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Executives

Doug Guarino - Director, Corporate Relations

Ron Zwanziger - Chairman and CEO

David Teitel - CFO

Analysts

Dan Leonard - Leerink Swann

John Putnam - Capstone Investments

Greg Simpson - Wunderlich Securities

Eric Criscuolo - Mizuho Securities

Zarak Khurshid - Wedbush Securities

Jeff Frelick - Canaccord Genuity

Jeff - Goldman Sachs

Nicholas Jansen - Raymond James

Alere, Inc. (ALR) Q1 2012 Earnings Conference Call April 30, 2012 8:30 AM ET

Operator

Good morning and welcome to the Alere Inc. Conference Call to discuss First Quarter 2012 Results. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

I’d now like to turn the conference over to Mr. Doug Guarino, Director of Corporate Relations. Please go ahead sir.

Doug Guarino

Thank you, Denise, and good morning and welcome to the Alere conference call to discuss our results for the quarter ended March 31, 2012. We are joined today by Ron Zwanziger, Chairman and CEO; and David Teitel, CFO.

Before we get to that discussion I’d first like to draw your attention to the fact that certain matters discussed in this conference call will constitute forward-looking statements within the meaning of the U.S. Securities laws. These statements reflect our current view of the respected future events or financial performance and are based on management’s current assumptions and information currently available.

Actual results and the timing of certain events could differ materially from those projected or contemplated by the forward-looking statements due to numerous factors including without limitation our ability to successfully acquire and integrate our acquisitions and to recognize the expected benefit that restructuring and new business activities. Our exposure to changes in interest rates and foreign currency exchange rates; our ability to successfully develop and commercialize products, the market acceptance of our products; continued acceptance of Health Management services by payers, providers and patients; our ability to develop enhanced Health Management programs through the integrated use of innovative diagnostic and monitoring devices and to recognize the expected benefits of this strategy; the impact of healthcare reform legislation as well as future reform initiative; the content and timing of regulatory decisions and actions including the results of FDA inspections as well as the impact of changes in reimbursement policy and budgetary constraint, both in the United States and abroad. The effective pending and future legal proceedings and our financial performance, and the risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission including our From 10-K for the year ended December 31, 2011 as well as in our quarterly reports on Form 10-Q.

Our company undertakes no obligation to update forward-looking statements. Additionally, please note that during this call, we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed, the presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available on the company’s website at Alere.com.

And with that let me turn the call over to Alere Chairman and CEO, Ron Zwanziger. Ron?

Ron Zwanziger

Thanks Doug and good morning everyone. We are pleased to report a strong first quarter results highlighted by strength in both revenues and earnings, organic growth and our professional diagnostic business was particularly good at 6.9%.

New product sales continue to increase achieving 13.7 million in the first quarter with particular traction in Europe and Asia. We expect this trend to continue and anticipate that our new platform achieves increased medical adoption, their underlying consumable sales will drive and expanding organic growth rate over the next several years.

Another favorable trend in the first quarter was improved predictability and stabilization of our Health Management unit which posted a sequential increase in revenues for the first time since the third quarter of 2010, while institutions predict the consisting growth trend in Health Management we are seeing increased customer interest of added business in the first quarter. Therefore, we are cautiously optimistic that revenues in this segment will at least remain flat during the rest of the year and notable improvement over 2011.

Although we previously reported challenging fourth quarter in Europe and a higher risk in the region entering 2012, European sales in the first quarter held up relatively well although margins are sharply lower relative to year ago. We continue to watch trends in Europe and expect issues to arise as a result of budgetary problem in many countries. The Asia Pacific region, however, continue to perform well primarily driven by growth of higher margins, cardiology products in China, over the past few years we have had some step backs in approval delays there, which negatively impacted our cardiology business and the resumption of product sales growth there represents a promising development.

Sales were excellent for the third consecutive quarter of more than 50% from the first quarter of last year; this trend was driven primarily by high sales of cardiology and Infectious Disease diagnostic including a strong flu season.

