Alere's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Alere Inc. ( ALR)

Q3 2011 Earnings Call

October 26, 2011 8:30 AM ET

Executives

Doug Guarino – Director, Corporate Relations

Ron Zwanziger – Chairman, President and CEO

David Teitel – CFO, VP and Treasurer

Analysts

Jon Groberg – Macquarie Capital

John Putnam – Capstone Investments

Peter Lawson – Mizuho Securities

Zarak Khurshid – Wedbush

Ashim Anand – Natixis

Greg Simpson – Wunderlich

Jeff Frelick – Canaccord

Isaac Ro – Goldman Sachs

Presentation

Operator

Good morning, and welcome to the Alere Inc. conference Call to discuss Third Quarter 2011 Results. All participants will be in listen-only mode. (Operator Instructions) Management has asked that you limit yourself to two questions while in the queue. Please note this event is being recorded.

I would now like to turn the conference over to Mr. Doug Guarino, Director of Corporate Relations. Please go ahead, sir.

Doug Guarino

Thank you, Danis. And good morning, and welcome to the Alere conference call to discuss our results for the quarter ended September 30, 2011. We are joined today by Ron Zwanziger, Chairman and CEO; and David Teitel, CFO.

Before we get to that discussion now, 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 the U.S. securities laws. These statements reflect our current views with respect to future events or 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 a number of factors, including without limitation our ability to successfully acquire and integrate our acquisitions and to recognize the expected benefits of restructuring in new business activities; our exposure to changes in interest rates and foreign currency exchange rates; our ability to successfully develop and commercialize products; the market acceptance of our products; continued acceptance of health management services by payers, 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 healthcare reform legislation as well as future reform initiatives, the content and timing of decisions by regulatory authorities as well as the impact of changes in reimbursement policy and budgetary constraint 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, 2010 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 the call we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed, a 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 alere.com.

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

Ron Zwanziger

Thanks, Doug, and good morning, everyone. I’m pleased to report a strong third quarter highlighted by currency adjusted organic growth in our diagnostics business of 8.7%. Given the increasing uncertainty in the world, we carefully managed expenses throughout the third quarter to deliver solid leverage below the line. In response to continuing worldwide economic uncertainties, we will continue to carefully monitor spending and further tighten as necessary to respond to any additional pressures.

Despite the ongoing EU debt crisis, our European in particular has performed well throughout 2011 and sales in the third quarter were no exception. Supported by new product sales, revenues in Europe reflected strong organic growth, particularly in our cardiology and infectious disease units. We feel well-positioned for the rest of the year in this geography.

Sales growth in Asia were also particularly strong with revenues in Japan beginning to rebound from the effect of earthquake earlier this year and further benefiting from higher sales of recently cleared new cardiology products. Additionally, the investments we made in R&D and sales force during the first half of the year have begun to show earlier results which we expect to accelerate through to ‘12.

In the U.S., an otherwise strong performance, was offset by the expected negative effect of ongoing quality and related FDA problems being experienced by Beckman Coulter with the sales of our BMP test for the use on their instrument in the U.S. down 9% to $2 million in the quarter compared to last year.

Viewing global revenue trends as a whole and factoring the projected income of new product sales over the next several years, we continue to expect strong and increasing organic topline growth for our Professional Diagnostics business throughout 2012 and beyond.

In our Health Management unit consistent with the trends we highlighted in our Q2 call, revenue declined sequentially in our smoking cessation unit primarily a result of state budgetary pressures.

Additionally, revenues in our coagulation monitoring business also declined for the third quarter in a row as the final negative impact of the CMS reimbursement policy change flow through their results. This impact has now been fully absorbed by the business and we expect to return to modest growth for our home monitoring unit in the fourth quarter.

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