Financial Overview
We enable individuals to take charge of improving their health and quality of life at home by developing new capabilities in near patient diagnosis, monitoring and health management. Our global-leading products and services, as well as our new product development efforts, focus on cardiology, women's health, infectious disease, oncology and drugs of abuse. We expect to continue to expand in all of these product categories through focused research and development projects and further development of our distribution capabilities.
During 2007 and 2008, we entered the growing health management market with our acquisitions of Alere Medical, Inc., or Alere Medical, ParadigmHealth, Inc., or ParadigmHealth, and more recently, Matria Healthcare, Inc., or Matria. Today, Matria, ParadigmHealth and Alere Medical, each a leader in their respective areas, are united as one business under the name Alere. Our most recent acquisitions of GeneCare Medical Genetics Center, Inc., or GeneCare, Free & Clear, Inc., or Free & Clear, and CVS Caremark's Accordant Common disease management programs, or Accordant, are also joined under the Alere name. Alere is a leader in the health management field offering a broad range of services aimed at lowering costs for health plans, hospitals, employers and patients. Our health management services are focused in the areas of women's and children's health, cardiology and oncology. We are confident that our ability to offer near patient monitoring tools combined with value-added healthcare services will improve care and lower healthcare costs for both providers and patients.
Our research and development programs have two general focuses. We are developing new technology platforms that will facilitate our primary objective of enabling individuals to take charge of improving their health and quality of life by moving testing out of the hospital and central laboratory, and into the physician's office and ultimately the home. Additionally, through our strong pipeline of novel proteins or combinations of proteins that function as disease biomarkers, we are developing new tests targeted towards all of our areas of focus.
We continue to advance toward our goal of establishing a worldwide distribution network that will allow us to bring both our current and future diagnostic products to the global professional market. In addition, we continue to focus on improving our margins through consolidation of certain of our higher cost manufacturing operations into lower cost facilities, including our 300,000 square foot manufacturing facility located in Hangzhou, China, as well as our jointly-owned facility in Shanghai, China, and we are already seeing improved margins on some of our existing products that we have moved to these facilities. Our business integration activities remain on track and we have seen positive results from the integrations completed to date and as we continue to aggressively integrate acquired operations in order to achieve further synergies within expected timelines.
Net revenue increased by $97.0 million, or 22%, to $535.8 million for the three months ended September 30, 2009, from $438.8 million for the three months ended September 30, 2008. Revenue increased partially as a result of our acquisitions which provided $37.4 million of incremental revenue, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Additionally, as a result of the H1N1 flu outbreak, revenues from our North American flu sales increased approximately $33.6 million comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Organic growth from our professional diagnostics business segment also contributed to the increase in net revenue during the three months ended September 30, 2009, as compared to the three months ended September 30, 2008. Net revenue increased by $227.9 million, or 19%, to $1.4 billion for the nine months ended September 30, 2009, from $1.2 billion for the nine months ended September 30, 2008. Revenue increased partially as a result of our acquisitions which provided $168.0 million of incremental revenue, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. Additionally, as a result of the H1N1 flu outbreak, revenues from our North American flu sales increased approximately $35.1, million comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. Organic growth from our professional diagnostics business segment also contributed to the increase in net revenue during the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008.
For the three and nine months ended September 30, 2009, we generated net income of $20.1 million and $30.9 million, respectively, compared to a net loss of $3.7 million and $38.2 million for the three and nine months ended September 30, 2008, respectively.

