Alere Beats Earnings Est, Turns to Profit

Zacks

Alere (ALR), a medical products company focused on integrating rapid diagnostics with health management, reported first quarter 2013 adjusted earnings per share of 51 cents beating the Zacks Consensus Estimate of 48 cents.

Reported net income was about $7.2 million (or earnings of 9 cents per share) in the first quarter compared to a net loss of $4.1 million (or loss of 5 cents per share) in the year-ago quarter. Reported results include several one-time or extraordinary items such as restructuring charges and amortization.

Revenues

Net revenues came in at $739.2 million in the reported quarter, up 10.2% year over year, surpassing the Zacks Consensus Estimate of $724 million. Adjusted revenue came to $739.9 million in the reported quarter.

Segment Analysis

Net revenues from Professional Diagnostics were $582.5 million (includes license and royalty revenues of $3.9 million), up 12% year over year. Adjusted organic growth for the segment was 1.1% on a year-over-year basis.

Under the Professional Diagnostics segment, revenues from Cardiology ($114.9 million) declined 17% year over year. Revenues from Infectious disease ($189.8 million) increased 26% year over year whereas revenues from Toxicology ($149 million) and other sources ($74.7 million) increased 22% and dropped 1%, respectively, on a year-over-year basis, respectively. Diabetes business line accounted for $50.1 million of segment revenues, up 78% year over year.

Revenues from the Health Information Solutions segment were $134.2 million, up 3% year over year. Revenue growth was driven by coagulation monitoring programs in the residential setting.

Under the Health Information Solutions segment, revenues from Disease and Case Management ($54.1 million) rose 1% and revenues from Wellness ($26.3 million) declined 3% year over year. Revenues from Women’s & Children’s Health ($29.1 million) and Patient Self-Testing Services ($24.7 million) were down 2% and up 20% on a year-over-year basis, respectively.

Margin

Gross margin dropped to 49% in the reported quarter from 53% in the year-ago quarter. Operating margin dropped to 4.1% from 5.2% over the same timeframe. 

Balance Sheet

Alere exited the first quarter with cash and cash equivalents of about $327.2 million, down marginally 0.3% year over year. Total long-term debt (net of current portion) amounted to $3,800.5 million, up 4.4% year over year.

Outlook

Diagnostic tests are shifting closer to the consumers and into the home testing market, as more diagnostic tests are 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 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.

Alere carries a Zacks Rank #3 (Hold). We are more positive about Conceptus, Inc. (CPTS), which carries a Zacks Rank #1 (Strong Buy). We are also positive about Becton, Dickinson and Company (BDX) and The Cooper Companies Inc. (COO), each of which carry a Zacks Rank #2 (Buy).

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