
     incurred in connection with this Agreement or any of the other Transaction
     Agreements, and (ii) the transactions described in the Transaction
     Agreements, since March 31, 2001, the Company and its subsidiaries have
     conducted their respective businesses only in the ordinary course
     consistent with past practice, and there has not been (i) any Material
     Adverse Change, (ii) any declaration, setting aside or payment of any
     dividend or other distribution (whether in cash, stock or property) with
     respect to any of the Company's or any of its subsidiaries' capital stock,
     other than the payment of dividends by any wholly owned subsidiary of the
     Company to its parent (which parent is a Sunrise Company), (iii) any split,
     combination or reclassification of any of the Company's or any of its
     subsidiaries' capital stock or any issuance or the authorization of any
     issuance of any other securities in respect of, in lieu of or in
     substitution for shares of such capital stock, (iv) prior to the date of
     this Agreement (A) any granting by the Company or any of its subsidiaries
     to any current or former director, officer, employee or consultant of any
     increase in compensation, bonus or other benefits, except as was required
     under employment agreements in effect as of the date of the most recent
     audited financial statements included in the Filed Company SEC Documents
     and except for increases in cash compensation in the ordinary course of
     business consistent with past practice, (B) any granting by the Company or
     any of its subsidiaries to any current or former director, officer,
     employee or consultant of any increase in severance or termination pay,
     except as was required under any employment, severance or termination
     agreements in effect as of the date of the most recent audited financial
     statements included in the Filed Company SEC Documents, (C) any entry by
     the Company or any of its subsidiaries into, or any amendment of, (1) any
     employment, deferred compensation, consulting, severance, termination or
     indemnification agreement, arrangement or understanding with any current or
     former director, officer, employee or consultant or (2) any agreement with
     any current or former director, officer, employee or consultant the
     benefits of which are contingent, or the terms of which are materially
     altered, upon the occurrence of a transaction involving the Company of a
     nature contemplated by this Agreement or any of the other Transaction
     Agreements (all such agreements under this clause (C), collectively,
     "Benefit Agreements"), (D) any amendment to, or modification of, any Stock
     Option or Warrant or (E) any adoption of, or amendment to, a Benefit Plan,
     (v) any damage, destruction or loss, whether or not covered by insurance,
     that individually or in the aggregate has had or are reasonably expected to
     have a Material Adverse Effect, (vi) any change in accounting methods,
     principles or practices by the Company or its subsidiaries materially
     affecting the Company's assets, liabilities or businesses, except insofar
     as may have been required by a change in GAAP, or (vii) any material tax
     election or any settlement or compromise of any material income tax
     liability.

          (i) Litigation.  Except as disclosed in the Filed Company SEC
     Documents, there is no suit, action or proceeding pending or, to the
     Knowledge of the Company, threatened against or affecting the Company or
     any of its subsidiaries or any of their respective properties or assets
     that individually or in the aggregate has had or are reasonably expected to
     have a Material Adverse Effect, nor is there any judgment, decree,
     injunction, rule or order of any Governmental Entity or arbitrator
     outstanding against, or, to the Knowledge of the Company, investigation by
     any Governmental Entity involving, the Company or any of its subsidiaries
     that individually or in the aggregate has had or are reasonably expected to
     have a Material Adverse Effect.

          (j) Contracts.  Except as disclosed in the Filed Company SEC
     Documents, none of the Company or any of its subsidiaries is a party to,
     and none of its properties or other assets are subject

                                       1-12
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     to, any contract or agreement that are of a nature required to be filed as
     an exhibit to a report or filing under the Securities Act or the Exchange
     Act and the rules and regulations promulgated thereunder. None of the
     Company or any of its subsidiaries is in violation of or in default under
     (nor does there exist any condition which upon the passage of time or the
     giving of notice or both would cause such a violation of or default under)
     any Contract to which the Company or any of its subsidiaries is a party or
     by which the Company or any of its Subsidiaries or any of their respective
     properties or other assets is bound, except for violations or defaults that
     individually or in the aggregate have not had and are not reasonably
     expected to have a Material Adverse Effect. None of the Company or any of
     its subsidiaries has entered into any Contract with any Affiliate of the
     Company that is currently in effect other than agreements that are
     disclosed in the Filed Company SEC Documents. Except as set forth in the
     Post-Closing Covenants Agreement and except for agreements or covenants
     which do not affect the Sunrise Business and would not be binding on Parent
     or any of its Affiliates (other than the Company or any of its
     subsidiaries) as a result of the Merger, none of the Company or any of its
     subsidiaries is a party to or otherwise bound by any agreement or covenant
     not to compete or by any agreement or covenant restricting in any respect
     the development, marketing or distribution of the Company's or any of its
     subsidiaries products or services. Other than contracts relating solely to
     the Newco Business, none of the Company or any of its subsidiaries is a
     party to or is otherwise bound by any continuing contract for the future
     sale by the Company or any of its subsidiaries of materials, supplies or
     equipment that (i) is not terminable at will by the Company or such
     subsidiary upon not more than 30 days' notice without any obligation of the
     Company or any of its subsidiaries to pay a termination fee, penalty or
     similar payment or (ii) imposes any continuing obligation for the sale of
     materials, supplies or equipment following termination thereof.

          (k) Compliance with Laws.  (i) Each of the Company and its
     subsidiaries is in compliance with all statutes, laws, ordinances, rules,
     regulations, judgments, orders and decrees of any Governmental Entity
     applicable to it, its properties or other assets or its business or
     operations (collectively, "Legal Provisions"), except for instances of
     noncompliance or possible noncompliance that individually or in the
     aggregate have not had and are not reasonably expected to have a Material
     Adverse Effect. Each of the Company and its subsidiaries has in effect all
     material approvals, authorizations, certificates, filings, franchises,
     licenses, notices, permits and rights of or with all Governmental Entities,
     including all authorizations under the Federal Food, Drug, and Cosmetic Act
     of 1938, as amended ("FDCA"), and the regulations of the Federal Food and
     Drug Administration (the "FDA") promulgated thereunder, and under
     Environmental Laws (collectively, "Permits"), necessary for it to own,
     lease or operate its properties and assets and to carry on its business and
     operations as presently conducted, except for failures to have in effect
     such Permits that individually or in the aggregate have not had and are not
     reasonably expected to have a Material Adverse Effect. There has occurred
     no default under, or violation of, any such Permit, except individually or
     in the aggregate as has not had and are not reasonably expected to have a
     Material Adverse Effect. The Merger and the other transactions contemplated
     by the Transaction Agreements, in and of themselves, will not cause the
     revocation or cancellation of any Permit that individually or in the
     aggregate are reasonably expected to have a Material Adverse Effect. No
     action, demand, requirement or investigation by any Governmental Entity and
     no suit, action or proceeding by any other person, in each case with
     respect to the Company or any of its subsidiaries or any of their
     respective properties or other assets under any Legal Provision, is pending
     or, to the Knowledge of the Company, threatened, other than, in each case,
     those the outcome of which individually or in the aggregate has not had and
     are not reasonably expected to have a Material Adverse Effect.

