Ladies and gentlemen, thank you for standing by. Welcome to Quidel Corporation Fourth Quarter and Full Year 2014 earnings conference call. At this time all participants are in a listen-only mode. Later instructions will be given for question-and-answer session. [Operator Instructions] I would now like to turn the call over to Mr. Randy Steward, Quidel’s Chief Financial Officer. Please go ahead.

Thank you, operator. Good afternoon, everyone. Thank you for joining today’s call. With me today is our President and Chief Executive Officer, Doug Bryant; and Ruben Argueta, Director of Investor Relations. 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 significantly from these stated expectations. For a discussion of risk factors, please review Quidel’s Annual Report on Form 10-K, registration statements 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, today, February 11. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for the three months and full year ended December 31, 2014. If you have not received our news release, or if you would like to be added to the company’s distribution list, please call Ruben at 858-646-8023. For today’s call, Doug will report on the highlights of the fourth quarter and full year, and provide updates on our product development pipeline. I will then briefly discuss our financial results, and then we’ll open the call up for your questions. I’ll now turn the call over to Doug for his comments.

Thanks, Randy. Good afternoon, everyone. It’s always a pleasure to provide an update on our progress towards our longer term goals and aspirations. But I must admit that it seems easy and feels better when we had a good quarter. And that’s really the case for our final quarter of 2014. Revenues in Q4 were $63.6 million, up $13.4 million or 27% over the fourth quarter of the prior year. Overall, growth in the quarter came from influenza and Strep A products across all platforms, as well as from Sofia RSV, our AmpliVue, and Lyra molecular products, and grant revenue. New product revenues in the fourth quarter were $17.2 million, effectively doubling last year’s fourth quarter new product revenues. For the full year which includes the soft first quarter this year, new product revenues were $37.6 million, compared to $19.3 million in 2013. Another notable fact is that, of the $37.6 million in new product sales that were generated this year, $7.7 million were not flu, compared to $3 million in non-flu new product revenues generated in 2013. As we indicated in our pre-announcement for Q4, Sofia placements totaled over 9,000 driven by the largest number of placements in any quarter since launch. I think that it’s important to note that while demand for Sofia Influenza A+B and Sofia RSV created the increase in our placement rate, the timing in relative strength of the flu season were not critical factors, as most orders were taken well before the ILI percentage was north of 2%. As many have noted, this season has not actually been especially severe and in fact the ILI percentage curve published by the CDC has been a mere image of the 2012-2013 influenza season which we have previously characterized as a normal flu season. The difference for…

Thank you, Doug. As Doug mentioned total revenues for the fourth quarter of 2014 was $63.6 million as compared to $50.2 million on the fourth quarter of 2013, 27% increase. Global infectious disease revenues which include QuickVue, Sofia, and molecular products, grew 29% to $50 million in the fourth quarter of 2014, as compared to $38.9 million in the previous year. Influenza revenues in the quarter rose 45% to $36.3 million as compared to $25.1 million in the fourth quarter of the prior year. From a platform perspective, Sofia Influenza revenue was up 97% from the 2013 fourth quarter to $14 million, while QuickVue Influenza revenue increased 25% to $18.9 million. We continue to gain momentum with our Sofia platform as illustrated by the fact that approximately 40% of our influenza sales were from Sofia. Strep A grew 20% versus the fourth quarter of 2013. And RSV product revenue was equal to last year with more than half of the revenue generated from Sofia. Revenues for the women’s health category increased 7% in the fourth quarter to $8.8 million, led by double-digit growth in both our autoimmune complement and Thyretain product lines. Our Thyretain revenue grew 14% in the quarter. This growth was partially offset by a decline in our bone health business driven by decreased spend in the research segment. Our pregnancy revenue grew 3% in the quarter. Our gastrointestinal product category revenue was $1.9 million in the fourth quarter, compared to $1.8 million in the prior year. We realized a strong increase in our AmpliVue C. difficile revenue, but this increase was partially offset by a decrease in our H. Pylori business. Revenue from our other category was $3.0 million in the quarter, compared to $1.3 million last year. The increase was due to the recognition of approximately…

[Operator Instructions] And your first question comes from the line of Bill Quirk with Piper Jaffray. Please proceed.

