- QuidelOrtho has reported its first financial results since its creation in a $6 billion deal earlier this year.
- Sales across the two formerly independent businesses, Quidel and Ortho Clinical Diagnostics, rose 37.5% on a constant currency basis, supported by double-digit growth in point-of-care and molecular diagnostics.
- While management said the third quarter is typically “softer” for both companies, QuidelOrtho expects to post full-year sales growth, excluding the impact of COVID-19 testing, of 6% to 9%. The flu season could dictate where QuidelOrtho falls on the range.
Quidel’s merger with Ortho was contentious with investors. Its stock plummeted 17.8% when the merger was announced late last year. After closing the deal in May, its second quarter results represented an early opportunity for QuidelOrtho to make its case as a combined company.
Sales increased 247% as reported, but that figure reflects the large merger, and says nothing about the underlying strength of either company. The 37.5% growth figure comes from an analysis that imagines QuidelOrtho as a combined company in the second quarter of 2021 to shed light on its year-on-year growth.
QuidelOrtho was affected by the same macro issues as other medtech companies, such as the lockdowns in China and supply chain disruptions, and factored those headwinds into its full-year guidance. Talking to investors on a conference call to discuss the results, QuidelOrtho CFO Joseph Busky pointed to signs that pressures could ease in the coming quarters.
“China continues to be an important growth driver for our business and we expect recurring revenues to grow mid single digits. However, instruments are expected to be soft due to previously mentioned lockdowns and local requirements. Inflation and global supply chain disruptions continue to be a challenge. We are seeing greater access to semiconductor chips and expect challenges to further ease as we move through the back of the year and into 2023,” Busky said.
As QuidelOrtho moves through its next quarters, Busky said he and his colleagues will work to integrate the two businesses. Its goal is to generate cost synergies of $30 million in 2023, and the same again in each of the following two years, and pursue cross selling opportunities. The integration has so far identified a larger cross-selling opportunity for Quidel’s Triage tests than was originally foreseen.
CEO Douglas Bryant cited “impressive growth” in the point-of-care, labs, transfusion medicine and molecular diagnostics units, in a statement before the call.
“This is not the same Quidel, and the earnings call reflected that with detailed slides, a more formal approach, and the establishment of guidance (legacy Quidel did not provide guidance),” wrote analysts with William Blair in a note released Friday. “ As all of this gets established over the first few quarters of the integration, we expect there to be a learning curve … As we look ahead, our thesis on Quidel has been based on the company’s ability to generate $850 million-$900 million in EBITDA next year. We came away from the call on August 4 believing that this remains reasonable.”