Quidel Corp. (QDEL)
Q1 2011 Earnings Call
April 28, 2011 5:00 pm ET
John Radak – CFO
Doug Bryant – President and CEO
Steven Crowley – Craig Hallum Capital Group
Pedan [ph] – William Blair & Company
Zarak Khurshid – Wedbush Securities
Jeff Frelick – Canaccord
Ashim Anand – Natixis
Previous Statements by QDEL
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I'd now like to turn the call over to Mr. John Radak. Please go ahead.
This is John Radak, Chief Financial Officer at 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 the three months ended, March 31, 2011. 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 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 see 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 it's accurate only as of the date of the live broadcast, April 28, 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 on the financial results for the quarter. Doug will talk about the impact of the influenza season and our progress with Thyretain in the quarter, and there are three projects in development. We will then open the call to your questions.
Total global revenues for the first quarter were $59.6 million, compared to $28.4 million in the first quarter of 2010, an increase of 110%. This increase in revenues in the first quarter reflects the benefit of an influenza and respiratory disease season, while no such season incurred in 2010.
The following comments on revenues by product category will be compared to the prior year as if DHI was acquired on January 1, 2010. Global revenues of infectious disease products totaled $47.6 million in the first quarter of 2011, compared to sales of $21.9 million in the first quarter of the prior year. All product lines contributed meaningfully to this growth.
Revenues in the woman's health category declined slightly from $8.4 million to $8 million reflecting the timing of orders for pregnancy test as well as softness in our bone health product lines. Our GI product category increased 24% to $1.7 million.
Gross margin in the first quarter of 2011 increased to 66%, as compared to 53% in the first quarter of the prior year, primarily due to a more favorable product mix associated with the flu in respiratory season. Operating expenses were $21.6 million in 2011, compared to $18.8 million in the prior year. The inclusion of DHI operating expenses for a full quarter in 2011 drove most of the increase in the quarter.
Research and development costs in the first quarter of 2011 were $7.8 million, which reflect to an acquisition adjustment first quarter of 2010. Higher clinical trial costs associated with the fluorescent – analyzer and higher molecular assay development costs were offset by lower instrument development costs.
Research and development costs in the second quarter should be about the same as the first quarter with an expectation that R&D spend should be lower in the second half of the year versus the first half. As a result of our molecular development programs running ahead of schedule, we now expect R&D to be somewhat higher than 2011 versus 2010 pro forma.
Stock based compensation expense was $1.8 million in the first quarter versus $1.2 million for the same period in 2010. The effective tax rate for the first quarter of 2011 was 34% compared to 37.8% in the first quarter of 2010. The difference in the effective tax rate is primarily due to the inclusion of the federal R&D tax credit and acquisition related expenses during the first quarter of 2010.
We anticipate that our tax rate for 2011 will be approximately 34%. Cash flow from operations was $26 million allowing us to repay $30 million of debt associated with the acquisition of DHI in February 2010. We ended the quarter with $59 million of cash and cash equivalents and $50 million of long-term debt in our balance sheet. I will now turn the call over to Doug.
Thank you, John. The first quarter of 2011 was significant because there was effective respiratory season. Throughout the quarter, our commercial organization focused on maximizing revenues of our market product, most notably flu, Thyretain and our other respiratory disease products.
The quarter results are important because we continue to make progress on the development of our three key projects, our fluorescent immunoassay analyzer, our cellular based analyzer Bobcat, and our molecular program. I will speak to these development projects shortly.
With regard to influenza, we benefited from the return of the cold and flu season in the first quarter. We characterized flu season as occurring at the later end of the (inaudible) terms of severity with ILI peaking at 4.9% and then quickly falling toward the end of the quarter.