Q1 2020 Earnings Call

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Good morning, ladies and gentlemen, and welcome to the Oxford Immunotec first quarter 2020 Conference call. As a reminder, this conference is being recorded it is now my pleasure to turn the call over to Matt Mclaughlin, Chief Finance Officer, Sir. Please go ahead.

Good morning, and thank you for joining us to review, Oxford Immunotecs financial results for the first quarter of 2020.

Before we begin I'd like to caution listeners that comments made in financial information provided during the conference call include certain statements that are estimates beliefs forward looking indoor subject to various risks and uncertainties.

Any statements made during this call that are not statements of historical or current facts are intended to be forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

We want to emphasize that such forward looking statements reflect our current expectations assumptions and currently available data.

And our neither predictions nor guarantees of future events or performance actual results could differ materially from those stated or implied by these forward looking statements due to risks and uncertainties associated with our business.

Including those under the heading in titled Risk factors in our annual report on form 10-K for the year ended December 30, Onest 2019, and in subsequent reports, including our quarterly reports on form 10-Q, including the form 10-Q being filed today and our current reports on form 8-K.

In addition, today, we'll make a number of comments about our expectations for the coven 19 pandemic on our business. We provide these comments to give investors insights into what we're observing however, given the dynamic nature of the pandemic Theres a high degree of uncertainty around any forward looking statements made in.

The company disclaims any obligation to update or revise any forward looking statements, except as required by applicable law.

During the call will also refer to certain financial information on a non-GAAP basis, we believe that non-GAAP financial measures taken in conjunction with GAAP financial measures provide useful information for both us and investors to evaluate the company's performance.

These include constant currency comparisons pro forma revenue gross margin loss from continuing operations EBITDA and adjusted EBITDA.

Reconciliations between certain GAAP and non-GAAP results such as EBITDA on adjusted EBITDA are presented in the tables accompanying our earnings release, which can be found in the Investor Relations section of our website.

Further as a reminder, in early November 2018, we completed the sale of our US Laboratory services business to quest diagnostics.

As such the now divested US laboratory services business is shown as discontinued operations and the historical financials in our press release in forthcoming form 10-Q.

With that it's my pleasure to turn the call over to Oxford, Immunotecs, Chief Chief Executive Officer, Peter Wrighton Smith.

Good morning on todays call I'll provide a brief overview of operating performance. The first quarter of 2020 before turning to an update on our business non strategic priorities.

Matt will then take over to discuss our financials before handing the call back to me to discuss the near term outlook for our business in light of Cobot 19.

We'll then open up aligned to your questions.

For the first quarter Twentytwenty, we posted revenues of $13.9 million in line with the guidance we gave in March.

U.S. revenue was $5.7 million.

As expected US revenue was up sequentially from Q4, the growth of 4% year over year was impacted by revenue mix and plans de stocking of inventory levels by quest as previously discussed.

You are from rest of World revenue was $3.1 billion I was up 13% compared to first quarter last year or 17% on a constant currency basis.

Highlights in the quarter, but continued strong growth in the UK, France and Russia.

As expected Asia revenues with seasonally weak in the quarter exacerbated by a reduction in consumption due to corona bars.

Revenues of $5.1 million for the first quarter were down 22% from the same period last year or 21% local currency basis.

We did ship some kits to China to maintain stock in the market pending on now successful re registration.

We continue to post on gross margin numbers. Despite the temporary volume headwinds from the CRO Novartis with Q1 gross margin coming in a 74.1% of about 270 basis points in the prior year period.

I'd, let's take a few moments to talk about the impact of the cobot 19 pandemic on the business and what we're seeing in various countries.

Firstly, all off thoughtful safe and well we've had limited cases of illness absence from work off fall for working in line with government guidance not various jurisdictions with those stuff, we do not need to attend all facilities working from home.

We have in many instances put in protective additional protective measures over and above government measures.

We've implemented social distancing measures for those employees, who need to what can all facilities such as that shift to allow natural firebreaks should we be unfortunate enough to have a symptomatic case.

We've also implemented a number of IP solutions to enable high working and maintain high levels of collaboration and communication.

Stauffer all this good people busy and productivity of the company is extremely high.

We've had no supply interruptions, we're continuing to manufacture and ship kits on continuing to process helpless and all UK OTI Alibaba tree.

We have good levels of stock of raw materials work in progress in finished goods.

Currently we feel we're well covered in the event, but if you should disruption to our supply chain.

We felt over 60 countries are the such we're seeing that pandemic play out across the world in terms of its effect on revenues.

Starting first with China at the height of the Lockdown.

In country and use the volumes were down to 25% of our estimated normal baseline.

We saw a recovery involves a further recovery in April volumes were up to approximately two thirds of baseline.

Domestic travel restrictions being lifted to some extent and customer visits and out possible once again, Bob so forth.

However, outpatient visits in China still significantly below normal both due to unwillingness to go to hospitals as well as far as restrictions placed around eligibility for appointments.

We currently believe it it will take until the back off of Twentytwenty before with back to baseline volumes.

In Japan testing demand held up in Q1, but Japan has been relatively late in terms of putting in place social distancing measures and we're starting to see these bye now.

All in April with down to about half of normal levels.

Q2 is typically a seasonally strong peak in Japan as is the time for lot of health care work at testing our expectation is that this will get pushed to later in the year, we'd like to the pandemic.

Given the experience of all the countries. Our current expectation is that given it was one of the latest countries into social distancing measures, Japan will consequently, the one of the loss to recover in terms of demand.

In the U.S. Holdings was strong in January and February before starting to fall off in March as more and more states imposed shelf at home mandates.

Based on public statements by quest, and others were expecting demands to be down to approximately 40% to 50% at baseline levels before recovering in the second half of Twentytwenty as restrictions get lifted.

In Europe in rest of World, that's clearly a lot of diversity based on each country's epidemiologic situation.

As with other countries, we've seen demand dropped significantly when strict lockdown rules that being imposed.

For example, our UK OTI L. lab is now running at about 20% of normal volumes as public health resources that are deployed elsewhere, including suspension of the national Tenda on LTB always screening.

Volumes for our European lab customers were down to between 20% to 50% of normal in April we therefore expect to significant impact in Q2 and given the diversity of countries. We shipped to in this region, we could find the rebound to be slower in this region compared to others due to the fact that some countries will enter and exit at different stages.

The read through between demand and the market and revenues is complicated by the amount of customer stock carried coming into this crisis and therefore, our revenue recovery will also be influenced temporarily by how start till destocked countries will be as they come out of it.

There's generally a good correlation between underlying demand in our shipments to customers, but there are a couple of areas, where we are sensitive to the possibilities of lags in old is even that demand recovers.

In Japan, why should we be generally reducing stocking levels in the country. As we've recently shipped initial stocking orders to a new wholesalers as part of our strategy to diversify channel that we may be coming into this a little overstocked, which could delay the recovery there unless all.

Japan's recovery is like in any case to be later another country simply started it look down later than others.

In the U.S. as previously discussed quest was aiming to take down the inventory in the first half the run julianna.

That's a possibility that despite much lower orders in Q2. This plans de stocking takes a little more time to fully achieved.

