Q3 2020 Quidel Corp Earnings Call
Excuse me, ladies and gentlemen, this is the operator today's conference call is scheduled to begin momentarily until that time. Your lines will again be placed on me as a cold. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by welcome to quite <unk> Corporation third quarter 20 Journey earnings Conference call. At this time all participants are in a listen only mode. Later instructions will be given for the question and answer session it'd be anyone has difficulty hearing the conference. Please press.
Storage zero for operator assistance.
Now I'd like to turn the call over to Mr. Rubin or get it quite else director Investor Relations. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining todays call with me today is our president and Chief Executive Officer, Doug Bryant, and Randy Stewart, Our Chief Financial Officer.
Our third quarter 2020 earnings release is now available on our IR dot quite L. Dot com, our Investor Relations website.
We will also post our prepared remarks on the presentations tab of our IR website. Following the conclusion of this call.
On October 29 for a period of 24 hours.
Please note that this conference call will include forward looking statements within the meaning of federal securities laws, including our anticipated revenues for Q4 2024.
Forward looking statements by their nature involve material risks assumptions and uncertainties.
In particular, our expectations and assumptions around the impact of the COVID-19 pandemic on our business results of operations and financial condition and that of our suppliers customers and other business partners are uncertain and subject to change many.
Many possible that's for factors could affect our future financial results and performance such that our actual results and performance may differ materially from those in the forward looking statements.
For a discussion of such factors. Please review quite Els. Most recent annual report on form 10-K, including the section titled Risk factors registration statements and subsequent quarterly reports on form 10-Q as filed with the FCC.
Furthermore, This conference call contains time sensitive information that is accurate only as of the date of the live broadcast October 29 2021.
<unk> undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call, except as required by law.
Today quite old released financial results for the three and nine months ended September 32020, if.
If you have not received our news release or if you would like to be added to the company's distribution list. Please contact me Bobby 6468 zero to three.
Following doug's comments, Randy will briefly discuss our financial results.
Open the call to take your questions I'll now hand, the call over to Doug for his comments.
Thanks Reuben.
And good afternoon everybody.
Welcome to my 47 himself.
Consecutive quarterly earnings call.
I hope that you and your families are well I'm safe during these challenging and uncertain times.
At the moment America faces the prospect of a third wave of COVID-19 infections.
As indicated by a rise in the number of daily cases, now up to 23 infections per 100000 residents.
The spread of the novel crowd of ours has migrated from metropolitan centers to suburban areas and even to the countryside. The weather is getting colder.
In a flu season, it's still looming as we face.
Central for a third wave and then another rising infections, our company understands the need for increased testing and.
Continues to rise to the challenge in the fight against Kobe 19 bikes.
By expanding access to affordable highly accurate diagnostic testing.
Throughout our communities.
I couldn't be more proud of our people.
Deemed essential as well as those working from home.
With the way that they have in body to quite dull spirit through.
Through dedication determination perseverance singular focus quick problem solving ability and a team first mentality all the qualities that are a bedrock of our company's culture.
Allow us to tackle a challenge like cool that 19 at all.
We had a record quarter in terms of revenue consistent with our Preannouncement.
And a record in terms of profit for the quarter.
To be efficient I'll, let Randy provide more detail on.
Revenue and margin in a minute.
Sure the revenue drivers for Q3 at a high level and what we can expect in Q4.
First the rapid point of care operations and supply chain teams and San Diego exceeded expectations line two is converted at the Sars.
And as your production and the nasal phone swab issues that slowed the kitting process has been resolved, which together enabled us to reach the level of 2.1 million Kitted Sofia Sars antigen tests per week.
We believe we can sustain.
Sustain that level of production throughout the fourth quarter well.
While shipments in Q3 of Sofia influenza should have been and were lower than in the prior year quarter.
We have manufactured and shipped several million dollars reverse or fee influenza tests already this quarter as well as several million dollars over Sofia APC combination tests, we expect at this point to move to 80% AIDC combination tests, and 20% Sars antigen test and December.
We placed approximately 5000 Sofia two instruments in Q3.
And expect to exit the year with about 75000 analyzers on the ground.
With recent increases in instrument production, we expect to satisfy most of the pent up demand from the traditional laboratory segment.
By the Middle of Q1, 2021, and can then began providing instruments smart routinely to newer market segments and opportunities which are ambitious.
