Welcome to the Quidel Corporation first quarter 2009 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) I would like to now turn the call over to Mr. John Radak. Please go ahead.

Hello, everyone. This is John Radak, Chief Financial Officer at Quidel. Thank you for participating in today’s call. Joining me today is our President and Chief Executive Officer, Doug Bryant. Earlier this afternoon, Quidel released financial results for its three months ended March 31st, 2009, if you have not received this news release or if you would like to be added to the Company’s distribution list, please call Shirley Chow at Porter Novelli Life Sciences at 212-601-8308. 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 materially from these stated expectations. For a discussion of Risk Factors, please review Quidel’s annual report on Form 10-K and any 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, April 22, 2009. 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. For today’s call, I will report on the financial results and our previously announced restructuring then Doug will provide some observations to put this year’s influenza season and perspective and give an update on a new product development activities. Clearly, our first quarter results were not what we were expecting at the start of 2009. This year’s influenza season was a very late and mild season as compared with any season in the past 12 years in terms of the number of patients presenting to their physician with influenza-like illness or ILI. Total global revenues for the quarter were $16.9 million, a decline of 59% from the first quarter of 2008. This decline was…

Thank you, John. Given the importance and size of flu business as well as its impact on our Q1 results, I thought it would be constructive to put this year’s flu season into perspective. As you know, there are a number of factors that can impact the size of the flu test market from year to year. Those factors include new physicians adopting flu testing, existing users, utilization rates, and severity of the flu season as defined by the percentage of patients visiting healthcare providers with influenza-line illness or ILI, influenza vaccine effectiveness and the number of people who actually get vaccinated. Clearly, we feel the most important drivers of the flu test usage during a flu season or the number of patients who present with ILI and the number of physicians who use flu tests. It is instructive to note that there are some small incidents of ILI throughout the calendar year. The CDC characterizes the small level of ILI incidents as a benchmark or [saver for two] as the baseline. We know that the majority of flu test usage occurs when ILI does exceed the baseline level. Our internal analysis of CDC data on the rate of physician visits for ILI for the last 12 influenza seasons suggest that there were three mild seasons, three severe seasons and six seasons that were average in severity. The following seasons were mild, 0102, 0203 and 0809. The 0304, 0405 and the 0708 seasons fall under the severe category therefore as many of you have already concluded that severe 0708 season was followed by a mild 0809 season which is actually the first time this has happened in the last 12 years. Let me describe the difference between a mild and a severe flu season. Generally, a severe season will last…

(Operator instructions) Your first question comes from the line of Scott Gleason - Stephens Inc.

I guess the first question is just when we look at, you guys mentioned that you still have some excess flu before in the channel. Is there any way you can kind of quantify what you believe that excess meant to be on a dollar basis or give us some more granularity on how to think about that when we think about the third and fourth quarter this year?

Well, we have previously disclosed, Scott as you know that we think that the amount is required to stock the QuickVue setting and physician’s offices. That amount is approximately what we have in the channel and we are validating that plus we have recently concluded the study of end users so we have a pretty good understanding of what is out there and beyond that, we really cannot quantify it for you.

Great and then Doug, I guess just given some of the events that is going along around the Company and the weak flu season and some of the inventory issues, how do you guys get comfortable around market share data and the claims that your market share stays the same? I guess what additional data points do you guys look at right now to give the assessment that your market share has not changed?

Well, we have a telemarketing department and they are in constant contact, daily contact with our end users. So, based on those data which, that obviously are not absolutely conclusive, we concluded that market share has not changed much if at all and we look forward to getting our report after Q1 and seeing what the results actually are.

Great and you guys saw that the RSV test grew double digits? Can you guys maybe give us anymore granularity about around the actual kind of magnitude of that test contribution in the quarter? Are you ready to talk about that yet?

No.

No, I mean we are just pleased with the performance of the sales of RSV in the quarter but we are not ready to break that out separately.

Great and then John, one housekeeping question, can you give us what the stock-based compensation was in the quarter and then also, can you talk a little bit about what the expense was from the management transition?

Yes, the stock-based comp in the quarter was about $800,000 and that was versus roughly about $1 million in the prior year first quarter and the CEO transition costs were roughly around $300,000.

Great!

Your next question comes from the line of Ashim Anand - Natixis Bleichroeder.

I was wondering if you have available some balance sheet data, how much was account receivable this quarter?

Sure, accounts receivable at the end of the quarter was $6.1 million.

Wonderful! And inventories, if you have?

Inventory was $12.6 million.

Wonderful! Now, in terms of the other revenues, would you be able to tell us what revenue stream contributed the most for you got a nice increase there?

Veterinary, the veterinary product kind of creates…

Okay, and H. pylori and SPG, they were essentially where they have been.

Yes.

And finally, I think you already said this but I think I did not get it, in terms of timing of the new products, you said second half for FIT and then probably, what did you say about, did you give the timing about Mono or not?

Yes, we did. Front half of 2010.

Your next question comes from the line of Zarak Khurshid - Caris & Company. Zarak Khurshid - Caris & Company: Sorry, John I think spaced it out but could you just go back over the breakout of the three big segments quickly?