I'd like to the many uncertainties over the end demand outlook and how in market current stock levels Les I rolled into that in some stocking destocking dynamics and also because of the overall uncertainties with respect to the global impact of Koby 19, generally we're not in a position to give reliable revenue guidance for the full year. However, I will.

Comment later on on near term expectations, the Q2 revenues.

There's rightly a lot of attention right now to how diagnostic testing to provide a way to relax social distancing measures and get our economy's back to something closer to normality.

There's been a little bit discussion about the role that to roll that she could play in that but understanding who has been exposed and carries immunity.

It's yet to be confirmed the presence of antibodies correlates with immunity, if cobot, 19th and it seemed like HIV or CMV viral infections that then antibodies will not be informative and indicating protective immunity.

In that case, they'll become necessary to test for T cell responses.

We've already being approached by several <unk> groups requesting that we join them in investigating the potential role of a T cell based covert 19 test based on our T support technology.

We're just beginning work on that subject.

As much to learn about this virus and immunity and we'll keep you posted but material developments as we look for these collaborations.

Notwithstanding the understandable focus on growing the virus right now this pandemic will be temporary and when they debates we believe that the outlook for TB testing, we remain as strong if not stronger than it was before corona virus.

There are several reasons for this.

We know from history that whenever TBS neglected as its being right now it Unfortunately comes back with the vengeance.

Cases get on diagnosed transmission accelerates on checked a more can expect there'll be a price to pay in terms of new cases, and contact tracing ones public health resources are again, a with a focus on things other than cobot 19.

It did formative that the world Health organization has expressed its concern over the dangers of neglecting TB screening in the cobot 19 pandemic a notable that double it show also reaffirmed its commitment to TV preventative screening and treatment for the issuance of updated guidelines last month.

We believe it likely that there will be an increase in public health funding in general as governments painfully reload the importance of public health staffing funding and infrastructure and protecting populations.

As TB, the leading cause of death from infectious disease any increase funding for public health will likely benefit TB and TB testing programs.

On a more specific level as early evidence of the presence of TB may increase susceptibility to covert 90 morbidity.

If proven this could provide a rationale for stepping up TB testing of infected patients and those with possible exposure to covert 19.

We're also starting to see some shifts and behavior within TB testing programs. The skin test required to patient visits and then a world where they're trying to eliminate unnecessary into personal contact we've seen several instances off and recommendations to use a blood test instead of the skin test.

This could provide another tailwind to the long term trend of replacing the skin test with more modern technology like car T spot TB test.

The TV vaccine could be C.G. it under investigation as a possible vaccine to which you susceptibility to covert 19 infection.

It's proven and BCG has rolled out widely as a vaccine strategy and against Cobot 19 that would provide another strong spring to adoption of all test at the skin test have become highly problematic given it produces false positive results in those supersede the BG vaccine.

As a consequence of these factors were extremely confident but long term demand outlook for all tests, therefore, while being mindful of Opex, and where conserving capital where appropriate we are choosing to continue to spend in areas. We believe will maximize our growth and success as we come out of this.

As a reminder, our strategy to grow our TV revenues is across three factors firstly by converting from a skin test the market is only about 20% converted from the skin test I got technology. We continue to drive this conversion through the expansion of sales marketing and medical affairs resources aided by guide.

Lines that are becoming ever more favorable Tigers.

Secondly from overall market growth.

Maybe testing is continuing to grow as the world six to get to control of a TV epidemic.

It is being led by bodies such as the World Health organization. His newly updated LTB guidelines show clear evidence for the benefit of systematic testing and treatment of LTB <unk>.

A couple ICRA testing globally, if at risk populations.

We're expanding our market reach so as to benefit from this trend.

Most people are taking share from micro competitors. We currently have about 25% of the micro markets. Although we've shown that we can become a leading brand in several countries on the basis of differentiated performance and simpler Preanalytical work flows.

We're not able to strengthen the offer through providing automation and improved economics to labs.

We continue to make progress on all key initiatives to support strategy.

Firstly, we continue to work on delivering automation and Q1, we completed installation to the mid to high throughput system, and then opinion, leading French customer displacing a competing essay.

Our new T spot automation process is not a routine use and performing well.

We've made good progress on all U.S. trials that FDA approval, although the tail end was interrupted by cobot 19, and juice site closures.

We're in the process, if they to clean up and analysis and we'll talk to anticipated launch timing is once we submitted.

Have received feedback from the agency.

We continue to make good progress on a very high throughput system on a working towards providing automation and a large other jurisdictions.

As we previously communicated a major focus has been on sales and marketing expansion, especially in China, where you've been in transition to a new business model away from our prior exclusive distribution partner to a model whereby we take more direct control of a sales promotional and market development activities.

That transition continues to progress well, we've retained a high proportion of a and use a customer through the transition as well as more recently, adding new customers and channel partners.

Pricing is coming in line with our estimates, but it will take some time for <unk> for revenue mix to stabilize and therefore for us to know where pricing finally settled out.

The operational side of things are running smoothly with importation by Shanghai Pharmaceuticals, and subsequent on what contracting and shipment and use a custom is working well.

As we recently announced we've now obtained re registration of our product in China.

As a close three medical device China's medical device regulations require the company apply to the National Medical products administration will and M.P.A. to renew its license, but he spoke TB every five years. The latest Preregistration follows a significant review by the N.P.A. on an overseas such inspection of the company's Oxford UK manufacturing facility.

Despite the delays in obtaining registration we've been able to continue to supply the market with kits already in stock in country.

Obtaining we would be registration of our test for the first time, using our own China and UK based regulatory team does rely on a partner is a significant achievement I missed closes the final step in completing our transition to this more direct commercial model in China.

With the transition behind us and the company country opening up somewhat we're now focused on driving growth in the market through both account wins as well, it's deeper penetration of existing accounts.

We're driving this through all growing sales and marketing technical service and medical Affairs teams.

The opportunity in China is lost and we'll be looking to add more resource to the market as we can demonstrate success with all growth strategies.

Turning to commercial partnerships, we continue to focus on the successful relationship with quest to the key partner for the company in the United States.

As you know a principal rationale for the transaction with quest was to significantly increase the reaching competitiveness of T spot TV in the U.S. market.

We're now seeing this strategy bearing fruit.

However, the cobot 19 pandemic hasn't dropped to the integration plans and this will unfortunately delay the full benefit to the partnership being realized until that works come as you.

Nonetheless, we continue to believe and the value of the partnership to both parties and look forward to completing the remaining integration steps as soon as practical.

We continue to invest in programs to reduce our cost of goods. Both to continue our long term trend to gross margin expansion as well as to provide us with more pricing flexibility as we seek to penetrate more if the global market.

We're now gaining the benefit of projects undertaken to increase batch sizes. I think Q1, we also obtained FDA approval for two amendments, which will allow us to rollout cogs improvements to the U.S.

We also continue to build solid foundations to support the company's gross the planned capacity expansions in the Oxford facilities as well as the relocation of ought to Massachusetts sites into one smaller side continue to progress.

We've also initiated the projects replace all antiquated operating financial system with a new ERP system, which will once implemented give us new analytics and bring multiple efficiencies to cover and processes.

So despite the significant disruption from the Corbett 19 pandemic. The company Nonetheless continues to execute on as long term growth agenda.

Before I hand, it over to Matt I'd, just like to comment briefly on our balance sheet and I'll share buyback plans.

