Ladies and gentlemen, thank you for standing by. Welcome to Quidel Corporation Second Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I’d now like to turn the call over to Mr. Ruben Argueta, Quidel’s Director of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon everyone -- and thank you for joining today's call. With me today is our President And Chief Executive Officer, Doug Bryant and Randy Steward, our Chief Financial Officer. Our second quarter 2018 earnings release is now available on ir.quidel.com, our Investor Relations Web site. We will also post our prepared remarks on the Presentations tab of our IR Web site following the conclusion of this call, on August 7th, for a period of 24 hours. 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, August 7, 2018. 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 and six months ended June 30, 2018. If you have not received our news release, or if you would like to be added to the company's distribution list, please contact me at 858-646-8023. Following Doug's comments, Randy will briefly discuss our financial results and we’ll open the call for your questions. I’ll now hand the call over to Doug for his comments.

Thank you, Ruben, and good afternoon everyone. There are many positive things to report on this quarter. So let's get started. In terms of the integration of the Alere assets, we achieved the two key milestones for the quarter that we said we would. We officially opened the shared services center in Galway in June and currently have a staff of 20 people employed in functions such as IT, Finance, Legal, Customer Support and Technical Support. And as planned, we went live on August 1 in Europe without a hiccup. European orders are now through our global ERP system, and distributed from our 3PL warehouse in the Netherlands. And we're out from under our TSA's with Abbott for order-to-cash and distribution in those countries. The last milestone - the last major piece of the business to be integrated is China, which we expect to move over in early 2019. And finally, in terms of synergies, we are confident in $11 million in cost reductions as we exit 2018, with potential upside depending on how quickly inventory at the older higher cost sells through the channel. At this point, we are anticipating a bit better gross margins in 2018 for the overall business than we had originally forecasted, due in large part to improvement in manufacturing yields for the Triage products. During the quarter, we used $60 million in cash to pay down a portion of the initial $255 million term loan that we used to finance a part of the Alere asset transaction. At the end of the quarter, the outstanding balance was $83.2 million. In addition, we entered into separate, privately negotiated Exchange agreements with a small number of holders of our Convertible Senior notes. We exchanged roughly $38.6 million in principal amount of the notes for 1.3 million…

Thank you, Doug. Good afternoon everyone. As we reported earlier today, total revenues for the second quarter of 2018 were $103.2 million, this compares to $38.3 million in the second quarter of 2017. The significant increase in revenue was driven by the $69.9 million in incremental revenue from the acquired Triage and BNP businesses. It is rewarding to realize the benefits of the hard work and efforts by our integration and commercial teams in a very short time period. Our integration continues to be on track as Doug mentioned. As illustrated by the second quarter Triage and Beckman BNP revenue, we are well down the path of completing our commercial team integration. Rapid Immunoassay product revenues decreased to $16.7 million in the second quarter of 2018, versus $22.0 million in the prior year. Within this category, Sofia product revenue decreased from $7.9 million to $5.1 million and QuickVue product revenues decreased 27% to $10.1 million. The Rapid Immunoassay revenue decrease was mostly due to a $4.5 million dollar decline in Influenza revenues over the second quarter of 2017, as demand for Influenza and respiratory diagnostic products softened in Q2 following the exceptionally strong flu season in the first quarter. This can be seen in our Distributor inventory levels, which declined significantly in the second quarter from Q118 levels. Compared to 2017, inventory levels were relatively constant overall. Triage inventory levels are in line with prior quarters. Cardiac Immunoassay revenues, at $69.9 million, exceeded internal expectations for the second consecutive quarter. Triage grew 1% from Q2 of last year to $38.3 million, led by growth in Asia Pacific and Europe, Middle East, Africa regions. The Beckman BNP business grew 6% from the second quarter of 2017 to $31.5 million, led by growth in the US, Asia Pacific and Europe, Middle East,…

[Operator Instructions] And our first question comes from the line of Alex Nowak with Craig-Hallum Capital. Your line is now open.

