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Alere (ALR - Snapshot Report), a medical products company focused on integrating rapid diagnostics with health management, reported fourth-quarter 2012 adjusted earnings per share of 51 cents beating the corresponding Zacks Consensus Estimate of 48 cents. For 2012, the company reported adjusted earnings per share of $2.18 surpassing the Zacks Consensus Estimate of $2.03. 

Reported net loss was about $62.7 million (or loss of 84 cents per share) in the fourth quarter compared with a net loss of $363.9 million (or loss of $4.67 per share) in the year-ago quarter.


Net revenues came in at $755.8 million in the reported quarter, up 16.1% year over year, surpassing the Zacks Consensus Estimate of $715 million. For 2012, sales were $2,818.8 million, up 18.1% year over year, beating the Zacks Consensus Estimate of $2,780 million.   

Segment Analysis

Net revenues from Professional Diagnostics were $600 million (includes license and royalty revenues of $15.8 million), up 19.6% year over year. Adjusted organic growth for the segment was 5% on a year-over-year basis.

Under the Professional Diagnostics segment, revenues from Cardiology ($116.7 million) declined 9% year over year. Revenues from Infectious disease ($190.6 million) increased 20% year over year, whereas revenues from Toxicology ($149.5 million) and other sources ($83.5 million) increased 25% and 13% on a year-over-year basis, respectively. Diabetes business line accounted for $43.8 million of segment revenues.

Revenues from the Health Information Solutions segment were $131 million, up 4% 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 ($53.1 million) dipped 5% and revenues from Wellness ($23.8 million) declined 3% year over year. Revenues from Women’s & Children’s Health ($30 million) and Patient Self-Testing Services ($24.1 million) were up 5% and 43% on a year-over-year basis, respectively.


Adjusted gross margin was 52.4% in the fourth quarter compared with 55.8% in the year-ago quarter. The same for the Professional Diagnostics segment was 54.4% compared with 60% a year ago. Adjusted gross margin for the Health Information Solutions segment was 44.2%, down from 45.3% a year ago. 

Adjusted operating margin was 17.8% in the quarter compared with 21.7% in the prior year quarter. Adjusted operating margin for the Professional Diagnostics segment was 24% compared with 28.9% a year ago. Adjusted operating margin for the Health Information Solutions segment was (2%) compared with 2.9% in the year-ago quarter.

Balance Sheet

Alere exited the fourth quarter with cash and cash equivalents of about $328.3 million, up 9.8% year over year. Total long-term debt (net of current portion) amounted to $3,641.6 million, up 11% year over year. Adjusted free cash flow came in at $25.8 million in the fourth quarter.  

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. One of the company’s competitors is Abaxis (ABAX - Analyst Report).

Alere carries a Zacks Rank #4 (Sell). We are more positive about NuVasive, Inc. (NUVA - Snapshot Report) and Conceptus, Inc. , which carry a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively, and are expected to do well.

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