As I've already outlined as soon as the scale of the Prime time. It became clear we set up a plan to have a company weather the storm and come out of the other side more strongly.

Having no ability to tweak the parameters of our Tenbfive one plan for the repurchase of the company shares we took the decision to terminate the specific trading parameters of our existing Tenbfive one plan.

I know this news will be disappointing to some of our shareholders and so I'd like to explain the reasoning behind the decision.

When krona virus was first hitting we have to contemplate various scenarios each of which implied significant risks to cash utilization.

There was then and there still remains now considerable uncertainty over the near term outlook for the company's revenues that duration and extend to the drop in demand the company's products as a direct implication for how much cash the company needs to continue to fund its operations.

Outside of revenues there are many derivative impacts of the cobot 19 pandemic on all companies, including all.

The pandemic House for example, already we are ready given rise to a multitude of business continuity risks, which so far we've managed without too much expense.

Our primary concern here was the solvency of some of our suppliers who might critical raw materials for all tests should they be unable to continue the operations. We entered would be unable to manufacture kits for prolonged period of time over at all which would present a business continuity issue.

We wanted to preserve some balance sheet flexibility to intervene in this situation to allow us to prevent such a situation from a rising.

On top of this we have to contemplate the risk of not successfully Guinea registration in China in a timely manner why should we view. This is low risk it was not zero risk and how did it could it would have significantly increased our losses.

We needed to ensure that we had enough cash for the company to survive any of these scenarios.

Oh, we took this decision not just the defensive reasons, we view the strong balance sheet of the company as a strategic tool that can be leveraged to maximize the long term success of the business for example.

We all are knowledge intensive business, and we invest significant sums and recruiting and training talent, which is difficult and time consuming to replace and we wanted to retain as much of all how they tend to talented workforce as possible.

We wanted to keep investing in the business when competitors are distracted or through liquidity constraints on able to.

Our teams on maintaining high productivity, we believe the projects, we prioritize things such as automation and new product development will lead to value creation for shareholders over the longer term.

So why should we understand the capital markets advantages of repurchasing stock at today's prices.

I, just say as prices, we have to balance that against ensuring the capital adequacy of the company, an unprecedented and still very on certain circumstances.

And maximizing the growth profile of the business and value creation over the longer term.

We have the ability to resume the buyback program at any time subject of course to regulatory restrictions.

I'm really proud of how the company is rising to the challenge presented by Cobot 19, and how the company is maintaining productivity and positioning itself for long term growth that's about as the pandemic hopefully at nights.

I'll now hand, it over to Matt ill give you some more detailed comments nor financials.

Thank you Peter Peter our full GAAP results as shown in our press release issued today show the comparison of our Q1 2020 with Q1 2019.

Total revenues in the first quarter of through 13.9 million were down 6% versus revenues in Q1 2019.

No for the first time, we don't break out service and product revenue. This is because service revenue is and is expected to remain below 10% of our total revenues. We will therefore now just burnout report total revenue incorporating both product and service revenue.

Breaking down our revenue on a regional basis U.S. revenue was 5.7 million representing 41% of a revenue.

Asia revenue was 5.1 million, representing 36% of our revenue in Europe in rest of World revenue was 3.1 million representing 23% of our revenue.

Turning to volumes in the first quarter, we sold over 300000 TB test in the U.S. via kit sales and almost 400000 tests in our O U S region, both via kit sales in test process in our UK OTI L. service business.

Gross profit for the quarter of 10.3 million was down 2% from gross profit in the prior year period.

Overall gross margin for the quarter was 74.1% an increase of about 270 basis points from the prior year period.

Given the change in our near term revenue assumptions, we reserved for some inventory at risk of hitting its expiration date, if if you can't be sold.

Absent that reserve gross margin would have been 76.6%.

We continue to see strong gross margin performance driven by favorable ASP changes in manufacturing cost reduction efforts. We're also benefiting from the roll off of royalties as we move to protecting our products through company generated IP.

Turning operating expenses.

Operating expenses increased 21% from the prior year period to 16.9 million sales and marketing expenses increased to 7.2 million, primarily driven by growth in the APAC region, and our transition to a more direct model in China.

Research and development expenses increased to 2.7 million.

Due to timing of both new and ongoing clinical studies, particularly those to support automation.

General and administrative expenses increased 7 million, partly due to the non recurrence of questions here say income in the prior year period.

Operating expenses for the first quarter included approximately $935000 some share based compensation.

Net loss for the first quarter of 2020 was 6 million compared to a net loss of 1.5 million in the first quarter of 2019.

EBITDA for the first quarter of 2020 was $5.2 million loss, adjusted EBITDA, which excludes share based compensation unrealized FX gains or losses and unusual items. If any was also a $5.2 million loss for the quarter.

Both EBITDA and adjusted EBITDA, our non-GAAP measures.

Turning to the balance sheet, we finished the fourth quarter with a very healthy cash position of over $166 million.

During the quarter, we repurchased $7.7 million of our shares at an average price of approximately $14.57 per share, including commissions under our share repurchase program.

In the quarter, we also used to $5.5 million Occassion operating activities from continuing operations, primarily driven by the net loss in the quarter.

I'll now hand, it back to Peter who will discuss our business outlook.

Thanks, Matt.

There's obviously considerable uncertainty if everybody over the business outlook for that reason will not be giving full year revenue guidance. However, I would like to make some comments on the near term outlook in Q2.

We're currently expecting Q2 revenues to full between five and $6 million. You know you show, we're expecting a sequential decrease from Q1, reflecting the continued impact of cobot 19 in Asian markets.

In the U.S., we're expecting a sharp sequential drop in revenues, reflecting the significant slowdown in demand in Q2 to cope with 19 as one of the continuation of Quest Destocking.

In Europe rest of World, we're expecting a sharp sequential drop reflecting the significant reduction in demand as many countries in Europe and all rest of world territories are the start or simply maintain social distancing measures.

Based on my earlier commentary about our expectations about the recovery of volumes in various countries. We expect Q2 to be our lowest for the year.

That concludes our formal prepared remarks, and we'll now open up the lines for questions.

Thank you as a reminder, asked a question you need to press star one on your telephone so Joe Your question press the pound <unk>. Please stand by will be compiled a June a roster and once again that is star one if you like to ask the question and our first question comes from Doug Schenkel from Cowen.

Your line is now.

Okay. Thank you good morning, and good afternoon, everybody and.

Thanks for all the detailed remarks on how you guys are navigating through such an unprecedented time and good luck.

And Peter.

Based on your prepared remarks is is it fair to conclude that only 40% to 50% of healthcare workers that would normally be screens using T spot are being screened in the U.S. today and is it right to conclude that theres likely know catch up on these revenues.

And then building off of that you acknowledge the clear logistical advantages of eyebrows versus skin tests.

Which have always been there, but our particularly evident in the midst of the pandemic how meaningful can this tailwind be and how should we think about the durability of that dynamic.

Oh, great questions, Doug and thanks for them. So in health care work as you will recall that we're kind of two types of health care, what could testing in the United States right. This firstly this new hire testing, which is the majority of our volumes.

