Quidel Corporation Q2 2010 Earnings Conference Call Transcript

Quidel Corporation Q2 2010 Earnings Conference Call Transcript
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Quidel Corporation

Q2 2010 Earnings Conference Call

July 29, 2010 05:00 pm ET


Doug Bryant – President and Chief Executive Officer

John Radak – Chief Financial Officer


Zarak Khurshid - Wedbush Securities

Steven Crowley - Craig Hallum Capital Group

Scott Gleason - Stephens, Inc.



Good day ladies and gentlemen and welcome to the Quidel Corporation Second Quarter 2010 conference call.

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At this time all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session. (Operator Instructions)

As a reminder this conference is being recorded for replay services. I’d now like to turn the call over to Mr. John Radak, please go ahead.

John M. Radak

This is John Radak, Chief Financial Officer, Quidel thank you for participating in today’s call. Joining me today is our President and Chief Executive Officer, Doug Bryant.

Today Quidel released financial results for it's three months ended June 30


2010. if you have not received this news release or if you would like to be added to the company’s distribution list, please call Reuben or Gerta at Quidel Corporation at 8586468023.

Please note that this conference will include forward-looking statements within the meaning of Federal Securities laws. It is possible that actual results and performance could differ materially from the stated expectations. For a discussion of risk factors please review Quidel’s annual report on form 10K and subsequent quarterly reports on form 10Q as filed with the SEC.

Furthermore this conference call contains time-sensitive information that is accurate only as of the dates of the live broadcast July 29


, 2010. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call except as required by law.

For today’s call I will report the financial results for the quarter on year-to-date and also provide details on the DHI acquisition synergies. Doug will provide color to our near-term and longer-term business growth prospects and give an update on a new product pipeline. We will then open up the call to your questions.

Total global revenues for the quarter were $25 million, an increase of 2% compared to the second quarter of 2009. There are several factors that affect revenue comparison for the two quarters. In 2009 there were $11.3 million of pandemic-related influenza revenues offset by weak strep and pregnancy shipments to US distributors as they lowered inventory levels of these products. In 2010 revenues were favorably impacted by $10.1 million from the acquisition of DHI, partially offset by a weak respiratory season and the timing of orders for our veterinary products.

Domestic revenues for Quidel were $21.2 million, an increase of 28% period over period, while international revenues came in at $3.8 million, a decrease of 53% from the second quarter of 2009.International revenues accounted for 15% of total revenues in the second quarter of 2010.

Global infectious disease revenues were$13.9 million versus $16.1 million in the second quarter of last year, a decrease of 14% driven by an absence of influenza sales partially offset by the additional revenues from DHI’s respiratory, urology and herpes product lines.

Strep sales grew 20% in the quarter largely due to more normalized distributor inventory levels in 2010.

Global revenues of our reproductive and women’s health category increased 37% in the second quarter of 2010 to $8.4 million. This increase was driven primarily by the inclusion of DHI’s Thyretain product line as well as robust growth in our other, immune and complement product lines. Pregnancy revenues also contributed to the growth in this category as a result of more normalized distributor inventory levels in 2010.

Gross margins in the second quarter of 2010 decreased to 50% as compared to 59% in the prior year. The decline in gross margin was driven by the following: first an unfavorable product mix shift due to the significant flu sales during 2009 associated with the pandemic, lower unit production volumes and related leverage of our manufacturing facility in 2010 and finally by the final $400,000 of amortization at the inventory per value write up associated with the DHI acquisition.

These unfavorable factors were partially off set by the addition of DHI’s gross margins which were higher than our Pregnancy and Strep products.

Operating expenses were $19.9 million compared to $13.5 million in the prior year. This includes $5.3 million of DHI’s operating expenses in the current period as well as $1.5 million of intangible asset amortization associated with the DHI acquisition.

Research and development costs were$6.3 million in line with our expectations. On a GAAP basis the loss per share in the quarter was $0.09 compared to earnings of $0.02 per diluted share in the same period of 2009. Those familiar with our company know that in a normal year Quidel historically reports a loss in its second quarter in the range of $0.05 to $0.12 per share so this quarter is not a typical.

On a pro-forma basis our loss per share was $0.03 per share compared to earnings per diluted share of $0.04 in the same quarter in 2009.

Stock-based compensation expense was $1.4 million for the quarter versus $0.9 million for the same period in 2009. During the second quarter Quidel repurchased approximately 400,000 of its common stock at an average price of $11.30 under the company’s previously announced share repurchase program. A total of $10.3 million remains available for stock repurchase under the current board-authorized program.

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