Welcome to the Quidel Corporation Second Quarter 2012 Earnings Conference Call. At this time all participants are in listen-only mode, later instructions will be given for the question-and-answer session. (Operator Instructions) And now I’d like to turn the call over to Mr. Randy Steward, Quidel’s Chief Financial Officer. 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 Ruben Argueta, our Investor Relations Manager. Please note that this conference call will include forward-looking statements within the meaning of Federal Securities Laws. It's possible that actual results and performance could differ materially from those 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 July 25, 2012. 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 ended June 30, 2012. 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 second quarter and provide updates on our product pipeline. I will then briefly discuss our financial results and we will open the call for your questions. I’ll now hand the call over to Doug for his comments.

Thank you, Randy. Total revenues for the second quarter at $39.9 million were just slightly better than what we had expected and we have 12% improvement over revenues of $27.5 million in the second quarter of 2011. This was also a 24% improvement over revenues of $25 million in the second quarter of 2010. While physician visits for influenza like illness and testing, for influenza in the first quarter of this year were much lower than normal. Respiratory illness and test demand in the second quarter were at levels that we would typical see this time of year. Inventory levels at distribution were low as we exited the first quarter and remained that way as we entered the third quarter. Spending during the quarter was also as planned, and representative of our ongoing R&D investment and the increase in the size of our U.S. sales force. Overall we had a productive quarter. Sales and operating margin were bit better than we had planned, Randy will walk you through these details shortly. And we made pretty good progress with the two initiatives that we are likely to drive sales within the next year or so. Let me walk you through where we are with growth. Let’s start with Sofia, we did received clear waiver from the FDA in the second quarter for Sofia influenza A+B for nasal for swap specimens across all its ranges. And have now launched in both U.S. hospital and physician segment. Our placement rate improved during the quarter which is encouraging given the low prevalence rate and customer interest in discussing flu this time of the year. Other assays for hCG strep and RSV are planned to follow shortly and we would expect by the first quarter of 2013 to have a menu of four tests in…

Thank you, Doug. As mentioned for the second quarter of 2012, total revenues grew 12% to $30.9 million compared to $27.5 million in the second quarter of 2011. Global sales of infectious disease products were $18.8 million as the category increased 23% from $15.2 million in the second quarter of 2011. Increase in revenue was primarily due to influenza sales in the quarter. Strep A revenue also grew in the quarter by 11% compared to the same quarter of last year. Revenues from DHI’s respiratory DFA business also contributed to the category growing 12% over the second quarter of 2011. Our herpes product line grew 4% in the quarter. Revenues for the women’s health category increased by 3% in the quarter to $8.7 million led by 3% growth in pregnancy and 8% growth from thyroid. We also saw quarterly growth from our bone health business of which revenues increased 4%. Our gastrointestinal product category revenues were $1.6 million in the quarter. Gross margin in the second quarter of 2012 was 55% compared to 54% in the second quarter of 2011. The slight improvement in gross margin in the quarter was mostly the result of product mix from influenza sales. This improvement was partially offset by higher one-time expenses relate to a transition to a new packaging and fulfillment partner which was completed in the quarter. Operating expenses were $21.4 million in the second quarter of 2012 compared to $20.1 million for the second quarter of the prior year. Research and development cost in the second quarter were $6.8 million compared to $6.2 million in the second quarter of last year. The increase was largely due to increased efforts associated with our development of additional diagnostic products including clinical trial cost for these products and outside service cost. We expect R&D…

(Operator Instructions) Your first question will come from the line of Steven Crowley with Craig-Hallum Capital. Please proceed.

The partnership you have disclosed here with Life, it sounds like you will be developing some product, they will be reimbursing you for some of that development and having a milestone. Is the expense related to that development effort contained in that 29 to $30 million R&D number or there will be contract revenue and there will be some contract cost of goods sold that will move some of that to different places.

There will be contract revenue and the R&D will still be within the 29 to $30 million that we said that we would spend for 2012.

There will be some incremental R&D type cost that won’t fall into R&D, should we think about that contract revenue as reasonable margin stuff or is it a means to expanding that menu cost effectively that you alluded to the Wildcat?

We will go to the specifics of our development agreement with Life next quarter. At this time we are simply disclosing that we are likely to receive cash in Q3, some portion of which will be recognized as contract revenue. Once we determine the likely impact in Q3, we will give you an update Steve.