It is clear obviously, the hospitals and not being hard not to be in hiring significant because if you paid members have softened in fact in many cases hospitals have been following staff, who have been in parts of the hospital, where they can't be productive. So it's a new high volumes of obviously dropped off or annual screening obviously that.

He is a smaller subset the business.

Under the circumstances.

I think we've seen that a lot of that's been deferred if it's happening at all so I think that's that there maybe a little bit a catch up and health could walk a testing just stepping outside the U.S. For example, we clearly think that's going to happen in Japan, where typically what happens in that kind of March April may time.

We got some of that in March, but we're expecting about the remainder of that they pushed to the later in the yeah.

So I think addresses the catch up I think on new high testing the last part of that piece of the catch up answer is that new hard testing I think is gonna be driven by how quickly hospitals get back to business is usually in terms of hiring and on boarding stuff.

The logistical advantages of ICRA I think it's too early for us to figure out how how meaningful that is but it certainly you an attribute that we are starting to bring up in cells cools and it's it's not just from the social distancing perspective. It's also the fact that isn't efficiency dynamic you know, it's going to be a lot of Penn.

Demand for healthcare in general as social distance and gets relax and anything you you as a physician can do to free up an extra appointment is good news and so it's certainly something we're going to gather and hit and albeit a comment I think when next call about how significant is turning out to be as a as a messaging tool.

Okay. Thank you for that.

Moving down the CNL Q1 operating expenses.

The investment you've made there I mean, there's actually inline with what we were forecasting prior to making any adjustments or the impact in coated.

[laughter].

You talked about.

Pretty quickly late in the quarter.

I'm just wondering are there specific areas that we should be cognizant of that youre planning to pullback R&D investment or specific sales and marketing initiatives and have you reallocate it any planned investments or development of a T cell based covert diagnostic.

Yes, so I think all the comments there. So I think a into Q1 <unk> is probably slightly higher than that the baseline of spending just because of some naturals seasonal expenses a full in Q1.

The way we've been approach.

She is that you know we have certainly been continuing R&D spend because of the these are projects that are not for the long term in nature.

And that the payback from those is as strong as they ever have a war and so it makes no sense to put those.

Those projects on hold.

So it can be continuing that yeah. The spend on the Cavatt T cell test right now is relatively small obviously if that if we start to get increasing conviction over that because it turns out that antibodies, Doug I indicated community and do it the science pans out on that then obviously that would become a meaningfully higher spend but all the see with I mean, you feel a revenue.

Expectation attached to it but it's just too early to just a comment on that right now.

What we're doing to offset those expense increases in R&D into something said in sales and marketing because we're continuing obviously to have been continuing to add resources in a in China.

You know from a sales and marketing perspective, it's too is to save on spending elsewhere, where it can be productive.

There are many such areas that we've been doing that in the company.

Great and.

And just one.

Oh, sorry.

No yeah, Doug I know I think Peter hit it I mean, obviously as you think about advertising travel kind of other discretionary costs.

Roughly.

Roughly two thirds of our costs are people related you still have another third that we can go and look at so we'll continue to be smart there as we get through twoq even into the back half.

Okay, that's great.

Okay, and one one last quick one and I'll get back into queue.

Just in the cognizant context thinking about it.

Inventory management and working person inventory, just given what's going on in the near term.

Can you just remind us what what is the shelf life of your products are on average just so we can can I have that variable click and collect the equation going forward. Thank you yet it depends on jurisdiction base between 12, and 18 months of <unk> yeah. Okay. Okay.

Thank you. Thank you. Thank you.

And thank you and our next question comes from Tyco Peterson from JP Morgan. Your line is now open.

Hi, guys. This is crazy on three Tyco. My first question is regarding T cells right could you give a sense of how cold it.

The impact would be expected timeline for years approval, maybe a any sort of clinical study push out nine any sort of yeah.

I don't know at the moment. Thank you for the question at the moment, our view is that hasn't changed at all.

I am line I didn't reach the fact that the the tail end of one other studies on truncated by Kobe <unk> at the moment, we're not viewing that as as material. We think we'll still the discipline.

With.

Slightly smaller sampling.

Yes in gross margin improvement.

Based on.

For Q, so maybe any any comments on that thanks.

[laughter].

Yes, I think I think absent the kind of one off inventory reserve that I had mentioned in my prepared remarks, we feel that.

Gross margin profile is still in line with what we've talked about at year end.

Obviously, there is going to be some minor dynamic around volumes and mix depending on the quarter.

But if I step back and look at the balance of the year, Yeah, we very much see a 76 plus percent gross margin profile.

Got it thank you.

I'm curious about given your strong performance in Europe and continued strength in.

In France.

I guess pretend Dan.

Hey could you talked about the key drivers they are what they largely driven by the implement.

Jason if automation.

Thanks, Angie ask a question quick question. So I think in Europe. The growth has been driven by three main areas UK, France, and Russia and the dynamics are all different in each of them. So.

In the UK, we've continued to be very very successful.

In building stronger and stronger links of public health in the UK leveraging on the accident. So as we've been delivering.

The in the Tenda.

That's what's been driving the Q1 strength, but it's also one of the reasons why the UK lab has suffered.

Significantly from Cobot 19, because obviously public health.

Oh resources in the UK and now focus away from TV owns cobot 19 at least temporarily.

In France, yes, it's being driven by automation.

I'm going to end in the third driver is right.

Sure, whereas really being driven by the fact that we've got a.

Some significant market opportunity to penetrate there.

Yes, definitely see that this is a global interest is rising in this and typically I know we're focused on T cell measurement not not through all the G four or five antibodies.

The purpose of T cell measurement would be too.

Indicate immunity, if it turns out that antibodies and not correlated with immunity.

So where the early stages right now so I prefer not to comment on timelines, because we need to get a little bit more evidence.

Before I can comment.

I think with great clarity on telling us.

Okay and then just lastly from me was wondering if you.

Might be able to provide additional updates on some of the I pad development.

Development opportunity underway I can't see Andy.

Hi Tech and you know other potential.

Opportunities for the feature.

Yes, so CMV we all.

In the process of if you recall will need to go through a regulatory approach approval process in the U.S. CMV. So we're.

And going through the work of figuring out the right pathway, there as well as figuring out the pathway to reimbursement so that we can get.

Something like value based reimbursement in the U.S.

We are expecting a read out on those pieces of work, even not too distant future at which point, we'll make a decision about the commercialization pathway and timelines for CMV.

Other than CMV, we continue our work on.

Welcome entering our TV products, not just through automation, but through some other things we're working on there which for competitive reasons, we're not going to go into great detail on but we continue to focus a little renting the TV programs.

Okay, great. Thank you.

Thank you.

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Good morning, ladies and gentlemen, and welcome to the Oxford in you know trip at first quarter 2020 conference call as a minded as complex as being recorded.

It is now my pleasure time to call over to Matt Mclaughlin Chief Financial Officer. So please go ahead.

Good morning, Thank you for joining us to review, Oxford Immunotecs natural.

Results for the first quarter of 20 2020.

Before we begin I'd like to caution unless there's that comments made in financial information provided during the conference call include certain statements that are estimates beliefs forward looking indoor subject to various risk uncertainties.

Statements made during this call that are not statements of historical or current facts are intended to be forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

We want to emphasize that such forward looking statements reflect our current expectations assumptions and currently available data.

