Quidel Corp. ( QDEL)

Q2 2011 Earnings Call

August 2, 2011, 5:00 p.m. ET


John Radak – CFO

Doug Bryant – President and CEO


Matt Hewitt – Craig-Hallum Capital Group

Scott Gleason – Stephens, Inc.

Ashim Anand – Natixis Bleichroeder

Tycho Peterson – JP Morgan

Brian Weinstein – William Blair & Co.

Nicholas Jansen – Raymond James

Brad Hoover – Sidoti & Co.



Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation second quarter 2011 earnings conference call. At this time, all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session. (Operator instructions).

I would now like to turn the call over to Mr. John Radak. Please go ahead.

John Radak

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

Today Quidel released financial results for its three months ended June 30 th, 2011. If you’ve not received this news release or if you would like to be added to the company’s distribution list, please call Hooven Argetta at Quidel Corporation at 858-646-8023.

Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ materially from these stated expectations.

For a discussion of risk factors, please review Quidel’s annual form on, annual report on Form 10-K, and registration statements and subsequent quarterly reports on form 10-Q as filed with the FCC.

Furthermore, this conference call contains time-sensitive information that is accurate only as the date of the live broadcast of August 2 nd, 2011. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call expect as required by law.

For today’s call, I will report the financial results for the quarter. And Doug will provide an update on our new product pipeline. We will then open the call to your questions.

In the second quarter of 2011, total revenues were $27.5 million compared to $25 million in the second quarter of 2010, an increase of 10%.

Infectious disease product lines comprised $1.3 million of the revenue increase driven mainly by growing in Strep and RSV.

Global sales of infectious disease products totaled $15.2 million in the second quarter of 2011 compared to sales of $13.9 million in the second quarter of the prior year.

While the primary contributor to this increase was very strong growth in our Strep A product line, we also saw growth in our RSV and flu product lines relative to 2010.

Revenues in the women’s health category grew 1% to $8.4 million as a 17% growth in Thyretain was offset by continued weakness in our bone health product line.

Our gastro intestinal product revenues increased 16% to $1.8 million due to increased sales of IFOB, H Pylori, and Enterovirus.

Gross margin in the second quarter of 2011 increased to 54.4% as compared to 49.5% in the second quarter of the prior year primarily due to lower manufacturing costs as a result of acquisition cost synergies and lower scrap costs at DHI. In addition, the 2010 period included amortization of an inventory fair value purchasing accounting adjustment related to the DHI acquisition.

Operating expenses were $20.1 million in the second quarter of 2011 compared to $19.9 million for the second quarter in the prior year, which included $0.7 million of business acquisition and integration costs.

Research and development costs in the second quarter of 2011 were $6.5 million as clinical trial costs came in lower than expected.

General administrative expenses increased primarily as a result of increased stock compensation due to two and three year clip vests and an accrual from incentive compensation in 2011 as compared to not doing so in 2010.

Stock-based compensation expense was $1.9 million in the second quarter versus $1.4 million for the same period in 2010. We expect stock compensation to be lower in the second half of the year totaling approximately $6.4 million for the full year.

Our effective tax rate for the second quarter of 2011 was consistent with the first quarter at 34% versus the year-to-date rate of 59% for the first six months of 2010.

You may recall that last year, the tax rate in the second quarter was abnormally high, particularly when compared to the effective tax rate at the end of the calendar year. This drove an unusually high tax benefit on the pre-tax loss in the second quarter of 2010, thereby significantly reducing the net loss in that quarter. Had the final year-end rate of 35.3% been applied to the second quarter loss in 2010, the resulting net loss in loss per share would have been $5.3 million and $0.19 respectively.

Net loss for the second quarter of 2011 was $3.7 million or $0.11 per share compared to a net loss of $2.5 million or $0.09 per share for the second quarter of 2010.

On an non-GAAP basis excluding non-recurring items, amortization of acquired intangibles and stock compensation expense, net loss for the second quarter of 2011 was $1.5 million or $0.04 per share compared to a new loss of $0.1 million or $0.00 per share in the same period of 2010.

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