QuidelOrtho Corp (QDEL) 2005 Q4 法說會逐字稿

Welcome to the Quidel fourth quarter and year end financial results conference call. [OPERATOR INSTRUCTIONS]. I would now like to turn the conference over to Mr. Don Markley. Sir, please go ahead,.

Thank you. This is Don Markley with Lippert/Heilshorn & Associates. Thank you for participating in today's call. Earlier this afternoon, Quidel released financial results for the fourth quarter and year ended December 31, 2005. If you have not received this news release or if you would like to be added to the company’s distribution list, please call Lippert Heilshorn in Los Angeles at 310-691-7100 and speak with Cheryl Gurten.

Today's call will begin with prepared remarks by management and then we’ll take your questions. 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 from these stated expectations. For a discussion of risk factors, please review Quidel's annual report on Form 10-K and subsequent quarterly reports on Form 10-Q as filed with the SEC.

Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 15, 2006. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Today's conference call is hosted by Caren Mason, President and Chief Executive Officer, and Paul Landers, Senior Vice President and Chief Financial Officer. I will now turn the call over to Caren.

Thank you, Don, and my thanks to everyone joining us to discuss our quarterly and annual financial and operating results. We are very pleased with our financial results for the fourth quarter and for the year. In particular, Paul and I will highlight the strengths of our revenue and gross profit which contributed to the significant growth of adjusted non-GAAP earnings per share of $0.35 per share in 2005 as compared to $0.05 per share in 2004. I will also highlight significant progress we’ve made in key strategic areas of our business.

The Quidel team developed an aggressive operating plan for 2005 derived from our long term strategic imperatives. I am pleased to congratulate the entire team for the over achievement of planned objectives and for a building year in which to take great pride. Sales of our three core products lines all showed strong growth in the fourth quarter and for the year with influenza test sales up 10% in Q4 and 32% for the year, Strep-A test sales up 17% in Q4 and 19% for the year, and pregnancy test sales up 11% in Q4 and 19% for the year.

The latest U.S. professional market data covering sales through distribution as of September 30, 2005 shows that our share of the rapid point of care diagnostic market for our key products is 64% for flu, up 12 points from last year, 44% for Strep-A, up 2 points from last year, and 49% for pregnancy, sustaining its market leadership position.

With regard to new products, in January we introduced our immuno-chemical fecal occult blood test for the early detection of colon cancer. This test is not seasonal in nature, and along with others in development will support our objective of smoothing the effect of seasonality on our business. We expect our iFOBT test will become a very important product for Quidel as more than 50 million fecal occult blood tests are performed annually in the United States. The immuno-chemical fecal occult blood test has distinct advantages over the guaiac fecal occult blood test which accounts for the vast majority of colorectal cancer screening tests today.

Distinct advantages of the immuno-chemical format versus guaiac format include specific detection of human hemoglobin, no detection of animal hemoglobin, so there is no red meat interference, no dietary restrictions, easier to use directions, expected improvement in false positive readings with the potential for fewer unnecessary colonoscopies, expected improved in-patient compliance through our easy patient friendly, more pleasant one sample regimen versus the 3 sample suggested regimen of certain competitive tests. Additionally, the immuno-chemical FOBT test is currently reimbursed by Medicare at $22.22 versus $4.54 for the guaiac FOB test.

We plan to employ the same rigor in our marketing and promotion, targeted for building the iFOB test market as we have been successfully building the professional market for influenza testing As such, in concurrence with Colon Cancer Awareness Month in March, we will be launching an aggressive physician adoption and patient education and awareness campaign.

A significant new product in our upper respiratory infectious disease pipeline that our influenza customer base has been requesting from us is the RSV diagnostic test. RSV is a highly contagious viral infection of the respiratory tract that easily spreads from contact with respiratory secretions from infected individuals or contaminated surfaces or objects. The virus is a member of a subgroup of viruses that in tissue culture cause the formation of giant cells associated with small airway obstruction.

While two subtypes of the RSV virus, A and B, are recognized by the scientific community, it is the A strain that typically causes more severe clinical illnesses Nearly all children are infected by the age of two. With seasonality from late fall into the spring and many symptoms similar to those of the common cold and flu, RSV often goes undiagnosed or misdiagnosed, thus increasing the risk of serious health complications. It is the leading cause of bronchialitis and pneumonia in infants and small children under two years old, increases an infant’s risk of getting an ear infection, and may exacerbate asthma or other chronic lung conditions in both children and adults.

