Inverness Medical Innovations (IMA)

Q1 2010 Earnings Call

April 28, 2010 10:00 am ET

Executives

Doug Guarino - Director of Corporate Communications & Corporate Relations

David Teitel - Chief Financial Officer, Principal Accounting Officer, Vice President and Treasurer

Ron Zwanziger - Chairman of the Board, Chief Executive Officer and President

Analysts

Bruce Cranna - Jefferies & Company, Inc.

Ashim Anand - Natixis Bleichroeder Inc.

Erik Schneider - UBS Investment Bank

Bill Bonello - RBC Capital Markets Corporation

Jonathan Groberg - Macquarie Research

Jeff Ares

Gregory Simpson - Stifel, Nicolaus & Co., Inc.

Mark Afrasiabi - PIMCO

John Putnam - Capstone Investments

Zarak Khurshid - Caris & Company

Constantine Davides - JMP Securities LLC

Daniel Owczarski - Avondale Partners LLC

Presentation

Operator

Good morning, and welcome to the First Quarter Earnings Conference Call. My name is Suzette, and I will be facilitating the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would like to turn the event over to Doug Guarino, Director of Corporate Relations. Sir, you may begin your conference.

Doug Guarino

Well, thank you, Suzette, and good morning, and welcome to the Inverness Medical Innovations Conference Call to discuss our results for the quarter and year ended March 31, 2010. We are joined today by Ron Zwanziger, Chairman and CEO; and Dave Teitel, our CFO.

Before we get to that discussion though, I would first like to draw your attention to the fact that certain matters discussed in this conference call will constitute forward-looking statements within the meaning of U.S. securities laws. These statements reflect our current views with respect to future events of financial performance and are based on management’s current assumptions and information currently available.

Actual results and the timing of certain events could differ materially from those projected or contemplated by the forward-looking statements due to numerous factors, including without limitation, our ability to successfully acquire and integrate our acquisitions and to recognize the expected benefits of restructuring and new business activities; our exposures to changes in interest rates and foreign currency exchange rates; our ability to successfully develop and commercialize products; market acceptance of our products; continued acceptance of Health Management services by payors, providers, and patients; our ability to develop enhanced Health Management programs through the integrated use of innovative diagnostic and monitoring devices and to recognize the expected benefits of this strategy; the impact of the recently approved healthcare reform legislation, as well as future reform initiatives; the content and timing of decisions by regulatory authorities, both in the United States and abroad; the effect of pending and future legal proceedings on our financial performance; and the risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2009, as well as in our quarterly reports on Form 10-Q. Our company undertakes no obligation to update forward-looking statements.

Additionally, please note that during this call we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed, the presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available on the company’s website at invernessmedical.com.

With that, let me turn the call over to Inverness Medical Chairman and CEO, Ron Zwanziger. Ron?

Ron Zwanziger

Thanks, Doug, and good morning, everyone. Despite a number of key challenges, which were laid out during our last call in February. I'm pleased to report that our first quarter reflected strong performance, characterized by year-over-year earnings growth, continued new product launches, meaningful progress with our new technology initiatives and the completion of a number of important acquisitions and business agreements.

Beginning with the financial performance for the quarter, revenue and earnings were solid at $515 million and $0.64 a share. Several factors, which we have previously described, impacted our results unfavorably. First, overall weakness in worldwide respiratory sales had the effect of materially reducing both revenues and margins. As an example, U.S. flu sales and worldwide Strep A sales alone accounted for more than $9 million of lower revenues in the first quarter to compare to the prior year. Additionally, continued pressures in our Health Management unit resulted in a further decline in gross margin percentage for that business. Although overall, Health Management revenues increased primarily due to strong growth in the differentiated part of the business.

Despite these challenges, broad favorable trends in our other business units combined with expense controls enabled us to deliver healthy earnings in the quarter. In fact, Q1, was one of the strongest operational quarters we've had in some time, as the organization responded to the sudden ending of H1N1 and no seasonal flu. We were able to achieve our financial results under these challenging conditions, while continuing to advance key initiatives such as assuming responsibility for global distribution of the Epocal system, finalizing the shutdown of the Cholestech facility, continuing to roll out Apollo, successfully integrating Tapestry and QAS business, soon to be renamed Alere Home Monitoring, as well as a number of other milestones, which I'll touch on later in the call.

Taking into consideration the anticipated impact of recent acquisitions combined with acceleration in the growth rates of some of our core businesses, such as drugs of abuse and HIV-related diagnostics, we continue to feel confident in our ability to achieve our goal of $2.90 per share of diluted EPS for 2010. And now let me turn the call over to Dave for a discussion of our reported financial results for the quarter.

Read the rest of this transcript for free on seekingalpha.com

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