Results of Operations
Net Product Sales and Services Revenue, Total and by Business Segment. Total net product sales and services revenue increased by $94.9 million, or 22%, to $528.0 million for the three months ended September 30, 2009, from $433.0 million for the three months ended September 30, 2008. Excluding the impact of currency translation, net product sales and services revenue for the three months ended September 30, 2009 increased by $100.8 million, or 23%, compared to the three months ended September 30, 2008. Total net product sales and services revenue increased by $228.8 million, or 19%, to $1.4 billion for the nine months ended September 30, 2009, from $1.2 billion for the nine months ended September 30, 2008. Excluding the impact of currency translation, net product sales and services revenue for the nine months ended September 30, 2009 increased by $267.1 million, or 22%, compared to the nine months ended September 30, 2008. Net product sales and services revenue by business segment for the three and nine months ended September 30, 2009 and 2008 are as follows (in thousands):

                                                 Three Months Ended                         Nine Months Ended
                                                    September 30,             %               September 30,               %
                                                 2009          2008        Change         2009            2008         Change
Professional diagnostics                       $ 334,345     $ 252,584          32 %   $   876,258     $   762,602          15 %
Health management                                131,335       124,092           6 %       376,013         261,780          44 %
Consumer diagnostics                              39,137        34,732          13 %       103,611         104,235          (1 )%
Vitamins and nutritional supplements              23,145        21,626           7 %        63,590          62,067           2 %

Total net product sales and services revenue   $ 527,962     $ 433,034          22 %   $ 1,419,472     $ 1,190,684          19 %

Professional Diagnostics
Net product sales and services revenue from our professional diagnostics business segment increased by $81.8 million, or 32%, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Excluding the impact of currency translation, net product sales and services revenue from our professional diagnostics business segment increased by $86.5 million, or 34%, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. As a result of the H1N1 flu outbreak, revenues from our North American flu sales increased approximately $33.6 million comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Acquisitions contributed $30.3 million of net product sales and services revenue in excess of those in the comparable period in 2008. Organic growth contributed to the increase in net revenue during the three months ended September 30, 2009, as compared to the three months ended September 30, 2008.
Net product sales and services revenue from our professional diagnostics business segment increased by $113.7 million, or 15%, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. Excluding the impact of currency translation, net product sales and services revenue from our professional diagnostics business segment increased by $145.9 million, or 19%, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. As a result of the H1N1 flu outbreak, revenues from our North American flu sales increased approximately $35.1 million comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. Acquisitions contributed $53.5 million of net product sales and services revenue in excess of those in the comparable period in 2008. Organic growth contributed to the increase in net revenue during the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008. Health Management
Net product sales and services revenue from our health management business segment increased by $7.2 million, or 6%, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Net product sales and services revenue from our health management business segment increased by $114.2 million, or 44%, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. The increase in net product sales and services revenue is primarily a result of acquisitions which contributed an additional $7.0 million and $113.1 million in net product sales and services revenue during the three and nine months ended September 30, 2009, respectively, as compared to the three and nine months ended September 30, 2008.