Further, a recent study has also shown that RSV is a major cause of serious respiratory infections among the elderly as well as high risk adults with congestive heart failure and chronic pulmonary disease after which reinfection may be common throughout an individual’s life.

The American Academy of Pediatric cites that 125,000 children are hospitalized annually in the U.S. due to RSV infections and approximately 500 of these children will die. Additionally, a team of researchers from the University of Rochester School of Medicine, led by Dr. Ann Falsby, has estimated that RSV is also responsible for more than 175, 000 hospitalizations and 14,000 deaths among adults with over $1 billion in related hospital costs in the U.S. each year. Our RSV rapid test began clinical trials in the U.S. in the fourth quarter of 2005. We expect to begin selling this product later in 2006.

We continue to advance our Quidel Value Build program, or QVB, to provide our customers the evidence and proof of the value of our products from the standpoint of both clinical and economic validation. We were very pleased to have received FDA clearance to include the impressive results of the Australian flu season study in our package inserts. Among the claims we have the clinical study evidence to support is that our QuickVue influenza A+B test delivered 94% sensitivity for detecting influenza A when using nasal swab specimens. The performance of any rapid flu test is dependent on the sample type, the quality of sample collection, the care taken in sample handling, the stage of the patient’s infection, the prevalence of disease in the region, and among other things, the adherence to the test package insert.

Each of these factors can impact actual clinical performance and outcome. The independently achieved results from the Australian study reinforced the analytical study’s findings at the University of Rochester as we reported in May of 2005 which indicated our test had the highest sensitivity 95% of the time, was the easiest to use and provided the most rapid time to result compared with certain competitive tests. As part of QVB, we also established our infectious disease medical advisory board consisting of renowned leaders in the field. It is truly an honor to have physicians and researchers of this caliber advising Quidel. Our advisory board is currently focused upon the appropriate utilization of rapid tests for influenza in public health, emergency preparedness, and seasonal as well as pandemic planning.

We continue to work with other leading public health professionals and scientific and medical experts around the globe to gather information on the effective use of our rapid diagnostic test. Significant studies are currently underway and papers are in development that support the use of our test in a number of clinical settings. Economic validation is also a main topic or added feature of this endeavor. We look forward to introducing our QVB affirmations at targeted society meetings throughout 2006.

Another key element of our strategic plan is strengthening and streamlining our distributor relationships and I’m very pleased with our progress in that regard. We were recently recognized, as an example, by Cardinal Health for extraordinary industry performance and named as one of their outstanding suppliers for 2005 in the category of marketing excellence. We continue to expand our focus and commitment to our specialty products group as well, which identifies and develops diagnostic and research markers for bone health and oncology. The unit has established strong partnerships and OEM agreements that we believe will allow us to exploit our R&D capabilities. We are targeting the launch of two new research tests in bone health in the first half of 2006, stemming from these recent collaborations.

I’m extremely pleased with the announcement made last week regarding two additions to our Board of Directors. Jack Schuler, a former president of Abbott Laboratories and one of the most respected executives in the medical industry, and Rod Daymeier, a recognized expert in finance and capital investment, have agreed to join our board. I look forward to working with Jack and Rod and look forward to their assistance in our efforts in building greater value for our shareholders.

In summary, we posted strong operating and financial results in 2005. As we look ahead into 2006, we anticipate overall revenue growth in our core product lines as well as incremental revenue achievement generated from new product introductions, primarily our recently launched iFOBT test. We believe gross margins will continue in the current range in 2006 as we continue to benefit from increased sales volumes, a more favorable product and geographic mix, and the impact of recently implemented price increases while we continue to invest in operating efficiencies and manufacturing upgrades.

We plan to continue our investments in sales, marketing and QVB that will support and expand our leadership position and allow us to take advantage of the growing opportunity and point of care rapid diagnostics domestically and internationally. And finally, we are focusing our growing investment in R&D in 2006 on innovation and acquired and new technologies. Overall, we expect 2006 to be another strong year for Quidel as we continue to focus on achievement of our strategic imperatives and continued growth.