I will mention quickly Sars, managing when I talk about pipeline, but we're expecting a meaningful revenue contribution from this new product in Q4 as well.
Second the molecular operations and supply chain teams in Athens, Ohio were rock solid in Q3 and poised to both meet increasing demand for lira Sars in the fourth quarter and.
And to ramp up production of slot of Sars following eway clearance from the FDA for that new product.
Third quarter revenue of Lira, Sars driven by orders from just over 120, North American customers and.
In a handful of international sites was better than we had suggested.
And fourth quarter Lira, Sars revenue looks to be about a third higher sequentially.
We're expecting a meaningful revenue contribution.
From slide Sars in the fourth quarter as well in terms of our ongoing cope with pipeline, we will go into some detail at our Investor day.
Which is scheduled for November November 12.
The meantime.
Here are a few high level notes first in Q4, we expect to launch or associates are all GNC.
Another first of its kind into a limited number of sites to do studies with the intent to demonstrate the clinical utility of a point of care Fingerstick combination assay that test for DG antibodies to the nuclear capsid protein into two distinct epitopes Thats wanted us to.
Like protein.
In just minutes. We also expect to launch quick few Sars, which promising Lee has shown similar performance in terms of agreement with PCR Sofia Sars and Jim.
We are executing on a plan that should get us to a manufacturing capacity at 50 million Quickvue Sars tests at some point.
Per month and 2021.
In terms of molecular products, we are expecting to launch a lot of Sars and lira APC in Q4, initially we intend.
To manufacture about 1 million Salon, a sars tests per month for about 700, or so of our existing slot of customers each.
Each salon instrument can perform 12, Solana Sars essays at once and 25 minutes.
The data generated by the Salon of Sars isothermal molecular assays show remarkable agreement with extracted Pcr weak.
We expect that demand for a more complex assay with the speed and performance to be quite high.
In terms of our core business and pipeline I'll save that for the Investor day.
Which should allow more time for your questions today.
During our time together on November 12, a few members of our executive team and I will cover three topics first I will take you through what our long range plan looks like before calls it a plan that resulted in 12% compounded revenue growth over a six year period.
Provide an overview then we'll jump into the details Dr. tenure, and Ali and Dr. honest Kayla will bring you up to speed on the savanna program as you'll see Savannah is destined to become the next flagship product for quite a while and is expected to be a key growth driver for the company.
Our punching way above our weight, but this company was built for what we're doing today, we have extraordinary strategic technical and commercial competencies.
And the ability to scale the much greater heights, and most important we are happy Randy.
Thank you Doug.
Good afternoon, everyone.
As Doug stated, we had another very strong quarter that exceeded our own expectations.
Our employees have truly risen to the COVID-19 challenge by delivering new products to market and continuing to expand production for newly launched COVID-19 antigen and PCR products.
Making a profound difference in people's lives and livelihoods through the dedication and hard work of our organization we've positioned the company for a strong end to the year and beyond.
As reported total revenues for the third quarter of 2020 or $476.1 million. This compares to $126.5 million in the third quarter of 2019.
The 276% increase in revenue was driven by significant growth in our rapid immuno assay and molecular categories driven by considerable demand for our COVID-19 diagnostic products.
We did realize minimal declines in demand for the cardio metabolic and specialized diagnostic solutions product categories.
Foreign currency had a positive impact of $500000 in the quarter.
Rapid amino assay product revenues increased $294.5 million to $337 million in the third quarter of 2020 with.
Within this category Sofia products grew 303.2 million to $331.9 million of which $317.9 million was attributed to Sofia sires antigens sales.
Quickvue product revenues decreased 8.7 million to $4 million.
In September we did not realize the ramp up of distributor purchases of influenza strep and RSV heading into the respiratory season as we have seen in previous years we.
We intentionally prioritize our production and shipments towards the Sars antigen test.
As a result influenza rapid immuno assay revenue was $7.9 million was approximately 90% of that revenue derived from the Sofia platform.
For the cardio metabolic immuno assay business revenue was $64.8 million, a 3% decrease versus the third quarter of 2019.
More importantly, this category was up $10.6 million sequentially and we are optimistic that the cardio metabolic category has stabilized.
Of the $64.8 million in revenue in the third quarter $32.77 million was derived from the tree us business and $32.1 million from the Beckman BMP business.
