Alere Inc. (ALR)

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Alere (ALR)

Q4 2012 Results Earnings Call

February 15, 2013 8:30 a.m. ET


Doug Guarino - Director, Corporate Communications & Corporate Relations

Ron Zwanziger - Chairman, CEO, and President

David Teitel - CFO


Isaac Ro - Goldman Sachs

Bill Bonello - Craig-Hallum

Jon Groberg - Macquarie

Greg Simpson - Wunderlich

Jeff Frelick - Canaccord

Pete Lawson - Mizuho

Zarak Kursid - Wedbush

Dan Leonard - Leerink Swann

Anthony Petrone - Jefferies

Roger Gordon - Feingold Capital



Good morning, and welcome to the Alere Inc. conference call to discuss fourth quarter 2012 results. [Operator Instructions] I would now like to turn the conference over to Doug Guarino. Please go ahead.

Doug Guarino

Thank you, and good morning and welcome to the Alere conference call to discuss our results for the quarter and year ended December 31, 2012. We are joined today by Ron Zwanziger, Chairman and CEO; and Dave Teitel, CFO.

Before we get to that discussion though, 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 numerous factors including, without limitation, our ability to successfully acquire and integrate our acquisitions and to recognize the expected benefits of restructuring and new business activities; our exposure to changes in interest rates and foreign currency exchange rates; our ability to successfully develop and commercialize products and services; the market acceptance of our products and services; continued acceptance of health management services by payers, providers, and patients; our ability to develop enhanced health information solutions through the integrated use of innovative diagnostic and monitoring devices and to recognize the expected benefits of this strategy; the impact of health care reform legislation as well as future reform initiative; the content and timing of regulatory decisions and actions; the impact of the FDA warning letter and the OAG subpoena, as well as the impact of changes in reimbursement policy and budgetary constraints, 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, 2011, 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 this 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

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

Ron Zwanziger

Thanks, Doug, and good morning everyone. We finished the fourth quarter of 2012 with characteristically strong revenue, EBITDA, and cash flow from operations. However, lingering issues with our Triage manufacturing capacity negatively impacted our profit in the quarter.

Despite the greater than expected challenge with Triage production, which Dave will go into in greater detail, the organic growth in our professional diagnostics business, excluding the impact of U.S. flu and Triage was 5% in the quarter, as most of our units performed well.

New product sales were particularly strong in the fourth quarter at $17 million, and were helped particularly by the Alere CD4 and Epocal systems. Both of these platforms show great promise for particularly strong growth in 2013. We continue to believe that the Alere CD4 platform has the potential to revolutionize the way in which HIV is managed throughout the world.

Last week, we were very pleased to announce the completion of our acquisition of Epocal, which followed through on a contractual obligation we entered into several years ago. Enjoying the full economics of this best-in-class platform as well as gaining final control over end-user pricing will enable us to maximize the benefit of the expanding test menu, not only in the U.S. but around the world.

With built-in connectivity that allows test results to be transmitted in real time to electronic health records and decision support systems, the Epoc platform mirrors our internal design philosophy of seamlessly connecting rapid diagnostic platforms with healthcare technology to deliver faster, more comprehensive data to healthcare providers.

Alere is the market leader in point of testing in each of our three main business areas of cardiology, infectious disease, and toxicology. Our diagnostic solutions are designed to provide accurate, timely, and actionable information which increasingly can be accessed by patients, physicians, and payers through clinical and mobile platforms.

This combination of [unintelligible] patient diagnostics with our connected health system will enable individuals to take better control of their own health while supporting the emerging needs of accountable care organizations and other organizations that are looking to share risk in healthcare.

As 2012 progressed, we saw a significant increase in interest for our connected health solutions from both current and potential customers. We expect to see increasing sales this year as a consequence of our integrated approach.

With the Epocal transaction closed and our company formation essentially complete, Alere is now entering a phase of significantly reduced acquisitions and improved cash flows with a corresponding deleveraging of the balance sheet.

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