I now turn the call over to Paul Landers, who will provide more detail on the financial results.

Thanks, Caren. Let me start by saying that I am also pleased to report strong financial results for the fourth quarter as our results improved across the board. Working our way down the P&L statement, fourth quarter total revenues increased 9% to $34.8 million, from $31.9 million in the fourth quarter of 2004. Worldwide, product sales were up 8%. In the U.S., product sales of $22.9 million were up 4% from the prior year fourth quarter. This increase was driven by our sales of our core product lines of pregnancy, Strep-A and influenza tests, which totaled $19.8 million, up 9% from last year's fourth quarter.

International product sales of $11.2 million increased 16%, compared with the fourth quarter of 2004, primarily due to continued shipments of influenza tests to our distributor in Japan. On a worldwide basis, sales of our core products of pregnancy, Strep-A and influenza were $29.7 million, representing 87% of net product sales. More specifically, comparing the fourth quarter 2005 with the fourth quarter of 2004, influenza test sales were up 10%, pregnancy test sales were up 11% and Strep-A test sales were up 17%.

As Caren mentioned, our gross margin improved to 62% for the 2005 fourth quarter, up from 59% last year due to higher product sales, a more favorable product and geographic mix, and a price increase on the majority of the company’s products. Operating expenses for the fourth quarter of 2005 were $11.9 million compared with $10.7 million for the fourth quarter of 2004. This was primarily due to planned increases in R&D, clinical trials, and sales and marketing expenses associated with the support of the company’s Quidel Value Build, or QVB, program, somewhat offset by lower legal fees associated with our previously disclosed patent litigation settlement.

For the fourth quarter of 2005, earnings from continuing operations were $9.8 million, or $0.28 per diluted share compared with earnings from continuing operations of $6 million or $0.19 per diluted share for the fourth quarter of 2004. The loss from discontinued operations net of tax for the 2005 fourth quarter was $165,000, or $0.00 per share compared with a loss from discontinued operations of $6.7 million or $0.21 per share for the fourth quarter of 2004.

Net earnings for the quarter were $9.6 million or $0.28 per diluted share. This compares with a net loss of $644,000 or $0.02 per share for the fourth quarter of 2004. Turning now to our full year financial results, for the year ended December 31, 2005, total revenues rose 17% to $92.3 million, up from $78.7 million for the year ended December 31, 2004. Total product sales also increased by 17% and reached $88.7 million in 2005 with strong contribution from all core product lines. In the United States, products sales increased 22% to $65.9 million. International product sales for 2005 were $22.9 million, an increase of 3% versus 2004, driven by a 56% increase in influenza product sales mainly offset by the planned decline in international product sales as we terminated unprofitable distributor relationships in the smaller geographies and developed preferred partnerships in other key markets.

For 2005, Quidel reported strong sales growth in all core product lines, including full year sales of influenza tests up 32%, pregnancy tests up 19%, and Strep-A tests up 19% compared to 2004. Gross margin for 2005 was 58%, compared with 54% for 2004, primarily as a result of higher product sales, a favorable product and geographic mix and a price increase in the majority of the company’s products. Excluding the $17 million expense paid under the terms of the patent litigation settlement in the first quarter of 2005, operating expenses for 2005 were $43.5 million, versus $41.6 million for 2004. The slight increase, 4%, in operating expenses primarily is the result of higher research and development costs associated with work on new technologies and increased market research, clinical trials, promotion and advertising costs for key products and further development of the QuickVue brand related to QVB.

For 2005, Quidel reported a loss from continuing operations of $8.3 million, or $0.26 per share, compared with earnings from continuing operations of $1.6 million or $0.05 per diluted share, for 2004. On a GAAP basis, the net loss for 2005 was $9.3 million or $0.28 per share, compared with a net loss for 2004 of $6.3 million or $0.20 per share. Looking at our full year financial performance on a non-GAAP basis, adjusted net earnings for 2005 were $11.7 million or $0.35 per share on a fully diluted basis. This compares with adjusted net earnings of $1.6 million or $0.05 per share on a fully diluted basis for the year ended December 31, 2005. Included in the items in GAAP net loss, but excluded from the adjusted net earnings are the $17 million payment made as part of the patent litigation settlement. A resulting increase in our tax provision due to the impact of the settlement on our assessment of deferred tax assets and discontinued operations encompassing our urinalysis and ultrasonographic businesses. A reconciliation of these items is provided in today’s press release as part of the attached financial tables.