Neither predictions are guaranteed to the future events or performance actual results can differ materially from those faded implied by these forward looking statements due to risks and uncertainties associated with our business.

Including those under the heading entitled the rest.

Factors in our annual report on foreign 10, Okay for the year ended December 31st 2019.

Subsequent reports.

Who they are quarterly reports out a form 10, q., including the form 10, Q. being filed today and our current reports on the form eight k.

In addition to they will make a number of comments about our expectations for the coven 19 pandemic on our business. We provide these comments to give investors insights into what were your observing however, given the dynamic nature of the pandemic. There's a high degree of uncertainty around any forward looking statements made.

The company disclaims any obligation to update or revise any forward looking statements, except as required by a <unk>.

During the call will also referred a certain financial information.

We believe that non gap financial measures taken in conjunction with gap financial measures provide useful information for both us and investors to evaluate the company's performance.

These include Council currency comparison special form of revenue gross margin Wall Street, continuing operations eat it down adjusted even <unk>.

Reconciliations between certain gap and non gap results such as either down adjusted even <unk> are presented in the tables accompany earnings release, which can be fine.

Oh I'm sorry.

Further as a reminder, in early November 2018, we completed the sale of our U.S. Laboratory services business to quest diagnostics.

S. Dutch the now divest at U.S. Laboratory services business is shown is discontinued operations and the historical financials in our press.

At least in forthcoming form tents you.

With that it's my pleasure to turn the call over to Oxford, Immunotecs, Chief <unk>, Chief Executive Officer, Peter Writing Smith.

Good morning.

That's cool if you have all breaking performance the first quarter of 2020 before turning to an update on I'll business loss, which is your <unk>.

Not well then take over to discuss our financials before hunting Nicole back to me to discuss the near to I'll look for a business in like 19.

Well, then open up a lot to your questions.

For the first quarter of 2020, we posted revenues of $13.9 billion in line to the guidance we gave in March.

U.S. revenue.

$5.7 million I was expected U.S. revenue would opt sequentially from Q. for the <unk> seven European.

Yeah. It was impacted by revenue mix and plans d. stocking if inventory levels by quest as previously discussed.

You're from it.

The World revenue was $3.1 million I was up 13% compared to the first quarter of last year or 17% on a call from currency buys.

Yes.

Highlights in the course I will continue to strong growth from the U.K., France and Russia.

I think expected I use your revenues with decently weekend, the quota exacerbated by reduction in consumption Juge Corona virus.

Revenues of $5.1 million for the first quarter went down 22% from the same period last year or 21%.

C basis.

We get shipped some kids to China to maintain stock in the market depending on now success.

Oh you registration.

We continue to post strong course margin numbers. Despite the temporary volume headwins from the Crow divorce with Q1 gross margin coming in the 74.1% off about 270 basis points in the project period.

Let's take a few minutes to talk about the impact of the kind of it 19 pandemic on the business of what we're seeing in various countries.

Firstly, all off thoughtful safe and well we've had limited cases of illness absence from work off the off of working in line with government guidance and all various jurisdictions without offered did not need to attend all facilities working from home.

We have in many instances put in protective additional protective measures over and above government measures and we've intimate social distancing meshes for those employees you need to working off cities such a split shifts to allow natural firebreaks should we be unfortunate enough to have a symptomatic case.

<unk> implemented the number of I.T. solutions to enable high working and maintain high levels of collaboration and communication.

Software all is good.

People are busy and Paul activity at the company's extremely high.

We've had no supply interruptions, we're continuing to manufacture and ship kits and continuing to process all putting all U.K.O.D. all of our tree.

We have good levels of stalk of raw materials work in progress unfinished good.

Consequently, we feel well covered in the event of any future disruption 12 supply chain.

We felt over 60 countries others, such we're seeing the pandemic play out across the world in terms of its effect on revenues.

Tossing first with China at the height to the locked down incomes free and use the volumes with down to 25% of wise to make it normal baseline.

We saw recovery in Baltimore.

Hover in April where volumes were up to approximately two thirds of baseline.

Domestic travel restrictions are being lifted to some extent and cost them to visit so now possible once again ball self fourth.

However, outpatient visits in China, I still significantly below normal both cue to unwillingness to go to hospitals.

Various restrictions placed around eligibility for appointments.

We can already believe that it will take until it back off of 2020 before we're back to the baseline volumes.

In Japan testing them, all and held up in Q1, but Japan that'd be relatively late in terms of putting in place social distancing measures I must awful to see these bike now.

<unk> April with down to about half of normal levels.

Q too is typically a season they stole peak in Japan is is the time for a lot of.

Okay, well could testing our expectation is that this will get pushed to later in the year would like to the pandemic.

Given the experience of all the countries what car an expectation is like giving it was one of the late that country into social distancing measures.

Pad will constantly be one of the loss to recover in terms of demand.

In the U.S. volume is a strong in January and February before starting to fall off in March as more and more states imposed sheltered mandates.

Based on public statements by question, others were expecting demands to be down to approximately 40 to 50 per cent of baseline levels before recovering in the second half a 2020 years restrictions get lifted.

In Europe and rest of wealth is clearly a lot for diversity based on each country's epidemiological situation.

Other countries, we've seen demand drop significantly when strict lockdown roles that being imposed.

For example, a U.K.O.D.L. lab is not running at about 20% of normal volumes, it's public health resources out deployed elsewhere, including suspension of the national tend to on L.T.B.I. screening.

Volumes for all European lap customers would down to between 20% to 50% of normal in April.

Therefore expensive significant impacting q. too and given the diversity of countries. We ship to in this region, we could find the rebounds to be slower in this region compared to others due to the fact that some countries will end to an x. at different stages.

The read through between them onto the ball kit revenues, it's complicated by the amount of customer stalk carried coming into this crisis that for our revenue recovery will also be influenced temporarily by health doctoral destocked countries will be as they come out of his.

The generally a good correlation between underlying them, all and and all shipments to customers, but there are a couple of areas, where we are sensitive to the possibilities of lacks an old is even if the monitor colors.

In Japan, why three being generally reducing stocking levels in the country.

Recently shipped initial stockholders to a new wholesaler as part of our strategies diversify channels that we may be coming into this a little over stalked, which could delay the recovery that are less all.

Japan's recovery is like in any case to be late to the other countries simply salt is locked out later than others.

In the U.S.S. previously discussed quest was aiming to take down they've been trained the first <unk>.

That's a possibility that despite much level orders in Q. to this plans. These talking takes a little more time to fully achieve.

You'd like to the many uncertainties over the end them on outlook and how in market current stock levels layer on to that in some stocking d. stocking dynamics and also because of the overlap uncertainties with respect to the global impact covered 19 generally when not in a position to give reliable revenue gardens.

How if I will comment later on or near a time expectations security revenues.

There's a lot of attention right now to how diagnostic testing to to find a way to relax social distancing measures and get our economy's back to something closer to know my let's see.

It's been a lot of discussion about the role that serology could play in that by understanding who's been exposed and carries immunity.

Yet speak confirmed that the presence of antibodies correlates with immunity if Kobe at 1917 like H.I.V.O.C.M.V. viral infections that then antibodies will not be informative and indicating protective immunity.

In that case, it will become necessary to test for T. cell responses.

