Dear Shareholders,

This was a great year for BioReference Laboratories, not only for our performance but for the building blocks that we have planted for the future. Either through our own efforts and initiatives or changes in the market environment, we have the opportunity to substantially increase and enhance our footprint in the laboratory space. For many years we have stated that BioReference builds franchises. Last year was a watershed year for us because we either strengthened significantly our existing franchises or we initiated the creation of new ones from which we will reap the benefits for many years to come. Expanding our market share in our regional market, growing significantly and enhancing our professional capabilities in our oncology markets and making a strong entrance into the new genetics market, are all steps that will bear fruit after the financial results of this year are forgotten.

Over the last several quarters we have seen significant growth in our specialty testing areas. The regional business growth has lagged somewhat behind. There are a number of fine regional laboratories that compete for this business. Quest is far and away the dominant laboratory in the northeast, especially in the New York metropolitan area. But in many ways business has been somewhat stable among competing laboratories. This stability was disrupted in October 2006 with the announcement by United Health Care of its change in laboratory vendors by excluding a national laboratory competitor from its approved provider list. By excluding one laboratory from its approved list of providers, this decision, especially in the New York metropolitan area where Oxford represents a significant amount of the testing could well alter the dynamics in the marketplace. BioReference cannot concede this business to our competitors in this environment; we must take full advantage of this opportunity. BioReference, as a full and strong participant with a good working relationship with United Oxford, is in an extremely strong position to leverage these changes.

In December, we announced that we had been enrolled as a participating provider in the Aetna Healthcare network. While this is not as disruptive as the United Healthcare contract because United actually removed the dominant competitor from the provider panel, this event is also rife with opportunity for BioReference. We have always done a reasonable amount of Aetna PPO business, but we are now able to provide services for their entire lines of business. There are physician offices that will be willing to consider us now because we have the bulk of their patients’ insurance company payers who previously did not consider us. If all we get is the low margin managed care business, the value is marginal; but if we are able to bring on all or most of the business from an account, the outcome will be excellent.

The next effort I want to mention is our continued growth in GenPath. Once again over this past year, our volume has grown significantly. The number of tests handled through molecular diagnostics, flow cytometry and bone marrows continues to grow at an outstanding rate. I mentioned before that we believe that our number of feet on the street is larger than any other laboratory in the New York area but what may not be clear is that the numbers of sales people that are primarily selling specialty services such as GenPath outnumber our New York regional sales force. As we look to continue our leadership position in this area, we continue to bring in new tests, new technologies and new molecular markers. Our Scientific Advisory Board, leading oncologists from around the country, has been helpful in confirming our new testing initiatives so that we remain on the cutting edge of cancer diagnostics. We will continue to explore new testing platforms as well. This will be an area that will continue to define us in the coming quarters.

Other specialty areas also continue to expand. Our correctional business has continued to grow. This year we started to service the correctional health population in Alabama. Women’s Health has enjoyed considerable growth and has been a large part of our growth. We look to expand our offerings in this area as well. The coagulation laboratory has also grown and, based on our addition of some new diagnostic tests, this area will also contribute to future growth. We also have plans to expand our cardiology program. We believe that our strength is finding clinically relevant areas where markets can be created. Physicians want special attention. We can design the program. We believe we can implement the program.

The last area of strategic importance is genetic testing. GeneDx is a leading laboratory known for superior service. GeneDx has two strong assets: unquestioned scientific and technical leadership as well as an invaluable credibility in the genetics community. As we expand the services of GeneDx, we need to leverage these assets. In the coming months, we look to expand the test menu offered by GeneDx. In addition to expanding the test menu, however, we intend to create new products in a wide variety of areas that we cannot discuss specifically at this time. We will state, however, that while GeneDx is currently known as a primary source for the diagnosis of rare diseases, the goal of our genetics initiative is to expand into the diagnosis of the genetic variants of common diseases.

On December 14th, 2006, myself, accompanied by our senior management and Board of Directors, closed NASDAQ. It was an exciting time and NASDAQ is to be congratulated for making us feel very special. But as I took pride in looking back on what we have accomplished over the past 20 years I found myself distracted, filled with anticipation and more preoccupied about the future. There has never been a more exciting time at BioReference.

Thank you.

Marc Grodman, M.D. President