Hi. This is Blaze Beecher on for Alex. I was wondering if you had any update on the Beckman lawsuit and if they have indicated anything about settling at all.

No. There is no change. And I would add that we are as confident on our position as we ever were. And no, there hasn't been any further discussion.

Okay, great. Thank you and then just one more, I know you had given top-line guidance, but with all the non-GAAP add backs in Q1 and Q2, EPS estimates are kind of all over the place, so any chance if you give us a ballpark EPS guidance, so we can start to narrow the consensus range?

No. We have given -- although we don't provide guidance, we have given general range of revenue for the year just given the unfamiliarity of everybody to the new acquired businesses. The volatility of the flu business though makes it pretty difficult for us give guidance.

Okay. Thank you.

Okay. Thank you. And our next question comes from the line of Jack Meehan with Barclays. Your line is now open.

Good afternoon. I was hoping to drill a little bit into the cardiac number this quarter, it seemed like BNP posted really good result. So, what are you seeing in terms of the cross-selling, do you think you are being able to target some of the accounts better and just any way to quantify that would be helpful.

I do see some cross-selling and I would say that in the U.S. in particular we are seeing some opportunities and the emergency departments and also the freestanding emergency departments are also working some opportunities. On the urgent care side that include both the legacy opportunity as well as the new Alere assets. In terms of quantifying I think what we are seeing is a more accurate understanding of the actual demand in places like China and a smoothing of the inventory fluctuation that we saw earlier. At the end of the day, I think as I said in my comments, we believe pretty confidently that we're in a range of $67 million per quarter, which would take into account several ins and outs that we're beginning now to understand. But I think we've got a pretty good handle on it right now. I think $67 million moving forward it's pretty solid.

Got it. The one product update you didn't mention was the new tox panel, I think Randy mentioned in terms of the R&D, but just could you just reiterate kind of a forecast there and if I look into the second half of '19, do you think numbers can actually improve beyond the high single digits. What could the tox panel mean in terms of the opportunity?

I'll just start with where we're at. We're planning on cementing somewhere in the fourth quarter. The data from our clinical trials to the FDA and probably sometime by the middle of 2019 will be in market. It's pretty hard to understand how quickly the ramp up will occur. But if I understand, we have more demand than we're able to fill right now. And so, I would suggest that we'll see a reasonable up tick almost immediately after launch. At one time, the total business was worth somewhere around $50 million to the company. I'm not sure how we might get to that level and that would rate and at what time, but I think it's a reasonable expectation over time that we would move over the next couple of years towards a number of that, approach that.

Great. If I could squeeze in one final one, I know you met with a bunch of large health system last week at AACC, what was some of the feedback you got on the new Savanna platform?

I think people love the size. Right now it said 8x7 inches I think and I think we have opportunity actually to get a little bit smaller. People love the cartridge; cartridge is simple. And as you probably noticed when you saw Jack, it is what it is, it's right there. It's modular; it's tight; it's small; it's got a great graphical user interface; and effectively it's going to do what customers really want, which is the smaller syndrome in panels. With the opportunity to run individual assays as needed. And I think also for the panels that have multiple things there'll be an ability to select what you want, what you don't want as well some of those. So, overall we left the meeting quite positive and feel very good that there's going to be receptivity of the product, once we launch it. It is the U.S, meeting, so in fairness, there is a lot of U.S. input, I don't have a flavor yet for how it will play x-U.S. but there are similar needs and demands out there and I would think we'll do well when we launch x-U.S. early in the process to be followed by the U.S. launch in the back half of 2020.

Great. Thank you, Doug.

Thank you. And our next question comes from the line of Tycho Peterson with JPMorgan. Your line is now open.