You've already been approached by several <unk> groups requesting that we join them in investigating the potential role of a t. cell based covet 19 test based on all T. support technology.

Just beginning well.

On that subject.

There's lots to learn about this virus and immunity, we'll keep you posted the material developments as we look for these collaboration.

What was standing the understandable focus on Corona virus right now this pandemic will be temporary and whether the pay three believe that the outlook for T.B. testing would remain as strong if not stronger than it was before corona virus.

There were several reasons for this.

We know from history that whenever T.B.S. neglected as it's being right now it Unfortunately comes back with a vengeance.

Just get on diagnosed transmission accelerate some check.

It can expect there'll be a price to pay in terms of new cases, and contact tracing ones public health resources are again able to focus on things other than covert 19.

It's it's formative to the World Health organization as expressed his concern over the dangers of neglecting T.B. screening in the covert 19 pandemic a notable that it W. show also reaffirmed its commitments to T.V. preventative screening and treatments for the issue and set up they could guidelines last month.

We believe it unlikely that there'll be an increase in public health funding in general as governments painfully reload the import public health staffing funding and infrastructure and protecting populations.

As T.V.'s, a leading cause of death from infectious disease any increase funding for public health will likely benefit T.V.

<unk> on T.B. testing programs.

One of more specific level, there's only evidence at the presence of T.B. may increased susceptibility to cope with 19 morbidity.

If proven this could provide a rationale for stepping up T.B. testing of infected patients and those with possible exposure to cope with 19.

We're also talking to see some shift in behavior with the T.B. testing programs. The skin task requires to patient visits and then a world what we're trying to eliminate unnecessary into personal contact we've seen several instances off and recommendations to use a blood test instead of the skin test.

This could provide another tailwinds for the long term trend of replacing the skin test with mobile technology like all t. spot.

You can test.

The T.V. vaccine cool P.C.G. 800 investigation as a possible vaccine, which you susceptibility to cope with 90 infection if proven in D.C.G.S.

Rolled out widely as a vaccine strategies against covered 19 that would provide another story, but to adoption of all tested the skin tested become highly problematic given it produces false positive results.

Perceived to be G. vaccine.

That's a consequence of these factors were extremely confidence in the long term demand outlook for all test.

Therefore, weiss being mindful of all packs and wait conserving capital where appropriate we are choosing to continue to spend in areas. We believe what maximize all growth and success as we come out of this.

As a reminder, especially to grow up T.V. revenues is across three factors firstly by converting from a skin test the market is only about 20% converted from the skin test <unk> technology. We continue to drive this conversion for the expansion of sales marketing and medical Affairs resources.

Hated by guidelines are becoming ever more favorable Tigers.

Secondly from overall market growth T.B. testing is continuing to grow the well six to go to control the T.V. epidemic.

Led by bodies, such as the World Health organization, he's newly updated L.T.V. like guidelines should clear evidence for the benefit of systematic testing and treatment to L.T.B.I. and support like for testing globally fabrics populations.

<unk> expanding our market reach so as to benefit from this trend.

Lofty by taking share from I go competitors. We currently have about 25% of the lycra markets. Although we've shown that we can become a leading brands in several countries on the basis of differentiated performance and simpler preanalytical work flow.

We're not able to strengthen the office with providing automation and improved economics to labs.

We continue to make progress Lucky initiative to support strategy.

Firstly, we continue to work on delivering automation and Q. why don't we completed installation to the midst a high throughput system isn't opinion, leading French customer displacing a competing essay.

<unk> routine use and performing well.

We've made good progress all U.S. trials F.D.A. approval, although the tail end with interrupted by type it 19 in juice like closures.

The process, if they to clean up and analysis and we'll talk to anticipate launched timings once we submitted.

Have received feedback from the agency.

We continue to make good progress on a very high throughput system.

Working towards providing automation there large other jurisdictions.

As we previously communicated a major focus has been on sales and marketing expansion, especially in China, where he's been in transition to a new business model away from our <unk> exclusive distribution partner.

Whereby we take more direct control of a sales promotional unlock development activities.

That transition continues to progress well, we've retained a high proportion of all and use a customer through the transition.

More recently, adding new customers and channel partners.

Pricing is coming in line with our estimates, but it will take some time for right for revenue mixed to stabilize and therefore for us to know where pricing finally settled out.

Operational side of things are running smoothly with importation by Shanghai Pharmaceuticals, and subsequent contracting and shipment and use the customers working well.

As we recently announced we've now uptight, we registration of our product in China.

As a clause three medical device China's medical device regulations require a company apply to the national Medical products administration, and M.P.A. <unk> <unk> TB every five years. The latest Preregistration follows a significant review by the N.M.P.A. I didn't overseas such inspection of the company's Oxford U.K. manufacturing facility.

Despite the delays and obtaining me registration we've been able to continue to supply the market with kids already in stock and country.

Obtaining we will we registration of all test for the first time using our own China in U.K. based regulatory team does is relying on a partner is a significant achievement I Miss closes the final stepping completing our transition to this more direct commercial model in China.

With the transition behind us and the <unk> country opening up somewhat we're now focused on driving trucks in the market three bucks account wins as well as deep penetration of existing accounts.

<unk> through all crying sales and marketing technical service and medical Affairs teams.

The opportunity in China is off that we'll be looking to add more resource to the market as we can demonstrate success with awkward strategies.

So it's commercial partnerships, we continue to focus on a successful relationship with quest to to keep calling us that accompanies the United States.

You know what principle rationale for the transaction with quest was to significantly increase the reaching competitiveness off t. spot T.V. in the U.S. market, we're now seeing their strategy bearing fruit.

However, the corporate 19 pandemic has interrupted the integration plans.

Unfortunately delay the full benefits the partnership being realized until I was covers you.

Nevertheless, we continue to believe in the value of the partnership to both parties I look for completing the remaining integration steps as soon as practical.

We continue to invest in programs to reduce the cost of goods. Both to continue our long term trend of course margin expansion as well, let's provide us with more pricing flexibility as we seek to penetrate more if the global market.

We're now gaining the benefit of projects undertaken to increase batch sizes I think g. One we also obtained f. gay approval for two amendments, which will allow us to roll out caucus improvements to the U.S.

We also continue to build solid foundations to support the company's gross the plant capacity expansions and the Oxford facilities as well as the relocation of all to Massachusetts sites into one small aside continue to progress.

We've also initiated the project replace a antiquated operating financial system within you Oh, Y'all P. system, which will wants implemented give us new analytics and bring multiple efficiencies to cover and processes.

So despite significant disruption from the carpet 19, pandemics accompany nonetheless continues to execute want as long time crooks agenda.

Before I had it over to Matt I'll, just like to comment briefly on a balance sheet Oh shit by by plans.

I've I've already outlined as soon as a scared of the pandemic became clear we set up a plan to have the company weather the storm come out of the other side more strongly.

Having the ability to tweak the parameters of all tend to be five one plan for the purchase of the company shares. We took the decision to terminate this specific training parameters of our existing that'd be five one plan.

I know this news will be disappointing to some of our shareholders and so I'd like to explain the reasoning behind the decision.

When Crow divorce was first hitting we have to contemplate various scenarios each of which implied significant risks to cash utilization.