          (ii) Except for those matters disclosed in the Filed Company SEC
     Documents or those matters that individually or in the aggregate have not
     had and are not reasonably expected to have a Material Adverse Effect: (A)
     each of the Company and its subsidiaries is, and has been, in compliance
     with all applicable Environmental Laws; (B) during the period of ownership
     or operation by each of the Company and its subsidiaries of any of its
     currently or previously owned, leased or operated properties, there have
     been no Releases or threatened Releases of Hazardous Material in, on, under
     or

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     affecting such properties or any surrounding sites; (C) there is no
     investigation, suit, claim, action or proceeding pending, or to the
     Knowledge of the Company, threatened against or affecting the Company or
     any of its subsidiaries, relating to or arising under Environmental Laws,
     and none of the Company or any of its subsidiaries has received any notice
     of, or entered into or assumed by contract or operation of law or
     otherwise, any obligation, liability, order, settlement, judgment,
     injunction or decree relating to or arising under Environmental Laws; and
     (D) to the Knowledge of the Company, there are no facts, circumstances or
     conditions which could reasonably be expected to form the basis for a suit,
     investigation, claim, action or proceeding against or affecting the Company
     or any of its subsidiaries relating to or arising under Environmental Laws.
     The term "Environmental Laws" means all laws (including the common law),
     rules, regulations, codes, ordinances, orders, decrees, judgments,
     injunctions, notices, Permits, or binding agreements issued, promulgated or
     entered into by any Governmental Entity, relating in any way to the
     environment, preservation or reclamation of natural resources, the
     presence, management, Release or threat of Release of, or exposure to,
     Hazardous Materials, or to human health and safety. The term "Hazardous
     Material" means (A) petroleum products and byproducts, asbestos, urea
     formaldehyde foam insulation, asbestos or asbestos-containing materials,
     medical or infectious wastes, polychlorinated biphenyls, radon gas,
     chlorofluorocarbons and all other ozone-depleting substances or (B) any
     chemical, material, substance, waste, pollutant or contaminant that is
     prohibited, limited or regulated by or pursuant to any Environmental Law.
     The term "Release" means any spilling, leaking, pumping, pouring, emitting,
     emptying, discharging, injecting, escaping, leaching, dumping, disposing or
     migrating into or through the environment or any natural or man-made
     structure.

          (l) Absence of Changes in Benefit Plans; Labor Relations.  Except as
     disclosed in the Filed Company SEC Documents, since the date of the most
     recent audited financial statements included in the Filed Company SEC
     Documents, there has not been any adoption or amendment by the Company or
     any of its subsidiaries of any collective bargaining agreement or any
     employment, bonus, pension, profit sharing, deferred compensation,
     incentive compensation, stock ownership, stock purchase, stock
     appreciation, restricted stock, stock option, phantom stock, performance,
     retirement, thrift, savings, stock bonus, paid time off, perquisite, fringe
     benefit, vacation, severance, disability, death benefit, hospitalization,
     medical, welfare benefit or other plan, program, policy, arrangement or
     understanding (whether or not legally binding) maintained, contributed to
     or required to be maintained or contributed to by the Company, any of its
     subsidiaries or any other person or entity that, together with the Company,
     is treated as a single employer under Section 414(b), (c), (m) or (o) of
     the Code (each, a "Commonly Controlled Entity"), in each case providing
     benefits to any current or former officer, director, employee or consultant
     of the Company or any of its subsidiaries (collectively, the "Benefit
     Plans"), or any material change in any actuarial or other assumption used
     to calculate funding obligations with respect to any Pension Plans, or any
     change in the manner in which contributions to any Pension Plans are made
     or the basis on which such contributions are determined. Except for any
     Benefit Agreements under which the sole obligations of the Company or any
     of its subsidiaries are (x) to pay no more than $100,000 under each such
     Benefit Agreement and $500,000 in the aggregate under all such Benefit
     Agreements and (y) to provide other items that may be purchased for a de
     minimis monetary value and except as disclosed in the Filed Company SEC
     Documents, there exist no currently binding Benefit Agreements. There are
     no collective bargaining or other labor union agreements to which the
     Company or any of its subsidiaries is a party or by which the Company or
     any of its subsidiaries is bound. Since January 1, 1999, none of the
     Company or any of its subsidiaries has encountered any labor union
     organizing activity or had any actual or threatened employee strikes, work
     stoppages, slowdowns or lockouts.

          (m) Benefit Plan Compliance.  (i) Section 4.01(m)(i) of the Company
     Disclosure Schedule contains a complete and accurate list of each Benefit
     Plan that is an "employee pension benefit plan" (as defined in Section 3(2)
     of the Employee Retirement Income Security Act of 1974, as amended
     ("ERISA")) (sometimes referred to herein as a "Pension Plan"), an "employee
     welfare benefit plan" (as defined in Section 3(1) of ERISA) and all other
     Benefit Plans. The Company has delivered to Parent true, complete and
     correct copies of (A) each Benefit Plan and Benefit Agreement (or, in the

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     case of any unwritten Benefit Plan or Benefit Agreement, descriptions
     thereof), (B) the two most recent annual reports on Form 5500 required to
     be filed with the Internal Revenue Service (the "IRS") with respect to each
     Benefit Plan (if any such report was required), (C) the most recent summary
     plan description for each Benefit Plan for which such summary plan
     description is required and (D) each trust agreement and insurance or group
     annuity contract relating to any Benefit Plan. Each Benefit Plan has been
     administered in all material respects in accordance with its terms. The
     Company, its subsidiaries and all the Benefit Plans are all in compliance
     in all material respects with the applicable provisions of ERISA, the Code
     and all other applicable laws, including laws of foreign jurisdictions, and
     the terms of all collective bargaining agreements.

          (ii) All Pension Plans intended to be tax-qualified have received
     favorable determination letters from the IRS with respect to "TRA" (as
     defined in Section 1 of Rev. Proc. 93-39) to the effect that such Pension
     Plans are qualified and exempt from United States Federal income taxes
     under Sections 401(a) and 501(a), respectively, of the Code; no such
     determination letter has been revoked (or, to the Knowledge of the Company,
     has revocation been threatened) nor, to the Knowledge of the Company, has
     any event occurred since the date of the most recent determination letter
     or application therefor relating to any such Pension Plan that would
     adversely affect the qualification of such Pension Plan or materially
     increase the costs relating thereto or require security under Section 307
     of ERISA. All Benefit Plans maintained or contributed to by the Company or
     any of its subsidiaries required to have been approved by any foreign
     Governmental Entity have been so approved; no such approval has been
     revoked (or, to the Knowledge of the Company, has revocation been
     threatened) nor, to the Knowledge of the Company, has any event occurred
     since the date of the most recent approval or application therefor relating
     to any such Benefit Plan that would materially affect any such approval
     relating thereto or materially increase the costs relating thereto or
     result in the loss of any intended favorable tax treatment for such Benefit
     Plan. The Company has delivered to Parent a true and complete copy of the
     most recent determination letter received with respect to each Pension
     Plan, as well as a true and complete copy of each pending application for a
     determination letter, if any. The Company has also provided to Parent a
     true and complete list of all Pension Plan amendments as to which a
     favorable determination letter has not yet been received.

          (iii) Neither the Company nor any Commonly Controlled Entity has (A)
     maintained, contributed or been obligated to contribute to any Benefit Plan
     that is subject to Title IV of ERISA or (B) any unsatisfied liability under
     Title IV of ERISA.

          (iv) All material reports, returns and similar documents with respect
     to all Benefit Plans required to be filed with any Governmental Entity or
     distributed to any Benefit Plan participant have been duly and timely filed
     or distributed. None of the Company or any of its subsidiaries has received
     notice of, and to the Knowledge of the Company, there are no investigations
     by any Governmental Entity with respect to, termination proceedings or
     other claims (except claims for benefits payable in the normal operation of
     the Benefit Plans), suits or proceedings against or involving any Benefit
     Plan or asserting any rights or claims to benefits under any Benefit Plan
     that could give rise to any material liability, and, to the Knowledge of
     the Company, there are not any facts that could give rise to any material
     liability in the event of any such investigation, claim, suit or
     proceeding.

          (v) All contributions, premiums and benefit payments under or in
     connection with the Benefit Plans that are required to have been made as of
     the date hereof in accordance with the terms of the Benefit Plans have been
     timely made or have been reflected on the most recent consolidated balance
     sheet filed or incorporated by reference into the Filed Company SEC
     Documents. No Pension Plan has an "accumulated funding deficiency" (as such
     term is defined in Section 302 of ERISA or Section 412 of the Code),
     whether or not waived.

