QUIDEL Corp. (QDEL)

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Quidel Corporation Q1 2008 Earnings Call Transcript
Quidel Corporation (QDEL)

Q1 2008 Earnings Call

April 23, 2008 5:00 pm ET

Executives

John Radak - CFO

Caren Mason - President and CEO

Analysts

Jeff Frelick - Lazard Capital Markets

Un Kwon-Casado - Pacific Growth Equities

Keay Nakae from Collins Stewart

Zarak Khurshid - Caris & Company

Scott Gleason - Stephens Inc

Steven Crowley - Craig-Hallum

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Quidel first quarter 2008 conference call. My name is Cynthia, and I will be your operator for today's call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to your host, Mr. John Radak, Chief Financial Officer. Please proceed.

John Radak

Thank you, and good afternoon to everyone. Thank you for participating in today's call. Joining me today is our President and Chief Executive Officer, Caren Mason. Earlier this afternoon Quidel released financial results for its three months ended March 31, 2008. If you've not received this news release, or if you would like to be added to the Company's distribution list, please call, Rachel Lipsit at Porter Novelli Life Sciences, at 619-849-5378.

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 Report on Form 10-K 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, today, April 23, 2008. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

Turning to the financial results for the first quarter of 2008. We are very pleased with our business performance this quarter, as our margin expansion continued on double-digit revenue growth. Total revenues for the first quarter were $40.9 million, a 20% increase over the same quarter a year ago. We saw very strong growth in the U.S. market, where revenues increased 26% over Q1 of 2007. As expected, our international revenues declined 13%, largely as a result of continued pricing and reimbursement issues in the Japan flu market.

Excluding Japan flu sales, our international business posted a 48% revenue growth over Q1 of 2007. For the first quarter of 2008, worldwide infectious disease revenues increased 34% to $32.2 million, compared to $24 million in the first quarter of 2007. As we discussed on our previous earnings call, we experienced a shift in normal distribution reorders of our QuickVue influenza test from December of '07 into the first quarter of '08, contributing to record domestic quarterly flu growth of 80%. While a portion of this growth can be attributed to the impact of the late influenza season.

The primary growth drivers also include additional flu test adoption, higher test utilization and increased acute-care market share, all in the U.S. If we compare the '07 and '08 flu season to the '06 to '07 flu season, our domestic test sales increased 44%, and we expect distributor's to have an appropriate level of inventory heading into next year's flu season.

Also contributing to the infectious disease growth was a very solid performance from our RSV test, as a result of gains in the acute-care market. Even though, we received CLIA waiver for our QuickVue RSV test in late February, it was too late in the quarter, for a meaningful contribution from the physician office market. However, we have high expectations for this product next season, as we have already begun to market it to physician offices. In the first quarter of this year, revenues from our reproduct in women's health product family were $5.5 million, compared to $5.9 million, a decline of 6% from the corresponding quarter of 2007. The softness in the first quarter is not unusual given the strong performance of this product category in the fourth quarter of 2007.

Revenues from our other product lines, which include fecal immunochemical test, FIT, for colorectal cancer screening, and our veterinary product line, were $3.1 million in the first quarter of 2008, compared to $4 million in the first quarter of the prior year. The majority of this decline came from our veterinary products that had an exceptionally strong Q1 of 2007. Gross margin came in at 65.4% for the first quarter, a 360 basis point improvement over last year's first quarter, primarily due to higher than normal flu test sales in the quarter.

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