That was Ben and they're still remains now considerable uncertainty over the near term outlook for the company's revenues duration and extent at the drop in demand for the company's product. So the direct implications how much cash that company needs to continue to fund its operations.

Outside of revenues there are many derivative impacts of the coded 19 pandemic on oil companies, including all the.

Pandemic has for example, <unk> already given rise to multitude of business continuity risks, which so far we've managed without too much expense.

I'll primary concern here with a salt and see if some of our supplies you'd like critical raw materials fraught tests should they be unable to continue the operations we into it would be unable to manufacture kits for prolonged period of time over at all which would present a business continuity issue.

We wants to preserve some balance sheet flexibility to intervene in this situation to allow us to prevent such a situation from a rising.

On top of this we have to contemplate the risk of not successfully get any registration in China in a timely manner why should be viewed this is low risk. It was not zero risk and have that it could it would have significant <unk> increased all losses.

We needed to ensure that we had enough cash for the company survive any of these scenarios.

If we took this decision not just the defensive reasons, we've used a strong balance sheet of the company as a strategic tool that can be leverage to maximize the long term success of the business for example.

Yeah, we all knowledge intensive business and we have invest significant sums in recruiting and training talent, which is difficult time consuming to replace and we want to to retain as much of a highly talented workforce as possible.

We wanted to keep investing in the business what'd competitors are distracted or through liquidity constraints on able to.

Oh teams on maintaining high productivity would we believe the projects we are prioritizing such as automation, a new product development will lead to value creation for shareholders over the longer term.

So why should we understand the capital markets advantages of repurchasing stock at today's prices.

<unk>, we have to balance that against ensuring the capital adequacy of the company in unprecedented and still very on certain circumstances.

<unk> maximizing that grows profile of the business evaluation of the longer term.

We have the ability to receive the by by program at any time subject of course to regulate trade restrictions.

I'm really proud of how the company's rising to the challenge presented by cope with 19, and how the company's maintaining productivity.

Listening itself along some gross that's about as the pandemic hopefully it bites.

All that how that I've. It tomorrow I'll give you some more detail comments and all financials.

Thank you Peter.

A full gap results is shown in our press release issue today show the comparison of R. Q1, 2020 with Q. on 2019.

Total revenues in the first quarter of through 13.9 million were down 6% versus revenues unless you want to 2019.

You'll know for the first time, we don't break out service or product revenue. This is because service revenue is in is expected to remain below 10% of our total revenues will therefore now just <unk> report total revenue incorporating both product and service revenue.

Breaking down our revenue.

Basis, U.S. revenue was 5.7 million, representing 41% of our revenue.

Revenue was 5.1 million, representing 36% of our revenue in Europe and rest a world revenue was 3.1 million representing 23% of our revenue.

[noise] turning volumes in the first quarter, we sold over 300000 T.B. test in the U.S. vehicle sales.

Almost 400000 tests in R.O.U.S. region, both via kit sales and test processing or U.K.O.D.L. service business.

Gross profit for the quarter of 10.3 million was down 2% from gross profit in the prior your period.

Overall gross margin for the quarter was 74.1% an increase of about 270 basis points from the prior your peer review.

Given the change in or near term revenue assumptions reserved for some in the story at risk of getting expiration date. If if you can't be sold me so absent that reserve gross margin would've been 76.6%.

We continue to see strong gross margin performance driven by favorable A.S.P. changes in manufacturing cost reduction efforts were also benefiting from the roll off of royalties as we move to protecting our products through company generated I.P.

Turning operating expenses.

Operating expenses increased 21% from the prior year period to 16.9 million sales and marketing expenses increased the 7.2 million, primarily driven by growth in the pack region and our transition to more direct model in China.

Research and development expenses increase the 2.7 million [laughter] due to timing of both new in ongoing clinical studies, particularly those to support automation.

Channel one administrative expenses increased 7 million, partly due to the Nonrecurrence request T.S.A. income in the prior year period.

Operating expenses for the first quarter included approximately $935000 a share based compensation.

Not lost for the first quarter of 20 26 million compared to a net loss of 1.5 million in the first quarter of 2019.

Adopt for the first quarter of 2020 was five 5.2 million dollar loss.

Adjusted EBITDA, which excludes sharebased compensation, unrealized F.X. gains or losses and unusual items. If any it was also a 5.2 million dollar loss for the quarter.

Both <unk> and adjusted to keep it out or non gap measures measures turning into balance sheet, we finish the fourth quarter with a very healthy cash position of over $166 million.

During the quarter, we repurchased $7.7 million of our shares at an average price of approximately $14.57 per share, including commissions under our share repurchase program.

In the quarter, we also used to $5.5 million of cash in operating activities from continuing operations, primarily driven by the net loss and a quarter.

Oh now hand, it back to Peter who will discuss our business outlook.

[noise] sex map.

See considerable uncertainty for everybody over the business outlook for that reason will not be giving full year revenue guidance. However, I would like to make some comments on Monday to have outlook I think you too.

We're currently expecting Q.T. revenues to full between five and $6 million.

You show, we're expecting a sequential decrease which you one reflecting the continued impact of covert 19, it'll Asian markets.

In the U.S., we're expecting a shop sequential dropping revenues, reflecting the significant slow down into them, all and and cute you type in 19 as well as a continuation of quest he's talking.

In Europe rest of well, we're expecting a shop sequential drop perfecting the significant reduction in demand as many countries in Europe, and all rest to well territories are the start or simply maintain sexual distancing measures.

Based on my earlier comment tree about our expectations about the recovery volumes in various countries. We expect you to to be all lowest for the yeah.

Conclude softball prepared remarks someone out but not the lines of questions.

Thank you as a reminder, asked a question you'll need to print star one on your telephone. So Jolly you questioned press the pound key <unk> roster and once again that is star one if you'd like to ask the question and I first question comes from <unk> from <unk>.

<unk>.

Okay. Thank you good morning, and good afternoon, everybody and thanks for all the details remarks on how you guys are navigating perception on pressing that some time and good luck.

Peter Ah.

Based on your prepared remarks isn't fair to conclude that only 40 to 50 per cent of health care workers that would normally be screens using.

Spot are are being screen in the U.S. today, and and use it right to conclude that there's likely no catch up on these revenues and then then building off of that you acknowledge that clear logistical advantages the viper out versus <unk>, which have always been there but are particularly avenue.

So the pandemic <unk>, how meaningful can this tale wouldn't be and how should we think about the durability about dynamic.

Yeah, all great questions talking doesn't thanks for them. So in health care about because you know you you will recall that are kind of two types of health care about testing in the United States right, especially if it's you hot testing, which is the majority of all volumes. It. It. It is clear all the see the hospitals and not being hard not to be in hiring significant because you'd be members of staff.

In fact in many cases hospitals are being following staff, who have been pause at the hospital, where they called be productive. So it's a new high volumes of obviously dropped off.

Annual screening, obviously that is a smaller subset of the business under the circumstances I think we've seen that a lot of that's been <unk>. If it's happening at all so I think that that that maybe a little bit of catch up in health care worker testing just stepping outside the U.S. <unk>.

Oh, we clearly thing that's going to happen in Japan way typically will happens in that kind of March April may time Ah. We got some of that in March for expect him to about the remainder of that to push to that later in the yeah.