Great. Thanks. Good afternoon, everybody. First question is I was hoping you could talk a little about the CLIA-waived market. Now, that you’ve got a couple of approvals in hand, obviously, even more to go, but can you just speak to, I guess, maybe the early reception there?

Hi, Bill. Are you asking about the Sofia Strep A CLIA-waiver?

Yes.

We’re just a few weeks into the launch, but I would say that it’s gone fairly well. The receptivity is certainly is there. The pricing assumptions that we had thought about as went to the launch are holding true so far. We see a number of existing flu customers that are taking onboard Strep A+, and we also see those that are needing a Sofia placement. So in both categories I think so far so good, but with the caveat that it’s obviously pretty early in the launch.

Understood. And then maybe one for Randy, can you help us think a little bit about the pacing of the two operating expense items that you talked about here on the full year?

Yes, with sales and marketing, I think you’ll see that as probably pretty consistent over the four quarters. R&D obviously will be predicated on spending, especially on a molecular platform, probably we really don’t see a significant variance quarter-to-quarter on net spend either, maybe a little lighter Q1 and then consistent spend in Q2 through Q4.

Okay, got it. Thanks, guys.

And your next question comes from the line of Nicholas Jansen with Raymond James & Associates. Please proceed.

Hey, guys, thanks for taking the call. Regarding Savanna, I’m just trying to get a sense of what’s your go-to-market strategy there, is it going after AmpliVue customers that you have already, maybe just kind of give us a feel or flavor of how you think about approaching Savanna once it’s launched mid-year.

Initially, we believe that we should target the market segment that is 400 beds and fewer, in other words the hospital labs and hospitals with 400 beds and fewer, that’s approximately 4,100 sites. We believe that particularly as you go smaller into the market, those customers are capital constrained and more price sensitive. And we believe fundamentally in the long-term the cost of goods sold is going to matter and healthcare costs are going to need to come down. Therefore, a low cost of goods sold position is advantageous in that segment, where our competitors have not had a great deal of success so far.

That’s helpful. And then thinking about the first quarter with flu, I’m trying to think about it relative to the 2012/2013 season. How should we think about obviously the curves looks pretty aligned, how should we be thinking about kind of flu contribution in the first quarter to make sure our models are aligned appropriately? Thanks.

If this season continues to mirror the 2012/2013 season, as I mentioned a couple of minutes ago and to follow the normal pattern of decline following the peak. Then Q1 2015 influenza revenue should be about the same or in the best case slightly higher than Q4 2014, just as Q1 2013 was about 3% higher for us than Q4 2012. A quarter to-date, we’ve continued to see ordering patterns that are consistent with the normal flu season.

Great. And then last one for me in terms of contract revenue, I know that could be lumpy from quarter-to-quarter, but how should be we thinking about contract revenue contribution in 2015?

Are you talking specifically the Gates grant revenue?

Correct.

Yes. We’ve indicated, I think that we’re looking probably in the range of $6 million to $8 million through the year, obviously dependent on those spending pattern, but probably consistent on a quarterly basis.

Great. I will hop back in the queue. Nice quarter.

Yes, and that compares to $6.3 million that we did in 2014.

Thanks.

You bet.

And your next question comes from the line of Matt Larew with William Blair. Please proceed.

Hi, guys, thanks for taking my question. Just in for Brian this afternoon. In the context of record quarter of placements you mentioned for Sofia and then sort of a building CLIA-waived menu. Can you talk a bit more broadly about how you see the point-of-care space shaking out over the next couple of years particularly with CLIA-waived molecular product on the market? Do you feel comfortable with Sofia’s competitive position in the space, is there something you have internally you could bring to CLIA-waived markets there in terms of molecular. Could you just talk a little bit more broadly about that?

