Alere Notes Mixed 2Q, Loss Widens - Analyst Blog

By Zacks | August 09, 2012 AAA

Alere (ALR), a medical products company focused on integrating rapid diagnostics with health management, reported second quarter 2012 adjusted earnings per share of 42 cents, trailing the corresponding Zacks Consensus Estimate of 50 cents. Reported net loss was about $18.2 million (or loss of 23 cents per share) in the second quarter compared to a net loss of $4.7 million (or loss of 5 cents per share) in the year-ago quarter.

Revenues

Net revenues came in at $700.5 million in the reported quarter, up 23.5% year over year, easily surpassing the Zacks Consensus Estimate of $654 million.

Segment Analysis

Net revenues from Professional Diagnostics were $540.1 million (includes license and royalty revenues of $3.2 million), up 32% year over year. Adjusted organic growth for the segment was 6.3% on a year-over-year basis.

Under the Professional Diagnostics segment, revenues from Cardiology ($125.6 million) declined 5% whereas revenues from Infectious disease ($137.8 million), Toxicology ($159.9 million) and other sources ($76.7 million) increased 13%, 80% and 28% on a year-over-year basis, respectively. Diabetes business line accounted for $36.8 million of segment revenues.

Revenues from the Health Management segment were $138.6 million, up 2% year over year. Revenues were driven by tobacco cessation programs as well as coagulation monitoring programs.

Under the Health Management segment, revenues from Disease and Case Management ($54.5 million) dipped 11% while revenues from Wellness ($29.6 million), Women's & Children's Health ($31.3 million) and Patient Self-Testing Services ($23.2 million) were up 13%, 10% and 17% on a year-over-year basis, respectively.

Margin

Adjusted gross margin was 53.4% in the second quarter compared to 54.9% in the year-ago quarter. The same for the Professional Diagnostics segment was 56.3% compared to 58.6% a year ago. Adjusted gross margin for the Health Management segment declined to 46.5% from 48.4% in the prior-year quarter.  

Balance Sheet

Alere ended the second quarter with cash and cash equivalents of about $303.7 million, down 45.4% year over year. Total long-term liabilities (net of current portion) amounted to $3,499 million. Adjusted free cash flow came in at $46.2 million, up 41.3% year over year. 

Diagnostic tests are shifting closer to the consumers and into the home testing market, as more diagnostic tests are being developed to monitor patients rather than simply diagnose them. Alere's strategy of combining disease management with point-of-care testing (POCT), in a manner that encourages patients to take responsibility over their overall health care, is viewed as a prudent approach while at the same time ensuring affordability.

In addition to growing its revenues through a combined strategy of continued acquisitions and measured organic growth, the company is committed to improvement of its operating margin. Further, its product pipeline is strong, which has been developed through a combination of internal R&D as well as serial acquisitions. One of the company's competitors is Abaxis (ABAX).

Alere currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

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