Alere ($ALR) continued down the path of deleveraging and refocusing on its core competency in diagnostics with the sale of its Alere Health unit to Optum, a part of the insurance company UnitedHealth Group ($UNH), for $600 million."Through the combination with actions already taken, we have achieved approximately $75 million of the annual expense base reduction already compared to our $100 million target," said Chief Financial Officer David Teitel during today's Q3 earnings call, used to further describe the just-announced deal. In addition, the company said it will use $575 million of the proceeds to pay down debt.Alere Health provides case management and wellness services, such as tobacco cessation and obstetrical services, to more than 22 million people in the U.S.. Alere hopes to close the transaction by the end of the year. Another $55 million was raised in other product divestitures including the sale of its 40% stake in diagnostics company Vedalab.
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Namal Nawana, Alere CEO
More unprofitable businesses are up for sale. The remaining $25 million in savings "will come from further dispositions of non-profitable non-core assets and other cost-saving measures, which we expect to implement during the fourth quarter of 2014 or early 2015," Teitel said. Specifically, CEO Namal Nawana said the company has received external interest in its health care analytics unit, home of the Alere Clinical Decision Support Platform.In addition, the company said it continues to look at the strategic alternatives for its consumer diagnostics joint venture with Proctor & Gamble ($PG), focused on pregnancy tests and female contraception devices."The strategic review, I think, has been very helpful in making us focus on what business we're in and what business we specifically want to be in going forward," said Nawana, who had already made clear that the overarching focus will be "rapid diagnostics."Speaking of specifics within the diagnostics sector, Nawana said, "I don't think we're going to really put much resource at all into getting beyond mail-order diabetes business and that's been a big change for us." But he is encouraged by the flu portfolio because he believes the Alere i system for molecular testing of infectious diseases will soon be CLIA-waived, giving it a regulatory stamp of approval in the U.S.Another area of focus will be emerging markets. "To provide some highlights of this underlying growth during the third quarter, China grew by 21%, India 23% and Africa 18%. Throughout this year strong global growth rates of malaria of 16%, CD4 of 75% and HIV of 13% have supported our infectious disease business," Nawana said.Overall, the company reported net revenue of $736.2 million during the quarter, down 2.3% year-over-year. The quarterly loss from continuing operations was $98.6 million.Alere's board and management are in the midst of trying to fend off a $3.8 billion take-private offer being assembled by the former executives who departed at the end of June, including Ron Zwanziger, the former president and CEO. "I want to be very clear, this board is very mindful of its duties and obligations to shareholders. And everything we are doing is about creating shareholder value. So, with that, as context, I think that's how you should view our response to Ron," said Gregg Powers, the chairman of Alere's board, during the call.Partly in response to pressure from Zwanziger, the company had planned to spin off part of its diagnostic business on the London Stock Exchange, but changed its mind in June.- read the release about the sale of Alere Health (PDF)- here's the earnings statement (PDF)Related Articles:[/table]
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David Teitel, Alere CFO
Namal Nawana, Alere CEO
