Q2 2020 Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Meridian Biossance second quarter fiscal 2020 earnings call at this time off [laughter] Arnold listen only mode. After the speaker's remarks, there will be a question and answer session to ask a question. During the session you would need to press star one on your telephone if you.

I'd like to the door. Your question press the pound <unk>. Please be advised that todays conference is being recorded if you require further assistance. Please press star zero I wouldn't want to hand, the conference over to go Speaker today, Charlie would vice President Investor Relations. Thank you you may begin.

Thank you good morning, welcome to money and the school Twentytwenty second quarter earnings call.

With me on truck, Kenny Chief Executive Officer, and Bible, Our Chief Financial Officer.

Please note that our Ltcs borrowing earnings press release.

Slides to accompany this call are available on our website under investor somebody Enviroflight Dot com.

Post a copy of these prepared remarks after the call.

Well the bar for calendar Joc, and Brian will be participating in a virtual fireside chat as part of the William Blair annual growth stock Conference on Tuesday June 920 Twond.

Details about events will be posted 12 website as their final.

We are working on a schedule other than to provide opportunities to virtual economic indicators.

Finally, our Q3 fiscal Twentytwenty earnings call is currently scheduled for Friday August stopped me 2020.

Before we begin today, let me remind you that the presentation and the company's remarks.

And when do you see.

Forward looking statements are subject to numerous risks and uncertainties many of which are beyond the company's control.

Putting risks and uncertainties described from time to time in the company's out to be fun.

The company's results may differ materially from those projected a note in particular that these forward looking statements maybe affected by risks related to the coldest 19 pending.

Well here makes these statements other than today, maybe twentytwenty undertakes no obligation to probably helping them.

Additionally throughout this presentation, we refer to non-GAAP financial measures, specifically operating expenses operating income operating margin net earnings and earnings per share each on an adjusted basis.

A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures and other related discussion are included in our press release.

Now I'd like to turn over the call Joc.

Charlie These left four months has been a tremendous challenge for us as an industry a company for me personally.

That makes the this pandemic the change weekly times daily I'm extremely proud of power Meridian team came together and execute on or such uncertainty and demonstrated the strength of the company. The we're transforming.

First and foremost are focused with the health and wellbeing of our employees all aspects of our business mobilized to support the broader team from I.T. when able to over 40% of our workforce to seamlessly begin working remotely and matter of days.

All of these enhanced clean procedures and adjusted the office environment to maximize to minimize potential exposure to krona virus and maximize our ability to socially distance workforce.

The leadership team, we evaluated meridians business continuity plan across our global footprint I made enhancements responsive to the unique situation of this pandemic.

We are fortunate that today, we have no known cases of cobot 19, among our employees and our global team continues to meet the needs of our customers.

We are rebuilding the company for long term sustained growth and as such our response to the situation with carefully crafted to both keep us on track and officially maximize our contribution to the goal response.

Demonstrated in prior offerings like the Zika virus in 2015 or lifetimes Division is built for rapid response.

Back in January we were one of the first company supporting over 90 test development.

I can quickly ramped up production of our molecular reagent optimize for Arnie virus detection and got them in the hands of diagnostic companies in China developed has for the growing outbreak.

That's the virus began to spread around the world. The team accelerated worldwide test development by watching a program to provide samples of our superior reagents and zero cost to diagnostic companies developing new Kogan 19 test.

The largest IBT manufacturers want to work with us because of our high performance and quality reputation and a reagents are now being used in over 35, Kobin 19 assay developed by companies in China, Australia, Europe, and the United States. The demand has been extraordinary and that seems to be commended for their continued efforts to keep pace with is contagious.

In parallel life Science research and development team began work on a product that would be needed in the subsequent phases of this battle last week, we launched a new master mix designed to bypass the need for an already restriction step, which not only saves time in cost, but also eliminates the dependence on the extraction kids the emin in short supply.

Recently, we launched a series of recombinant viral antigens necessary for the manufacturer of cope with 19 antibody gases demand for these products has been high and we and we will play a major role in supporting them the development and manufacturer millions of Soroti test being run around the globe.