Year over year, the revenue decline was realized in two of the three major geographies Paul.
However sequentially growth was observed in these three major geographies, a very encouraging sign.
Revenue in the specialized diagnostic solutions category decreased 10% or $1.2 million in the third quarter to $11.2 million, mostly driven by a decline in our respiratory products from our cell culture business.
Our molecular diagnostic solutions category increased $58.3 million in the quarter to $63 million driven by $57.8 million in sales of our lira and lira direct Sars Cove two products.
Despite these being gap filling products from the sense of fees reagents have no priority proprietary instrument and are used as a second or third option. We are seeing good growth from these products and believe that we will continue to see added growth as more small and mid sized labs continue to bring PCR testing.
In house.
In the quarter total influenza revenue, which includes rapid immuno assay DHR respiratory and molecular diagnostics was $9 million.
Gross profit in the third quarter increased.
$307.8 million to $383.6 million and gross profit margin was 81%.
This improvement was driven by the demand for the Cyrus Cove to outpace which drove improved product mix.
In addition, higher volumes contributed to increase manufacturing overhead absorption.
In the third quarter as in the second quarter, we realized a significant improvement in our profit profitability profile because over the short term, we do not incur material variable operating cost increases.
In the third quarter total operating expenses measured as a percent of revenue declined by 28 percentage points versus last year and sequentially sequentially declined by 16 percentage points to 16% of revenues, helping improve our operating income in the quarter to 65% of revenues.
We see this trend continuing into the fourth quarter as well.
We continue to invest in R&D with the goal of launching additional COVID-19 diagnostic assays advancing on our Savannah. So.
So the China initiatives as well as introducing knows new Sofia out safe and next generation platforms.
Such as our internally named projects Sniffles.
We will also continue to invest in our sales and marketing organization as we expand framing in new markets, such as nursing homes, and occupational health and significantly broadening our customer base.
For the full year, we are currently estimating R&D spend to be in the range of $80 million to $85 million and our DNA spend for the full year should be in the range of $65 million to $70 million.
And number quarter, we recorded a 10.4 million dollar loss on extinguishment of debt.
This was the result of retiring in cash $5.9 million in principle of our convertible notes.
The current principal outstanding balance on the convertible notes at $6.8 million.
As it relates to the provision for income taxes, we recorded 63.5 million an income tax provision in the quarter and the effective tax rate was 21%.
All items adjusting our tax had an insignificant impact, including discrete tax benefits from excess stock compensation.
We are currently estimating a full year effective tax rate between 21 and 22%. This rate is approximately two percentage points higher than previous estimates due to the increase in pre tax income versus prior years.
We successfully completed this quarter, our contract with the NIH and supportive increasing our manufacturing capacity.
The total contract value is for up to $65 million.
The contract has a performance period of one year, beginning July 2020, with key deliverables and milestones that would directly support. The addition of new immuno assay manufacturing lines as well as outfitting a new distribution center.
As part of the agreement the company will provide to NIH Sofia, two instruments and COVID-19 assets.
As of the end of September we had $77.5 million in cash and cash equivalents.
During the third quarter, the company generated $70.5 million in cash flow from operations. This number would have been larger had it not been for the approximately 244 million dollar investment and accounts receivable and inventory as we accelerate our growth to support increased production of Sars assays.
In the quarter company also invested $22.7 million and capital expenditures.
At the end of the current fiscal year, we anticipate having an excess of $500 million in cash on the balance sheet, no convertible debt outstanding and no outstanding balance on our revolving credit facility.
In short we have a very strong capital structure access to credit good cash flow, which places us in a great position to support our future initiatives.
These initiatives include increasing our R&D investment strengthening and expanding our supply chain aggressively ramping up our manufacturing capacity and pursuing M&A.
And with that we conclude our formal comments for today.
Operator, we're now ready to open the call for questions.
Thank you at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key one moment, while I compiled documentary roster.
And your first question is from the line of Brian Weinstein with William Blair. Please go ahead.
Hey, guys. Good afternoon. This is Andrew Brackman on for Brian Thanks for the questions and for all the color Jim.
Just to start winning.
For housekeeping I may have missed this but did you give guidance for Q4 and if so could you just break down Sofia antigen as part of that.
We've said previously actually in the Preannouncement that.
Revenue for the fourth quarter will be at least $800 million, we've not broken out the contribution.