Before we take questions, let me provide some balance sheet highlights. Days sales outstanding for the fourth quarter remained at 48 days, the same as the 2004 fourth quarter. The quality of our accounts receivable, as expressed as a percentage of receivables greater than 60 days out, remain excellent. Inventory turns for the 2005 fourth quarter were 4.9 times, or approximately every 74 days. Capital expenditures during the fourth quarter were approximately $1.7 million while full year 2005 capital expenditures totaled $3.2 million. Our cash and cash equivalents as of December 31, 2005 totaled $34.9 million, slightly down from $36.3 million as of December 31, 2004, which is largely driven by the impact of our $17 million litigation settlement payment in the first quarter of 2005. But this was a very strong improvement from the cash and equivalents balance of $24.3 million at the close of the third quarter of 2005. Additionally, the company’s unused credit facility as of December 31, 2005 was $30 million.

In summary, I am very pleased with the financial results for the quarter and with the progress we've made throughout the year in achieving operational efficiencies while supporting impressive growth. We remain confident in our plan and our continued ability to deliver positive results. And now, Operator, we’re ready to take questions.

[OPERATOR INSTRUCTIONS]. Nate Cornell with Quidel.

It’s actually Nate Cornell from Pacific Growth. Congratulations on the quarter. Great quarter. Paul, you mentioned the tax rate. Can you give a little more color on that? It seems like your tax rate was a little bit lower.

Nate, as you and other investors know, the company has spent significant time over the past couple of years making sure that we have healthy and fresh net operating losses. And we have been very effective and the financial results show the use of those NOLs for which we had a valuation allowance against them.

Okay. Great. And any update on any potential discussions with over the counter partners?

Yes, we continue our discussions. We have 3 partners that we are currently negotiating with. I think there will come a time we know at least one of them is interested in making public their intentions and the general terms of the agreement that we’re working through. And I think as we get further along with the others we’ll know whether or not we’ll be able to share details. But yes, I think over the counter for both reproductive health and upper respiratory products is a major emphasis for us this year in terms of really getting our arms around what that looks like, how long it will take, the funding sources from it, both from the outside and inside. So we’re feeling good about our progress.

Okay, and how about over the counter flu tests?

Well there’s definitely an interest in over the counter flue tests especially with some of the fear, which is certainly understandable, around avian flu. It has just basically taken even seasonal flu up a notch in terms of parental concerns and geriatric concerns as well. So we don’t have any real foresight to give you in terms of how long it will take to do the clinical studies to support it, but I think there’s more openness as we see it with regulatory agencies as well as with public health around those types of discussions because of public interest.

Okay, and any - - I know that Japan has had a particularly virulent flu season this year. Have you had more orders in Q1 from Japan?

Well, Japan’s flu season this year really - - what we like to do, Nate is we like to talk about flu seasons and their severity at the end of the season. What we have -- the way it really works for us is that we start to see orders both in North America as well as in Japan starting in August, September, October as our distributors want to make sure that either their wholesalers or their end users have product on the shelf even for the earliest cases of influenza. And then we begin to see usually peak seasons for both North America and Japan in mid February, late February, and can go as late as end of March through early April, it really depends. So we don’t really predict the season, but we do monitor obviously the season, and we see some real strengths continuing in influenza for us.

Okay, my last question, can you give us an idea of the price increases that took place? The products and what - -

It was pretty much across the board. And there were price adjustment made twice last year. There was a collapsing of a three tier price schedule into a single price schedule. The development for preferred partnerships to work into through committed volumes, market share increase, commitments on promotion of newly introduced products, the ability to get better pricing, but overall there were two increases in 2005.

Okay. Thank you. Great quarter.

Your next question comes from the line of Zarik Krasheid with Keris & Company.

Hey guys, congrats on a solid quarter. Just expanding on the tax rate issue, should we expect any NOLs going forward in ’06?