On the diagnostic side, a response is much more tactical to ensure limited disruption to our strategic imperative to get test kits to our customers in the shortest time possible, we focused on identifying a U.S. manufactured soroti asset with performance that matter standards. That's a great deal of diligence, we partner with send trying to buy a research to distribute their quit pack to Corona virus test.

Designed and manufactured in San Diego This test detect I Gi and ITM antibodies to cope with 19, human serum plasma or whole blood.

Initial customer demand customer demand has been positive and we expect to begin shipments later this month.

In molecular the ravaging as an eye is an ideal platform for infectious disease testing with its small footprint simple operation and ability to deliver results on eat sample simultaneously and about 70 minutes.

The came in Quebec has revised the design of the ravaging respiratory panel to include a cobot 19. In addition to flu and other respiratory viral targets, we plan to see Eway status from the F.D.A. for the coping 90 target later in this fiscal year 2020 in time for the next respiratory season, and we'll follow up with a five 10-K submissions.

Maybe RSV and cobot Nike targets in time for the 2021 2022 respiratory season.

Of course, not everything it's been about krona buyers.

Our diagnostics research and development team has built key technology centers in Quebec for molecular diagnostics.

Cincinnati for lateral flow based in the last A's and below records billerica for our chemical electrochemical sensor, but.

Electrochemical sensor based blood chemistry. These locations are working on the robust pipelines that position us well for long term sustainable growth.

In March the first of these products the Curian analyzer and each PSC assay received FDA clearance. This is a tremendous milestone in the transformation of meridian as it is a first internally developed product for at least in several years.

Consistent with innovations on the revenue platform securing platform couple simple sample preparation and workflow as an intuitive user interface and improved performance.

Early in the quarter. We were also busy evaluating the acquisition of excellent bio fines and later preparing for its an integration as previously announced we close that transaction last Thursday, we cannot be more that didn't have excellence joined the meridian family.

As a reminder, our vision for diagnostics is centered on gastrointestinal disease, and pediatric point of care testing bridged by testing for respiratory illnesses.

This acquisition supports continued strength and focus on guy.

There are four approaches to H. pylori testing stool antigen urea BREP surajit, an invasive procedures meridian as the leader in U.S. still antigen testing and excellence has innovative urea Brett testing platform called Brett I'd.

So Robert G. testing can have lower sensitivity as compared to other tasks and may not identify an active infection in the face of accumulating evidence on this topic reimbursement for Soroti tests has declined and in some cases nonexistent.

The test also started to lose favor with clinicians not only will we be able to leverage meridians U.S. salesforce to grow share of the real broadcasting market. What we will also be able to accelerate the shift away from serology as the only you what company offering both noninvasive approach is active infection diagnosis.

For two incorporating the breadth any analyzer NFC into our portfolio and building out the momentum that excellent team has created now I'll hand, the call over to Brian to talk about financials for the core.

Thank you, Jeff we reported earlier today, we've had an excellent second quarter consolidated revenues of 57.3 million up 40% 50.2 million second quarter of 2019.

Moving the impact of foreign currency exchange rate changes revenues were up 15%.

With record revenue right fiscal second quarter by wildfire also with record quarterly run it.

Gross profit margin top 60% in a quarter up from 58% the second quarter of last year.

One of a dramatic increase in life science gross margin and an expected reduction in diagnostics, which I will discuss further insight.

On an adjusted or non-GAAP basis second quarter operating income was 12.1 million they margin of approximately 21% adjusted operating expenses were 22.4 million up 4.3 million year over year also on adjusted basis non-GAAP net earnings were 10 million and non-GAAP diluted EPS.

Yes, 20 for example.

Year over year increase in operating expenses of approximately 2 million in cash incentive.

Reflecting better performance relative to plan at this stage in the year versus the prior year.

Additionally, we spent an incremental 1.6 million in R&D, primarily on park development.

While.

Not at an increase of approximately 900000 and purchase accounting amortization from the acquisition of gene.

Third quarter fiscal 2009.

Despite the year over year, increasing spending our operating expenses were still lower than our expectation driven primarily by the deceleration spending on clinical trial and product development revolving from the code at night.