Overall, Asia has performed very well for us over the past year when we expect it to continue through the remainder of the year. Two of our recently acquired diabetes related companies Axis-Shield and Arriva are in the price of being integrated. We are continuing to review opportunities in the area with the intend of establishing novel approaches to the management of individuals with diabetes which will help, which we expect will yield better outcomes from both the individual and the payer, future M&A activities likely to be heavily weighted towards this area and secondarily towards our toxicology business which is performing very well.

On past calls we have spoken about key performance goals including strong and improving organic growth rate, increased predictability of earnings and stay progressed towards our longer term objective of becoming the world leader in empowering individuals to gain greater control over their health at home through the use of breakthrough diagnostics.

In Q1, while there is still work to be done, I’m pleased to report that we have moved closer to each of these goals and with that let me turn the call over to Dave for a discussion of our reported results.

David Teitel

Thanks Ron, and good morning. Adjusted revenues for the first quarter of 2012 were 672.4 million compared to revenues of 582.5 million in Q1 2011 and 652.6 million in Q4 2011. The effect of foreign currency translation decreased Q1 2012 to adjusted revenues by 3.4 million compared to Q1 2011 and has a nominal effect compared to Q4 2011.

Adjusted cash basis, earnings per diluted share for continuing operations for Q1 2012 were $0.77. By business segment adjust product and services revenues from our professional diagnostic segment were 516.7 million in Q1 2012 as compared to 409.8 million in Q1 2011.

Acquisitions accounted for 96.9 million of this increase. Revenues from North American flu sales were 6.6 million in Q1 2012 compared to 19.5 million in Q1 2011. Excluding the change in flu sales, the currency adjusted organic growth for the quarter was 6.9% for a professional diagnostic segment compared to Q4 2011, Professional Diagnostics product and services revenues of 497.4 million. The acquisition of Axis-Shield, Arriva and AmMed added 20.7 million of incremental revenues to our first quarter results compared to the partial contribution from each in Q4 2011.

Within our professional diagnostic segment, net product revenues for our cardiology business were 129.9 million in Q1 2011, and 138.8 million in Q1 2012 with the acquisitions of Axis-Shield adding 5.9 million of revenue offset by continued softness in domestic PNP sales.

Net product revenues in our Infectious Disease business grew from 140.4 million in Q1 2011 to 151.0 million in Q1 2012 with increased CD4 and Epocal revenue adding 9.7 million increase from Axis-Shield offsetting decrease in respiratory sales of 6.6 million.

Our toxicology business grew from 85.5 million in Q1 2011 to 121.7 million in 2012 with a recent acquisition of Avee contributing 28.8 million of the increase. Adjusted gross margins from our Professional Diagnostics segment were 60.3% in Q1 2012 compared to 59.6% in Q1 2011. Our recent acquisition of Avee, Arriva, and Axis-Shield contributed adjusted gross margins of 68.2% in Q1 2012, excluding these acquisitions Q1 2012 adjusted gross margins were 58.6%. With the year-over-year decline from Q1 2011 reflecting principally continuing marginal pressures in our European business and well our respiratory sales.

Adjusted operating income in the professional diagnostic segment was 144.4 million or 27.8% of adjusted revenues in Q1 2012, compared to 117.7 million or 28.3% in revenues in Q1 2011. Year-over-year decline in adjusted operating income as a percentage of revenue was driven by the lower European margins and respiratory sales as discussed earlier, coupled with the decrease in segment royalty income from 6 million in Q4 2011 to 2.9 million in Q1 2012.

Revenues from our Health Management segment were 130.8 million in Q1 2012 compared to 125.9 million in Q4 2011. Revenues from our disease and case management business were 53.4 million in Q1 2012 compared to 55.8 million in Q4 2011. Revenues from our wellness business were 27.0 million in Q1 2012 compared to 24.5 million in Q4 2011.