Hey thanks. I'll start with a couple on Sofia 2. I think even you backing up that short of flu season rapid immuno assay still declined a little bit year-over-year. Can you maybe just comment on that? And then also how discussions are going with retail pharmacies, as we think about alternate sites ramping and any updates on the timelines for the Sofia 2 assays with sensitivity improvement?

Sure. We will start with the quarter itself. Yes, flu is a big driver but remember that restorage is generally tied to flu, so we have in that overall category RSV, which is growing in importance for us and also [indiscernible]. So then we can walk you through at some point how that breaks down, but the day it's those three products. And then, Tycho I think you were asking about pharmacies. The pharmacies and that continue to be an area of focus for us. I think the longer term, we do see movement of patients into the retail clinic setting. For sure we do have 15 states that allow pharmacists to ready to test and treat for various routine conditions. I think that's going to change over the next couple of years. And certainly we're positioned as if it's going to happen and we're positioned in the event it does happen. But for the moment, it's a great question because at the moment, we spend a lot of time on it, but it's not a big -- it's not a big percentage of our total quite yet.

Okay. And then, I guess on Triage BNP obviously you've kind of raised the annual run rate here to 270. Can you just maybe talk about the sustainability of the momentum? And as we think about selling Triage MeterPro to your existing U.S. surgeon care touch points. How much penetration have you achieved at this point? How do we think about that ramping?

Again, we just acquired the business in October, so we're a few quarters in. I do see that we are closing boxes and the value of each of those we'll see -- we will also see what the gap between close and region recorder is and how all that ramps up. But we are seeing an acceleration in our placement rate, which is encouraging. Again, it's too early to raise the checkered flag. But I'm encouraged by what we're seeing so far. And on the 270, I know that you're taking the 5 and multiplying that by four you're going from the 250 to 270, which I think is a reasonable math exercise. Again, I guess we can sign up for something in that range. But it's still early.

Okay. And then, I guess lastly, I know you had the question last quarter, I'm trying to clarify, assume no change in your view there? I just want to make sure given that.

The review we've done internally actually mirrors what we're hearing from the [vice] [ph] we are getting at the med and who are in contact with the USTR. So far nothing in our space has affected.

Okay. Thank you.

Thank you, Tycho.

Thank you. And our next question comes from the line of Brian Weinstein with William Blair. Your line is now open.

Hi. Thanks for taking the question. Sorry for the background noise here. Did I hear you rightly, did you say Triage was up 1%. I wasn't sure if I heard that. And if so what do you see that particular business growing at longer term?

You did hear correctly. It's 1% q2-over-q2. And we're still thinking low to mid single digits. I think stable U.S. offset by Asia Pac ultimately we also are thinking but a bit of growth in Latin America as well.

So is the 1% that I was -- I'm sorry, was it 1% in line with what you guys are thinking?

I'm sorry. Repeat that Brian.

Yes, 1% in line with what we are thinking.

Yes. That the 1% though is just an anomaly on the quarter because it does appear that in Q2 of 2017 that was the highest Triage revenue of that calendar year. So that did look like there was a little bit of distribution play in there as well. So for us to get a 1% gain, I think is actually pretty positive versus last year where there was some distribution loading from what we could tell.

In one country in particular which we previously discussed.

Yes. Yes.

Okay understood. And then, you guys talked a little bit about cross-selling. I think you had that had an assay to the back of the triage accounts which started so I wasn't sure if you are referring to cross-selling which way you referring to when you were entering the prior question. So can you just kind of update us on that program in particular?

Well, we are doing both Brian, it's both. Right, there is adding assays on to boxes - triage boxes that is and we've got an active program comp plan that is tied to it. And then, we also have cross-selling that occurs between the two, there's a lot of Sofia placements at accounts where they can use the Triage MeterPro and vice versa.

Fine. And then, on the -- the last thing for me is, you had previously talked about EBITDA up 32% to 34% and I think there was a free cash flow number. I think it might have been $45 million to $55 million. I didn't hear you reiterate that. Is there any change to that or should we think that there's some upside the country there as well.

