Q4 2019 Earnings Call
[music].
At this time, all participants are in listen only mode.
Later instructions will be given for the question and answer session. If anyone has difficulty hearing the conference. Please press star zero for operator assistance I.
I'd now like to turn the call over to Mr., Ruben Argueta quite <unk> director of Investor Relations. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining todays call with me today is our president and Chief Executive Officer, Doug Bryant, and Randy Stewart, Our Chief Financial Officer.
Our fourth quarter and full year 2019 earnings release is now available on our dog quite else Dot Com, our Investor Relations website.
We will also post our prepared remarks on the presentations tab of our IR website. Following the conclusion of this call February 12 for a period of 24 hours.
Please note that this conference call will include forward looking statements within the meaning of federal Securities laws. It isn't it is possible that actual results and performance could differ significantly from these stated expectations.
For a discussion of risk factors. Please review quite else annual report on form 10-K registration statements and subsequent quarterly reports on form 10-Q as filed with the FCC.
Furthermore, This conference call contains time sensitive information that is accurate only as of the date of the like broadcast February 12 2020.
Quite l. undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call, except as required by law.
Today quite L. released financial results for the three months and full year ended December 30, 129 team. If you have not received our news release or if you would like to be added to the company's distribution list. Please contact me at 85864 680 to Threeq.
Following doug's comments, Randy will briefly discuss our financial results and we'll open the call to your questions.
Ill now hand, the call over to Doug for his comments.
Thank you Ruben and good afternoon, everyone as ever reported at a recent health care conference, we were expecting strong fourth quarter revenue.
So there's no surprise.
$152.2 million, we were just slightly ahead of the $151 million to $152 million that we had suggested.
The strength was driven by an early start to the influenza season.
In which very unusually flu be was the dominant strain.
And now as you know we're in the middle of another influenza a epidemic.
Across most of the United States.
Sofia Ancelotti Q4 revenues were favorably affected of course, but we also saw a pickup and quick fee revenue as customers, who may have purchased generic flu test in the past because of price returns to our quick few brands because of ease of use factors.
And the importance of a short or turnaround time when patient volumes are high.
For many of our larger multi site customers our proven ability to scale during an epidemic.
Leveraging our supply chain to manufacture millions more flu test when needed.
Has also been a compelling reason to switch back to quick view.
Secular product revenue.
Which was also helped by the early start to the influenza season was up 21% to $7.1 million.
Cardio metabolic revenue contributor to the strong quarter as well up 5% on both an actual and a constant currency basis as the unfavorable foreign exchange impact that we saw in the first three quarters is largely mitigated in the fourth.
For the year overall revenues were roughly $535 million inline with our expectations for 2019.
Despite soft influenza revenue in Q1.
And the delay and regulatory clearance for the new trios toxicology Pal.
Equally important we had a number of operational accomplishments in the year.
The global integration of the Treehouse businesses was completed in November delivering $20 million, an annual synergies, which was ahead of our plant.
We reduced our debt by another $98.6 million also a little earlier than we had expected.
The R&D clan Reg and instrument systems development teams made significant progress in 2000 my team as well.
All of the 20 or so R&D projects that we are working on are important.
And I'll be happy to discuss any of them as you like should during the today, but I want to mention Sthree first the Savannah Cross functional product development team did achieve a couple of critical milestones one the first six assay panels that were previously discussed and our presentations are complete.
I can review those again, if you watch, but there's no change at this point to our initial menu strategy.
And to the cartridge design was finalized and cartridges are now being manufactured clearing the way for the integration of assets and cartridges with the instrument.
Which is in is currently in development.
Second Sniffles, our next generation Sofia platform is still on track for us clinical trials during the respiratory season next Fletcher.
Third we're expecting the publication of the eighth case study data that demonstrates the excellent performance.
Hi sensitivity proponent.
In a major cardiology journal any week now and hope to finalize our us clinical trial design for the product this spring.