As well as delays in filling open positions.

GAAP basis operating income of 11.8 million with operating expenses of 22.7 million.

This into the a four mentioned operating expense drivers GAAP operating expenses were impacted by year over year reduction in a contingent consideration obligation for the acquisition of gene.

Partially offset by increased acquisition related expenses.

GAAP net earnings were 9.4 million and got to one.

Uh huh.

Now I'd like to grow into the specifics of our two operating sites.

And diagnostic revenues were 34.9 million up about 4% and for the first time in fourth quarter keeps all year over year group on a constant currency basis revenues were up about 5%. This growth was driven by the outperformance of our respiratory products, partially offset by declines in gastrointestinal.

For the ended the quarter, we benefited from increased demand for respiratory test.

Well testing negative for Koby 19 fall further diagnosis or something.

At the same time, we started to see reduced demand for not urgent testing of note was the continued stabilization of our molecular business posted modest growth.

Gross profit margin for the segment was approximately 57% down from the same quarter last year, but in line with our expectation a year over year decrease was primarily driven by product mix and continued pricing pressure on our higher margin H. pylori products.

Diagnostics operating income on an adjusted basis was 3.3 million a margin of approximately 10%.

These margins year over year consistent with our plan for the segment exceeded our expectations due to lower than expected spending and clinical trials on Fox development as well as delays in hiring.

I'm going to file clinical trials related park development stalled as much of the U.S. ceased operation.

We also have a few vacancies across the functions the organization.

In Florida Phil.

Our life Science segment delivered revenues of 22.4 million up about 33% year over year or 34% on a constant currency basis.

Delivery the highest quarterly revenue in the history of the segment.

This outperformance was driven by sales on our molecular reagent, primarily as a result of the coded 19 Panda.

We estimate that increased revenue from the pandemic with approximately 5.6 million.

Outside so the 19 the business generally performed as planned.

Ordering patterns for non coven related products with our topline PD manufacturing customers returned to normal for the quarter. However, it is not clear if they will make up all of the shortfall from Q1 during the remainder of the year.

In addition to outperform upon revenues gross profit margin falling dramatic improvement over 1200 basis points to 65%.

In order to meet the expected demand back sizes will increase which does not requiring linear increase in cost.

Adjusted operating income more than doubled in the quarter to 10.9 million a margin of 49% as resolve the unprecedented revenue and strong gross margin.

One of our strength continues to be our balance sheet during the quarter, we increased the capacity ROI credit to 160 million in conjunction with in now when or acquisition of excellent Biofire.

As of March 31st we had 49.6 million in cash and borrowing capacity of approximately 111 million under our line of credit.

Subsequent to the ended the quarter. We grew an additional 50 million to fund the acquisition and as at the end of April have borrowing capacity of approximately 61.

Now turning to our guide our performance fiscal year to date was well above our expectations. We're slightly ahead of last year's first half revenue and already delivered adjusted diluted EPS at the upper end of our original guidance range from the full year.

Despite the turmoil MCO that 90 pandemic and related uncertainty. We expect this strong performance to continue our lifelines business more than compensated for the temporary reduction in demands for non urgent care test in our diagnostics business.

Based on this dynamic we're raising our guidance for the year.

We now expect consolidated net revenue for fiscal 2020.

2200, 30, and 236 million the global co midnight team pandemic has led to unprecedented demand for our molecular lifeline product and we are seeing significant demand weather related immuno athletic product line or recently launched.

Our guidance assumes koby 19 related sale of 43 to 47 million in the second half sales, peaking in our third quarter and beginning that paper and our fourth quarter, that's resulting in revenue range for life science of $110 million to $114 million for the full fiscal year.

At the same time in the last few weeks of margin throughout April we saw increasing headwinds on or non respiratory diagnostic business.

As a result this trend we now expect revenue for the diagnostic business to be between 120 122 million for the full year.

This assumes a 40% reduction in volume for our third quarter or recovering toy, 25% reduction in volumes for our fourth quarter. The softness in demand is partially offset by modest contribution from the Exelons acquisition and sales of the Coca 19 for all of the tough as Jack mentioned earlier.