          (vi) With respect to each Benefit Plan, (A) there has not occurred any
     prohibited transaction in which the Company or any of its subsidiaries or
     any employee of the Company or any of its subsidiaries has engaged that
     could subject the Company or any of its subsidiaries or any such employee,
     or, to the Knowledge of the Company, a trustee, administrator or other
     fiduciary of any

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     trust created under any Benefit Plan to any material tax or penalty on
     prohibited transactions imposed by Section 4975 of ERISA or the sanctions
     imposed under Title I of ERISA and (B) none of the Company, any of its
     subsidiaries or to the Knowledge of the Company, any trustee, administrator
     or other fiduciary of any Benefit Plan or any agent of any of the foregoing
     has engaged in any transaction or acted in a manner that could, or failed
     to act so as to, subject the Company, any of its subsidiaries or, to the
     Knowledge of the Company, any trustee, administrator or other fiduciary to
     any material liability for breach of fiduciary duty under ERISA or any
     other applicable law. No Benefit Plan or related trust has been terminated,
     nor has there been any "reportable event" (as that term is defined in
     Section 4043 of ERISA) for which the 30-day reporting requirement has not
     been waived with respect to any Pension Plan during the last five years,
     and no notice of a reportable event will be required to be filed in
     connection with the transactions contemplated hereby.

          (vii) Section 4.01(m)(vii) of the Company Disclosure Schedule
     discloses whether each Benefit Plan that is an employee welfare benefit
     plan is (A) unfunded, (B) funded through a "welfare benefit fund", as such
     term is defined in Section 419(e) of the Code, or other funding mechanism
     or (C) insured. Each such employee welfare benefit plan may be amended or
     terminated (including with respect to benefits provided to retirees and
     other former employees) without material liability to the Company or any of
     its subsidiaries at any time after the Effective Time. The Company and its
     subsidiaries comply in all material respects with the applicable
     requirements of Section 4980B(f) of the Code with respect to each Benefit
     Plan that is a group health plan, as such term is defined in Section
     5000(b)(1) of the Code. The Company does not have any obligations for
     retiree health or life insurance benefits under any Benefit Plan or Benefit
     Agreement that has a present value calculated as of the date of this
     Agreement exceeding $100,000 in the aggregate.

          (viii) None of the execution and delivery of this Agreement or any of
     the other Transaction Agreements, the obtaining of the Stockholder Approval
     or the consummation of the Merger or any other transaction contemplated by
     this Agreement or any of the other Transaction Agreements (including as a
     result of any termination of employment following the Effective Time) will
     (A) entitle any current or former director, officer, employee or consultant
     of the Company or any of its subsidiaries to severance or termination pay,
     (B) accelerate the time of payment or vesting or trigger any payment or
     funding (through a grantor trust or otherwise) of compensation or benefits
     under, increase the amount payable or trigger any other material obligation
     pursuant to, any Benefit Plan or Benefit Agreement or (C) result in any
     breach or violation of, or a default under, any Benefit Plan or Benefit
     Agreement. Section 4.01(m)(viii) of the Company Disclosure Schedule sets
     forth, as of the date of this Agreement, the estimated aggregate amount of
     all payments and the fair market value of all non-cash benefits (exclusive
     of any benefits or payments related to Stock Options) that may become
     payable or provided to employees, officers, directors or consultants of the
     Company or any of its subsidiaries under the Benefit Agreements who as a
     result of such individuals' employment being terminated immediately
     following the Effective Time would individually receive such payments and
     benefits in a total amount exceeding $100,000.

          (ix) None of the Company nor any of its subsidiaries has any material
     liability or obligations, including under or on account of a Benefit Plan,
     arising out of the hiring of persons to provide services to the Company or
     any of its subsidiaries and treating such persons as consultants or
     independent contractors and not as employees of the Company or any of its
     subsidiaries.

          (n) No Excess Parachute Payments.  Other than payments or benefits
     that may be made or provided to the persons listed in Section 4.01(n) of
     the Company Disclosure Schedule ("Primary Company Individuals"), no amount
     or other entitlement or economic benefit that could be received (whether in
     cash or property or the vesting of property) as a result of any transaction
     contemplated by this Agreement or any of the other Transaction Agreements
     (including as a result of termination of employment on or following the
     Effective Time) by or for the benefit of any officer, director, employee or
     consultant of the Company or any of its Affiliates who is a "disqualified
     individual" (as such term is defined in proposed Treasury Regulation
     Section 1.280G-1) under any Benefit Plan, Benefit Agreement or otherwise
     would be characterized as an "excess parachute payment" (as such

                                       1-16
   243

     term is defined in Section 280G(b)(1) of the Code). No disqualified
     individual is entitled to receive any additional payment from the Company,
     the Surviving Corporation or any other person (a "Parachute Gross Up
     Payment") in the event that the excise tax required by Section 4999(a) of
     the Code is imposed on such person. None of the Board of Directors of the
     Company or any of its subsidiaries has granted to any officer, director,
     employee or consultant of the Company or any of its subsidiaries any right
     to receive any Parachute Gross Up Payment. Section 4.01(n) of the Company
     Disclosure Schedule sets forth the estimated aggregate amount of "excess
     parachute payments" that could be paid or provided to the Primary Company
     Individuals under all Benefit Plans and Benefit Agreements as a result of
     the Merger or the other transactions contemplated by this Agreement
     (including as a result of any termination of employment on or following the
     Effective Time).

          (o) Taxes.  (i) Each of the Company and its subsidiaries has timely
     filed all material tax returns (as defined below in clause (xiii)) required
     to be filed by it. Each of the Company and its subsidiaries has timely paid
     or caused to be timely paid all material taxes due and payable with respect
     to the taxable periods covered by such tax returns and all other material
     taxes as are due, and the most recent financial statements contained in the
     Filed Company SEC Documents reflect an adequate reserve (in addition to any
     reserve for deferred taxes established to reflect timing differences
     between book and tax income) for all material taxes payable by the Company
     and its subsidiaries for all taxable periods and portions thereof through
     the date of such financial statements.

          (ii) No tax return of the Company or any of its subsidiaries is under
     audit or examination by any taxing authority, and no notice of such an
     audit or examination has been received by the Company or any of its
     subsidiaries. There is no deficiency, refund litigation, proposed
     adjustment or matter in controversy with respect to any material taxes due
     and owing by the Company or any of its subsidiaries. Each deficiency
     resulting from any completed audit or examination relating to material
     taxes by any taxing authority has been timely paid. No issues relating to
     material taxes were raised by the relevant taxing authority in any
     completed audit or examination that could reasonably be expected to recur
     in a later taxable period. The United States Federal income tax returns of
     the Company and its subsidiaries have either been examined and settled with
     the IRS or closed by virtue of the expiration of the applicable statute of
     limitations for all years through 1997.

          (iii) There is no currently effective agreement or other document
     extending, or having the effect of extending, the period of assessment or
     collection of any material taxes of the Company or its subsidiaries and no
     power of attorney (other than powers of attorney authorizing employees of
     the Company to act on behalf of the Company) with respect to any material
     taxes has been executed or filed with any taxing authority.

          (iv) No Liens for material taxes exist with respect to any assets or
     properties of the Company or any of its subsidiaries, except for statutory
     Liens for taxes not yet due.

          (v) None of the Company or any of its subsidiaries will be required to
     include in a taxable period ending after the Effective Time taxable income
     attributable to income that accrued (for purposes of the financial
     statements of the Company included in the Filed Company SEC Documents) in a
     prior taxable period but was not recognized for tax purposes in any prior
     taxable period as a result of the installment method of accounting, the
     completed contract method of accounting, the long-term contract method of
     accounting, the cash method of accounting or Section 481 of the Code or
     comparable provisions of any other, domestic or foreign (whether national,
     Federal, state, provincial, local or otherwise) tax laws.

          (vi) The Company and its subsidiaries have complied with all
     applicable statutes, laws, ordinances, rules and regulations relating to
     the withholding of taxes (including withholding of taxes pursuant to
     Sections 1441, 1442, 3121 and 3402 of the Code and similar provisions under
     any other domestic or foreign (whether national, federal, state,
     provincial, local or otherwise) tax laws) and have, within the time and the
     manner prescribed by law, withheld from and paid over to the proper
     Governmental Entities all amounts required to be so withheld and paid over
     under applicable laws in all material respects.

                                       1-17
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          (vii) Other than the distribution of Newco Common Stock in connection
     with the transactions contemplated by this Agreement, none of the Company
     or any of its subsidiaries has constituted either a "distributing
     corporation" or a "controlled corporation" (in each case, within the
     meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
     qualifying for tax-free treatment under Section 355(e) of the Code (A) in
     the two years prior to the date of this Agreement or (B) in a distribution
     that could otherwise constitute part of a "plan" or "series of related
     transactions" (within the meaning of Section 355(e) of the Code) in
     conjunction with the Merger.