Moving forward to 2020, we expect increasing efficiency and productivity of the sales and marketing teams globally.
Leveraging key account and distributor relationships to sell and increasingly broader product offering.
Well, we expect to continue promoting our flagship products and believe that there's still more share to be gains and 2020, we are counting on seeing traction and getting help from the newer products Sofia Lyme Treehouse toxicology.
Hi, sense gone and Europe treat PL, GF and the new Sofia G.I. products.
These products should account for about $10 million an incremental revenue.
Before turning it over to Randy to review financial detail for last quarter, Andy here I should make a brief comment on the potential impact as a novel Corona virus in China.
Most importantly, none of the numerous employees we have in China has been hill and none of several employees returning from trips to China has been at all.
Routine trips to China like my own have been postponed until the spring.
Shipments of our products this quarter have been received by our re Packer and distribution partners.
We have additional products in China that clear customers. This morning.
If there is a risk to our ability to ship and recognize revenue this quarter it would be in the next ship.
If for some reason there were a problem and we were unable to ship our total downside risk for the quarter would be about $5 million.
And with that I will summarize by saying that Q4 was really good.
2019 was fine inline with expectations.
And we're really looking forward to 2020 on a number of fronts.
Camaraderie and this company is terrific and the morale and happiness of our employees has never been higher quite L. has truly become a great place to be and the recruiting of extraordinary talent from the outside has been.
Increasingly easier.
Randy.
Thank you Doug.
Good afternoon, everyone.
As we reported earlier today total revenues for the fourth quarter of 29 team or what 152.2 million as compared to $132.6 million in the fourth quarter of 2018.
This 15% increase came from revenue growth across all four major categories, we realize 29% increase in rapid immuno assay revenue, 5% growth in cardiac immuno assay revenue, 21% growth and molecular diagnostic solutions revenue and.
7% growth from specialized diagnostic solutions.
In the quarter, there was not a significant foreign currency impact.
For the cardiac immuno assay business revenue was $65.8 million as mentioned the growth of 5% for in the fourth quarter of 2019.
The $65.8 million $33.6 million was derived from the tree us business and $32.2 million from the Backman BMP best.
We placed an incremental 292 tree as meter Pearl instruments in the quarter as we continue to close smaller volume accounts on the tree outside of the business to offset lost customers still the higher volume multiplex system.
Cardiac immuno assay realized revenue growth in all major geographies, North America increased 5%, China increased 6% and Europe Middle East Africa grew 3%.
North American China realized growth on the Batman BMP side somewhat offset by declines inventory us business.
Middle East Africa realized strong growth and tree is somewhat offset by declines abetment BMP business.
For the year on an as reported basis cardiac immuno assay revenue was $266.5 million equal to last year.
On a constant currency basis, cardiac immuno assay revenue grew by 2% over the prior year.
Well the $266.5 million totaled three us business revenue was $139.9 million, a decrease of 6% and the Batman BMP revenue was $126.6 billion an increase of 7%.
From a geographic perspective for the full year cardiac revenue in North America was $137.3 million, China was $61.4 million and Europe Middle East Africa was $43.7 million.
Rapid immuno assay product revenues increased 29% to $64.9 million in the fourth quarter as compared to $50.4 billion in the previous year within this category Sofia products grew 38% to $46.6 million.
While quickvue product revenues increased 11% to $17.1 million driven by influenza.
Total influenza revenue, which includes rapid immunoassay da tie respiratory molecular diagnostics grew 44% in the quarter to $50.3 million influenza rapid immuno assay revenue was $45 million with approximately 80.
3% of the revenue derived from the Sofia platform.
Total strop revenue was up 1% and RSV was up 29%.
Revenue in the specialized diagnostic solutions category increased 7% in the fourth quarter to $14.3 million driven by 42% increase in respiratory related DHR revenues as well as a 4% increase on our specialty micro tighter business.