Consumer Diagnostics
Net product sales and services revenue from our consumer diagnostics business segment increased by $4.4 million, or 13%, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Net product sales and services revenue from our consumer diagnostics business segment decreased by $0.6 million, or 1%, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. The increase in net product sales and services revenue for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008 was primarily driven by an increase in manufacturing and services revenue associated with our manufacturing agreement with Swiss Precision Diagnostics, or SPD, our consumer diagnostics joint venture with The Procter and Gamble Company, or P&G, whereby we manufacture and sell consumer diagnostic products to the joint venture. The decrease during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008, was primarily driven by a decrease in net product sales and services revenue associated with our First Check home testing for drugs of abuse business.
Vitamins and Nutritional Supplements
Our vitamins and nutritional supplements net product sales and services revenue increased by $1.5 million, or 7%, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. Net product sales and services revenue from our vitamins and nutritional supplements business segment increased by $1.5 million, or 2%, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. The increase during the three and nine months ended September 30, 2009 is primarily a result of organic growth from our existing customers.
License and Royalty Revenue. License and royalty revenue represents license and royalty fees from intellectual property license agreements with third parties. License and royalty revenue increased by approximately $2.1 million, or 36%, to $7.8 million for the three months ended September 30, 2009, from $5.8 million for the three months ended September 30, 2008, and decreased by approximately $0.9 million, or 4%, to $20.6 million for the nine months ended September 30, 2009, from $21.5 million for the nine months ended September 30, 2008. The increase in license and royalty revenue during the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, was primarily attributed to an increase in royalty payments received from the Quidel Corporation, or Quidel, under existing licensing agreements. The decrease in license and royalty revenue during the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008, was largely attributed to an overall decrease in royalty payments received under existing licensing agreements, partially offset by increases in royalty payments received from Quidel during the same periods.
Gross Profit and Margin. Gross profit increased by $54.8 million, or 24%, to $283.0 million for the three months ended September 30, 2009, from $228.1 million for the three months ended September 30, 2008. The increase in gross profit for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, was largely attributed to the increase in net product sales and services revenue resulting from acquisitions, an increase in flu-related sales associated with the H1N1 flu outbreak and organic growth from our professional diagnostics business segment.
Gross profit increased by $141.5 million, or 23%, to $756.2 million for the nine months ended September 30, 2009, from $614.6 million for the nine months ended September 30, 2008. The increase in gross profit for the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008, was largely attributed to the increase in net product sales and services revenue resulting from acquisitions, an increase in flu-related sales associated with the H1N1 flu outbreak, and organic growth from our professional diagnostics business segment. Restructuring charges associated with various restructuring plans to integrate our business totaling $6.1 million were included in cost of net revenue during the nine months ended September 30, 2009, representing a decrease of approximately $10.2 million from the comparable period in 2008. Gross profit included a write-off in the amount of $0.7 million and $2.0 million during the nine months ended September 30, 2009 and 2008, respectively, relating to inventory write-ups recorded in connection with the acquisitions of Concateno plc, or Concateno, during the third quarter of 2009 and BBI Holdings Plc., or BBI, during the first quarter of 2008.
Cost of sales included amortization expense of $10.3 million and $10.5 million for the three months ended September 30, 2009 and September 30, 2008, respectively, and $30.5 million and $34.2 million for the nine months ended September 30, 2009 and September 30, 2008, respectively.

Overall gross margin was 53% for both the three and nine months ended September 30, 2009, compared to 52% and 51% for the three and nine months ended September 30, 2008, respectively.
Gross Profit from Net Product Sales and Services Revenue, Total and by Business Segment. Gross profit from total net product sales and services revenue increased by $53.0 million, or 24%, to $277.1 million for the three months ended September 30, 2009, from $224.0 million for the three months ended September 30, 2008. Gross profit from total net product sales and services revenue increased by $140.2 million, or 23%, to $740.9 million for the nine months ended September 30, 2009, from $600.6 million for the nine months ended September 30, 2008. Gross profit from net product sales and services revenue by business segment for the three and nine months ended September 30, 2009 and 2008 are as follows (in thousands):

                               Three Months Ended                                 Nine Months Ended
                                 September 30,                  %                   September 30,                  %
                             2009             2008            Change            2009             2008            Change
Professional
diagnostics                $ 198,487        $ 146,838              35 %       $ 517,451        $ 430,621              20 %
Health management             69,762           68,105               2 %         204,251          142,173              44 %
Consumer diagnostics           6,147            7,244             (15 )%         15,706           20,854             (25 )%
Vitamins and
nutritional
supplements                    2,668            1,838              45 %           3,456            7,000             (51 )%

Total gross profit
from net product
sales and services
revenue                    $ 277,064        $ 224,025              24 %       $ 740,864        $ 600,648              23 %