Revenues from our women’s and children’s business were 29.8 million in Q1 compared to 28.7 million in Q4 2011. Our Home Monitoring revenues were 28.6 million in Q1 up sequentially from 16.9 million in Q4 2011. Adjusted gross margins from our Health Management segment were 45.4 million in Q1 2012 compared to 45.3% in Q4 2011.

Our adjusted operating income from our Health Management segment was a loss of 2.0 million in Q1 2012 compared to income of 3.7 million in Q4 2011. Seasonally higher operating expenses principally in our disease and case management in women’s and children’s businesses accounted for the profitability decreased despite the higher revenues generated in the quarter.

Product and services revenues from our consumer diagnostic business segment were 22.0 million in Q1 2012 compared to 21.9 million in Q1 2011. Q1 2012 revenues included 17.4 million of manufacturing and services revenues, for product and services provided for the joint venture compared to 16.5 million from Q1 2011. Adjusted gross margins from our consumer diagnostic segment were 17.5% in Q1 2012 compared to 22.3% in Q1 2011.

Adjusted selling, general and administrative expenses were 205.9 million or 30.6% in Q1 2012 compared to 187.8 million or 28.8% of revenues in Q4 2011. The acquisition of Axis-Shield and Arriva added 8.4 million of incremental adjusted SG&A expenses compared to Q4 2011 with the majority of the remaining increase in our Health Management businesses.

Adjusted research and development expense was 35.2 million or approximately 5.2% of revenue compared to 35.2 million in Q4 2011, which R&D expense increased to approximately 40.0 million in Q2 2012. Our adjusted operating income was 134.9 million for Q1 2012 compared to 122.3 million in Q1 2011.

Adjusted interest and other expense was 37.5 million in Q1 2012 compared to 34.0 million in Q1 2011. Adjusted interest expense net of interest income was 48.8 million in Q1 2012 compared to 35.9 million in Q1 2011. Other income in Q1 2012 included 13.5 million of income from final royal termination payment received from Quidel in the quarter offset by 2.3 million of other charges. Together, and net of tax, these other income items added approximately $0.12 to our adjusted cash-basis per diluted share during the quarter.

As a result of the final royalty termination payment, we did not record royalty revenue from Quidel during the first quarter of 2012 and do not anticipate recoding additional royalties from them in the future. In the first quarter of 2011 and the full-year 2011, royalty revenue related to Quidel was 3.0 million and 7.5 million, respectively.

In Q1, our adjusted tax rate was approximately 29.4% of pre-tax income compared to 31.7% for Q1 2011.

Adjusted EBITDA from continuing operations through the quarter was 167.6 million which include deduction for restructuring charges of 5.5 million and 1.5 million of acquisition related expenses. Free cash flow was 71.5 million which included 101.9 million of cash flow from operations offset by 30.4 million of capital expenditures.

And now let me turn the call back over to Ron.

Ron Zwanziger

Thanks Dave. Our novel biomark of PLGF is receiving significant attention from key experts and is widely recognized as an important and necessary development in the assessment of serious pregnancy conditions such as preeclampsia. The adoption of PLGF measured on the Triage platform for the confirmation of preeclampsia diagnosis is increasing, with doctors now beginning to use the assay in many countries in Europe and Asia-Pacific.

Additionally in Q1 2012, we completed a significant clinical study that confirms high diagnostic accuracy of Triage PLGF and demonstrates that it outperformed traditional markers for preeclampsia. Based on this study we expect to expand our claims to the prediction of pregnancy complications at a key international congress this summer. Whilst sales are minimal at this point, there is an increasing evidence suggesting significant future sales for this product. Our molecular programs are also continuing to progress.

We have two primary platforms in development, the Alere NAT Analyzer and the Alere iNAT system. The NAT Analyzer will offer high performance, multiplexing capabilities from a drop of whole blood. HIV viral load will be the first application, but other applications, including Hepatitis C, are expected to follow.