But I think addresses the the cat shop, you know I think on you Hot testing with lost it as a piece of the catch up on three is the new Hot testing I I think is going to be driven by how quickly hospitals get back to business as usual in terms of hiring an on building stuff.

The logistical advantages of <unk>, you know I think it's ability for us to figure out how how meaningful that is but it certainly you an attribute that we are starting to bring up in sales calls <unk>. It's it's not just from a social distancing perspective. It's also the fact that it's an efficiency dynamic.

There's going to be a lot of pent up demand for healthcare in general as social distance and gets relax and anything you you are the position can do to free up an extra appointment. It's good news and so it's 70, something we're going to gather in here and I'll be at a comment I think of an x. coal about how significant turning out to be as a as a messaging tool.

Okay. Thank you for that just.

Moving down the P.N.L. she won't operating extent.

The investment you know there it was it was actually in line with what we were workout staring prior to making any adjustments for the impact <unk>.

<unk> you talked about.

Clearly and obviously wanting to be prudent what stand moving forward, but just keeping in mind what happened you want but also being mindful that but things changed pretty quickly late in the corridor.

I'm just wondering are are there specific areas that we should be cognizant of that you are planning to hold back to our M.D.N. best man or a specific sales and marketing industry bows and and have you reallocated any plans investments pork development about t. cell based Coca diagnostic.

Yeah. So I think <unk> comments that so I think you know <unk>, it's probably slightly higher than the that the baseline of spending just because of some natural's seasonal expensive folding Q1, the way we've been approaching it is that you know we we have certainly been continuing or do you spend.

Because of the these are projects are the naturally long so I've been nature and that the the payback from those as as strong as they have I have a wire in the set makes no sense to put those those projects on hold so if continuing that yeah. The spend on the coffee at T. cell test right now is relatively small obviously if that we thought.

Increasing conviction no over that because it turns out that antibodies don't indicate immunity and or at the size pans out on that then obviously that would become a mini for the highest spend but all the c. with a a menu for the higher revenue expectation attached to it but it's just too early to to to comment on that right now what we're doing too.

Yeah, offset those expensive increases in in in already into something set in sales and marketing because of where continuing obviously to have been considering died resources in a in China from a sales and marketing perspective is to is to save on spending elsewhere, where it can be productive.

Such areas that we've been doing that in the company.

Great and you can just one.

Oh, sorry.

No yeah, Doug I I know I think Peter hit it I mean, obviously is you think about advertising travel kind of other discretionary costs you know roughly.

Roughly two thirds of our costs are people related you still have another third that we can go and look at so will continue to be smart, there's we get through two q. in in in the back okay.

Okay, that's great and one one last Ah click on and I'll I'll get back in the queue.

Mmm just didn't the <unk> context, thinking about inventory management, and and working person 10 minutes or just given what's going on in the near term.

Can you just don't mind, that's what what is the shell like <unk> on average just so we can have that variable plus the collect the equation looking forward. Thank you yeah. It depends on jurisdiction based between 12 and 18 months <unk> yeah. Okay. Okay.

Thank you. Thank you. Thank you.

And thank you and our next question comes from Tyco Peterson from J.P. Morgan reliance no open.

Hi, <unk>.

Yeah I go my first question is regarding tease her correct could you give it depends on how.

Impact your D. expected timeline three years <unk>, maybe any sort of clinical study per shot.

<unk> any sort of yeah.

At the moment. Thank you for the question at the moment off you is that haven't changed the timeline I think they reach the fact that the tail end of one of the study truncated by cover it.

We're not viewing that as as material, we think will still be there simply with <unk> someplace that if that if that turns out to be true on will know that little bit more Olympics.

Cleaning and understand how many exclusions, we have from the data, but if if that turns out to be true then it wasn't impacts the this hotlines at all.

Okay, and then maybe one regarding gross margins can we expect.

The.

Once you have more gross margins that we saw your throughout the rest of the <unk>. The year I think you're tracking too around 100 deaths in gross margin improvement.

Based on Fort you, so maybe any any comments on that.

Yeah, I think I I think absent that kind of one off inventory reserve that I had mentioned in my prepared remarks, we feel that the gross margin profile is still in line with what we've talked about a year end you know obviously, there's gonna be some minor dynamic around volumes and mixed depending on the quarter.

But you know if I step back and look at the balance of the year. Yeah. We we very much see a 76 plus percent gross margin profile.

God. Thank you.

Thank you and ladies and gentlemen, if you have a question that's going to new Star one again, ladies and gentlemen, if you have a question that is going to be star one and our next question comes from some G. Nam from B.P.I.G.

Yeah.

<unk>.

Thanks for taking a question ways that curious about keeping your strong performance in Europe and continued strength that yeah in France, I guess pretend that it could you talked about that he tried resale within like me driven by the implementation about nation.

Thanks Energy. It's good questions quick question. So I think in Europe, the growth it'd be driven by three main areas UK, France, and Russia, I'm a dynamic several different in each of them. So in the U.K.. We've continued to be very very successful in building stronger and stronger links with public health in the UK leveraging the accident. So.

Weeping delivering in the in the 10 not supposed to be driving the Q1 strings, but it's also one of the reasons why the U.K. lab is suffered a significantly from type. It 19, because obviously public health resources in the U.K. and now you know focused away from T.V. on side of it 19 least temporarily.

In France, yes, it's being driven by automation I'm Gonna and then the third drivers, Russia, whereas really being driven by the fact that we've got a.

Significant market opportunity to penetrate that to a compliment if not replace the skin test and a variety of patient groups that.

Okay great.

And then L.O.I.D. <unk> 19, allergy testing cricket talked about what the timeline couldn't look like for that and also you said you mentioned that you're being approached by several groups.

But the comment whether or not either coming at some.

From all over the world or from that certain region.

Yeah definitely see that this is a global interest is rising in this and typically I know we're focused on t. cell measurement <unk> antibodies I'd be purpose of T. cell measurement would be to indicate immunity. If it turns out that antibodies and not correlated with immunity.

So you know with you already stages right now so I would prefer not to comment on time lines, because we need to get a little more evidence before I can comments I think that's great clarity on toddlers.

Okay and then just last me from me with wondering you might be able to provide it's not date I kind of the I pod.

<unk> and your way [laughter] E.M.D.

Cats, and you know either potential Pat <unk> feature.

Yep, so seeing the we are in the process of if you recall, we'll need to go through a regular chip <unk> approval process in the U.S.C.M.B., so where in going through the work of figuring out the right pathway that as well as figuring out the pathway to reimbursement. So that we can get something like value based reimbursements in the U.S.

We are expecting a a readout on those pieces of work if adults used in future at which point, we'll make a decision about the commercialization pathway and time lines for C.N.B.

Other than C.N.V., we continue I'll work on augmenting all T.V. products, and we'll just through automation, but through some other things are working on their which for confessed of reasons, we're not going to go into greater detail on but we continue to focus on open seeing the T.V. programs.

Okay, great. Thank you.

Thank you and I'm showing no further questions out now like to turn the call back over to Doctor <unk> for closing remarks.

Yeah, I think you will for joining us to discuss first call to 2020 results. We look forward to update you on X. quarterly cool.

Thank you.

And ladies and gentlemen, this <unk> today's conference call thing you participate you may not just <unk>.

[laughter].

[laughter].