Zarik, obviously getting a little bit into the forward-looking statement, but let me say that as we ended the year, we have approximately $9 million of deferred tax assets, and we believe that we will more likely than not be effective in using that in the future.

So do you think it’s safe to assume that $9 million to be applied completely in ’06?

I wouldn’t go so far as to predict that, but suffice it to say that our future earnings flow in the near term will be able to utilize a significant portion of that.

Sure. Okay, thanks. And then can you talk a little bit about your understanding of product in the channel? Can you read anything from your vendors as to what was sold in Q4 and what is left at the distributors?

Yeah, we have a clear understanding from our distributors Our teams check with them on a daily basis. Some of them have real time data that’s fed directly to us. So yes we do have visibility and we feel good about what we see.

Okay, so in terms of what’s left with the distributors, can you provide us any more color there?

Well, I think that each of the distributors takes the year and let’s talk about cold and flu season. They work with us very aggressively to make sure that they can move as much as they possibly can off their shelves. These are seasonal products, they do have two year shelf lives, and it’s good for both of us to make sure that we appropriately plan to move product and we are. So some of the distributors, for example, do what I would consider a second life of the season starting now. They do promotions direct with their customers. We support them in that effort. And so as I said, I’m feeling good that our distributors have well determined their ability to meet demand and are working with us to aggressively promote the products to get them off the shelf.

Thank you, that’s helpful. And with the FOB product launch, I realize it’s probably too, maybe too soon, but are you seeing any pushback of the product, any color there?

Well, I think that as with, this is really a physician change and a patient change sale, so it isn’t a replacement that’s a one for one of current format technology. So what we’re hearing is that there is a real enthusiasm around a take home test that has a one sample regimen that’s easy to use and that has a manufacturer that’s provided a very easy to follow direction as well as a very nice packaging and I guess you would say procedure for the at home patient in terms of comfort. So we’re getting really good feedback on our tests, bottom line. I think pushback that we’re hearing is that some of the doctors are unfamiliar with the comparison of guaiac capability to immuno-chemical which is why I’ve outlined it today. It’s the way we outline it with the doctors. I think that some patients believe that colorectal screening in its entirety most likely consists of a digital rectal exam and a slide at the office And we’re finding that they’re learning for the first time that there is a simple way rather than potentially some companies have tests with a three step regimen to use, a one step regimen and take it home.

And I think that for us, our goal is to be as aggressive, if not more so, than we’ve been in the physician education, the patient education and the outreach to societies to really support what we think is a critical movement to individuals who are predisposed through genetic qualification as well as those age 50 and above, of which there will be 30 million of us in the not too distant future. And that those tests are used very effectively at least once a year. So we’re going to push really, really hard. It is a change and so it has a migration path from current use to future use of a new test.

Great. Then one last question for Paul. Could you give us a cut of flu, strep and pregnancy individually as a percentage of Q4 revs? And I’ll jump back in the queue, thanks.

On a consolidated basis for the year, pregnancy represented 22%.

Can you break that out for Q4?

Okay. For the quarter pregnancy represented 14%, Strep-A 19%, and influenza 54% for the quarter.

Great, thank you.

Your next question comes from the line of Jessica Lee with River Edge Capital.

Hello, guys. Just going back to the over the counter partnership, I was wondering if you could put any kind of timelines on that if we should say that something more the back half of the year? And also if you know say the timeline it would take for a product to be approved for over the counter use?

Well, what I can say is that as we sign these agreements, if with our partners we feel it makes sense to discuss them and give some color to what we’re trying to accomplish with what products and in what timeframe, we’ll do so. My best guess is that at end of second quarter we’ll be in a better position to be announcing something if we’re in agreement. I think in terms of how long it will take for us, it depends on format, it depends on whether we’re going to try to take our CLIA waived product and modify it successfully for over the counter use or whether we’re going to take one of our formats under development and apply that instead. Ad so it could be anywhere from on the real aggressive estimate probably 12 to 18 months and then from there depending upon the format choice.

Okay, and then also on the iFOBT, I don’t know - - is there any kind of indication - - is that something that you’re still perhaps detailing?

We started in January and we’ll be able to report on our results at our next call.

Okay, and then the marketing campaign that you’re doing that’s direct to consumer.