          (viii) The Company was not, at any time during the period specified in
     Section 897(c)(1)(A)(ii) of the Code, a United States real property holding
     corporation within the meaning of Section 897(c)(2) of the Code.

          (ix) None of the Company or any of its subsidiaries has made with
     respect to any of the Sunrise Assets (as defined in the Restructuring
     Agreement), any consent under Section 341 of the Code.

          (x) None of the Sunrise Assets is "tax exempt use property" within the
     meaning of Section 168(h) of the Code.

          (xi) None of the Sunrise Assets is a lease made pursuant to Section
     168(f)(8) of the Internal Revenue Code of 1954.

          (xii) None of the Company or any of its subsidiaries has taken any
     action, or failed to take any action, or has knowledge of any fact,
     agreement, plan or other circumstance that could reasonably prevent the
     Merger from qualifying as a reorganization within the meaning of Section
     368(a) of the Code.

          (xiii) As used in this Agreement, (A) "taxes" shall include (1) all
     forms of taxation, whenever created or imposed, and whether domestic or
     foreign, and whether imposed by a national, Federal, state, provincial,
     local or other Governmental Entity, including all interest, penalties and
     additions imposed with respect to such amounts, (2) liability for the
     payment of any amounts of the type described in clause (1) as a result of
     being a member of an affiliated, consolidated, combined or unitary group
     and (3) liability for the payment of any amounts as a result of being party
     to any tax sharing agreement or as a result of any express or implied
     obligation to indemnify any other person with respect to the payment of any
     amount described in clause (1) or (2) and (B) "tax returns" shall mean all
     domestic or foreign (whether national, Federal, state, provincial, local or
     otherwise) returns, declarations, statements, reports, schedules, forms and
     information returns relating to taxes and any amended tax return.

          (xiv) If all the transactions described in Section 4.1 of the
     Restructuring Agreement (excluding (i) the transfer by Inverness Medical
     Inc. ("IMI") of certain assets to Newco described in Section 4.1(m) of the
     Restructuring Agreement and (ii) any payments or contributions contemplated
     by Section 4.1(n) of the Restructuring Agreement) had occurred on December
     31, 2000, the aggregate tax basis for federal income tax purposes that the
     Company would have had in its Newco Common Stock immediately after such
     transactions had occurred (the "Newco Basis") would have been not less than
     the amount set forth in Section 4.01(o)(xiv) of the Company Disclosure
     Schedule. For purposes of computing the Newco Basis, it has been assumed
     that the fair market value of the stock of Can-Am Care Corporation held by
     IMI at the time of the transaction described in Section 4.1(g) of the
     Restructuring Agreement is equal to IMI's basis (for federal income tax
     purposes) in such stock. The Company is not currently aware of any facts or
     circumstances that would result in the Newco Basis being materially less
     than the amount set forth in Section 4.01(o)(xiv) of the Company Disclosure
     Schedule immediately after the transactions referred to in the second
     preceding sentence if such transactions (excluding (i) the transfer by IMI
     of certain assets to Newco described in Section 4.1(m) of the Restructuring
     Agreement and (ii) any payments or contributions contemplated by Section
     4.1(n) of the Restructuring Agreement) occurred on the Closing Date instead
     of December 31, 2000, except for reductions occurring in the ordinary
     course of business.

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          (xv) As of December 31, 2000, the aggregate tax basis for federal
     income tax purposes that IMI has in the assets that it holds that are used
     or held for use primarily in the operation or conduct of the Women's Health
     Business (as such term is defined in the Restructuring Agreement) is not
     less than the amount set forth in Section 4.01(o)(xv) of the Company
     Disclosure Schedule.

          (xvi) The amount of "net operating loss carryovers" (as defined in
     Section 172 of the Code) allowable to the Company as a deduction under
     Section 172 of the Code as of January 1, 2001, after taking into account
     any limitations to which such net operating loss carryovers are subject
     under Section 382 or any other provision of the Code is not less than the
     amount set forth in Section 4.01(o)(xvi) of the Company Disclosure
     Schedule.

          (p) Title to Properties.  (i) Each of the Company and its subsidiaries
     has good and marketable title to, or valid leasehold interests in, all its
     material properties and assets except for such as are no longer used or
     useful in the conduct of its businesses or as have been disposed of in the
     ordinary course of business and except for defects in title, easements,
     restrictive covenants and similar encumbrances that individually or in the
     aggregate would not materially interfere with its ability to conduct its
     business as presently conducted. All such material assets and properties,
     other than assets and properties in which the Company or any of its
     subsidiaries has a leasehold interest, are free and clear of all Liens,
     except for Liens that individually or in the aggregate would not materially
     interfere with the ability of the Company or any of its subsidiaries to
     conduct their respective businesses as presently conducted.

          (ii) Each of the Company and its subsidiaries has complied in all
     material respects with the terms of all material leases to which it is a
     party and under which it is in occupancy, and all such leases are in full
     force and effect in all material respects. Each of the Company and its
     subsidiaries enjoys peaceful and undisturbed possession under all such
     leases in all material respects.

          (iii) At the Effective Time, the properties and assets of the Sunrise
     Companies (collectively, the "Sunrise Assets") will compose all the
     material assets of the Company and its subsidiaries primarily used or held
     for use in the Sunrise Business (including such material assets primarily
     used or held for use in the Sunrise Business in connection with research
     and development activities and programs). Assuming that (i) the Sunrise
     Companies (A) continue to employ all of the employees of the Sunrise
     Companies set forth on Schedules 1.1(b) and 1.1(c) of the Restructuring
     Agreement and (B) retain as consultants those current executives of the
     Company who have entered into the Non-Competition Agreements and (ii) the
     existing agreements, contracts and other relationships of the Sunrise
     Companies remain in effect, at the Effective Time there will be no other
     assets of the Company or any of its subsidiaries, other than the Sunrise
     Assets and assets and services contemplated as of the date of this
     Agreement to be provided pursuant to the Restructuring Agreement or the
     Transition Services Agreement, that are material to the conduct of the
     Sunrise Business as currently conducted. For the avoidance of doubt, the
     Sunrise Assets shall include all Intellectual Property Rights (other than
     trademarks, trademark applications, registrations and other rights, trade
     names and trade dress, trade name rights, service marks, service mark
     rights and service names which shall be allocated as set forth in the
     Restructuring Agreement) related to the Diabetes Field (as defined in the
     Post-Closing Covenants Agreement).

          (q) Intellectual Property.  (i) Each of the Company and its
     subsidiaries owns, or is validly licensed or otherwise has the right to use
     (without any obligation to make any material fixed or contingent payments,
     including royalty payments) all patents, patent applications, trademarks,
     trademark applications, registrations and other rights, trade names and
     trade dress, trade name rights, domain names, service marks, service mark
     rights, service names, copyrights, copyright applications and
     registrations, technical information including engineering, production and
     other designs, drawings, specifications, formulae, technology, computer and
     electronic data processing programs and software, inventions, processes,
     trade secrets, know-how, confidential information and other proprietary
     property, rights and interests and Documentation (as defined in the License
     Agreement)(collectively,

                                       1-19
   246

     "Intellectual Property Rights") which are material to the conduct of the
     Sunrise Business free and clear of all material Liens.

          (ii) No claims are pending or, to the Knowledge of the Company,
     threatened that the Company or any of its subsidiaries is infringing
     (including with respect to the manufacture, use or sale by the Company or
     any of its subsidiaries of its commercial products) the rights of any
     person with regard to any Intellectual Property Right. To the Knowledge of
     the Company, no person or persons are infringing the rights of the Company
     or any of its subsidiaries with respect to any Intellectual Property Right.

          (iii) No claims are pending or, to the Knowledge of the Company,
     threatened with regard to the Company's or any of its subsidiaries'
     ownership of any of its Intellectual Property Rights.