And just to be clear on your historical efforts, Life announced that they were going to be in certain countries or geographies within Europe, selling some of your open box assays without the prior working relationship that they had disclosed.

That’s right and that’s a completely different agreement, and this agreement we are talking about the development of assays for a brand new instrument platform, not yet launched.

Now in terms of the commercial build out or the build out of your commercial organization, can you have some pretty ambitious plans there? The influence I got from Randy’s comment is that you had made pretty good progress and thus we are seeing kind of sales and marketing run rate ex commission that are variable with your product sales. Can you bring us up to speed on what you have been able to do with the commercial organization?

The U.S. sales organization is now fully staff n trained and I think randy was suggesting directly that you can expect sales and marketing expenses to be equivalent to the second quarter over the next couple of quarters. I’d ad Steve anticipating the follow-up here that interestingly we are seeing no lag effect with the newly hired sales representatives and of course that ties to commissions and all of that as you ask. In fact on average the newly hired folks are placing more Sofia analyzers per day than our more seasoned sales people. And to me that means that we either hired great talent or our training program is terrific or the Sofia and influenza A+B product truly are addressing what our customers want or maybe all of above.

And in terms of the (inaudible) that you have been able to hit the early adopters of Sofia, I know there is a list of benefit and features that you presented to us, but are there couple that are resonating in particular with the early adopters?

Objectivity is key particularly in a physician office segment; physicians also love the walk away mode. And I’d tell you that when we do present data, the data are convincing suggesting that the product performance of Sofia influenza A+B is dramatically (inaudible) including our own legacy product. And as demonstrated in a number of papers, somewhat closer to the performance of PCR.

Your next question will come from the line of Scott Gleason with Stephens. Sir, please proceed.

Doug, can you give us little more detail on what’s going on with the sales infrastructure, where you guys stand now in terms of total rep count, and maybe where that might go, (inaudible) end of the year in 2013.

No, I’m not going to answer the question specifically. Our sales organization in total is pretty much where we said that it would be in terms of numbers. Some of the numbers of territories will have changed depending on; actually have changed as a result of how we go on the market. and so unfortunately I’d rather not disclose that given the fact that I know that we have competitive on the line.

And the Doug, can you talk a little about (inaudible) when we look at the hospital channel specifically, where do you guys kind of point or where do you believe they (inaudible).

Can you rephrase that question?

Molecular testing versus immunoassay methodologies, if we look at market share today in the hospital channel, where do you think molecular is today on the percentage of test performed.

I now understand the question, I’ll have to answer it slightly differently I think as I can’t give you the total market share simply because I don’t really know the total amount of flu sales that are molecular. Well I can say to you during the pandemic, we suspect that some are between 5 to 8% of the latter flow volume in the hospital segment was converted to molecular only testing.

Your next question will come from the line of Nicholas Jansen with Raymond James. Please proceed sir.

Question on the Bobcat, obviously being delayed, how will that impact you guys revenue assumptions for Bobcat within your 2015 target?

Obviously it will have an impact because we pushed this out by year, what we said during our Analyst Day in Boston a little over a year ago was that we expected to exit 2014 at a run rate that would include about 100 million in annualized incremental revenue and that 30 million of that was Bobcat, obviously we are no longer forecasting 30 million for Bobcat actually in 2015, instead it will be significantly lower in that particular year. The good news is though that with visibility into the markets that we hope to address, there is upside, we think the Sofia and our core business and we are still aiming at an incremental of about 95 to $100 million.

And just thinking Wildcat certainly there is a growing competition within the molecular field, maybe just talk about the your time to market and I guess first mover advantage and what you think will drive success replacement of that device once it is officially launched?

The number of potential entrance in the clinical molecular diagnostics space from our perspective appears to be about the same as it has been. We are uniquely positioned here in San Diego and we have seen almost everything that’s out there. The recent acquisitions and product introductions from our point of view are simply acknowledgement of what the IVD industry knows that the pace of demand for molecular assay performance is likely to quicken and that there are customer needs and segments that are not currently being addressed by the existing players. We believe firmly that there are three key needs that if addressed we will enable a new platform in a space like Wildcat to succeed.

Your next question comes from the line of Brian Weinstein with William Blair. Please proceed.