The uncertainty or the impact on revenue thats between products and settlement complicated forecasts of gross profit margin, but you should expect to see the same dynamics of the second quarter of higher margin for lifeline offset by lower margins for diagnostic.

We expect adjusted operating margin of between 18%, 19% and adjusted diluted EPS of 70 cents to 75.

This includes spending on clinical trial from Park development.

This includes lower spending on clinical trials and park development, while shelter and placed orders still remain.

Offset by the incremental operating expenses and the acquisition of excellent and increased cash incentive comp expense from the outperformance relative to our plan.

We'll lay this guidance reflects our current visibility into market condition for our products and our current assumptions about the extent and duration of the impact from the pandemic.

We expect that our visibility will improve throughout the quarter and local governments around the world began to relax shelf are in place orders and health care systems returned to normal operation with respect and diagnostic testing for infectious diseases and blood chemistry, we will keep you updated as a situation involved and now I'll hand, the call back over to Jack.

Offer some final thought thanks, Brian we are certainly a strange times and while there is global uncertainty, we think that the value of what we're building a meridian is becoming more clear every day.

We continue along our journey to execute our strategies toward sustainable revenue and earnings growth. While also investing in our businesses where needed. The curian analyzer is the first of many new internally developed products, we plan to bring to market in the coming years combined its new Hps assay with the addition of the excellence team and the breadth any platform and we are solidifying our leadership in each.

I worry testing and advancing our goal of being health systems trusted partner for gastrointestinal disease testing.

Revenue in platform has led to the stabilization of our molecular business and repositioned thus for growth with cutting edge molecular technology that deliver simple sample prep high throughput and multiplexing capabilities.

Our let care business has returned to growth in the first half of 2020 with our investment in the next generation. We're confident that we will continue to expand pediatric point of care.

We were one of the first to respond to cope with 19, yet again Meridian life science has demonstrated its ability to rapidly respond to global health crises crises with critical materials and volumes that meet the demand.

And then immix of this pandemic have highlighted the quality of our reagents and antigens and open the door to future partnerships with diagnostic companies around the globe.

Continue to stay focused on the strategy that we laid out 18 months ago, while at the same time contributing to the fight against this goal pandemic with the most effective assets Meridian I'm very proud of the dedication of the one meridian team this challenging time and Im energized about our future as a company now Brian and I are here to answer any questions that you guys may have.

As a reminder, if he would like to ask your question. Please press Star then the number one on your telephone keypad that is star one to ask a question.

Well first question comes from a line of Andrew Brackman with William Blair.

And or how you doing.

Yes, Hey, Brian a Charlie good morning, Thanks for taking the questions. So really not much of the surprise here I want to start on the life Sciences site.

Jack can you maybe provide a bit more color on the cobot 19 impact you're expecting hearing back after the year I guess, how did you build up to the assumptions and then moving forward how should we be thinking about.

This with respect to your current manufacturing capacity the infrastructure and supply chain for you guys to deliver more of these projects should there be demand.

Certainly start on this and Brian you can wrap around me.

So as Brian mentioned in our and the guidance that we put out there we have seen very very strong demand I think the molecular product demand hit was kind of the first peak if you will in the testing for the testing that was going on so we started to see that growth in Q2 and that continues in Q3, So we have pretty good.

Its ability to the orders on the molecular front as people have tried to secure test for the coming months.

Whether that continues on at the same levels in Q4, we don't know we've anticipated that will start to taper, but then it's not going to go away as we get into Q4 and beyond what we're starting to see now with increased demand on the immuno assay side the.

Theres a lot of talk about these antibody test being out there to be able to determine if people have been exposed to the virus and the demand for those products is great, Florida and her team on the life science side had been working aggressively to expand all the capacity that we have.

And we're doing this that part of the good news to this Andrew I would say is that the capacity is not just in one location, we have been ramping up and doing an amazing job in Germany, our facility in Germany to ramp up a lot of the molecular production and that continues.

We have expanded that multiple fold versus what our capabilities, where with large batches and at this point, we've been able to meet the demand. That's out there. We certainly are approaching a point, where it's getting more challenging but we've done a very nice job.