          (iv) Section 4.01(q)(iv) of the Company Disclosure Schedule sets
     forth, as of the date hereof, a complete and accurate list of all patents,
     trademarks and applications therefor owned by or licensed to the Company or
     any of its subsidiaries. All patents and patent applications listed in
     Section 4.01(q)(iv) of the Company Disclosure Schedule are owned by the
     Company or its subsidiaries free and clear of all material Liens. The
     patent applications listed in Section 4.01(q)(iv) of the Company Disclosure
     Schedule are pending and have not been abandoned, and have been and
     continue to be prosecuted by patent counsel. All patents, trademarks and
     applications therefor owned by or licensed to the Company or any of its
     subsidiaries have been duly registered and/or filed with or issued by each
     appropriate Governmental Entity in the jurisdiction indicated in Section
     4.01(q)(iv) of the Company Disclosure Schedule, all necessary affidavits of
     continuing use have been filed, and all necessary maintenance fees have
     been timely paid to continue all such rights in effect. None of the patents
     listed in Section 4.01(q)(iv) of the Company Disclosure Schedule has
     expired or has been declared invalid, in whole or in part, by any
     Governmental Entity. There are no ongoing interferences, oppositions,
     reissues, reexaminations or other proceedings involving any of the patents
     or patent applications listed in Section 4.01(q)(iv) of the Company
     Disclosure Schedule, including ex parte and post-grant proceedings, in the
     United States Patent and Trademark Office or in any foreign patent office
     or similar administrative agency. To the Knowledge of the Company, there
     are no published patents, patent applications, articles or other prior art
     references that are reasonably expected to invalidate any patent listed in
     Section 4.01(q)(iv) of the Company Disclosure Schedule. To the Knowledge of
     the Company, each of the patents and patent applications listed in Section
     4.01(q)(iv) of the Company Disclosure Schedule properly identifies each and
     every inventor of the claims thereof as determined in accordance with the
     laws of the jurisdiction in which such patent is issued or such patent
     application is pending. Each inventor named on the patents and patent
     applications listed in Section 4.01(q)(iv) of the Company Disclosure
     Schedule has executed an agreement assigning his, her or its entire right,
     title and interest in and to such patent or patent application, and the
     inventions embodied and claimed therein, to the Company or any of its
     subsidiaries. Each such inventor has executed an agreement with the Company
     or any of its subsidiaries obligating such inventor to assign the entire
     right, title and interest in and to such patent or patent application, and
     inventions embodied and claimed therein, to the Company or any of its
     subsidiaries, and, to the Knowledge of the Company, no such inventor has
     any contractual or other obligation that would preclude any such assignment
     or otherwise conflict with the obligations of such inventor to the Company
     or any of its subsidiaries under such agreement with the Company or such
     subsidiary.

          (v) Section 4.01(q)(v) of the Company Disclosure Schedule sets forth a
     complete and accurate list of all options, rights, licenses or interests of
     any kind relating to Intellectual Property granted to the Company or any of
     its subsidiaries, other than software licenses for generally available
     software, or granted by the Company or any of its subsidiaries to any other
     person.

          (vi) No material trade secret of the Company or any of its
     subsidiaries has been published or disclosed by the Company or any of its
     subsidiaries or, to the Knowledge of the Company, by any other person to
     any person except pursuant to licenses or contracts requiring such other
     persons to keep such trade secrets confidential.

                                       1-20
   247

          (r) Voting Requirements.  The affirmative vote of the holders of a
     majority of the outstanding shares of Company Common Stock entitled to vote
     at the Stockholders' Meeting or any adjournment or postponement thereof in
     favor of adopting this Agreement (the "Stockholder Approval") is the only
     vote of the holders of any class or series of the Company's capital stock
     necessary to adopt this Agreement and approve the Merger. The affirmative
     vote of the holders of the Company Common Stock is not necessary to approve
     any transaction contemplated by this Agreement or the other Transaction
     Agreements (other than the consummation of the Merger).

          (s) State Takeover Statutes.  The Board of Directors of the Company
     has unanimously approved the terms of this Agreement and the other
     Transaction Agreements and the consummation of the Merger, the
     Restructuring and the other transactions contemplated hereby or thereby,
     and such approval represents all the action necessary to render
     inapplicable to this Agreement, the other Transaction Agreements, the
     Merger, the Restructuring and the other transactions contemplated hereby or
     thereby, the provisions of Section 203 of the DGCL to the extent, if any,
     such Section would otherwise be applicable to this Agreement, the other
     Transaction Agreements, the Merger, the Restructuring and the other
     transactions contemplated hereby or thereby. To the Knowledge of the
     Company, no other state takeover statute or similar statute or regulation
     applies or purports to apply to this Agreement, the other Transaction
     Agreements, the Merger, the Restructuring or the other transactions
     contemplated hereby or thereby.

          (t) Brokers.  No broker, investment banker, financial advisor or other
     person, other than ABN AMRO Incorporated, UBS Warburg LLC and Covington
     Associates, the fees and expenses of which will be paid by the Company, is
     entitled to any broker's, finder's, financial advisor's or other similar
     fee or commission in connection with the transactions contemplated by this
     Agreement or the other Transaction Agreements based upon arrangements made
     by or on behalf of the Company. The Company has delivered to Parent true
     and complete copies of all agreements under which any such fees or expenses
     are payable and all indemnification and other agreements related to the
     engagement of the persons to whom such fees are payable.

          (u) Opinions of Financial Advisors.  The Company has received the
     opinions of ABN AMRO Incorporated and UBS Warburg LLC to the effect that,
     as of the date thereof, the Closing Consideration is fair from a financial
     point of view to the holders of shares of Company Common Stock, signed
     copies of which opinions will be delivered to Parent promptly after receipt
     thereof by the Company.

          (v) Development, Distribution, Marketing, Supply and Manufacturing
     Agreements. Section 4.01(v) of the Company Disclosure Schedule sets forth a
     complete and accurate list of all material contracts or agreements (whether
     or not in written form), other than contracts or agreements with Parent or
     any of its Affiliates, to which the Company or any of its subsidiaries is a
     party as of the date hereof or with respect to which the Company or any of
     its subsidiaries has any ongoing obligations as of the date hereof, in each
     case relating to the research, development, distribution, training, sale,
     license, marketing and supply of components for, and manufacturing by third
     parties of, the Company's or any of its subsidiaries' products or products
     licensed by the Company or any of its subsidiaries. The Company has made
     available to Parent true and complete copies of all material contracts or
     agreements, other than contracts or agreements with Parent or any of its
     Affiliates, to which the Company or any of its subsidiaries is a party
     relating to the research, development, distribution, training, sale,
     license, marketing and supply of components for, and manufacturing by third
     parties of, the Company's or any of its subsidiaries' products or products
     licensed by the Company or any of its subsidiaries.

          (w) Regulatory Compliance.  (i) As to each product subject to the FDCA
     and the FDA regulations promulgated thereunder or similar Legal Provisions
     in any foreign jurisdiction (each such product, a "Medical Device") that is
     manufactured, tested, distributed and/or marketed by the Company or any of
     its subsidiaries, such Medical Device is being manufactured, tested,
     distributed and/or marketed by the Company or any of its subsidiaries in
     compliance with all applicable

                                       1-21
   248

     requirements under FDCA, the FDA regulations promulgated thereunder, and
     such similar Legal Provisions, including those relating to investigational
     use, premarket clearance, good manufacturing practices, labeling,
     advertising, record keeping, filing of reports and security, except for
     failures to be in compliance which, individually or in the aggregate, have
     not had and are not reasonably expected to have a Material Adverse Effect.
     Excluding any notices given directly to Parent or any of its Affiliates,
     none of the Company or any of its subsidiaries has received any notice or
     other communication from the FDA or any other Governmental Entity (A)
     contesting the premarket clearance or approval of, the uses of or the
     labeling and promotion of any of the Company's products or (B) otherwise
     alleging any violation of any Legal Provision by the Company or any of its
     subsidiaries, which, in the case of clause (A) or (B), individually or in
     the aggregate, has not had and is not reasonably expected to have a
     Material Adverse Effect.

