Quidel's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Quidel Corporation ( QDEL)

Q4 2011 Earnings Call

February 29, 2012 5:00 pm ET


Randy Steward - CFO

Doug Bryant - President and CEO


Steven Crowley - Craig-Hallum

Tycho Peterson - JPMorgan

Zarak Khurshid - Wedbush Securities

Ashim Anand - Natixis

Scott Gleason - Stephens

Jeff Frelick - Canaccord Genuity

Ross Taylor - C.L. King



Welcome to the Quidel Corporation fourth quarter and full year 2011 earnings conference call. (Operator Instructions) I'd now like to turn the call over to Mr. Randy Steward.

Randy Steward

Good afternoon. This is Randy Steward, Chief Financial Officer of 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 its three months ended December 31, 2011 as well as for the full 2011 period. If you have not received this news release or if you would like to be added to the company's distribution list, please call Ruben Argueta at Quidel Corporation, 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 those stated expectations. For a discussion of risk factors, please review Quidel's annual report on Form 10-K, registration statements and subsequent quarterly reports on Form 10-Q as filed with the SEC.

Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 29, 2011. 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 and Doug will provide a company update on the more recent developments. We will then open the call for your questions.

For the fourth quarter of 2011, total revenues were $38.4 million compared to $31.7 million in the fourth quarter of 2010, an increase of 21%. The infectious disease product category comprised a majority of the revenue increase, growing 28% versus last year along with 8% growth from our women's health category. Inventories at distribution remained at low levels, indicating that revenues in Q4 were reflective of that in user demand.

Global sales of infectious disease products totaled $27.3 million in the fourth quarter of 2011 compared to sales of $21.4 million in the fourth quarter of 2010. Strong sales from our influenza product line of which sales $9.7 million for the quarter drove the increase along with continued growth from our Strep A, RSV and herpes product lines. In the fourth quarter of 2011, Strep A and RSV each grew 8% over the fourth quarter of 2010.

Revenues for the women's health category increased by 8% in the quarter to $8.2 million due to the timing of orders in our autoimmune and bone health business and an 18% growth from Thyretain, our Graves' disease product. Our gastrointestinal product category revenues were $1.7 million, equal to the fourth quarter of 2010.

Gross margins in the fourth of 2011 expanded nearly 400 basis points to 60% from 56% in the fourth quarter of 2010, largely due to improved product mix, manufacturing efficiencies gained at our Athens, Ohio, facility and continued cost reduction activities, the latter two of which we consider to be permanent.

Included in cost of sales for the quarter were $2.2 million of intangible amortization related to the Alere lateral flow royalty buyout discussed last quarter.

Operating expenses were $21 million in the fourth quarter of 2011 compared to $18.5 million for the fourth quarter of the prior year. Research and development costs in the fourth quarter of 2011 were $6.8 million compared to $5.6 million in the fourth quarter of 2010. Attributing to this R&D increase was a $1.1 million impairment charge related to a discontinued product and $500,000 related to a discontinued research and development project.

Sales and marketing costs increased to $6.8 million in the fourth quarter of 2011 from $5.9 million in the fourth quarter of the previous year due to an increase in sales commissions associated with the increased sales in 2011.

General and administrative expenses in Q4 of 2011 increased to $5.7 million from $4.9 million in the fourth quarter of last year. This is primarily related to an increase in employee incentive compensation in 2011 versus 2010.

Stock-based compensation expense was $2.3 million in the fourth quarter versus $1.3 million for the comparable period in 2010. In the fourth quarter, we've recorded in the other expense line item $400,000 primarily associated with a facility shutdown in Ohio. In total, all of the aforementioned one-time items had a negative impact of approximately $0.04 per share.

Our tax rate for the fourth quarter of 2011 was 30.1% and for the full year our effective tax rate was 33.5%. This compares to a tax rate of 35.3% for the full year of 2010.

Net income in the fourth quarter of 2011 was $1 million or $0.03 per diluted share compared to net loss of $400,000 or $0.02 per share for the fourth quarter of 2010. On a non-GAAP basis excluding non-recurring items, amortization of intangibles and stock compensation expense, net income for the fourth quarter of 2011 was $4.9 million or $0.15 per diluted share. This compares to net income of $1.5 million or $0.05 per diluted share for the same period in 2010.

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