Alere to complete strategic review by year-end

Alere COO Namal Nawana

In the midst of a management transition, diagnostic company Alere ($ALR) missed its quarterly numbers. The company acknowledged its recent problems and missteps as well as started to outline a new strategic vision for Alere that will become clearer to investors around the end of this year, when a comprehensive review will be finished.

As a result of cost cutting and refocusing, Alere should be back on track for organic revenue growth to resume next year, according to interim president and CEO, as well as COO, Namal Nawana.

In the meantime, he expects to focus Alere on cardiometabolic disease, infectious disease and toxicology. He plans to divest the health management business before year-end, as well as potentially "other smaller, noncore assets in various fields of oncology, women's health, and veterinary products." Nawana also said the company would evaluate and limit its investment in Connected Health, which cost the company $10 million of operating income last quarter alone. The company does not plan to revisit a potential spinoff for BBI Diagnostics products, which had been pursued previously.

Nawana also committed to an SG&A rate of 28% for 2015. The company started a workforce reduction last quarter that is expected to save it $21 million annually.

During the second quarter, Alere reported adjusted EPS of $0.42, well below the consensus of $0.58 and a 29% decline from the same quarter in 2013 when it was $0.62. Revenue for the quarter was $737.9 million, below analyst expectations of $747.6 million. Nawana attributed the EPS miss to two product recalls, weak results in higher margin geographies and increased spending on Connected Health.

Nawana assumed his position on July 1 when former Alere president and CEO Ron Zwanziger resigned along with SVP of R&D Jerry McAleer and CSO Dave Scott.

He was therefore able to give a brutal account of the company's flaws and what it will take to reverse them. "In the first half of 2014, softness in our respiratory business as well as overall U.S. market performance and the effect of two recalls has stalled growth," Nawana said on the call. "This will not be materially reversed during the second half of 2014 despite solid performance in international markets."

Nawana concluded, "With improved manufacturing performance, our full portfolio of products back in the market, and a more focused approach of our core diagnostics areas, we expect organic revenue growth to resume in 2015."

Investors were dismayed, pushing Alere shares down 13% on Aug. 4.

- here is the release
- and the transcript

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