We actually are going direct to physicians. And we are also enlisting the support of our distributors in that education. We also are doing some, have some planned direct to consumer advertising as well as appeal to advocates who support early screening, both in the medical community as well as those public figures who have been touched by the disease.

You get a little pushback for the I guess the increasing emphasis on colonoscopies as the only form of effective - -

Right. I think for colonoscopies are really a diagnostic tool that the American Cancer Society, they have a 4 step process that they believe effective colon cancer awareness requires. We start with fecal occult blood testing or digital rectal exam and then make a determination from those results as to what other procedures should be recommended. Colonoscopy is recommended every 10 years by the American Cancer Society for those individuals age 50 and over. If there is something found during that colonoscopy they can move it to an every two year or every five year. But in between time, on an annual basis, at the annual physical, every individual 50 and over or those who have first degree relatives or others who have diseases that cause bleeding, there is a recommendation that annual screening take place.

Okay, thank you.

[OPERATOR INSTRUCTIONS]. Your next question comes from the line of Andrew McPherson with Infinium Securities.

Hi, guys. Congratulations on a great quarter. I wanted to get some color - - your last conference call you provided some commentary about physician adoption of point of care tests. And I wanted to see if you’ve seen any changes in attitude or feel that the glacial change is moving in the right direction still.

Yeah. I think physician adoption of point of care tests continues to aggressively move. As we see it, the prediction is that point of care testing is going to grow greater than 20% annually over the next several years. And what’s really pushing that needle is the ability for the physician to understand the clinical validity as well as the economic validity of rapid point of care testing. So we’ll move that needle much faster by the kind of work we’re doing that we call QVB. We’ve seen a dramatic growth in our flu testing, 12 points a share, a lot of it tied to the fact that they really need to understand whether their empirical look, for example, in influenza, can be matched by or improved by clinical evidence supported by a rapid flu test. One of the other areas they’re interested in, and we’re interested in providing payer’s information on, is really a look into what happens when a physician diagnoses influenza empirically versus when they use a rapid diagnostic test.

And what we’re finding in the study that we have now that I can just shed a little light on, but want to wait because we have a number of major journals that are interested in this study, it’s showing that the doctors that don’t use the tests are tending to prescribe either antibiotics or antivirals inappropriately in some instances. Or are ordering additional tests for young children who can’t well describe their symptoms. And so as a result of that, we really have this fight in the United States and globally about overuse of antivirals and antibiotics. And so there will be a lot of discussion around that. So we’re seeing really in the physician community, a lot of interest, but it’s really up to us to really provide the appropriate proof to support their decision to make a change in the way they practice medicine.

Gotcha. I also wanted to see if you can provide any color on the market for potential acquisition.

You’re speaking of our interest in acquiring, correct?

Correct.

Okay. We’re always on the lookout for a good deal. I can tell you that we’re aggressively looking at new technologies, we’re looking at companies. We’re looking at new platforms, we’re looking at private equity. We’re very aggressive and very excited in rounding out the commitments we’ve made in the four disease states where we plan to rule.

Gotcha. Thank you.

Your next question comes from the line of Bill Swanson with MJSK.

I was just wondering if you guys could shed a little bit more light. You talked about taking some of the seasonality out of your results with the iFOBT test. If you look out at he historical results, your first quarter is down typically anywhere from 10 to 30%. Can you kind of clarify what type of seasonality you can take out? What we might expect in 2006?

Well, you know, we’re getting started in 2006 with introducing tests that are going to have a screening frequency for a large patient population that we hope to get adopted as quickly as we possibly can. And so the focus is, for us, when we look at reproductive health, what tests would really assist the OBGYN in making the right diagnosis at the doctor’s office around bacterial vaginosis for example. So we have a candidate test that we think is going to potentially have a huge impact. It’s still in clinicals but we’re looking at it. Potentially in ’06 it’s getting some stickiness and resonance with OBGYNs. With the iFOBT test we’re talking about 50 million guaiac tests out there, so that’s a huge converted market opportunity for us where we really want to take the lion’s share. So in terms of the ability to tell you in 2006, is seasonality over? No. But our goal is to make certain that seasonality has a less and less effect over time.

