美國雅培 (ABT) 2003 Q4 法說會逐字稿

Good day, everyone, and welcome to the TheraSense’s Fourth Quarter 2003 Conference Call. (Operator instructions) I will now turn the conference over to Mark Lortz, Chairman and CEO of TheraSense. Please go ahead, Mr. Lortz.

Thank you all for joining us today. I am joined today by Charlie Liamos, our COO and CFO; and Mark Tatro, our VP of finance. We’re pleased to have the opportunity to review the events and results of the fourth quarter of 2003. Prior to discussing the proposed transaction, I need to advice you that during the course of this call, we may make certain forward-looking statement regarding future events or future performance. We need to caution you not to place undue reliance on such forward-looking statements. They are not guarantees of future performance, and have known and unknown risks and uncertainties, which may cause actual results in performance to be materially different from that expressed or implied by those forward-looking statements.

These risks include the risk that the proposed merger with Abbott Laboratories may not be consummated. Other risks concerning TheraSense, Abbott, and their respective operations are detailed in the periodic filings with the SEC of TheraSense and Abbott, including our most recent filings on Form 10-Q. Information in this presentation which is forward-looking, represents this outlook only as of today’s date, and we undertake no obligation to update or revise any forward-looking statement.

As most of you know, on January 13th, TheraSense and Abbott Laboratories jointly announced a merger agreement for Abbott to acquire all of the outstanding stock of TheraSense for $27 per share in cash. TheraSense followed the announcement with a conference call to discuss the proposed transaction. As such, this conference call will focus on a review of our fourth quarter results.

However, first I will briefly recap some of the key aspects of the merger announcement. This is a one step, cash merger subject only to stockholder approval, antitrust clients and other customary conditions to closing. TheraSense will maintain and expand its operations in Alumina, California, and our portfolio of innovative, freestyle products will become part of Abbott Laboratories Diabetes Care business, which includes their MediSense products.

This transaction will not affect our product offerings or branding, and we will continue to pursue our product development programs like our Freestyle Navigator continuous glucose monitoring system. We are very excited about the significant opportunities created by the combined company, which we believe is well-positioned to bring innovative products and technologies to the marketplace, and improve the lives of people with diabetes.

The existing TheraSense and Abbott’s MediSense product lines are quite complementary, and both will continue to be marketed, creating opportunities to expand our joint presence, both domestically and internationally. In addition, we believe this combination provides us with a depth of resources including sales, marketing, product development and business development resources that is competitive with the leading players in glucose monitoring. We are very pleased that Abbott’s commitment to our people and our products and we are very proud of all of our employees who have made this very positive event possible. We anticipate the merger will be consummated early in the second quarter of this year.

Now onto our financial results. Charlie will be discussing our fourth quarter results in detail, but I am very pleased to provide some of the highlights. TheraSense continues to generate strong growth, producing fourth quarter net income of 10 cents per share, up substantially over the 6 cents reported last quarter. We generated total revenue of $61.8m this quarter, up 34 percent over Q4 of last year. Gross margin remains strong at 62 percent for the quarter. This makes our fourth consecutive quarter with positive cash flow from operations.

In October, we launched FreeStyle Flash, the newest addition to our FreeStyle product line. FreeStyle Flash is the smallest meter on the market, and like all of our FreeStyle line, utilizes the smallest blood sample size on the market, and a common test strip. FreeStyle Flash is a feature-packed system designed for frequent testers like children and active adults. We continue to roll FreeStyle Flash out on retail shelves in the U.S. with very positive reception.

In the fourth quarter we also submitted the premarket approval application for Navigator, our continuous glucose monitoring system. Last week we received notice from the FDA that the application was accepted for filing and has been granted expedited review status.

As you may know, IMS National Prescription Audit Data measures the rate at which products flow to U.S. consumers via formal prescriptions. On a rolling 90-day basis through December 31st, NPA prescription data indicated our share of the test strip market to be 7.2 percent, up 30.9 percent in the comparable 90-day period last year. The FreeStyle system market share for the same period was 11 percent, an increase of 42.9 percent from the prior year period. IMS National Sales Prospective Data reflects purchases by wholesalers and manufacturers tracking flow of product into the distribution channel. On a rolling 90-day basis through November 30th, NSP data shows our test strip share to be 6.4 percent, up 25.5 percent from the comparable period last year.

NSP data also shows the FreeStyle system as a 13.9 percent share, an increase of 46.3 percent from the prior year period. Neilson data is compiled from four major drug store chains; Rite Aid, Walgreen’s, CVS and Eckerd’s, representing roughly half of the over-the-counter market. For Q4 2003, FreeStyle product sales represent 10.2 percent of the total category share, a 37.8 percent increase year-over-year.