Our molecular diagnostic solutions category increased 21% look quarter to $7.1 million due to a 29% revenue growth insulin.
We continue to see strong growth from our plus Airseal auto platform, specifically with the strep, a and influence or product lines driven by the severe and earlier than typical influenza season, we're seeing strong growth from our slot C. difficile and HSV visa TV products.
For the year, our molecular franchise grew by 12% driven by a 25% growth from slot.
We believe there is continued strong demand for that slipped on a platform and that's why don't we will continue to be the driver a molecular growth going forward driven by incremental Florida instrument placements and increased assay utilization.
Gross profit in the fourth quarter increased $12.7 million to $94.8 million, primarily driven by improved product mix and higher revenue in the quarter gross profit margin in the fourth quarter 2019 was slightly improved at 62.3%.
For the full year, we achieved.
Gross margin of 60% of performance on par with last year.
Excluding intangibles gross margin gross profit margin for the full year was 61% with a breakdown as follows legacy quite out business gross margin was 66% Korea as gross margin was 51%.
When BMP gross margin was 63%.
R&D expenses increased by $2.3 million in the fourth quarter as compared to the same period in 2018. The increase is due to greater investments made on our new product platforms, including so that.
We expect R&D expenses in 2020, it should be equal to or slightly higher than in 2019, and we'll be in the range of 53 million to $56 million.
Sales and marketing expense in the fourth quarter increased by $1.6 million as compared to the same period last year due to increased spending on expanding our international sales organization product promotion costs and higher freight costs offset by lower transition service fees.
As we have completed the globalization of our commercial team.
The full year 2020, we expect sales and marketing expense to be between the range of 20% and 21% of revenue.
GNS expenses increased by $2 million in the quarter, primarily due to higher facility costs and information technology spend offset by lower fees for professional services.
We expect DNA expenses to be between 55 million and $60 million for the full year 2020.
As it relates to the provision for income taxes, the full year 2019 effective tax rate was 5.5%.
This 2019 overall tax provision rate includes beneficial impacts from equity compensation that occurred during the year and from the generation of federal and state research credits.
In 2018, the company had the onetime impact of releasing 13.4 million a bit evaluation allowance against its net deferred tax asset balance at the became more likely than not that these deferred tax assets will be utilized before they expire as a result, we recorded.
An income tax benefit of $10.8 million for fiscal year 2018.
Due to the uncertainty as a beneficial impact from equity compensation, we expect the 2020 effective tax rate to be in the range of 19% to 21% of pre tax income.
For the full year, we achieved net income of 72.9 million GAAP EPS of $1.78 and non-GAAP EPS of $2, a 97 cents a very rewarding here.
As we said since our analyst day in 2018, an important part of our capital deployment strategy has been to aggressively de lever the business in 2019, we continue to execute on that strategy by accelerating our debt reduction through opportunistic convertible bond exchanges and utilizing.
Our excess cash to reduce the balance on our revolving credit facility.
As of today, we have completely post paid off the remaining balance on the revolving credit facility of only $13 million remaining on our convertible bond debt, which matures. This December and plan to make our third 48 million dollar payment to Abbott in April.
The balance sheet perspective, our company is well positioned for M&A licensing or other partnership opportunities in support of our longer term growth objectives.
And with that we conclude our formal comments for today.
Operator, we're now ready to open the call for questions.
Okay.
And gentlemen to ask a question press star one on your telephone keypad to withdraw question press the pound cake.
First question is going to come from the line of Jack Meehan with Barclays.
Thank you good afternoon.
Nice quarter wanted to start with the two parter on flu. So as you reflect on the recent respiratory season, Doug I was curious if you had a sense for how market share my shifted just what you're seeing and then for Randy as you look in the Crystal ball just what are you thinking about pacing into the first quarter.
It's unclear at this point exactly how much share we gained through we'll do some work on it up quarter.
Close it's that we may have a better answer for you when we do the analyst day, the first week in April Jack.