Sure. So, the infectious disease category in Q1 was $7.8 million, reproductive and women's health was $4.9 million and other was $4.1 million. Zarak Khurshid - Caris & Company: Great, thanks for that and then my only question really pertains to the molecular diagnostic strategy. So, Doug could you just remind us what your thinking there at how might that strategy, how has that maybe been refined over the last few weeks and how are your meetings going with some of the platform technology companies in San Diego and elsewhere? Thanks.

Sure. We are actually doing diligence around a couple of ideas which will include the technology itself and IP. So, we have got two things that we are working out immediately and those are progressing pretty much as we had described during the investor road show. Does that answer it for you? Zarak Khurshid - Caris & Company: Yes, I think so. More specifically, I was curious with the cost savings we are expecting to see over the next year, do you envision that being offset by either small acquisitions or investments in new technologies?

Sure. Some of that will occur. Remember also, Zarak, that the P&L is pretty leveraged in such that any of these new products that we launch even though they will not necessarily be more than modest in terms of sales in the immediate future, the fall through on those products will be very healthy driven by mainly the fact that our direct labor expense for our manufacturing is quite well so that the remainder of our manufacturing costs are essentially fixed. Zarak Khurshid - Caris & Company: Okay and then roughly, what are your thoughts on the timing to get potentially a molecular product to market?

Well, that is really hard to estimate at this stage but I would say that we are aiming at the two to three year mark.

Your next question comes from the line of Keay Nakae - Collins Stewart LLC.

John, can you give us an idea, with your cost cutting initiatives, what level of quarterly gross profit you are targeting for breakeven?

Well, it is a tough question to deal without providing financial guidance to you, Keay. I mean, I think as you look at the business as we described in the past, you have a high margin products, a flu and RSV and you got the rest of the products which are generally in that 50% gross margin range. So, I mean I think somewhere slight north of that 50% should deliver on above breakeven performance.

Alright…

…first of the year.

Yes. I do not know if that really answers my question but maybe I will follow up with you on that later. In terms of the FIT test, how long do you think it will take you to get the CLIA waver? Are you going to file for that time of the FDA filing?

What we did say is we are working on the studies that would necessary to the filing and so far, we are actually encouraged by the early results. Obviously what we are looking for is the ability of the average person to be able to perform the test without failure and we are encouraged by the high percentage that for which that is actually true so far. But until we get to the end of the study, I cannot actually answer the question.

Okay. In terms of some of your product categories in the inventories associated with those for pregnancy, reproductive health, you posted this number for $4.9 million. Is that what we should consider as the baseline number now? Have you got your inventory straighten up for that product category?

Yes, those two categories or those two product lines are down at inventorial levels that we would expect.

Okay, very good and then what about strep? You have not talked about the inventory there. What is that looking like at this point?

That is the same.

At levels that you are comfortable with?

Absolutely.

Okay, and then finally on the flu inventory, you talked about where those levels are now but relative to where you would like them to be versus say where the prior CEO would have liked them to be, is your desire to have those at a much lower level and go from there?

I will answer that by starting in a little bit different way if I can. First, we just concluded a fairly significant study at the end user level because actually that is where the inventory matters most. So, we conducted a survey of the large number of our end users and a very high percentage of them have actually not enough inventories to go into the season. So, I do not know if encouraged is the right word but we are certainly not discouraged by what that survey told us. So, having said that then the question just is how much will need to go into the system in advance of the next flu season and so we would expect some modest amounts of sales into distributors probably in the fourth quarter. But the uptick that would be required to get more products into the physicians and acute care setting of those labs, that amount would be essentially taken up by what we have in the inventory now.

Okay understood and then, to make all that work I guess, you as well as your distributors/end user customers have a high degree of confidence in your ability to deliver product in a just in time fashion.

Absolutely, I think it is well described and well known that the effort that the Company is taking over the last four years to improve efficiency and to move to a more automated manufacturing process means that we can take with, that we continue to build throughout the year and we can gear up in very short notice to supply virtually anything that is required whether it be strep, flu, ASG. So, I think it is well known by our distributors that that is the case.

Okay and then just to complete the loop here, well I guess most of this has been focused on the US market. Where do your inventories stand with respect to distributors in Europe bioMerieux or in Japan?

I think we are comfortable with the inventory levels in both Japan and that bioMerieux.

So, are they where you want them to be at the start of the season as oppose to the excess that you are seeing in the US when you say comfortable, John?

Yes, I believe so because actually the amount that was ordered in Q1 by bioMerieux was not over the top.

Right. Okay, something just happened.

Operator? Yvette, are you in the line?

Are we going to need to call back in?

I am sorry about that, sir. (Operator's instruction) Your next question comes from the line of Steven Crowley - Craig-Hallum Capital Group.

It was like I was in hyperspace there just for a moment. I do have a few more questions. I am hoping you can give us a bit more information. You have attempted to give us some feel certainly for flu and the difficulties you experienced in Q1. I think you said year-over-year sales in that product were down roughly 90%. Q2 was typically been a period with very little flu product shipments. I think it is probably a safe assumption that there is not much flu product shipped in Q2. There is nothing corked either with international or southern hemisphere or anything that should affect your flu sales in Q2?