And the other the main products that we are now coming out with new new tests are the immuno assay side and those are primarily made in the United States and so there at a different facilities. So it reduces our risk. If you will have an overwhelming getting facility and so we are ramping up production capabilities on that front right. Now I will tell you demand is very strong for that we.

We anticipate that testing volume will ramp in Q3 and continue into Q4 as we go forward and that's really what we put our guidance. So we've done a very nice job we have processes in place to manage our supply chain. The leadership team is getting together in a frequent basis to discuss where we have vulnerabilities and we really have minimize those we do not per.

Just a significant amounts of products from China, and so we're not really reliance upon Chinese suppliers for key components that we built into our components that we make in the life science business. So we feel we're well positioned to continue to support this.

And we're continuing to explore opportunities for where and how we can ramp up capacity, Brian you want everything sure Andrew if I can just to add Jack's comments, there very important that the assumption that we articulated around our raised guidance are based on the visibility that we have into market conditions today.

And as I commented earlier as we get better improved visibility as you would expect is a pandemic we start to come out of the tail end of the pandemic if you will.

We'll update update to accordingly.

Got it thanks, and then I guess just sticking on the life Sciences side here first second I guess broadly speaking here and come out of the pandemic can you maybe talk about the competitive position that you guys. Previously had before that's where do you think that is now and then moving forward how is how that's going to evolve over time to just.

Strengthen your business.

Absolutely. So a couple of things as you know in our life Science business, we have an immuno assay part of our business in a molecular part of our business. Our immuno assay part of the business has been selling into the IBT manufacturers for 2030 years, we have longstanding very very strong relationships with some of the largest diagnostic companies for him.

You know assay testing and so that I would describe those positions as continuing to develop those those types of customers are need and theyre actively working on projects for grow the virus and the ability to work with them.

Certainly opening the doors for us to continue to.

Partner with them at high levels that we believe that that will occur the exciting part for US is the molecular area because if you remember in our strategy, we repositioned our molecular business, we pivoted that business 18 months ago moving away from we used to sell primarily into research facilities go to research Triangle Park and walk through until that key antibodies and supplies.

Bill test and things of that nature, we have pivoted and focused our energy on the IBT manufacturers for molecular.

What this situation has done is.

They were indeed have a quick response to this covance situation and it opened doors for us in a number of manufacturers around the globe via evidenced by the 35 manufacturers that we are now in inside their Kobin 19, molecular test I would also see that Andrew. So we had a press release that went out and in the last week a few days ago.

So they talked about one of our partners that essentially quantum TX that I noted that we worked with them on the coping 19, but this is clearly lead towards the partnership for us to continue to work as they develop their portfolios from mobile luckier standpoint, So we we firmly believe that.

We will respond appropriately during this pandemic and we have no idea of what that's going to bring to that going to be few months is it going to be a year. We honestly don't know none of us do but we truly believe that we're in a position in the long run to partner with these diagnostic company. Because this is first of mine I can assure you every diagnostic company is in critical states.

Turning to prepare and bring products to market and the companies that help them to do that are certainly in a good position going forward.

Got it thanks, and then just maybe last one on the life Sciences died before switching the diagnostics, but going back to capacity for men I just want to make sure. We had this correct.

Can you can you maybe give a little bit more more quantitative bats answer to sort of what you guys are seeing with respect to your current capacity in output what are those facilities running any sort of a percentage of total capacity and then as you begin to ramp that is that ramp just for sort of your current demand or is that anticipate.

No, but future demands.

So I don't know that I've got the exact percentages, but I can give you directional feedback what you saw in the Q2 performance was molecular.

Molecular business starting to ramp up and I think the example would be you're making that lie already material and you might make a one leader Bachelor at T. Two liter batch, we're making those batches in much higher quantities more like 20 leader batches now so we've increased the capacity significantly on that front and then the key to that is obviously expand.

In the batch size, which we've done which has enabled us to meet this demand as we go forward here at the end of Q3 at end of Q2 and into Q3, but then the other key to that is keeping our people healthy. So in addition to wanting to take care of our employees because thats. The right thing to do we also want to make sure that they're in a position to be able to come to work to be able to make these spot.