But as I mentioned on there was a bit assure shift back to quick view.
And clearly we've been placing Sofia analyzers as well.
And I will point to.
The competitive manufacturers, specifically, we can name that folks where where that share came from and so I think when the analytics are completed we'll be able to show.
More precisely what we think this year and actually.
And as a being but we know we know where we strongly suspect which put it that we strongly suspect that we have gained share with what I would say it's.
We're shifting everything we make.
At this point and we've not been backward.
I can't say that same is true for others.
And then right.
Yes.
Yes on the first quarter.
As Doug mentioned that it's been pretty strong today.
And rather than giving you some guidance on it I think probably the most astute thing to do is and we're having our analyst day. The on April eight and we can certainly than can be a lot more insight as to how we are the flu revenue was in Q1.
And then perhaps a better idea on revenue guidance for the year.
Sounds good.
Maybe on Triage then you know just reflect on the year down 6% for the year on Treehouse, specifically can you just assess.
What you think might have been going on between market in competition and then an update on.
The commercial efforts behind toxicology.
First we'll just start with what's happening with tree as generally it does depend on geography of course.
But here in the U.S. and in China, I will we see is the volume of the tree.
Accounts gets larger and larger and larger to the point, where it's no longer practical to do it on a tree estimated pro analyzer and those accounts than opt to go to a larger immuno assay analyzer and the main lab.
Often that's beckman that we pick up the volume there but.
Equally often it's not so when you lose an account like that.
That needs to be offset by the continued sales of people now having volume enough to start the trios meter pro so it's a bit of a churn.
As we've learned over the last couple of years and I think we're getting ahead of it.
And I do think that the introduction of the toxicology product is helping reintroduce that we're certainly seeing.
The introduced the introduction of the.
The tree as true.
Hi sensitivity product in Europe as as.
One effective tool.
And then to the toxicology piece.
What I can say is that.
We spent a lot of time.
Making sure that we're addressing all the accounts that we should.
The data that we see and Salesforce Dot com shows is the final as building.
I think the reps in the field have a very good understanding of where to go and and where they're at nature of the council more specific laying when I've traveled over the last couple of weeks with salespeople.
Theres quite a bit of focus that toxicology and I would say.
Except in one specific type businesses.
There's a lot answer and trio sector caused by the way the account where there wasn't and that's just is because their volume its Dubai. So I think an acceptable response by the customer we'd love to do it.
We couldn't we couldn't do it on your platform.
That's where we're at this stage the Jack I think the funnel looks good.
And we're still forecasting to deliver what we thought at this stage of the year.
Sounds good last question have you baked a cake yet before this van and instrument or when does that can take place and what needs to be finalized before you get there.
Well as I mentioned in my comments.
We're ahead of schedule on the assay development six of the seven actually Theres eight now.
The panels that we're working on our done.
The seventh is in progress.
And so as the case.
So that look what that looks really good we did finalized cartridge design, we have one manufacturing line going as fast as it at this point, we have plans to build to other.
Manufacturing lines for the cartridges and the aim there has to have enough cartridges built in order to do to do the clinical trials.
We're in the process of instrument development.
Which will go faster than the other components, but still has a lot of work to be done.
And effectively will be integrating all the pieces of that.
And we'll have a clinical trial box.
By the end of year, and we will be in a clinical trial.
By the end of the year, So we're still on schedule for that.
And let's just see what happens after that no of course.
A lot lots and lots of happened between him and.
Inevitably something will pop up that we need to solve which we don't know about that.
I'm pretty confident at this stage that most of the issues that.
We have in front of budgets are known them.
Sounds good congrats on the progress.
Thanks Jack.
And our next question is going to come from the line of Brian Weinstein with William Blair.
Hi, guys. Thanks for taking the questions.
As we think about 2020.
As you think about 2020, just putting some pieces together here. If you did 535 million. This year I think you said 10 million from a host of new products Cardio probably goes what mid single digit sets can add another 15 or so so.