Feedback from early access partners has been very positive, both on analytical performance and usability under point-of-care conditions and we anticipate completing the technical file and studies to support CE Mark before the end of this year.

Our second molecular system, the iNAT platform, which will provide low-cost molecular testing capability in the physician’s office, and ultimately the home, with the simplicity required for broad adoption. U.S. clinical trials for the iNAT flu test are underway. However, based on a lack of available flu samples due to low respiratory activity in the U.S. in Q1, the launch of this platform into the U.S. and EU hospital markets may not occur until 2013 respiratory season.

It’s important to note that this platform is more than a molecular flu test. This small footprint device will be capable of fully multiplexing raw, unpurified samples within 15 minutes from sample input to results, using a cost-effective, cartridge based system.

If this platform performs as anticipated, it can ultimately change the way medicine is practiced in both the developed world as well as resource settings, by allowing highly accurate Infectious Disease detection in low-tech and home environments. Once the flu cartridge has been introduced, additional Infectious Disease applications should follow closely behind.

Our other R&D programs are on-track with our key 2012 product introductions being the launch of our CD4 analyzer in the U.S. and the Afinion lipid panels in Europe. Based on our broad pipeline of in-development devices, we remain confident that new products will drive accelerating organic growth rates for the next several years.

While Q1 was clearly strong from several standpoints, both financial and operational, we have to recognize that we benefited from a number of one-time events, some of which Dave referred to in his earlier commentary. I would, therefore, like to strongly caution against overvaluing the first quarter results as a proxy for the full-year outlook, while we’re pleased with our Q1 results and feel good about our outlook for 2012 and beyond the risks that we have highlighted in public settings previously have not abated. To remind you, we’re still concerned with Europe, as well as the broader global economic picture. We are increasingly concerned with the U.S. regulatory environment and consequent disruptions to our current business or new product launch plans, as well as an ongoing FDA inspection related primarily to certain Alere Triage products.

Finally, while we are encouraged by the stabilization and recovery in our Health Management franchise, it is still too soon to rule out setbacks or a reversal in that business over the next few quarters.

As a result of these and other potential risks, despite our excellent performance in the first quarter, we feel that it’s premature to raise our guidance of exceeding $2.50 in adjusted cash earnings per share this year as the extent to which we will exceed that minimum target is insufficiently clear at this time. We urge analysts to mirror our caution.

And now let me open the call to your questions. Denise, can you take over, please?

Question-and-Answer Session

Operator

(Operator Instructions) And our first question will come from Dan Leonard of Leerink Swann. Please go ahead sir.

Dan Leonard - Leerink Swann

On the new product result in the quarter, is it fair to assume that the mix of revenue in new products was more skewed towards consumables in this quarter as comparison to the fourth quarter. And also was there any impact form the funding environment for HIV programs worldwide?

Ron Zwanziger

Well, it’s partially to make that statement. We did actually get some additional instruments placements, so we had those as well and we’re continuing to see consumables continuing to increase. And we haven’t detected any changes around payments from the various agencies for the products.

Dan Leonard - Leerink Swann

And this is my follow-up question, have you offered an expected accretion number for eScreen for 2012 and if not could you?

Ron Zwanziger

No, I don’t think we have. I mean all we’ve really said is that we paid about roughly speaking 10 times forward EBITDA and expected I should say and we have a fair amount of consolidation uncertainty around a number of areas in that space.

Operator

And our next question will come from John Putnam of Capstone Investments. Please go ahead sir.

John Putnam - Capstone Investments

Ron, in your press release you talk about the capture I guess of some of the Health Management business by other insurance companies. Can you kind of elaborate on that, what that’s doing to the business and how you can overcome that?

Ron Zwanziger

Well we saw a lot of that last year in-sourcing and that’s being factored in all our comments so far. If anything we’ve seen little bit of an abating of that, we’ve also seen an increase in demand in general. In-sourcing is a time that comes and goes and I think how we deal with it is by having increasing differentiation in our products where we can have better outcomes in the programs that we offer and as you know, we are very focused on the specialist side of Health Management using diagnostics which yields better outcomes and that remains our focus.