I would say, Sofia has a lot of room for a while to run. As I said, I think, we see a path for 20,000 to 30,000 placements fairly easily. We also see that the access points in healthcare are changing in the sites other than the physician office might also use a product like Sofia. And in that world, we think connectivity is important and, of course, connectivity is already a part of the offering that Sofia provides. So we see Sofia as having reasonable stickiness. The second part of your question has to do with molecular area. It is true that we have a platform called Solana and if indeed is CLIA waiverable. Then we think we would be very, very competitive relative to other things that we see so far either in the market or that are planned by our competitors. We think we have an advantage as I mentioned before in terms of cost. But I would say, I would stack rank my guys that are developing and putting together packages for the FDA against any other team in the industry. And I think that we’ve proven that we can develop products and do it fairly expeditiously. And so I would rank our chances there is fairly high and head-to-head versus those guys that we compete with today.

Okay, thanks. And then one just on Savanna, you mentioned the tweaks to the cartridge, does that imply any changes to the timeline and could you just remind us on what the expectations are from the timeline of launch on Savanna?

I would say that it has created certainly some mindfulness and some thinking around what we should do with that cartridge. But the technical hurdle of all that we think is behind us and we are now actually validating the change. So I don’t - I certainly don’t see any significant delay necessarily. I was actually trying to imply the opposite and that is that once I have the instrument developed that we will have the ability to put those assays much more quickly over. And as I said before, we intend to have, at least, 20 targets put together before we have the instrument developed. So the speed with which we can get those through the FDA, we think is enhanced by the change in the cartridge design. In terms of timing, we’ve said before that the end of this year, early next year for CE markets what we are aimed at, previously we said that before the end of last year, we would have alpha unit in Africa that did happen. We said that we would start studies this quarter and although they are not started today, we are about to start those studies. And I’m pretty comfortable that we’re moving down the path there. I think all of the milestones that that we have in front of us are achievable and within reason, I think that we will stay on track from now through the end of the instrument product development.

And your next question comes from the line of Shaun Rodriguez with Cowen and Company. Please proceed.

Hi, good afternoon. Thanks for taking my question. So I think that last quarter you said that that Street expectations for mid-teens revenue growth in 2015 was a reasonable expectation at that point in time. Is that something that you still view as reasonable today?

We feel like with Sofia Strep A+ and ACG pending and continued commercialization of our molecular products, with some help from Solana in the back-half of the year that a low to mid-teens growth rate is reasonable. Of course, this assumes, Shaun, that we would see a typical beginning to the respiratory season in Q4 just as we did this year. But assuming that’s the case, then, yes, we still see a low to mid-teens growth rate.

Okay. And then maybe to be more specific, so you provided kind of a potential target for flu in Q1 and who knows what Q4 of next year is going to look like, but obviously if you think a mid to high teens expectation for the top line next year is reasonable, there is some embedded expectation for what’s reasonable for a flu. So in that context and I mean, you did 72 million or so in flu revenue in 2014, and you are off to what it looks to be strong start in 2015 there. So is this is a line that will do $85 million, $95 million in revenue in 2015, and that’s part of how you get to that mid to high teens growth rate?

Well, again we are making an assumption that the ordering pattern that we see right now continue to go through the end of the quarter, and that would get you a number that’s comparable to Q4 of 2014. I assume when you see next year, you mean 2015, this year.

Correct, yes.

And so therefore is the Q4 that we just saw in 2014 repeatable again in 2015. I don’t know that in our planning process that we haven’t discounted that somewhat as we normally would. But certainly as I mentioned, we’re counting on Strep contribution or counting on hCG, and we’re counting on Solana as well. So it’s a combination of the reasonably robust flu situation given our obvious share gain coupled with those other new product - non-flu product gains as well. Does that okay?