Plus what we know whenever you're going to get from fluid and the other parts of the base I mean is there a reason why this shouldn't be.
Well over 560 million next year in terms of in terms of revenue.
I would suggest that theres certainly upside to the 550.
And as we get through the end of this quarter and see where we're at will head into that into the analyst day as Brent Randy just mentioned on April 8th.
And we'll tell you about who we are working on of course, but we'll give you a much better idea or we think we're going to lands for the year and it wouldn't surprise me.
If it's north of 550 App.
Okay, and then I think at.
After the Investor Conference earlier this year I think you said you the way to think about Q1 flu was similar to Q4.
Which would be just right around that kind of 50 million did we hear that right I heard what you said to Jack's question, but.
I think you did comment on a previously so I just want to go back in a did I hear that comment correctly and be would that still we just directionally the right way to think about it.
Yeah, I would say thats comfortable.
Okay and then a question for you on gross margin.
I'm sorry.
Hi, Jeff Ali I'll leave you then you interpret what that means.
Yes, I'm, sorry to be big but.
But it looks really good we're shipping everything we make right now okay and as you know, though when that stops and starts so.
Continues through the quarter it could be.
It could be I don't want to use the word extraordinary I'll just say it'll be.
It would be a good quarter.
Okay I appreciate that thanks and then.
Gross margin.
On gross margin.
You talked about.
I think it was overhead absorption was one of the issues that might have held back at least that's what I think you said in the press release, but yes, it would seem that.
With all the volume you guys are putting through with flu that you guys should have seen potentially better gross margins than than what you guys posted can you just go back through kind of the pluses and minuses with gross margin and how we should think about you know in a strong flu quarter, how from a does contribute to gross margin.
Well fluids, a strong contributor to gross margin and the high volumes that were were person to their factory right. Now would suggest that we're going to do fine. There I think the issue that we had before it was actually more on the cardio volume that we had assumed that we were going to do so I know group I know you know how to do.
Standard costing Brian so.
Effectively.
The the drag if you will as that we had overestimated what we thought we were going to manufacturer and ship.
The factory.
I forget.
The other piece and then Brian as there is a little different mix, a little lower margins and my rest of world products versus what we see in North America, So that had a little bit impact, but as Doug said summers rich manufacturing was where the overhead absorption was under absorbed.
Plus that remember the out Theres also a tax impact.
So that had had a negative impact full here was approximately just right I think was 4.8 billion negative FX impact.
As well.
Upwards, Okay, 4.63 quarters, Brian Yes.
Got it and then last one for me I promise is.
As far as China goes and Corona do you import anything that goes into your manufacturing process.
Or anything else from China that could be affected if those factories are down. So I was there any raw materials or anything else that you guys bring here that we should we thinking about.
No we don't.
Okay. Thanks for the clarification. Thanks.
Our next question will come from the line of Tyco Peterson JP Morgan.
Hey, thanks.
Little bit our definition of guidance, but I guess, we can wait till April but just a probe on a couple of things for cardiac your comps or notably easier. So is mid single digit the right way to think about it in light of easier comps and what's the latest on the toxicology panel delay.
Yes, you saw we are right at five now it's going to be conservative I'd call. It four to five.
It's depend obviously.
On the existing base business, but you've also got toxicology on there.
And there's a couple other things prgf could be helpful.
Yeah, and what we do in Japan and Europe.
Another factor so there's a few variables there, but I would say.
Were considerably in the four to five range.
Okay, but it but on the toxicology talking about having to retrain the commercial team. So would it would what's just the latest on on where you are in that toxicology rollout.
Yes.
Let me clarify because I've had to do this couple times.
Main driver to the mess with the FDA.
Delay and improving the product we have assumed that we would have.
Approval early in second quarter, and we had rolled out to the sales team.
In.
The sales meeting that was around that time.
So.
I don't think it was so much of retraining of the Salesforce as it was a.