Professional Diagnostics
Gross profit from net product sales and services revenue from our professional diagnostics business segment increased by $51.6 million, or 35%, to $198.5 million during the three months ended September 30, 2009, compared to $146.8 million for the three months ended September 30, 2008. The increase in gross profit was largely attributed to the increase in net product sales and services revenue, as discussed above. Restructuring charges associated with our various restructuring plans to integrate our businesses totaling $2.0 million and $1.9 million were included in cost of net product sales and services revenue during the three months ended September 30, 2009 and 2008, respectively. Gross profit for the three months ended September 30, 2009 included a $0.7 million charge related to the write up to fair market value of inventory acquired in connection with our third quarter of 2009 acquisition of Concateno.
Gross profit from net product sales and services revenue from our professional diagnostics business segment increased by $86.8 million, or 20%, to $517.5 million during the nine months ended September 30, 2009, compared to $430.6 million for the nine months ended September 30, 2008. The increase in gross profit was largely attributed to the increase in net product sales and services revenue, as discussed above. Restructuring charges associated with our various restructuring plans to integrate our businesses totaling $5.6 million and $16.4 million were included in cost of net product sales and services revenue during the nine months ended September 30, 2009 and 2008, respectively. Gross profit included a write-off in the amount of $0.7 million and $2.0 million during the nine months ended September 30, 2009 and 2008, respectively, relating to inventory write-ups recorded in connection with the acquisitions of Concateno during the third quarter of 2009 and BBI during the first quarter of 2008.
As a percentage of our professional diagnostics net product sales and services revenue, gross margin for both the three and nine months ended September 30, 2009 was 59%, compared to 58% and 57% for the three and nine months ended September 30, 2008, respectively. Health Management
Gross profit from net product sales and services revenue from our health management business segment increased by $1.7 million, or 2%, to $69.8 million during the three months ended September 30, 2009, compared to $68.1 million during the three months ended September 30, 2008. Gross profit from net product sales and services revenue from our health management business segment increased by $62.1 million, or 44%, to $204.3 million during the nine months ended September 30, 2009, compared to $142.2 million during the nine months ended September 30, 2008. The increase in gross profit was largely attributed to the increase in net product sales and services revenue, as discussed above.

As a percentage of our health management net product sales and services revenue, gross margin for the three and nine months ended September 30, 2009 was 53% and 54%, respectively, compared to 55% and 54% for the three and nine months ended September 30, 2008, respectively.
Consumer Diagnostics
Gross profit from net product sales and services revenue from our consumer diagnostics business segment decreased by $1.1 million, or 15%, to $6.1 million for the three months ended September 30, 2009, compared to $7.2 million for the three months ended September 30, 2008. The decrease in gross profit is primarily a result of net product sales and services revenue mix during the three months ended September 30, 2009, compared to the three months ended September 30, 2008.
Gross profit from net product sales and services revenue from our consumer diagnostics business segment decreased by $5.1 million, or 25%, to $15.7 million for the nine months ended September 30, 2009, compared to $20.9 million for the nine months ended September 30, 2008. The decrease in gross profit is primarily a result of net product sales and services revenues mix during the nine months ended September 30, 2009, compared to the nine months ended September 30, 2008.
As a percentage of our consumer diagnostics net product sales and services revenue, gross margin for the three and nine months ended September 30, 2009 was 16% and 15%, respectively, compared to 21% and 20% for the three and nine months ended September 30, 2008, respectively.
Vitamins and Nutritional Supplements
Gross profit from our vitamins and nutritional supplements business increased by $0.8 million, or 45%, to $2.7 million from $1.8 million, comparing the three months ended September 30, 2009 to the three months ended September 30, 2008. The increase is primarily the result of product sales mix during the three months ended September 30, 2009, compared to the three months ended September 30, 2008.
Gross profit from our vitamins and nutritional supplements business decreased by $3.5 million, or 51%, to $3.5 million from $7.0 million, comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2008. The decrease is primarily the result of product sales mix during the nine months ended September 30, 2009, compared to the nine months ended September 30, 2008.
As a percentage of our vitamins and nutritional supplements net product sales and services revenue, gross margin for the thee and nine months ended September 30, 2009 was approximately 12% and 5%, respectively, compared to 8% and 11%, for the three and nine months ended September 30, 2008, respectively.
Research and Development Expense. Research and development expense increased by $2.0 million, or 8%, to $27.7 million for the three months ended September 30, 2009, from $25.7 million for the three months ended September 30, 2008. Research and development expense during the three months ended September 30, 2009 benefited from approximately $1.2 million in exchange rate differences, as compared to the three months ended September 30, 2008.
Research and development expense decreased by $5.6 million, or 6%, to $80.8 million for the nine months ended September 30, 2009, from $86.4 million for the nine months ended September 30, 2008. Restructuring charges associated with our various restructuring plans to integrate our newly-acquired businesses totaling $0.9 million were included in research and development expense during the nine months ended September 30, 2009, representing a decrease of approximately $6.0 million from the comparable period in 2008. Additionally, research and development expense during the nine months ended September 30, 2009 benefited from approximately $5.0 million in exchange rate differences, as compared to the nine months ended September 30, 2008.
Amortization expense of $0.9 million and $3.2 million was included in research and development expense for the three and nine months ended September 30, 2009, respectively, as compared to $1.0 million and $2.8 million for the three and nine months ended September 30, 2008, respectively.