Sofia serve as an engine or the APC product, but I can tell you that.
We do anticipate manufacturing on average around 2 million tests per week.
And that would be inclusive of all the products so whether it's the combination assay.
Or Sars engine only the total would be 2.1.
Sprue million tests per week.
Okay. Thanks for that and then recognizing it's the end of October and a number of cross winds to consider but as we sit here right.
Right now in thinking about 2021, the outlook there so we'd be assuming sort of demand for.
Covert testing across your portfolio sort of persist at least through 2021 and then.
Along with that should pricing remained relatively stable.
It seems to be the question.
The day in the week Andrew.
I would say, there's not enough known yet about this virus about immunity.
In particular, we don't know enough about reinfection I could say, though that.
We're certainly being asked by a number of folks, including the government too.
To ramp up production to really high levels and so I think it's the expectation that this is going to persist.
Well beyond 2021, whether it's 2022 23.
I couldn't say at this stage, but at this point it feels to.
To me like this will not be in terms of the level of tests required.
Certainly until sometime in 2022 and beyond.
Okay. That's helpful. And then I don't want to steal your Thunder for a couple of weeks from now, but you know as we think about the end market dynamics here, how should we be thinking about the use case for antigen testing between symptomatic and asymptomatic testing sort of evolving over time, and I guess, along with that how should we be thinking about.
On any potential asymptomatic claims for your products here moving forward. Thanks.
So two questions in one there, but I see a symptomatic testing be coming more routine I think we're seeing in the pack tools on the Big 10, as an example comfort around daily testing.
And.
The desire.
On the.
Part of both conferences to keep their conti excuse.
Excuse me contact sport athletes safe.
And I think we're going to see data coming out of the University of Arizona that may be published sometime soon.
We'll see some studies that were working with the NIH that will be published as well. So I do think that as a country, we're going to get comfortable with the idea that even though I don't have symptoms.
Routinely testing is probably a pretty good idea, whether it's folks going to school, whether its grandma and grandpa who need to know whether they can safely.
Have their kids come visit whether it's.
Our employees.
Currently we are testing every Wednesday I.
Hi, guys swapped yesterday, I assume that I didn't get a call. So I guess I'm a negative.
But we're testing everybody who comes in here.
Every Wednesday and.
Right now the prevalence is low I guess, we have actually had one positive.
But we think that thats, what we need to do to keep our employees safe and I see that going on for some period of time, so a symptomatic testing.
Seems like a reasonable reasonably good strategy obviously.
Number of people who are.
Symptomatic could decline over time and that would be helpful, but I do see that.
Symptomatic testing is going to become.
Pretty important moving forward and.
We don't know what's going to happen on the serology fronts, we still don't know right.
Really with with the benefit of all that is at this stage, but we're going to learn more moving forward. So.
Thanks for that question Andrew.
Thanks, Jeff.
Your next question is from the line of Steven Moffat Piper Sandler. Please go ahead.
Okay, great. Good afternoon, thanks for taking the questions.
Sure Steve.
Hey, So maybe just to continue on this question about asymptomatic testing and I you know how big the market could be but you know.
You know as I start seeing university's doing a lot more testing back to work you see like Major League baseball spoke sports teams doing doing this more and it does seem like we are going to asymptomatic testing.
What do you think the sort of the run rate is going to be because I've heard a lot of numbers start out by think tanks that three to 5 million tonnes per day, but maybe give some color on what you think.
You know the run rate will be.
Yeah, I can only talk about the conversations we've had I can talk about.
Both domestically with the total market might be.
We certainly.
Have not spent that amount of time and frankly, I don't know for smart enough, but I can tell you that from the calls that we've taken.
And I've said this publicly before just if I might add.
Add up the number of tests being requested.
By different organizations, whether it's entertainment sports.
Large employers.
Just that.
Number of calls and some of that that adds up to about 685 million.
Test for a year or so.
Is that real.
I don't know I'm, just telling you that that's what we do know we've taken these calls from these types of people.
And.
Some people send us T shirts and hats.
All sorts of things trying to trying to get us to chat with them about how we could do this for.
$685 million is the number I have right now of who is requesting from me.
So do their testing.
I hope that's helpful. Steve.
Yeah, No. That's helpful. Yes, I did notice yeah. There was a 2 million to me a couple 2 million tests per day days, a couple of weeks ago. Okay. So my next question. It's a two part question.