No, nothing that we are aware of.

And Doug, from the sound of things, what you are telegraphing for Q3 and Q4 are some prospects for business in Q4 but some dampened prospects for business in Q3. I am just trying to get a feel for what the range of outcomes might be for flu shipments. I mean you had Q3s historically of the Company where you have shipped $13 million, $15 million, and $18 million of product. We are certainly talking about something considerably less than that but in the range of outcomes, is there a repeat performance of the March quarter potentially with just a couple million dollars or so of flu. Is that in the range of outcomes? I am just trying to understand what the middle part of the curve here looks like.

Again, we are assuming an average flu season because that is the best we can assume at this stage and if that is the case, then we would not see a real start to the flu season until maybe that first or second week of December and so therefore we know that there is enough in the channel to fulfill a big part we believe with the physicians and acute care labs we are going to need. So, yes we are telegraphing that we are not expecting to see the typical Q3. It is difficult to predict from our end as well because we do not, we are actually just assuming average.

So, if we as a collective would try and be real prudent and real…

Yvette, I think we lost you. Operator?

Yes, sir?

I think we lost a questioner, Steve Crowley.

Okay, sir. I will take care of that for you. I would call him back so he can ask another question in a moment. Okay, Mr. Crowley, your line is now open.

Okay, guys I am back. So, my follow on to your answer was, if we were to be trying to be conservative and prudent and all those good things, assuming a couple to several million dollars of flu in Q3 would seem consistent with that objective of being prudent and conservative? I just want to make sure I understand what you are trying to telegraph to us.

They should be conservative about Q3.

Okay, in terms of strep, can you give us some similar color? It was obviously down year-over-year. Was it down double digits, 20%? Can you give us a feel for what kind of challenge you have there and what kind of category is strep as it is normalized here and we can operate in a normalized manner? Help us understand how that category shakes out for you.

Well during Q1, we had distributors reducing inventory levels for both strep and pregnancy and those are, we exited Q1 as we said at more comfortable inventory levels in the channel for those products. So going forward, we should return to a more normalized run rate of revenues for those products and would be more, would be closer to what we experienced say in 2007.

Okay, so if I take those comments to heart and I appreciate them because again, we are trying to calibrate what the floor is. A quarter without much flu business and more normalized run rates in your other product categories, for example, your Q2 of 2007 was an $18 million quarter. That looks a little aggressive in the context of what you just reported but maybe that not overly aggressive. Is the Q1 run rate in your business representative of a more natural run rate in your non-flu products and little or no contribution from flu? Is that the way we should think about it, so, $17 million to $18 million or $16.5 million to $18 million?

Well, sequentially we would expect pregnancy and strep to be higher in Q2 than Q1 because of the draw down in the inventory levels.

Okay, but other had a nice top, and were that artificial? Is that not sustainable up at those levels? Is there bit of timing that helped cue on there?

Yes, there was a bit of timing that helped cue on. If you recall when we talked about the fourth quarter of 2008, we said that there were some veterinary orders that moved from Q4 and Q1 so Q1 is a little bit high on the veterinary business.

And then as you move into the September and December quarter, I guess there are some seasonal elements of your product mix that are not hampered by the inventory situation. Those would be strep, RSV and other in cold and flu-type products, correct? So, there would be some positive seasonality even X influenza for the back half of the year.

Yes, I mean there are clearly strep sales in Q4 tends to be higher than Q3 and higher than Q2.

Now, your cost savings from your restructuring seemed to be rather significant. I want to make sure that we understand what you are telegraphing. In the quarter you just reported, X the roughly $1 million restructuring charge, your total operating expenses were $12.1 million. You mentioned about a $1 million per quarter savings in operating expenses because of your restructuring. So, is it fair for us to assume on what sounds to be a largely similar revenue number. We would not have big commission differences of just a $1 million less operating expense as your operating run rate. Is there another variable in the equation that we need to know about?

No, I think that is, I think you got it.

And the management, the CEO transition expense, is it just in the first quarter or is there any tail to it to second quarter?

There is a small portion that is being recognized over the course of 12 months but it is not material so, for all intents of purposes, just in Q1.

And then final question, just moving back up to the growth side of the equation and the new products, Doug, can you talk about any response from the market place distribution, potential partners about the new product roadmap that you have disclosed so far. I guess I am talking about the combo panel, about the mono test. What kind of interest do you have there and if you do not really have interest, how have you sized up your opportunities in the mono area for example?

We had one initial meeting with the key distributor and laid out the product roadmap and I have to say the reception was just quite good. I do not have a lot of experience beyond that. I think again we should characterize these opportunities as basis. So the top line is not so important as the margin growth and again, any dollar and new product sales because of the leverage we have on the P&L, it is going to fall pretty much straight through the bottom.

Well, thanks very much for taking my questions. I look forward to picking up some of the stuff with you after the call.

Sure.

That is all the time we have today. Mr. Bryant, please proceed with your presentation or any closing remarks.

Well, this concludes the call for today. John, I thank you again for your time this afternoon and for your continued support. Take care, everyone.

Bye-bye.

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