Research and development expense as a percentage of net revenue was 5% and 6% for the three and nine months ended September 30, 2009, respectively, compared to 6% and 7% for the three and nine months ended September 30, 2008, respectively.
Sales and Marketing Expense. Sales and marketing expense increased by $12.7 million, or 12%, to $117.3 million for the three months ended September 30, 2009, from $104.6 million for the three months ended September 30, 2008. Sales and marketing expense increased by $38.7 million, or 14%, to $320.0 million for the nine months ended September 30, 2009, from $281.3 million for the nine months ended September 30, 2008. The increase in sales and marketing expense for both periods partially relates to additional spending related to newly-acquired businesses. Additionally, sales and marketing expenses increased for both periods from additional spending related to higher variable selling-related expenses as a result of net product sales and services revenue increases in our professional diagnostics business segment, particularly related to significant increases in North American flu-related sales.
Amortization expense of $48.5 million and $133.8 million was included in sales and marketing expense for the three and nine months ended September 30, 2009, respectively, and $41.9 million and $106.1 million for the three and nine months ended September 30, 2008, respectively.
Sales and marketing expense as a percentage of net revenue was 22% for both the three and nine months ended September 30, 2009, compared to 24% and 23% for the three and nine months ended September 30, 2008, respectively.
General and Administrative Expense. General and administrative expense increased by approximately $2.7 million, or 3%, to $87.3 million for the three months ended September 30, 2009, from $84.6 million for the three months ended September 30, 2008. General and administrative expense increased by approximately $34.8 million, or 16%, to $250.2 million for the nine months ended September 30, 2009 from $215.4 million for the nine months ended September 30, 2008. The increase in general and administrative expense for both the three and nine-month periods relates primarily to additional spending related to newly-acquired businesses. Contributing to the increase in general and administrative expense for the three and nine months ended September 30, 2009, as compared to the three and nine months ended September 30, 2008, was $5.1 million and $11.5 million, respectively, for acquisition-related costs recorded in connection with our adoption of a new accounting standard for business combinations on January 1, 2009.
Amortization expense of $5.5 million and $17.1 million was included in general and administrative expense for the three and nine months ended September 30, 2009, respectively, as compared to $6.4 million and $11.3 million for the three and nine months ended September 30, 2008, respectively.
General and administrative expense as a percentage of net revenue was 16% and 17% for the three and nine months ended September 30, 2009, respectively, compared to 19% and 18% for the three and nine months ended September 30, 2008, respectively.
Gain on Disposition. In September 2009, we disposed of our majority ownership interest in our Diamics Inc., or Diamics, operation, which was part of our professional diagnostics reporting unit and business segment. Since the date of acquisition, July 2007, under the principles of consolidation, we consolidated 100% of the operating results of the Diamics operations in our consolidated statement of operations. As a result of disposition, we recorded a gain of $3.4 million during the three and nine months ended September 30, 2009.
Interest Expense. Interest expense includes interest charges and the . . .