          (ii) No Medical Devices have been recalled, withdrawn, suspended or
     discontinued by the Company or any of its subsidiaries in the United States
     or outside the United States (whether voluntarily or otherwise) by order of
     the FDA or any other Governmental Entity. No proceedings in the United
     States and outside of the United States of which the Company has Knowledge
     (whether completed or pending) seeking the recall, withdrawal, suspension
     or seizure of any Medical Devices are pending against the Company or any of
     its subsidiaries, nor have any such proceedings been pending at any prior
     time.

          (iii) Except for instances that individually or in the aggregate have
     not had and are not reasonably expected to have a Material Adverse Effect,
     (A) none of the Company, any of its subsidiaries or, to the Knowledge of
     the Company, any of their respective officers, employees or agents has made
     an untrue statement of a material fact or fraudulent statement to the FDA
     or any other Governmental Entity, failed to disclose a material fact
     required to be disclosed to the FDA or any other Governmental Entity, or
     committed an act, made a statement, or failed to make a statement that, at
     the time such disclosure was made, could reasonably be expected to provide
     a basis for the FDA to invoke its policy respecting "Fraud, Untrue
     Statements of Material Facts, Bribery, and Illegal Gratuities", set forth
     in 56 Fed. Reg. 46191 (September 10, 1991) or for any other Governmental
     Entity to invoke any similar policy; and (B) none of the Company, any of
     its subsidiaries or, to the Knowledge of the Company, any of their
     respective officers, employees or agents, has been convicted of any crime
     or engaged in any conduct for which debarment is mandated by 21 U.S.C. sec.
     335a(a) or any similar Legal Provision or authorized by 21 U.S.C. sec.
     335a(b) or any similar Legal Provision.

          (iv) Excluding any notices given directly to Parent or any of its
     Affiliates, none of the Company or any of its subsidiaries has received any
     written notice that the FDA or any other Governmental Entity has commenced,
     or threatened to initiate, any action to withdraw its approval or request
     the recall of any product of the Company or any of its subsidiaries, or
     commenced, or threatened to initiate, any action to enjoin production at
     any facility of the Company or any of its subsidiaries which has had or are
     reasonably expected to have a Material Adverse Effect.

          (x) Solvency of Newco.  To the Company's Knowledge, immediately
     following the Effective Time, and after giving effect to the Restructuring
     and the Merger, (i) the fair value of the assets of each of Newco and its
     subsidiaries will exceed its debts and liabilities, contingent or
     otherwise, (ii) the present fair saleable value of the assets of each of
     Newco and its subsidiaries will be greater than the amount that will be
     required to pay its then existing debts and other liabilities, contingent
     or otherwise, as such debts and other liabilities become absolute and
     matured, (iii) each of Newco and its subsidiaries will be able to pay its
     then existing debts and other liabilities, contingent or otherwise, as such
     debts and liabilities become absolute and matured, and (iv) Newco and its
     subsidiaries will not have an unreasonably small amount of capital with
     which to conduct the businesses in which they will be engaged.

     SECTION 4.02. Representations and Warranties of Parent and Sub.  Except as
(i) disclosed or set forth in the Parent SEC Documents filed and publicly
available prior to the date of this Agreement (the

                                       1-22
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"Filed Parent SEC Documents") or (ii) disclosed or set forth on the disclosure
schedule (with specific reference to the particular subsection of this Agreement
to which the information set forth in such disclosure schedule relates;
provided, however, that an item included on the disclosure schedule with respect
to any subsection of this Section 4.02 shall be deemed to relate to each other
subsection of this Section 4.02 to the extent such relationship is obvious)
delivered by Parent to the Company prior to the execution of this Agreement (the
"Parent Disclosure Schedule"), Parent and Sub represent and warrant to the
Company as follows:

          (a) Organization, Standing and Corporate Power.  Each of Parent and
     Sub is a corporation duly organized, validly existing and in good standing
     under the laws of the jurisdiction in which it is incorporated and has all
     requisite corporate power and authority to carry on its business as now
     being conducted. Each of Parent and Sub is duly qualified or licensed to do
     business and is in good standing in each jurisdiction in which the nature
     of its business or the ownership, leasing or operation of its properties
     makes such qualification or licensing necessary, other than in such
     jurisdictions where the failure to be so qualified or licensed individually
     or in the aggregate has not had and is not reasonably expected to have a
     Parent Material Adverse Effect. Parent has made available to the Company
     complete and correct copies of its Restated Certificate of Incorporation
     and By-laws and the Certificate of Incorporation and By-laws of Sub, in
     each case as amended to the date hereof.

          (b) Authority; Noncontravention.  Each of Parent and Sub has the
     requisite power and authority to enter into each Transaction Agreement to
     which it is or will be a party and to consummate the transactions
     contemplated thereby. The execution and delivery of each Transaction
     Agreement to which it is or will be a party and the consummation of the
     transactions contemplated thereby have been duly authorized by all
     necessary corporate action on the part of Parent and Sub and no other
     corporate proceedings on the part of Parent or Sub are necessary to
     authorize any such Transaction Agreement or to consummate the transactions
     contemplated thereby. All outstanding shares of Parent Common Stock are,
     and all shares of Parent Common Stock which may be issued pursuant to this
     Agreement shall when issued be, duly authorized, validly issued, fully paid
     and nonassessable and not subject to preemptive rights. This Agreement has
     been duly executed and delivered by Parent and Sub, and, assuming the due
     authorization, execution and delivery by the Company, constitutes a legal,
     valid and binding obligation of Parent and Sub, enforceable against Parent
     and Sub, in accordance with its terms. Each Transaction Agreement (other
     than this Agreement) to which Parent will be a party will, when executed
     and delivered by Parent, and, assuming the due authorization, execution and
     delivery by each of the other parties thereto, constitute a legal, valid
     and binding obligation of Parent, enforceable against such entity in
     accordance with its terms. The execution and delivery by Parent of each
     Transaction Agreement to which it is a party does not, and the consummation
     of the Merger and the other transactions contemplated thereby and
     compliance with the provisions thereof will not, conflict with, or result
     in any violation or breach of, or default (with or without notice or lapse
     of time, or both) under, or give rise to a right of termination,
     cancellation or acceleration of any obligation or to loss of a benefit
     under, or result in the creation of any Lien upon any of the properties or
     assets of Parent or Sub under (i) the Restated Certificate of Incorporation
     or By-laws of Parent or the Certificate of Incorporation or By-laws of Sub,
     (ii) any Contract to which Parent or Sub is a party or any of their
     respective properties or other assets is subject or (iii) subject to the
     governmental filings and other matters referred to in the following
     sentence, any (A) statute, law, ordinance, rule or regulation or (B) order,
     writ, injunction, decree, judgment or stipulation, in each case applicable
     to Parent or Sub or their respective properties or other assets, other
     than, in the case of clauses (ii) and (iii), any such conflicts,
     violations, breaches, defaults, rights, losses or Liens that individually
     or in the aggregate have not had and are not reasonably expected to have a
     Parent Material Adverse Effect. No consent, approval, order or
     authorization of, action by or in respect of, or registration, declaration
     or filings with, any Governmental Entity is required by or with respect to
     Parent or Sub in connection with the execution and delivery of this
     Agreement or the other Transaction Agreements by Parent and Sub or the
     consummation by Parent and Sub of the Merger or the other transactions
     contemplated hereby or thereby, except for (1) the filing of a premerger
     notification and report form by Parent under the

                                       1-23
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     HSR Act or any other applicable competition, merger control, antitrust or
     similar law or regulation, (2) the filing with the SEC of (A) a
     registration statement on Form S-4 by Parent in connection with the
     distribution of Parent Common Stock in the Merger (as amended or
     supplemented from time to time, the "Parent Form S-4") and (B) such reports
     under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
     required in connection with this Agreement and the transactions
     contemplated by this Agreement, (3) the filing of the Certificate of Merger
     with the Secretary of State of the State of Delaware, (4) filings with the
     NYSE and (5) such other consents, approvals, orders, authorizations,
     registrations, declarations and filings the failure of which to be obtained
     or made, individually or in the aggregate, has not had and are not
     reasonably expected to have a Parent Material Adverse Effect.