John Putnam - Capstone Investments

Okay. And your guidance on the business going forward, do you think it’s flat on a sequential basis?

Ron Zwanziger

You are talking about the overall business or the Health Management?

John Putnam - Capstone Investments

Just the Health Management.

Ron Zwanziger

Dave indicated in the prepared remarks that while we are little bit optimistic and we perhaps hopefully this year it will be flat over the balance.

Operator

The next question will come from Greg Simpson of Wunderlich. Please go ahead.

Greg Simpson - Wunderlich Securities

First on gross margins, Dave, another strong quarter relatively speaking, lot of headwinds and things like that, but given the big year-over-year decline in flu, the headwind from Health Management and actually kind of a mix issue because Health Management exceeded expectations. What should we be thinking of as far as gross margin as the new products represent less of a drag, the new acquisitions have higher gross margins, how should we be thinking about this going forward?

David Teitel

I think all that’s true. Ron alluded to an ongoing FDA inspection, which may add some cost over the balance of the course of the year, as being potential headwind to offset some of the positive momentum we see in the rest of the business.

Greg Simpson - Wunderlich Securities

Okay. Secondly, new product revenue, can you break that our like you usually do?

David Teitel

Sure the two biggest pieces that we come along, Epocal was about 3.9 million and CD4 revenue was about 4.6 million.

Operator

And our next question will come from Peter Lawson of Mizuho Securities. Please go ahead.

Eric Criscuolo - Mizuho Securities

This is actually Eric Criscuolo filling in for Peter. I was wondering if you could maybe just talk about those European pressures again and the pricing environment and exactly where they are coming from, what countries and what product areas?

Ron Zwanziger

It’s fairly broadly based. We as a company and I don’t like surrendering any kind of market share. And so, as necessary we have been matching pricing in order to maintain market shares and it’s been a fair amount in our Infectious Disease business in a number of countries. A little being in cardiology as well, but more of it has been in the Infectious Disease side and in quite a number of countries there has also been some pressure in the drugs of abuse business as well.

Eric Criscuolo - Mizuho Securities

And second question, can you provide update on that FDA inspection that’s ongoing, further timelines of when you expect anything to come of it?

Ron Zwanziger

Not really. They (inaudible) issues around some release criteria and with discussions with them to resolve it. We have to get it resolved in next few weeks.

Operator

And our next question will come from Zarak Khurshid of Wedbush Securities.

Zarak Khurshid - Wedbush Securities

Just curious on the SG&A line, can you just talk about the cadence that going forward throughout the year and where some of the levers may or may not be and maybe talk about some of the broader shared service centers and ongoing activities in Europe? Thanks.

David Teitel

So, as Ron alluded to we remain cautious on the overall environment from an economic standpoint, so we are paying particular attention to managing SG&A expenses. At the same time we are continuing to introduce the number of products. So, we will have to make selected investments on a global basis over the course of the year, but we’ll continue to manage the expenses closely. So, this quarter we had full quarter of all of the acquisitions that we did partial quarters a year ago in the fourth quarter, so you saw the expense increase because of that, you saw a bit of the expense increase in Health Management as well. Some of that was timing as it relates to the change from the fourth quarter to the first quarter, where as they resettle there are withholdings from (inaudible) standpoint as well as date of an impact from benefits. I wouldn't expect a whole lot increase in Health Management business going forward, but we will make selected investments in certain of the businesses as we see the opportunities.

Operator

And our next question will come from Jeff Frelick of Canaccord. Please go ahead.

Jeff Frelick - Canaccord Genuity

Ron, could you please comment just on the selling cycle for the new products? Is that improving or is it still kind of the same pace there?

Ron Zwanziger

I mean the selling cycles for all these products, particularly in terms of the new ones, particularly I mean you’re probably thinking of?