Question for you on Sofia, as you guys are out now beginning to detail the product, what’s the biggest hurdle you are running into when an account is turning you down at this point?

I think the timing is not ideal, but frankly our close rate has been quite high. And we are seeing close rate that would be actually pretty impressive, I’d say the first call and second call close rates are actually quite good. And then for the competitive we are actually based on the data alone gaining a lot of traction.

As we think about let’s say you said target in first 1000, how would that break out between the physician office and hospital setting, how were the utilization per system differ if we were kind of think about building it up that way.

The larger proportion of analyzers will be in a physician office segment, simply because of market share, we said before that our market share in the physician office segment for flu is at around 50%. And we said in the hospital segment that it's less than 30%. Places that current use QuickVue and that are very easy conversions there are more of those in the physician office segment. In terms of utilization per instrument, we don’t see a great deal of difference because right now we are targeted that the larger physician office practice who are fully utilizing at least one analyzer and when they need more analyzers our customers are actually ordering those. The same would actually be true in the hospital segment.

Last question is kind of housekeeping one and that s you said, you expect to have four test approve Q1 ’13 in the U.S. and six outside the U.S. So, two question; number one, of those additional three, you mentioned hCG has Strep in RSV, I’m assuming that you are looking for (inaudible) all three of those by that timeframe. And then what would be the other two test that you would expect outside the U.S. in that timeframe.

Strep and (inaudible) ex-U.S.

Do you expect (inaudible) other three in the U.S. by that timeframe.

I’d say we will certainly file.

Your next question will come from the line of Jeff Frelick with Canaccord. Please proceed.

Doug, can you give us a sense of the split with Sofia between penetrating your existing Quidel account versus competitor account?

It's evolving everyday simply because it's replacing so many in the physician office segment right now. But early on we were assuming about a 50% cannibalization rate and we actually were about 60-40 split. 60% new business to 40% cannibalization, but that’s changing as I said everyday that we spend in the physician office segment we are getting more and more cannibalization.

With respect to the molecular test the open box, four assays in Europe, two in the U.S. The revenue contribution just yet, but maybe point how many customers you have now between Europe and U.S.

I’m sorry, Jeff, I’m not going to tell how many customers that we have, well I can tell you is that I described the traction as modest and obviously a lot of people are looking and have looked but for the assays that we launched we don’t see high prevalence at the moment.

How about AmpliVue, how that is being in position into the European hospital market?

As I said in the scripts we intend to be able to launch in a fall. And at this stage we are working through distribution partners from most locations and we are selling some directly. We intend to sell directly in Germany.

Your next question will come from the line of Tycho Peterson with J.P. Morgan. Please proceed.

This is (inaudible) for Tycho. Just on AmpliVue, first I guess besides several additional products that you might have, I guess within C. diff and maybe just Europe specifically here, do you see that being large opportunity in itself, C. diff within a specific geography or do you really have to sort of add on to the menu.

I’d tell you that the market research that we conducted suggest that customers find a format to be unique, and they are interested and they interested in just looking at C. difficile early on. Obviously with greater menu, we think that improves slightly, but for the moment there we believe is pent up demand in Europe and based on our market research here, we sort of convinced there pent up demand for this sort of product that would be a nice upgrade for those folks who are currently doing EIA testing.

Your next question will come from the line of Zarak Khurshid with Wedbush Securities. Please proceed.

Can you just provide update on your view of Europe and a situation there and how that may or may not be back in the business.

For us it's pretty simple, we don’t have a whole lot of foreign exchange, if I’m understanding the end of the line reason for your question. And right now as a percentage of our total it's still about 15. So, we don’t see a macroeconomic impact on our business and further for the test that we sell there, they are related to infectious disease that is generally is somewhat less affected by the economy.

Less worried about FX issue and more thinking along the lines of pricing pressure and I think some of your competitors have had some margins or pricing compression n Europe and just wanted to get a sense of have you seen anything like that?

I’d suggest to you that for rapid testing in particular, the pricing can't get a whole lot lower in Europe. So it’s always been competitive. I don’t see it as being more competitive then it is today. And I would the same is true of Japan. It’s a super price competitive market and it hasn’t increased, it’s just been that way for a while. So I think when you here this from other folks, I think you are talking about different segments and different products then what we are talking about.