          (c) Parent SEC Documents.  Parent has filed all reports, schedules,
     forms, statements and other documents (including exhibits and other
     information incorporated therein) with the SEC required to be filed by
     Parent since January 1, 1999 (together with all voluntary filings made by
     Parent with the SEC during such period, the "Parent SEC Documents"). As of
     their respective dates, the Parent SEC Documents complied in all material
     respects with the requirements of the Securities Act or the Exchange Act,
     as the case may be, and the rules and regulations of the SEC promulgated
     thereunder applicable to such Parent SEC Documents, and except to the
     extent that information contained in any Parent SEC Document has been
     revised, superseded or updated by a later-filed Parent SEC Document, none
     of the Parent SEC Documents contains any untrue statement of a material
     fact or omits to state a material fact required to be stated therein or
     necessary in order to make the statements therein, in light of the
     circumstances under which they were made, not misleading. The financial
     statements of Parent included in the Parent SEC Documents comply as to form
     in all material respects with applicable accounting requirements and the
     published rules and regulations of the SEC with respect thereto, have been
     prepared in accordance with GAAP (except, in the case of unaudited
     statements, as permitted by Form 10-Q of the SEC) applied on a consistent
     basis during the periods involved (except as may be indicated in the notes
     thereto) and fairly present the financial position of Parent and its
     consolidated subsidiaries as of the dates thereof and the consolidated
     results of their operations and cash flows for the periods then ended
     (subject, in the case of unaudited statements, to normal year-end audit
     adjustments). Except as set forth in the most recent financial statements
     included in the Filed Parent SEC Documents and except for liabilities or
     obligations incurred in connection with this Agreement or any of the other
     Transaction Agreements, neither Parent nor any of its subsidiaries has any
     liabilities or obligations of any nature (whether accrued, absolute,
     contingent or otherwise) which, individually or in the aggregate, have had
     or are reasonably expected to have a Material Adverse Effect.

          (d) Information Supplied.  None of the information supplied or to be
     supplied by Parent or Sub specifically for inclusion or incorporation by
     reference in (i) each of the Parent Form S-4 and the Newco Form S-4 will,
     at the time it is filed with the SEC, at any time it is amended or
     supplemented and at the time it becomes effective under the Securities Act,
     contain any untrue statement of a material fact or omit to state any
     material fact required to be stated therein or necessary to make the
     statements therein, in light of the circumstances under which they are
     made, not misleading, or (ii) the Proxy Statement will, at the date it is
     first mailed to the Company's stockholders and at the time of the
     Stockholders' Meeting, contain any untrue statement of a material fact or
     omit to state any material fact required to be stated therein or necessary
     in order to make the statements therein, in light of the circumstances
     under which they are made, not misleading, except that no representation or
     warranty is made by Parent or Sub with respect to statements made or
     incorporated by reference therein based on information supplied by the
     Company specifically for inclusion or incorporation by reference in the
     Parent Form S-4. The Parent Form S-4 will comply as to form in all material
     respects with the requirements of the Securities Act and the rules and
     regulations thereunder.

                                       1-24
   251

          (e) Interim Operations of Sub.  Sub was formed solely for the purpose
     of engaging in the transactions contemplated hereby, has engaged in no
     other business activities and has conducted its operations only as
     contemplated hereby.

          (f) Tax Matters.  Neither Parent, Sub nor any Affiliate of Parent has
     taken or agreed to take any action or knows of any fact or circumstance
     that is reasonably likely to prevent the Merger from qualifying as a
     reorganization within the meaning of Section 368(a) of the Code.

          (g) Parent Shareholder Approval.  This Agreement and the transactions
     contemplated hereby, including the issuance of shares of Parent Common
     Stock pursuant to Article II hereof, do not require the approval of the
     holders of any shares of capital stock of Parent.

          (h) Brokers.  No broker, investment banker, financial advisor or other
     person is entitled to any broker's, finder's, financial advisor's or other
     similar fee or commission in connection with the transactions contemplated
     by this Agreement.

                                   ARTICLE V

                   COVENANTS RELATING TO CONDUCT OF BUSINESS

     SECTION 5.01. Conduct of Business.  (a) Conduct of Business by the
Company.  During the period from the date of this Agreement to the Effective
Time, except (x) as set forth in Section 5.01(a) of the Company Disclosure
Schedule, (y) as specifically permitted or contemplated by any other provision
of this Agreement or the other Transaction Agreements or (z) to the extent
Parent shall otherwise consent in advance in writing, the Company shall, and
shall cause its subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice (including (x) in respect of
research and development activities and programs and (y) making capital
expenditures with respect to the Sunrise Companies as described in the Company
Capital Budget) and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use all
commercially reasonable efforts to preserve intact their respective current
business organizations, keep available the services of their respective current
officers and employees and preserve the relationships with their respective
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them with the intention that their respective goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, the Company agrees that, except for the
transactions specifically permitted or contemplated by the Transaction
Agreements or as set forth in Section 5.01(a) of the Company Disclosure
Schedule, it shall not, and shall not permit any of its subsidiaries to, without
Parent's prior written consent:

          (i) (x) declare, set aside or pay any dividends on, or make any other
     distributions (whether in cash, stock or property), in respect of, any of
     its capital stock, (y) split, combine or reclassify any of its capital
     stock or issue or authorize the issuance of any other securities in respect
     of, in lieu of or in substitution for shares of its capital stock or (z)
     purchase, redeem or otherwise acquire any shares of its capital stock or
     any other securities thereof or any rights, warrants or options to acquire
     any such shares or other securities;

          (ii) issue, deliver, sell, grant, pledge or otherwise encumber or
     subject to any Lien any shares of its capital stock, any other voting
     securities or equity interests or any securities convertible into, or any
     rights, warrants or options to acquire, any such shares, voting securities,
     equity interests or convertible securities, or any "phantom" stock,
     "phantom" stock rights, stock appreciation rights or stock based
     performance units (other than (x) the issuance of shares of Company Common
     Stock upon the exercise of Stock Options, Warrants or rights under the
     Company ESPP, in each case, outstanding on the date hereof and in
     accordance with their terms on the date hereof and (y) the issuance of
     Stock Options (and shares of Company Common Stock thereunder) to any
     employee of the Company hired after the date of this Agreement in
     connection with such hiring, provided that such issuance is in the ordinary
     course of business consistent with past practice and that such Stock
     Options have an exercise price per share at least equal to the market value
     of the Company Common Stock on the date of

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     issuance (and with other material terms no more favorable to such employee
     than the terms of the Stock Options outstanding on the date of this
     Agreement that were issued under similar circumstances));

          (iii) amend or propose to amend the Company Certificate or the Company
     By-laws or the certificate of incorporation or by-laws (or similar
     organizational documents) of any of the Company's subsidiaries;

          (iv) directly or indirectly acquire (x) by merging or consolidating
     with, or by purchasing assets of, or by any other manner, any person or
     division, business or equity interest of any person or (y) any assets that,
     individually, have a purchase price in excess of $50,000 or, in the
     aggregate, have a purchase price in excess of $250,000, except for
     purchases of raw materials, components or supplies in the ordinary course
     of business consistent with past practice;

          (v) sell, lease, license, mortgage, sell and leaseback or otherwise
     encumber or subject to any Lien or otherwise dispose of any of its
     properties or other assets or any interests therein (including
     securitizations), except sales of inventory and used equipment in the
     ordinary course of business consistent with past practice;

          (vi) (x) incur any indebtedness for borrowed money or guarantee any
     such indebtedness of another person, issue or sell any debt securities or
     warrants or other rights to acquire any debt securities of the Company,
     guarantee any debt securities of another person, enter into any "keep well"
     or other agreement to maintain any financial statement condition of another
     person or enter into any arrangement having the economic effect of any of
     the foregoing, except for short-term borrowings incurred in the ordinary
     course of business consistent with past practice not to exceed $250,000 at
     any time outstanding or (y) make any loans, advances or capital
     contributions to, or investments in, any other person, other than to
     employees in the ordinary course of business consistent with past practice;