Okay. It does make sense. And actually to maybe close the loop on this. What I’m trying to essentially get at is, there is clearly a lot that is flowing through the pipeline, right, I mean, a month or two doesn’t go by without seeing a press release on a new product. And there is a lot of momentum there and clearly a lot of opportunity. But when I just take the simplified view of the revenue model, I see that non-flu product revenues declined $7 million in 2014 over 2013. So clearly, there are some offsets there and but you still speak to a lot of incremental revenue from new products being generated. So I’m really just trying to get a sense for what the negative offsets have been and how those might have an impact in 2015, or whether there are certain reasons for why they are not going to have an impact, because clearly, we’re just sort of waiting for the new product contributions to really show through?

Shawn, I’m sitting here watching Randy go through the book and he is trying really hard to find what those offsets are. So, maybe, we could take a closer look and take a follow-up and see how you’re following.

Yes, Shawn, I don’t see a full-year $7 million loss on our core products X influenza.

Okay. I get there if you exclude non-product revenue as well as influenza revenue and you’re left with non-influenza product revenue, but obviously we can walk through it line by line offline. That’s helpful. Okay, guys, thanks a lot.

I would be happy to do that with you offline.

Okay. Thank you.

Not a problem.

And your next question comes from the line of Tycho Peterson with JPMorgan. Please proceed.

Thanks. This is actually Patrick Donnelly in for Tycho. When looking at flu this quarter, obviously the headlines were that the season is going to be pretty bad. So, I mean, did you see any kind of pull forward or inventory stocking, when those headlines were out there?

I think the headlines had to do with the morbidity not the actual IOI. So the number of patient visits that were associated with influenza illness, we’re not higher than a typical season. It is true that we probably benefited from a week or so of ordering prior to that. And perhaps that stimulated some of our distribution partners to order products, seeing it on CNN et cetera. But the reality is, this is not more severe than a typical flu season, as I said earlier. And so therefore, there wasn’t any pull forward from first quarter into fourth quarter, and the reverse is not true, we just left the order flow as they came in, and we certainly didn’t see any decline in the first, second, third-week of this year. And as I tried to say before, we see ordering patterns that are very consistent with a normal flu season as described in years past.

Yes, we actually saw inventory levels in Q4 were actually lower than Q3, as well as lower than the end of December in 2013 as well. So as Doug said, we just left the orders flow as they came in.

Interesting. Okay, thanks. And then on the sales force, I think, Randy, you said you added 20 during 2014. How do you view that kind of trending 2015 and as you launch some new products?

I think we’ve indicated that, we have a - I think a full complement of sales. As a sales organization, we have good coverage geographically as well on specific markets. So we do not currently anticipate any significant increase in our sales force at this point.

Great. Thank you.

And your next question comes from the line of Zarak Khurshid with Wedbush Securities. Please proceed.

Hi, Zarak.

Hey, guys, good afternoon. Hey, how is it going? Thanks for taking the questions guys. I have a cleanup/clarifying question on flu. I was just reading last year’s transcript, it said that flu was $21 million in Q4 of 2013. And then you said today it was $25 million, just wondering if you could, it looks like that was in the press release and the transcript from last year, just wondering if you could reconcile that?

Sure, I would be happy to. In the influenza number that we’ve reported currently it does include the respiratory business from DHI, and that’s consistently 2013, 2014 been approximately $12 million annualized. So to include all of the respiratory business, we thought it appropriate to include that business as well.

Great. That makes sense, thanks. And then given - Doug, some of the way comments this week from competitor on market share, can you just give us your state of the union on market share in the rapid point-of-care for this space?

Sure. We spent probably more time analyzing this than the typical company, because an element of the compensation for our executive team is actually related to year-over-year dollar market share for our influenza products, as determined by a third-party that we commissioned to do the analysis. That analysis said that in the POL, we had gained 4.5% market share, and in the hospitals we had gained 6% market share. And given what our competitors have said and we just alluded to Zarak, about sales of their flu products in the fourth quarter, this seems to be correct, at least, directionally. Furthermore, it appears from our analysis that our Sofia and BD’s Veritor have made a significant impact on the U.S. market at the expense of several competitors with visililed [ph] products. Those are just the fact.

Great. Thanks for that. And then last one just on the free cash flow, Randy, I’m just wondering if you could just think - comment on 2015 CapEx, and how you are thinking about free cash flow for 2015, is it going to be up substantially versus 2014 or flattish? Thanks.