Resource allocation issue because in Q3, our salespeople spent a lot of time.
Working with customers make sure that we retain our flu business and we also like to place more Sofia as you might imagine so.
I would say it was more of a resource allocation that are training issue, but having said that all that is behind us.
Our guys are out there are actively addressing every single opportunity that's out there and I believe I just heard a little while.
A little while ago that we expect very shortly to have contacted virtually every customer this possibility here and in the next quarter. So so I think I think we're in good shape the funnel looks good.
We track calls we track progress we track opportunities we try to assess.
Things under what we call. It 30, 60 90 forecast as I look at it I think.
And I like judge what people are telling me I think we're in pretty good shipped at the members that we suggested.
And then can you talk a little bit more on the molecular acceleration you just saw 21% versus 6% last quarter can you just maybe talk to drivers.
Yeah.
Well remember, we make a solana influenza say, we make a PCR assay under the brand lira.
Those certainly were healthy in the quarter the those products.
And I honestly Strep is also a big contributor our share I'm, Mike to ship is quite good.
And.
And so we've done.
Pretty well there as well so yeah the products that we have out there are.
Certainly helped by good respiratory season, and we didn't get some traction with C. diff and HFC vis-a-vis as Randy.
Also mentioned, so I think the salon business looks pretty solid right now the other thing that was a factor for us that I thought may have.
Impaired our growth.
Particularly in the larger accounts is the front end of the whole process was a little bit to laborious for some people and so we've recently.
Completed the development up of.
What I would call.
A front end engineering.
Solution that should be helpful and we're rolling that out now so I don't think we're done growing much line, we've got about.
1100, or so instruments out there and I I suspect that we'll continue to grow that.
This year assisted by.
Some improvements to the ease with which our customers can actually run the asset itself, but.
To your 0.4th quarter, 21% looks big but theres a lot of respiratory in there.
And then on line can you talk you talked at the time launch about getting Indian plc customers can you talk to the degree to which that's opened up new doors and then also your confidence and locking down the clinical study design win season hits in the fall.
Oh for.
Are you talking a richer potanin.
No no.
Line Yeah.
Well I'm exclusively.
So long right now for us is a market growth.
Concept the whole idea of getting physicians some of them don't even tested all for anything.
To begin testing customers.
Particularly in the upper Midwest on the North we.
The northeast so.
We have a number of marketing programs PR word of mouth.
Symposia, all sorts of things that we're working on two creates.
Both awareness by physicians and awareness by people who could be tested.
So it's still early phase, but I would say that.
We're expecting a reasonably significant uptick a couple of million dollars are so more in line. This year than we were before and we're also expecting some collateral benefit.
On flu RSV and strip as a result.
Okay.
That go with regard to Clinicals.
Clinical study yet you're doing clinical study for lime right before the season in the fall.
Well Oh, you mean, so so we are doing a tier two.
And we're in discussions right now with the FDA.
On what that study looks like because we couldnt mimic what it's done currently.
Which is the western blot.
And certainly we could.
We could launch a product to add all the proteins that are done by Western blot Sofia test trip. So we could mimic the tier two product we've decided to do instead is something novel, we'll talk more about it at the analyst day.
And why we think that that's a better result, but we actually think that rather than continuing with this testing process, which is woefully inadequate.
We think we've come up with something clever, that's actually going to be better and we're presenting that to the FDA here shortly so.
If you don't mind just hit the pause button on that question, then say that will provide a lot more detail on that.
Relays.
Last one on M&A, just curious odds of getting a deal done for first half year. So how do you how would you characterize.
Well as Randy pointed out we're certainly in good shape to do one.
And we've been looking at a number of targets and some of them are interesting and I'm hopeful that weekend.
We can announce something.
Reasonably soon but I can't.
Can't speak tightening of course.
Thank you.
Our next question is going to come from the line of Bill Quirk of Piper Sandler.
Great. Thanks, good afternoon everybody.