That are so important to fight the pandemic around the globe. So from a capacity standpoint in Germany, I wouldn't say that we are fully at capacity. We are finding ways to continue waste to make more but we're getting closer to that high point of capacity I would say in the molecular front on the immuno assay front.

This quarter, we anticipate building from.

Lower percentage batch sizes are also being increased on the immuno assay side, making these fees were confident antigens and and we are scaling that up as well I described that is that may reach approaching 100% capacity later in Q3 based on the demand that we're seeing.

And just to add to what Jack, saying I'm not going to quantify that Andrew but there is manufacturing capacity above the guidance range that we've put out there.

Okay Thats perfect. Thanks, guys.

And then I guess, maybe switching a diagnostics here for a minute.

Recognized through the outlook here is more dependent on patient volumes and win regular testing comes back but as you think about this in sort of a normalized environment. Jack can you maybe talk about your sort of level of comfort around that's whether or not we sort of seen the bottom of that you curve that you've talked about in the turnaround here.

So glad to talk with Andrew we.

We we came into Q2, and we had no idea about Corona virus right. Nobody was talking about current a virus on January onest and so our diagnostic business. We firmly believe that we would be in a position in Q2 to return to growth I'm coming into the quarter. I've described our Q1 performance was exactly in line with what we thought would occur in diagnostics and Q2 also.

It was delivering we had a very calm quarter. If you will our diagnostic business was predictable and it was delivery as we expected and even as the cobot stuff blew up we saw more respiratory stuff happen in some of the other stuff went down but ultimately diagnostics delivered actually better than we had anticipated in Q2 now obviously Q3 is going to be massively affected it.

Everybody nobody is going to see the doctor for non critical care things and that will start to change.

But we firmly believe that we are coming out of the bottom of that you.

We think that we're starting on that path back for growth. We don't know the impact of how Corona virus is going to impact that curve.

But but I can tell you that.

We are gaining momentum in our in our diagnostic business and so we're really excited about what happened with life science that we can make the positive impact we're equally excited about our diagnostic business in the prospect for that business. We think it's going to be a nice return over the coming years, and we havent even got to the point of significant R&D investment we've made in R&D will really start to.

Pay off the offensive products, if you will about a year from now it would've been about nine months from now the clinical trials of it slowed up a little bit. So we anticipate new products hitting the market as we committed next year and then the Excellence addition, there's huge opportunity for us with excellent. So Andrew we're very excited about our diagnostic business and we think that this at the beginning of a nice.

It's run for that business.

Great Great and then last couple just sort of on that on the cobot specific diagnostics products.

First on the RP panel sort of what are some of the key hurdles that remain for for bringing that product market recognize the timing. It's you guys have said, but sort of what are some of the technical hurdles. There and then maybe as similar question to life Sciences side and the capacity front, what's your capacity to manufacture not only ask Dave for that RP panel, but also the instruments.

Yes, So let me start a little bit the capacity. So we didnt immediately go after the put the co bid onto our onto our test. We we did not do that right out of the shoes in the pardon reason why we didn't do that Andrew was we were we still bit wrapping up our capacity. If you go back to covert test and you can't deliver to the market.

It doesn't video a lot of good and we have a limited number of instruments still with about 150 instruments that are out in the market right now and we weren't a position to be able to go make hundreds instruments to go to go support this situation. So we by design slowed that up however, when we were looking at the overall approach. We know that you need to have a cobot assay to respiratory pan.

In the future Theres Theres no way around that this is going to be with us. Even if this virus goes away over time, it's going to be with us via very important marker and respiratory panel. So I wanted to just give you a little bit of that perspective.

I would also say that from a hurdle standpoint, we are in the midst of working on the doing the development work on the cobot assay.

There's obviously developmental risk that you always have with the product. Although we do believe that we have a robust platform and we have a stronger scientists that we think that that is minimal risk sit here in this situation.

We also believe that coming a little bit later with our cap, we're going to try to make sure that we can build a good you eight that some people rust really quick we want to make sure that we take the time. So when we come out in the fall. We can have a test that is performing very well now what you don't do an easy way environment. It's all the clinical trial work to the same level that you would do later.