I think with the quarter it just gives us a little more confidence on the upper side of that range.

Okay. That's it for me. Thanks. Sorry about the back on noise.

That's okay, Brian.

No problem.

Thank you. And our next question comes from the line of Bill Quirk with Piper Jaffray. Your line is now open.

Great. Thanks. Good afternoon everybody. So I guess first couple of questions that have been kind of hit on in the past, sorry, I apologize about that. So TMT, so let me understand that Doug you want to point us to a $67 million run rate. So how should we be thinking about the growth for that? Clearly it's been doing better in your hands certainly than you suggested and you initially purchased the asset?

I guess we are being a little conservative Bill to be honest but when I see the multiple ins and outs that we're trying to take account for any of which could move the number one way or another I'm still feeling like it's a little early. Could I see how it's a couple more than that? Certainly it has been. But without going into great detail about what inventory is moving where and all those things and timing of orders in four or five countries and I got $1 million that came out of four small countries. I'm not really sure that's reproducible as an example. So the $69.9 million feels to me like 68.9 million already, so you can see how I'm a little bit cautious and I certainly don't want to be in a position where I'm missing numbers when we're actually doing pretty well.

Fair point. And then, secondly, with respect to cross-selling, you've largely highlighted kind of opportunities in the U.S., can you talk a little bit about outside of the U.S. certainly, you have a legacy out there -- their business had a fairly broad distribution particularly in Asia Pac and Latin America? And can you talk to us a bit little about how we should be thinking about leveraging some of the Quidel products into those countries and the associated timing with that? Thank you.

Sure. That's an interesting question. If we just focus on China for a second, we already know that for some time now the organization there has been selling both the Triage product line as well as Beckman BNP, which is a little bit unusual. They're a little bit ahead of the curve in that regard. There also we're awaiting for FDA clearance on Sofia and I know that team is anxious to get their hands on that product also. So there are going to be opportunities x-U.S. and I think it probably is as easy there as it is here to cross-sell.

And so should we think about that being in addition to the tox products being one of the growth drivers for '19 or is it too early and we should be focusing or thinking rather that this is more of a 2020 phenomenon? Thanks.

I think you're going to see some growth in 2019. And I and -- I'm anxious to have talks about that common market. So, I think there's other opportunities as well. And again, I'll just reiterate that we think we can get to mid-single digits pretty quickly with this business. We think that in the not so distant future over all we can get back to as a total organization to a point where we're growing the top-line by 10% overall. So I think you're going to see some evidence of that in 2019 to get the way to 2024.

Perfect. Thanks guys.

Thanks Bill.

Thank you.

Thank you. [Operator Instructions] And our next question comes from the line of Mark Massaro with Canaccord Genuity. Your line is now open.

Hey guys. Thanks for the questions. You indicated at your Analyst Day plans to acquire $150 million to $250 million of revenue by 2023. I wanted to get a sense of your business development initiatives understanding that there are a couple of companies evaluating strategic alternatives right now. Can you just speak to your pipeline and what you think could make a good fit or maybe not a good fit?

Sure. Your question is timely. We just had a review last night on the topic. And if we think about a baseball analogy, we get four initiatives that are bad and probably five and that we're working. And those would involve all manner of partnerships up to and including equity investments. So again, we're actively working four to five, I would say there's another handful that are on deck and there's a few in the hole. And I was -- I don't know if you want to call them strike out, we've crossed you off the list. So we're actively involved. I won't go into the list. I would say that the number of things that we're looking at March last night all the guys maybe we're looking at too many. So I like the baseball analogy and we're going to work to four or five that are out there right now pretty hard and see if we are going to move the ground.

Sounds like you're -- I was just going to say it sounds like your funnel is about as hot as the Boston Red Sox right now?

I would just say I don't want to be -- this is just -- we're having a great year and the other night watching the Red Sox come from 4-1 down to Knight was spectacular.