Got it. That’s helpful.

Yeah. (inaudible) The 15% that Doug mentioned, that’s our total international business not specially Europe. So Europe is....

Is smaller.

Yeah. It’s like may be 5% of our total sales. So it’s not a significant revenue generator for us at this point.

Understood. Thanks for that color. And then maybe can you just talk about some of the trends and behaviors here, either at the distributor or hospital level, following the Supreme Court ruling on affordable care. Are you seeing any kind of change in behavior that could impact your business?

We do see more decisions at IDN level, which in some cases had an impact on physician practices, but I wouldn’t call it a huge trend quite yet. I do hear from a sales organization discussion that we are having at the IDN level. But I am not sure I could describe a huge trend at this stage.

And then shifting gears to Sofia, it sounds like the traction is going pretty well there as we sort of look out over the next few quarters. Can you maybe talk about the gross margin on that product and how that could be lifting or dragging the overall corporate gross margin.

Gross margin for Sofia and the Influenza A+ B as have previously disclosed is expected to be in the same range as our QuickVue flu. Obviously in this particular case we are amortizing instrument systems which is below the gross margin in some companies, but for us I guess we included it on the total. So we will have a modest impact. Remember though that the cost of building the analyzer is low and we are depreciating it over three years. So I wouldn’t call the impact dramatic.

Gentlemen, your next question comes from the line of Ross Taylor with CL King. Please proceed.

Hi, most of my questions have been answered but just two minor one left. First, I wondered if you could comment at all about what percent of the mix of your infectious disease revenue this winter you expect might come from Sofia. And my second question is, I didn’t quite grasp the answer to your earlier question on Bobcat. But have you reduced your long term revenue expectations for that product at all or you really just pushed things out by one year?

No, we have just led them to the right on the chart. So we have no reason to believe that we don’t have a product that’s going to meet initial development requirements. We still there is the same market of 700 to 1000 clinical virology labs here in the United States, and we still think there is a market ex U.S. in countries like China and Hong Kong, as an example. So there is nothing that’s changed fundamentally. We just need a prevalence rate for all the virus types. Percentages of revenues from Sofia, no, we don’t have a good number for a year.

And gentlemen your next question comes from the line of Steven Crowley with Craig-Hallum Capital. Please proceed.

Thanks for taking my questions. Just a couple of follow-ups. You mentioned in the prepared commentary that influenza was a particularly bright spot in the slow seasonal quarter. But there has been some news flow out of the southern hemisphere regarding relatively active season. Did that have any bearing on your results and what might that variable mean or portend for you guys?

First, sales and New Zealand, in particular for us, would be low in the quarter. And I have said this before, Steve, there is very little predictive value from the flu experience in Australia and New Zealand. Nevertheless, anticipating the question, I looked up a few facts. One, it has been reported that Australia and New Zealand are experiencing unusually strong flu at this time. Two, the influenza A virus has been nearly 100% H3N2 Victoria 361. And the influenza B which has been in lower numbers has actually two lineage strains Brisbane 60 and Wisconsin 1. But the problems there are extremely low. And the vaccine for this year has the H3N2 Perth 16 and the circulating H3N2 strain just mentioned is a drift variant of that vaccine strain. So the vaccine is not exactly a perfect match. But in areas where there had been high immunization coverage, illness due to flu has actually been mild which suggest at least some level of vaccine protection. What this means for us, Steve, in the Northern Hemisphere is unknown.

And then in terms of Thyrotain, you had a more robust year-over-year growth quarter in Q1, a little less robust this quarter. What is that variability telling us and what are your latest thoughts on Thyrotain in the autoimmune franchise and who should we think about it?

First, Thyrotain are still small numbers. So it’s easy to move things from a percentage basis. We continue to see good growth on a year-over-year basis as well as sequentially, though we did see a slowdown in June orders from a very strong March. We anticipate low double-digit growth in the back half of this year, just as we have said before. In terms of the franchise overall, I think it’s going nicely. We are not spending a ton of sales and marketing on it at the moment but it still continues to grow. The effort we are spending is being spent internationally and we have a number of ongoing projects ex U.S. that could turn out to be fruitful for us, I would say as early as sometime in 2013.

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

Well, this concludes the call for today. Thanks everybody for your time this afternoon and for your continued support. Take care.