          (vii) except for projects specifically identified in the Company's
     budget for 2001 (the "Company Capital Budget"), a true and complete copy of
     which has been provided to Parent, make any new capital expenditure or
     expenditures which, individually, is in excess of $50,000 or, in the
     aggregate, are in excess of $250,000;

          (viii) (w) pay, discharge, settle or satisfy any claims, liabilities,
     obligations or litigation (absolute, accrued, asserted or unasserted,
     contingent or otherwise), other than the payment, discharge, settlement or
     satisfaction in the ordinary course of business consistent with past
     practice or in accordance with their terms, of liabilities disclosed,
     reflected or reserved against in the most recent audited financial
     statements (or the notes thereto) of the Company included in the Filed
     Company SEC Documents or incurred since the date of such financial
     statements in the ordinary course of business consistent with past
     practice, (x) cancel any indebtedness for borrowed money, (y) waive or
     assign any claims or rights of substantial value or (z) waive any benefits
     of, or agree to modify in any respect, any confidentiality, standstill or
     similar agreements to which the Company or any of the other Sunrise
     Companies is a party;

          (ix) except in the ordinary course of business consistent with past
     practice, modify, amend or terminate any material contract or agreement to
     which the Company or any of its subsidiaries is a party or waive, release
     or assign any material rights or claims thereunder;

          (x) enter into any contracts, agreements, binding arrangements or
     understandings relating to the supply of components for the research,
     development, distribution, manufacturing and assembling by third parties
     of, and the training, license and marketing of, products of the Company or
     any of its subsidiaries or products licensed by the Company or any of its
     subsidiaries, other than pursuant to any such contracts, agreements,
     arrangements or understandings currently in place (that have been disclosed
     in writing to Parent prior to the date hereof) in accordance with their
     terms as of the date hereof;

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          (xi) except as otherwise contemplated by this Agreement or as required
     to comply with applicable law, (A) adopt, enter into, terminate or amend in
     any material respect any collective bargaining agreement, Benefit Plan or
     Benefit Agreement, (B) increase in any manner the compensation, bonus or
     fringe or other benefits of, any current or former officer, director,
     employee or consultant of the Company or any of its subsidiaries (subject
     to and except as set forth in Section 5.01(a)(xi) of the Company Disclosure
     Schedule, except for normal increases in cash compensation in the ordinary
     course of business consistent with past practice), (C) pay any benefit or
     amount not required under any Benefit Plan or Benefit Agreement or any
     other benefit plan or arrangement of the Company or any of its subsidiaries
     as in effect on the date of this Agreement, (D) increase in any manner the
     severance or termination pay of any current or former director, officer,
     employee or consultant of the Company or any of its subsidiaries, (E) make
     any material determinations not in the ordinary course of business
     consistent with past practice, under any collective bargaining agreement,
     Benefit Plan or Benefit Agreement, (F) grant any awards under any bonus,
     incentive, performance or other compensation plan or arrangement or Benefit
     Plan (including the grant of stock options, "phantom" stock, stock
     appreciation rights, "phantom" stock rights, stock based or stock related
     awards, performance units or restricted stock or the removal of existing
     restrictions in any Benefit Plans or agreements or awards made thereunder),
     except as permitted by Section 5.01(a)(ii) (G) amend or modify any Stock
     Option or Warrant, except as specifically provided in Section 6.04 hereof
     or in the Restructuring Agreement, (H) take any action to fund or in any
     other way secure the payment of compensation or benefits under any employee
     plan, agreement, contract or arrangement or Benefit Plan, (I) take any
     action to accelerate the vesting or payment of any compensation or benefit
     under any Benefit Plan or Benefit Agreement, other than non-discretionary
     actions required by the terms of any existing Benefit Plans or Benefit
     Agreement as in effect on the date of this Agreement, or (J) change any
     actuarial or other assumption used to calculate funding obligations with
     respect to any Pension Plan or change the manner in which contributions to
     any Pension Plan are made or the basis on which such contributions are
     determined;

          (xii) except as otherwise contemplated by this Agreement, enter into
     any Contract of a nature that would be required to be filed as an exhibit
     to Form 10-K under the Exchange Act, other than contracts for the sale of
     the Company's products in the ordinary course of business consistent with
     past practice;

          (xiii) revalue any assets of the Company or any of its subsidiaries
     or, except as required by GAAP, make any change in accounting methods,
     principles or practices;

          (xiv) except in the ordinary course of business consistent with past
     practice, extend, accelerate, discount, compromise or settle any account
     payable or account receivable;

          (xv) sell, transfer or license to any person or otherwise extend,
     amend or modify any rights to the Intellectual Property Rights of the
     Company or any of its subsidiaries; or

          (xvi) authorize any of, or commit or agree to take any of, the
     foregoing actions.

     (b) Other Actions.  The Company, Parent and Sub shall not take any action
that would, or that are reasonably expected to, result in (i) any of the
representations and warranties of such party set forth in any Transaction
Agreement that are qualified by materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Split-Off and the Merger
set forth in Article VII not being satisfied.

     (c) Advice of Changes; Filings.  The Company and Parent shall promptly
advise the other party orally and in writing of (i) any breach of its
representations or warranties that would give rise to the failure of a condition
set forth in Section 7.02(a) or 7.03(a), as the case may be, or (ii) the failure
of it (and, in the case of Parent, Sub) to comply with or satisfy in any
material respect any covenant or agreement to be complied with or satisfied by
it under this Agreement at or prior to the Closing Date; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the

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parties under this Agreement; provided, further, however, that the failure to
provide such notification shall not give rise to a failure of a condition set
forth in Section 7.02(b) or 7.03(b), if any such breach or failure described in
clauses (i) or (ii) above shall have been cured on or prior to the Effective
Time or no longer exists immediately prior to the Effective Time. The Company
and Parent shall promptly provide the other copies of all filings made by such
party or its subsidiaries with any Governmental Entity in connection with any
Transaction Agreement and the transactions contemplated thereby, other than the
portions of such filings that include confidential information not directly
related to the transactions contemplated by the Transaction Agreements.

     (d) Certain Tax Matters.  From the date hereof until the Effective Time,
(i) the Company and its subsidiaries (including Newco) will file all material
tax returns and reports ("Post-Signing Returns") required to be filed by such
entity (after taking into account any applicable extensions); (ii) the Company
and its subsidiaries (including Newco) will timely pay all material taxes due
and payable with respect to the taxable periods covered by such Post-Signing
Returns that are so filed; (iii) the Company and its subsidiaries (including
Newco) will make reasonable provision for all taxes payable by the Company and
its subsidiaries (including Newco) for which no Post-Signing Return is due prior
to the Effective Time; (iv) the Company will promptly notify Parent of any
action, suit, proceeding, claim or audit (collectively, "Actions") pending
against or with respect to the Company or any of its subsidiaries (including
Newco) in respect of any material tax and will not settle or compromise any such
Action without Parent's prior written consent, which consent shall not be
unreasonably withheld; and (v) the Company will not make any material tax
election without Parent's prior written consent, which consent shall not be
unreasonably withheld.

     SECTION 5.02. No Solicitation.  (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of the Company or any of its subsidiaries or any investment
banker, financial advisor, attorney, accountant or other advisor, agent or
representative retained by the Company or any of its subsidiaries (collectively,
"Representatives") to, directly or indirectly through another person (i)
solicit, initiate or encourage, or take any other action designed to, or which
could reasonably be expected to, facilitate, any inquiries or the making of any
proposal that constitutes or could reasonably be expected to lead to a Takeover
Proposal or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information, or otherwise cooperate in any way with,
any Takeover Proposal. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in the preceding sentence by any
Representative of the Company, whether or not such person is purporting to act
on behalf of the Company or otherwise, shall be a breach of this Section 5.02(a)
by the Company. The Company shall immediately cease and cause to be terminated
all existing discussions or negotiations with any person conducted heretofore
with respect to any Takeover Proposal and request the prompt return or
destruction of all confidential information previously furnished.
Notwithstanding the foregoing, at any time prior to obtaining the Stockholder
Approval, in response to a bona fide written Takeover Proposal that the Board of
Directors of the Company determines in good faith (after consultation with
outside counsel and a financial advisor of nationally recognized repu