I would agree with that. So I wanted to ask another question on Savannah. Certainly the eight inch prototype marks a significant reduction more than 2-x reduction on the size of the first one that you showed two or three years ago. I know at Analyst Day, you talked about how Savannah certainly could be formidable in health clinics, but it seems like hospitals are also potentially a compelling opportunity. With Cepheid's GeneXpert has a number -- f thousands of placements in midsize and even small hospitals. So can you just give us a sense, there was a question earlier about conversations with large health systems but just give us a sense of which market you think could be bigger for Savannah over the next five years?

Well, we do love the hospital segment. I think that the small footprint the modularity of the product, the syndrome panels that we hear over and over again are in demand is going to give us an opportunity in the hospital. And you mentioned the Cepheid product. There's only one PCR chamber in that in that cartridge which without making too fine a point is a significant disadvantage relative to this Savannah cartridge which has four PCR chambers. So we're able to do a lot in -- with four chambers that this Cepheid product cannot. And I'll just add one more thing and I know, you all probably know this, but our success with Sofia in the hospital segment over the last couple of years has been dramatically better than our success in the physician office segment. Our market share gain in the hospital segment has been spectacular.

Fair point. The question for Randy just housekeeping. I think I heard you reiterate cost synergy target, so and then, I think I heard you say $11 million for '18? Is it right to also assume $15.5 million run rate for the end of '19?

I think we said all in $20 million total for -- as we kind of in a third full year. So I think its more $20 million mark than $25 million at this point.

Got it. And just one last one for me. Go ahead.

I'm sorry you're talking about synergy, is it correct, Mark?

Yes. Cost synergy.

Yes. We will be looking at $20 million as we exit 2019.

Great. And then, final one for me, I know you guys had guided for up to $520 million of revenue for full year '18. I think you said Doug last quarter that you thought it was certainly achievable last quarter. Given the stronger performance from the Triage earlier assets, can you just comment how you're feeling about the setup at this time?

Well, again, as I tried to suggest in the script we're very confident obviously in the $520 million now. The visibility that we've had over the first two quarters of this year in terms of the BNP and the Triage products causes us to have confidence that it's going to be north of $520 million. What I did say also is that even if we allow for some variability in Q4 with the start of the respiratory season which has always been a difficult call for us. So, even with an offset if you want, even if you want to risk adjust Q4, I think we're still going to be north of $520 million.

That's it for me. Thanks guys.

Thanks Mark.

Thanks Mark.

Thank you. [Operator Instructions] And we do have a follow-up question from Alex Nowak with Craig-Hallum Capital.

Good afternoon, everyone. I'm jumping between a few calls here so apologies if this is already mentioned. But can you just remind us where we're at with the transition of Abbott's teams to your own international infrastructure in APAC. And are you still confident that we won't see any sort of sales disruption in either APAC or Europe?

So I assume Alex that you're talking about our ability to move off of the TSA with Abbott…

That's right, Doug.

…on the sales side. And so that's an interesting question because we do break it into two parts. And in China, which is the biggest driver to Asia Pacific at this time. All the sales people that we need for that country at this time are already on the ground. In addition, the back office infrastructure that we need for China is already there and Randy, you are going over [Technical Difficult] next week. Okay. So on the sales side, we're in really good shape. Now order to cash, which I mentioned here in the script, we're still working on and we expect to be in a position where all the revenue from China and many of the countries in Asia would go through our ERP and through our distribution system early in 2019.

Okay. Very good. Thank you very much.

Sure.

Thank you. And I am not showing any further questions at this time. Please proceed with your presentation or any closing remarks.

Well, thanks everyone for your support and for your interest in Quidel. We had another great quarter and I believe that we are well-positioned to achieve our growth objectives. I will say everybody at this company is super enthusiastic right now and there is a lot of fun. Take care, everyone.

Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Goodbye.