Jeff Frelick - Canaccord Genuity

Epocal and CD4.

Ron Zwanziger

CD4 and Epocal, well they both have long selling cycles. In the case of CD4 you have to convince countries to change the way the algorithm works for testing for HIV in the entire country before you can even think about actually selling it, and so, that’s a very long lead time and while we’ve been very successful actually because we’ve been at it a long time and got many countries to converge, and now get to the point where you have to now get the budgetary aspects to work. So, we’re in that cycle in many countries at the moment, but part of the reason we’re seeing an increases because we do have it now. We do now have the product approved in a number of countries.

As for the Epocal products, in the larger systems, the larger hospitals whether it’s in the major economies, it does take a long time to work with health systems and hospitals to get them to convert, because it's a fair amount of dislocation to actually change the way the medicine is practiced and the systems within the hospital to accommodate the change such as putting in a new point of care system in a number of the departments and so there is always going to be a long cycle. But of course we’ve been at this now for a little while and so we have numerous negotiations around this. So, we’re sort of a little bit more optimistic that even though the cycle remains long, we have enough of these negotiations ongoing at the moment.

Jeff Frelick - Canaccord Genuity

Can you give us an update on the Epocal menu expansion for later this year.

Ron Zwanziger

We do have a couple of products at the FDA for clearance and we’re reasonably optimistic about it. I regret to say I forgot to check before the call to get an update within the last few days, but I checked quite recently we’re still reasonably optimistic that we should be able to get it.

Operator

And our next question will come from Isaac Ro of Goldman Sachs. Please go ahead.

Jeff - Goldman Sachs

This is Jeff in for Isaac. Just looking at your outlook for the business, specifically in the Professional Diagnostics side and how that compare to, how the quarter actually trended from a sequential basis given where you guys were coming in, in the quarter and where you are now from a visibility standpoint? Thanks.

Ron Zwanziger

Sure, I think it trended balance we expected on a global basis. We were obviously weaker in the U.S. with the lack of our respiratory season than we would have thought at the beginning of the quarter. Europe is okay. We saw that in January and commented on the earnings call we didn’t really see a change in that trend at all. During the quarter drugs of abuse toxicology business performed as expected. The business in Asia was reasonably strong, particularly in Japan with seasonal flu came in little bit higher. So, in general, I think probably more favorable than unfavorable, but still some concerns from an overall economic standpoint and so what the impact maybe in the balance of the year.

Jeff - Goldman Sachs

And then looking at the Health Management business and specifically on the gross margin line, you guys made some comments earlier in the call, but how is your visibility on pricing across the platform given this is the second time we have seen gross margin stabilize and how are you thinking about that through the remainder of the year?

Ron Zwanziger

Well, so visibility in the segments that impacted us most significantly over the past couple of years the impact of in-sourcing by the large health plans, as we have alluded to a couple of times, we think that’s largely behind us, so the rest of the platform tends to be relatively more stable and move more slowly. So optimistic that again we are sort of in a place that is bottomed out with an opportunity as we continue to look for opportunities to grow the business in selected areas perhaps we could see the margins pickup later in the year, but generally you should think of them about where they are for the balance of the year.

Operator

(Operator Instructions) Our next question will come from Nicholas Jansen of Raymond James. Please go ahead.

Nicholas Jansen - Raymond James

Talking about the Health Management, obviously you had a loss in the quarter, and I think there was some timing there, but maybe thinking about non-GAAP operating income for the full-year, should we expect a back to positive in the second quarter or should we expect this is kind of the new run rate until we get better top line growth?

David Teitel

You should expect a little bit of improvement over the course of the year but somewhere in this range.

Nicholas Jansen - Raymond James

And how does that loss kind of factor into your decision to either keep or perhaps divest some of that business if it doesn’t stabilize.