Sure. From a capital expenditure perspective, we don’t see us significantly different than what we did in 2014, maybe plus or minus couple of million dollars, but nothing significant. Certainly, we generate in a normal season, flu season, and kind of where our projections, we certainly will generate cash flow, I don’t want to say a specific number, but we certainly without a lot of CapEx, we manage our working capital very tightly. So we certainly see a very good positive cash flow here in 2015 as well.

Great. Thank you.

You bet.

[Operator Instructions] And your next question comes from the line of Mark Massaro with Canaccord Genuity. Please proceed.

Hey, guys, thanks for taking the question. Looking at the balance sheet, obviously it’s a lot stronger now than it was last year. Can you maybe comment on how this has changed your appetite for doing an acquisition and assuming that as higher, can you kind of comment on what you are seeing in the marketplace, and how maybe the acquisition of a technology or a company might fit in relative to Sofia, Solana, and Savanna?

So I want to be careful with the description of what any specifics are around what we would be looking at, of course. But I would say generally that we continue to look at assets of interest that would give us either improved distribution of our products outside the U.S., or brand strengths in the molecular category, or that would give us channel leverage in the physician office lab space. And further I’d say that would be accretive, and not a distraction from the execution of our organic growth strategy. And then I would add Mark that we’re not in a hurry.

Great. And could you provide maybe an update on the hCG conversations for CLIA waiver?

Are you referring, Mark, the conversations with the FDA?

Yes. Just what are you hearing in terms of the nature of discussions and when you might be able to obtain a CLIA waiver on hCG?

The conversations that we would have at the FDA specifically would be privileged, of course. But I would say generally that the last set of questions and the kinds of data that they are asking us for are reasonable at this point, and would lead us to believe that, we would stand a reasonably good chance of having clearly over this quarter.

Excellent. Maybe a final question for me, I know you’ve talked previously about non-traditional settings for Sofia, potentially helping to obtain the installed target of 20,000 to 30,000. Is there additional information you can provide to suggest that that might be near-term, or maybe by mid-year of 2015, or we might see something materialize that that might accelerate the rate of placements for Sofia?

Most of the businesses that you are referring to that are outside the traditional hospital or physician segment are and what they would call pilot phase, where they have a handful of our Sofia instruments at various sites. And so I don’t think it’s a 2015 event necessarily, but it could have an impact in 2016 certainly.

Great. Thanks very much.

Thanks, Mark.

And your next question is a follow-up of Zarak Khurshid with Wedbush Securities. Please proceed.

Hey, thanks a lot for taking the follow-up, guys. Just wanted to dig into the DHI flu business a little bit, I was wondering if you could just talk about the kind of trend in that in the last year. I mean, is the DHI flu a growing business and how does that tend to - what is the seasonal variance look like in the DHI flu versus your QuickVue and Sofia businesses? Thanks.

This is a pretty easy one, Zarak. It’s basically even flat for some time. It’s a certain subset of the hospital lab segment that’s basically clinical virology labs that are still doing DFA that hasn’t changed much. And the variability that you would see from quarter-to-quarter almost entirely mirrors what you would see with our QuickVue and Sofia flu business.

Okay. Thanks a lot, Doug.

You’re welcome.

And your next question is a follow-up of Mark Massaro with Canaccord Genuity. Please proceed.

Hey, guys. Just a follow-up from the - maybe Doug, can you walk us through the assay timeline, or I should say what - which tests we’re most likely to see in 2015 on Solana?

We said publicly before that our Group A Strep Assay and our flu assay are the first to out.

Excellent. And maybe we could see others to follow that later this year?

You’ll see more of a description of a menu whether any of those gets approved this year, is doubtful, but you never know.

Great.

That is all the time we have today. Please proceed with your presentation or any closing remarks.

Well, thanks, everyone, for your support and for your interest in our company. We had a great quarter, and I believe that we are well-positioned to achieve our growth objectives as we move throughout the year. Take care, everyone.