So we're going to build the great task do some clinical work to test like US Alpha site to do some work on that upfront in the summer with the goal of submitting for any way later in the summer and then participate in this season, we'll also have the ability to make or instrument. The more pies by the time, we get to fall. So we'll be at position to appropriately response for our customers and then.

And we'll be in the midst of doing our our work to move towards Clinicals for the RSV flew a b RSV and cobot. The the test that we will have Andrew it's going to if you remember the pie that different well so the koby will be in well three I believe it is at the flu Avi RSV is it well what they attend.

Of doing that is we're going to even put the fluid here as you will be in our kids, it's just going to be hitting the math, which is what we've talked with the FDA what to do it the right way with the FDA. So we're developing both of those so we can Pete those both moving so we can get them into Clinicals. In this next flu season. So we're ready to go in the future for that so that larger panel. So hopefully that gives you a little.

Perspective on that.

Yeah, that's great.

Before just moving onto my second question I, just want to make sure I heard that right. What did you say at the number of installed base what the installed base was for PURENERGY that's from I believe.

48 system is where we are right now.

Yes perfect.

Perfect. Thanks, and then I guess just last one on the serology product obviously, there's been a lot of news on the East can you maybe talk about sort of the performance of that asked and how that might stack up with the FDA guide guidance. That's out there and then any comments on sort of demand for that product.

Thank you.

Sure absolutely Andrew So a couple of things we completely or we're excited at the FDA is tightening things down I think you've seen a lot of people that have never made these types of test before coming to market now the ability to actually make original test and the median your lab make it work second habit and there's a lot of people out there doing it I can assure you that has occurred.

Roughly that makes these tests, making it the lab and making in high production and having worked consistently out the feel that the different story altogether. So when we were out there and we knew that we were not going to take this on ourselves internally. The other projects. We had we were up 13, you talked to a number of different companies that were making these test.

One of the things that impressed us about say trend that we worked with was their clinical trial.

They have over 600 assessments in the work that they had done. So if you look at that data that in the package insert for that.

That basically shows a sample size over 600, and so when you're doing to study the larger the study the better chance.

The better chance, you're going to half of the performance being accurate. So we also believe that the performance of that test with believable versus what we know the difference to be between lateral flow test and molecular tests. There is going to be a difference you have different performance characteristics and the performance characteristics based on what we saw look more appropriate now we are still.

Working with them and they still have worked together to get through the process, Let's say the biggest thing that this is not as just made it a little bit slower for companies like to try to work their way through the FDA then it originally looked like it was going to be but we viewed as a positive because we need to weed out the company that can make a good task and we're we're anxious to have this test kit.

Right process completed so we can go out there we have started selling this product to our customers a customer interest is high the demand is there and we believe that they will coexist with the lab based antibody test.

So you may drop lower incentive into the core lab to run an antibody test on some of the large immuno assay systems that are out there, but theres also a need at times, we might we use a finger stick and be able to do a rapid test that deal would tell quicker. So we think they both have a position. So we certainly can't speak to everything about the product isn't our product that we have good.

Competent to be it. This is a company that built high volume lateral lateral flow amino acids, and we think that there is positioned to best position in a quick timeframe to build a good test.

Got it thanks, guys talk you soon and see it skyline Chilean the other side.

Hey, guys guideline.

Hi.

Thanks standard Thanks, Andrew.

As a reminder, for you would like to ask a question. Please press Star then the number one on your telephone keypad data star one to ask a question.

And there are no further questions at this time I will turn it back over to our speakers for closing remarks.

So just in closing first of all if you can't tell we're excited about.

Performance that we ended the quarter, we do believe that.

Year to physician as a company to show the world, but we can do as we go forward. We appreciate the support of our shareholders. We look forward to delivering views. We go forward and also helping in this time, great kind of great need within the world with a global mobile krona virus pandemic. So thank you very much for joining and we we appreciate talking to you look forward to talking you. All soon thank you.

Thank you, ladies and gentlemen that does conclude today's conference call. We thank you for your participation and asset you. Please disconnect your lines.

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