Ron Zwanziger

If the business continues the non-differentiated piece of the house has given us headaches in the past. If it continues the way it is then we are actually more likely to do some kind of a transaction with the business of some kind, whether it’s selling it or merging it with another business or some other transaction to take away to reduce our dependency on it.

Operator

(Operator Instructions) We have a follow-up question from Greg Simpson of Wunderlich. Please go ahead.

Greg Simpson - Wunderlich Securities

First of all, David, I cut off when we were talking about the new product revenues. Can you give me the total new product revenue number in Q1?

David Teitel

I’m sorry. It was 13.7 million in total.

Greg Simpson - Wunderlich Securities

Perfect. Thank you. And then second question, Ron, on Axis-Shield, feedback I got, Dave gave us some numbers, but the feedback I get seems to be very, very positive on that. Can you maybe talk about that relative to your original expectations when you bought the business and maybe the ability of that acquisition to contribute in 2012 and going forward?

Ron Zwanziger

Well you may recall that, the reason we bought Axis-Shield as part of our reentry into diabetes and we had looked at, there is a number of tests in the marketplace for hemoglobin A1c, which is the measure of how well the patient is doing, and it's very clear that the Afinion, they have two products, but the Afinion in particular is the highest performing rapid test. And with the regulations around the world including within the U.S. regulators around tightening performance standards; Afinion meets those standards and some. And so, it is very well positioned and so the product is very well-positioned in general, but also tied to regulatory environment, the one I think one could expect. So, we’re really quite optimistic about it. It fits very well into our own units, so the ability to integrate it into our units around the world is very good. So, we’re actually really quite optimistic about what it will do for us.

Operator

And we have another follow-up from Nicholas Jansen of Raymond James. Please go ahead.

Nicholas Jansen - Raymond James

Just going back to your comments earlier about, not wanting to or thinking 1Q as more of a you don’t want place too much emphasis on the size of the contribution in 1Q, maybe 2Q, you think about 2Q, well actually you had a very challenging 2Q. What should we think about in just terms of modeling for us to take look at in terms of operating income on a sequential basis? How much, I know last year it was down pretty sizably as some challenges hit the Health Management franchise, but just maybe sequentially how should we think about the business so we kind of keep expectations where you guy want them?

Ron Zwanziger

I think that you mentioned Q2 being down last year. I mean Q2 is always down. I mean to go back many years, you can see that our Q2 tends to be the weakest quarter of the year. I suppose that will repeat itself. So we’re just generally being cautious because it's so hard to know what’s going on in the world. It's particularly hard to know what’s going on in Europe, so we are remaining cautious, notwithstanding the fact that our organic growth rate is rising and we think we got margins under reasonable control. And new product introductions, the ones that are in the market and doing well and the others that are on stellar are showing all the right characteristics. We chose to highlight PLGF in this call. We thought we’d s sort of update on every call, highlight how one of the ones that is not yet contributing revenues, how it’s doing as an indication of the future and so we highlighted PLGF at this time and that's showing every time success and we also remarked about some of our new products in molecular that we’re about to launch. And notwithstanding all of the optimism around and we have plenty of it and even the reduced drag of the Health Management. Notwithstanding all of that, we feel in the world at the moment it's better to be cautious.

Operator

And this will conclude our question-and-answer session. I’d like to turn the conference back over to Mr. Ron Zwanziger for any closing remarks.

Ron Zwanziger

Thanks, Denise. While first quarter results were a good start of the year, we will continue to strive for more consistent quarterly and annual earnings growth and seek to add increasing predictability to our business. And within that framework, the longer-term objective of Alere will of course, remain unchanged to become the world leader in enabling individual to take charge of their health under medical supervision at home, not just in the U.S., but in every major market around the world. We will stay focused on that objective until the full potential of our company and our business model is unlocked for the benefit both our customer and our shareholders. As always I’d like to thank you for your continued support and interest. Thanks very much and have a good day.

Operator

Thank you. The conference has now concluded. We thank you for attending today’s presentation. You may now disconnect.

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