Hi, Bill.
So first question for me, Doug I'm, just thinking about the Sofia.
[noise] pipeline here for 2020, obviously fairly full can you remind us.
Hi, how we should think about the pacing of the filings or the approvals for those over the course of 20.
Sure.
The first one likely to be submitted would be the seat at that say for toxin HP and GDH.
And then as I mentioned before we've got a number of other assays.
We have in development as well so in this third quarter I expect that we would be closer to two.
Submission with Campylobacter should gets auction.
Each floor I'd like to Farren, and say parasite panel.
So those are the ones, we're working on we expect them all to be submitted.
This year.
All of them are pretty much a back half.
With C. diff.
Potentially being early third quarter.
Okay got it.
And I missing sorry go ahead.
I'm looking at Randy asking I missed one sometimes I'm getting I'm getting to the age rates start to forget stuff.
Our story viral man.
Yes, but we don't know that we may we may be closer to two being able to start the trial.
For the before member respiratory panel, which just to remind you that through a b RSP in human met a pneumo I think what we may do as file a five 10-K or started up by PK clinical trial, and then move later to the to the CLIA waiver just so that we can start the trial and get.
Get data.
So we can actually dependent on this flu seasons.
So we might be able to get started here reasonably soon on that.
And then then as we go into the next winter.
Started the CLIA waiver trial. So that's the other one that on Sofia that was I was for getting that Randy just remind me.
Okay got it appreciate it and it sounds like Randy's do for higher bonus this year how about.
Separately, just like in Brazil.
You're welcome Andy the separately.
We are caught the daily or cost synergies you hit you hit your targets, how should we be thinking about.
Anything additional on a go forward basis. Thank you.
Well you should definitely think that were there is more.
And we still think there's work to do in the summer storage facility.
To improve yields.
And I don't know that we have a really solid.
Idea, but.
Okay.
Yes, a couple million maybe more bill.
That's a swag at this point Theres a lot more to be done.
We believe and we've got consultants working with US right now to soup weekend.
I could get more Don.
But it's sort of in that range of possibility I would guess.
Okay very good thanks, guys appreciate it.
Once again, if you would like to ask a question. Please press Star then one under telephone keypad again that star one for question.
Withdrawal question press the pound key.
And our next question is going to come from the line.
No.
Craig Hallum capital.
Good afternoon to one does provide some more details around the concept the projects Nichols here, if that cannibalize, the existing business and which markets. That's a smaller cheaper Sofia box open you up to.
Uh huh.
So question number one Alex was will sniffles cannibalize.
Some business and I would suggest.
Sure.
I would.
At the same time by the time, we launch.
Many of our boxes when it off their three year depreciation schedule. So.
It's not really relevant necessarily in fact swapping out.
Now with a with sniffles at a significantly reduce cost.
We'll be.
Ob, we'll be fine I think the biggest opportunity would be in it.
The.
Great ability to democratize testing and.
And to to quit these analyzers, just about anywhere where you want even.
Even then physicians today, who have a sofia and essential part of their office practice.
Imagine that you could have a little sniffles instrument and each of the exam rooms, which would dramatically reduce.
Overall turnaround time right now you know the assets are short, but you still have to take the swap and move it to the tour the Sofia and so if you can eliminate all that time, the transport time to set up and all that by simply just doing the test while the patient sitting on the.
On the funny paper.
That would be that would be not dramatically better and then also the same would be true urgent care centers you can imagine putting these in each one of the exam rooms, there versus going to a centralized slabs, so or on the floors and hospitals et cetera. So when you give the cost down that low.
I think theres, just almost snow and don't to where we could do it and then.
Certainly, we're counting on markets like China, and others, where volumes are significantly higher.
And I think this is a perfect product for expanding beyond the traditional places where we have got the past.
Thanks, Doug really appreciate that Thats very helpful. And then I don't have perfect math here, but if I go away low in immuno assay business.