Okay. Any more color on the iFOB test? Bekwin Coulter’s got the market share leader. Any type of expectations for 2006 on what type of market share you can grab or what you think is reasonable to grab?

We’re never happy under double digits even in year one. In acute care flu, within a year we took 18% where we hadn’t had a test. And so I - - we’re always looking to be as aggressive as possible. Bekwin Coulter has developed an iFOBT and made an announcement I think in September. We haven’t seen much of them yet in the marketplace in the last 6 weeks since we’ve been pushing the product. That doesn’t mean they won’t get out there. They do have the footholds in guaiac with 67% share of the guaiac test market, so they certainly have a vested interest in taking the lead. But from our vantage point, the more they talk it up, the better it is, because we feel we have a significantly terrific test.

And what kind of feedback can you share with us that you’ve gotten from the McCossens and the Cardinal Healths of the world that they give you some level of confidence that you are going to be, you have a strong product and you’re going to grab share. Do you have any initial feedback yet from those folks on what they think your potential is?

We have discussions with and commitments from several of our premiere distributors to carry this test and to promote it especially effectively in the coming weeks and months.

Okay, thank you very much.

[OPERATOR INSTRUCTIONS]. Your next question comes from the line of Gerald LeVan with Smith Barney.

Hello. I’ve got a question for Paul and one for you, Caren. Paul, you broke down the Q4 revenues with regard to flue, strep and pregnancy for another caller. Could you give us the same numbers for the year 2005?

Jerry, I’d be happy to. For the full year on a consolidated basis, pregnancy represented 22% of the total, Strep-A also 22% of the total, and the influenza product represented 38%.

Thank you, and Caren, it was my understanding that you had provided a sample product to pretty much most of the Asian governments and health organizations. Have you found any interest whatsoever in anybody like that wanting to stockpile flu tests with the thought that it might need them with - - when you segregate - - the term when you segregate people from the rest of the population. Boy, that’s skipping my mind.

Okay, yeah, we get inquiries consistently from governments and countries all over the world. They definitely increase during reports on hot spots. Bird flu activity. In some cases, tenders follow. So I think there is a general, very general concern that follows up with an interest in whether a rapid diagnostic test would make a difference. Where we are is not commenting on the ability of our tests with a potential avian influenza outbreak and how it would perform because we honestly cannot make that prediction. What we are doing, because it’s critical that we do so, is we’re staying very close to the public health experts worldwide, many of them with WHO, who help provide us the guidance around what they see, they do some anecdotal work on the side confidentially, they do some analytical determination, and you’ll see that the rapid test companies who make influenza products do highlight on their package inserts that they’re able invitro to detect H5N1 as they do other isolates. So we’re all over it, it’s important to us, but we can’t make any predictions about how the virus may or may not mutate and how our tests will or will not pick up that virus in its rapid format.

Thank you.

Your final question is a follow up question from Zarik Krasheid with Keris & Company.

Hey guys, it looks like a pretty significant up tick in diluted shares. Can you briefly comment on that?

That’s a function, Zarik, of exercise options.

Okay, is that from one or two folks or what is the distribution of that?

It’s across the board. Every employee of Quidel participates in an employee stock ownership plan from an ESP standpoint. Other manager level employees are provided options when they come aboard. And we’ve had a strong appreciation over the year and they have taken the benefit of that as part of their individual and personal decision making.

Yeah, I think also, Zarik, to add to that, I think really a significant portion of that as well was associated with a former board member as well as the former CEO.

Great, that’s helpful. And lastly, I’ll ask the ubiquitous LTF question. What’s going on there?

LTFI – proof of principal with the manufacturing equipment is currently underway. And we have set for ourselves a timeline as to which format LTF and LTFI will support in July of 2006.

Thank you.

You’re welcome. Okay, I think I’d like to close out and to thank everyone again for your time this afternoon. I hope today’s discussion gave you a really good sense, not only for our 2005 results and how we measure our success, but also for the strength of our strategic objectives going forward. We feel we’re really making significant progress. We feel very good about it on a number of fronts from creating growth opportunities through product development and marketing, to improving profitability through tight controls and production efficiencies. We look forward to providing another report card in about 3 month’s. Good day and thank you.

This concludes today’s conference call. You may now disconnect.