Now I will ask Charlie to review our financial performance in some greater detail.

Thanks, Mark. I will start with our income statement results for the fourth quarter, and compare those to the fourth quarter of 2002. As Mark said, total revenues for the fourth quarter were $61.8m, an increase of 34 percent over the fourth quarter of 2002. Our constant revenues for the fourth quarter was $23.6m, a 9 percent increase over the fourth quarter of 2002. Gross profit for the fourth quarter was $38.2m, a 56 percent increase over the fourth quarter of 2002.

So while revenues were up 34 percent, gross profit increased by 56 percent. This is the result of our continued cost reductions and test strip revenues composing a greater proportion of our total revenue. The resulting gross margin for the fourth quarter was 62 percent compared to 53 percent gross margin for the fourth quarter of 2002. Our fourth quarter gross margin was up slightly over the gross margin in the third quarter of 2003 as well.

Now I’d like to turn to operating expenses. Research and development expenses increased 24 percent to $5.6m, which represents 9 percent of revenue and is in the range of 9 percent to 11 percent that we had expected. Selling, general and administrative expenses increased 9 percent to $28m. This all resulted in our second consecutive profitable quarter. We had net income of $4.6m, or 10 cents per share, compared to a net loss of $5.7m or 14 cents loss per share for the fourth quarter of 2002.

Now I’d like to turn to our balance sheet at year end. We ended the year with cash and investments of $89.6m, compared to $83.5m at the end of the third quarter of this year, and $77.7m at the end of 2002. We are very pleased to be cash flow positive for the second consecutive quarter.

Accounts receivable at year end was $37.9m. DSO on both a weighted and unweighted basis were less than 55 days, demonstrating that inventory that is moving through the channel is being paid for. TheraSense balance sheet inventories went down 24 percent when compared to inventories at the end of the third quarter, and are down 53 percent when compared to inventories at the end of last year. We are very pleased with this inventory reduction in the same quarter that we had launched FreeStyle flash.

Accounts payable went down by 38 percent when compared to accounts payable at the end of the third quarter. This decrease reflects lower inventory purchases and the impact of our continued cost reduction efforts. We also continue to reduce debt on our balance sheet. We ended the year with $1.9m in debt, at the end of last year we had $8.3m in debt on our balance sheet.

With respect to providing financial guidance, given the pending merger with Abbott Laboratories, we will not be providing any guidance and will not be updating or confirming any prior guidance. This completes my financial overview. Now I’d like to turn the call back to Mark.

Now we have some time for limited questions, so operator, please.

(Operator instructions) Thank you. Our first question comes from Sam Chang with RBC Capital Markets.

Good afternoon, guys.

Hi, Sam.

Since no one is asking any questions, I guess I’ll ask a quick one. The expedited review status, what is your anticipation on the timing of that for the Navigator product?

Again, it doesn’t change our overall estimate for the elapsed time, Sam. We’re still expecting this to be in the neighborhood of about 15 months.

So about 15 months. Okay. All right. That’s it. Thanks.

Thank you. Operator, if there are no other calls, I will have my closing remarks.

No sir, our next question comes from Tom Gunderson with Piper Jaffray.

You can’t get away that easy.

Hi, Tom.

Got to have a good-bye round of Q&A here. Two questions, and I realize that some of this may be restricted, but I’ll try anyhow. Number one is, with the Q4 results that you got, what do you think the biggest benefits to having Abbott as a partner in diabetes care are going to be, in addition to their international exposure?

Well Tom, certainly the stronger breadth in product lines, larger critical mass going forward in both the SG&A spending and R&D, I think all bode well for the future. I think they are very complimentary product lines, as we mentioned in the call, so we look for just a significant number of synergies here going forward, and we think it is an exciting opportunity.

Okay. And second, just a Q4 wind up question, and that is, can you give us an estimate of what you thought wholesale inventories were?

What we mentioned in the call is the receivables are down and again, we continue to see the inventories dropping, things are moving through at a very good velocity, share is up, so everything is moving in the right direction, field inventories are going down, our inventories are going down, and velocity through the stores is going up. So everything directionally is in the right shape.

Well, good luck. I’m going to miss seeing those numbers go up.

Great, thanks Tom.

See you.

(Operator instructions) Since there are no further questions, Mr. Lortz, please continue with any closing comments.

All right, thank you operator. Thank you all very much for joining us on this call, and I also want to express our deep appreciation to our TheraSense employees for all of their hard work in helping us achieve these results and making a difference to so many people living with diabetes. Our business continues to hit its stride and we believe that the combination with Abbott will enable this organization, its products and its people to make an even greater impact going forward. Thank you all very much.

Thank you. Ladies and gentlemen, that concludes our conference call for today. You may disconnect all lines. Thank you for participating.