I see the non flu assets declining about mid single digits.
So yes, that's broken that business used to be pretty consistent but I'm, just curious whats driving declines there recently.
Right and answer anything yet Alex what what were.
The biggest out say that we're seeing a decline in our hcg product.
We continue to see being Commoditized private label is probably has a larger share now in that market and knew us until that's where you're seeing a decline that offset some of that growth in our strep RSV include business truly as a generic market now whether it's in the professional segment board seeing over the counter.
And.
In grocery stores should see see generic products versus the branded versions and so that's just to.
It's a commodity issue as you point out so unfortunately.
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We've been out of that market for a long time, when we've seen at where we had pretty high volumes.
Sort of slowly got away.
I mean, how much revenue left there I mean should we expect declines for enough material declines were going to sit on the revenue line next year.
Yes, yes. Thank you continue to see if I don't know mid to high single digit decline.
But we're done.
Yes.
We are under or probably only do on seven 8 million tons a year now.
Are used to be double down about five years ago.
Okay. That's helpful. Just kind of modeling this out and then.
I know you had it would just the political here for the screw up 98 tests. So I'm just curious what is the current timeline there and tell you Didnt mentioned as wasn't three products.
In the prepared remarks, and just remind us where what is the share what are your share in that market and then what's sort of price premiums could you build sit demand for reference our confirmatory product there.
Sure.
First we're manufacturing the immuno assay side now 17, 16 17 million Randy So 16, yes, I'm the CEO I say seven Sam.
The CFO he said sickening, so 16 17 million test as what we manufactured today.
Price point.
Unfortunately is.
Such that our gross margins are well under 50% so.
It's you certainly wouldn't want to jump into the business at this point.
That side.
Straight line need on the other hand, if we're successful enables somebody in a very short physician in very short period of time to.
To not have to reflects.
Negative results.
And frankly most of the results are negative 80, 85% of the strip tests are in a physician's office costs will be negative so there's a lot of value.
There, we do have to ideas and mine and we're going to have to work through that here as we.
Move closer to launch one as with Sniffles.
Is that a compelling enough.
Packages together.
I should just launch into the market with the existing reimbursement rate.
And then just price it modestly higher than it is today I don't know whether that's a couple of dollars higher what it is but certainly well below the reimbursement rate.
And there's a trade off there one is I get a lot more volume, but I'm going to forego some of the margin that I would again to fight priced at like a true confirmatory test. The other option that of course has to go in and expect low volume, but don't allow.
Reimbursement in other words.
Crosswalk at this product over to the current immuno assay code and if we did that we could potentially have pricing that was significantly higher.
Closer to where our own molecular tests are priced so in other words in the teams.
And if that were the case.
Obviously, the gross margin would be high but the volumes with the low because we would be doing outcome studies in order to.
Justify with Payors why we needed.
A reimbursement that was significantly higher at all we have today so.
Those are the two options that were exploring we're doing the investigation on that will probably again provide more analysis.
When we talk about our overall portfolio and strategy.
During the analyst day here in April.
Where we're at in terms of product development.
The product of course performs great.
We're working through the clinical trial.
At this stage, we'll continue to run samples I think we still have a little bit of runway before the end of this respiratory season, we'll see what we have.
We have to have for the FDA.
Set number of positive sampled some.
First we need to demonstrate the sensitivity and specificity that would be required to call. Its confirmatory assay. So that's where we're at.
Okay. Thank you.
You're welcome Alex.
Thank you and at this time, we do not have any further questions and I would like to turn the call over to Mr., Doug Brian for closing comments.
Sure well thanks, everyone for your support and of course your interesting quite Dell.
We did have a great year and were in terrific shape to achieve our growth objectives over the next few years.
Place holder would send out on analyst day April 8th encourage you to participate if can and thanks again, everybody for being on the call.
Ladies and gentlemen, we thank you for your participation and ask that you. Please disconnect your lines the bank.
Goodbye.
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