More along the high throughput testing reimbursement you know seems on Medicare lowered the rate to 75 with a 25 dollar kicker if they can meet some performance parameters. So could you could you maybe address what you think the low if there's going to be similar pricing pressures on the low throughput side.
And then the second part of the question.
He considered pricing of your combo assay, which give us some color on on your thoughts on pricing.
Sure. So on the first question regarding reimbursement it is true that the laboratory reimbursement the folks who are being reimbursed for actually running the test.
It's going to.
Be reduced in some instances from 100 down to 75.
By the way just on that and I don't see how that has any impact whatsoever on pricing.
Certainly has had an impact on pricing on PCR tests at this stage when you think about it.
We've said before that we price our product into the end user market for PCR somewhere around $30 relative to the 75, that's still less than 50% of that reimbursement and when you look at our space generally over time, you'll see that typically you can pass the red faced test if your product is in that.
50% to 60% range relative to what the reimbursement is so in other words that leaves a lot of margin for the lab.
After paying for labor buying your product performing the test that still leaves a lot of margin for the loud so I see no impact.
The pricing there similarly, I wouldn't see any impact.
On the low end as well right now.
We certainly at $23 a test.
More significantly below what the reimbursement is so if the reimbursement were adjusted downward slightly I wouldn't see that that would have any impact there as well.
The end of the day, the the price in the market.
Today for these products isn't necessarily driven by reimbursement is just driven by demand.
And so there's no. There's no reason to look at price differently I think from our perspective relative to other competitors in the market we are priced appropriately.
We're at the low end and so I don't see any price pressure, particularly when you when you consider that we.
You know I know I'm biased, but I would suggest that Sofia surface antigen is the premium brands.
And so I think repriced.
About right. So I don't see any price pressure for us certainly I don't see it for the PCR folks either.
Okay.
And then comment on pricing on the combo, which was your second as we've said before that we are going to be an end user somewhere around $35.
Realize that net sales.
Would be lower as we would obviously pay a rebate to our distributors. So net net we would be.
Just under $30 I suspect.
Okay. Thank you.
Sure you're welcome.
Your next question is from the line of Alex Nowak with Craig Hallum Capital. Please go ahead Sir.
Great. Good afternoon, everyone. We've seen some big partnership announcements, Hey, Hey, Good afternoon, we said, we've seen some big partnership announcements with liquid gel and some others like but the Pac 12, and the big 10, but.
But I think the two places that that make the most sense to see associate every single store is somewhat like a cvs or Walgreens. So maybe not those two directly but could you just speak to any more of the retail oriented partnerships that you're in discussions with.
Sure Thats a great question, Alex you know, it's a logical place for Sofia.
Is a logical place for sniffles as well and we'll talk more about that at Investor day, but please remember that when we started this year. We said that we were going to do what we could do for the greater good to get testing democratized into the communities.
Closer to the patient.
Primarily at the onset to make sure that health care providers and first responders were being tested so therefore.
We felt obligated to be in the segment that we would call the professional segment.
Thats Hospital labs large.
Large clinics.
Urgent care and all those who logically could provide that testing to folks who really.
At the onset of all this actually needed the testing we were constrained as you'll remember Alex by the number of boxes, we were producing at the time.
We've now expanded our production from.
The instruments, we get from Australia to about 2500 a month.
And you would have seen that up.
So far from you all.
In Wisconsin, we are manufacturing.
As many as 7500 inside.
Instruments from US there so for a total of 10000.
We're nearly there.
We think we'll be at that level sometime in November and at that time as I said in my prepared remarks, we should be able to move into those other segments like retail. So you can imagine that we've been contacted by everybody that you can name.
And probably some that you don't even know about.
So we.
We do think there is a robust retail segment, we think we have a product that fits that segment.
Super well and we will be pleased when we can actually ship them the instruments that they're asking for.
Oh, that's great very helpful. And then expanding on the asymptomatic testing assuming routine asymptomatic testing does take hold clearly an at home test is going to be necessary you touched on it a little bit but can you just expand on what else plans for home testing how that product would work, it's going to be over the cow.
Okay, and then when we could see something last year by Codell.
Step one is the Quickvue Sars antigen approach.
Approval in the traditional point of care segment.
Very quickly after that we will conclude were in the at home segment. It is our intent to be in.
In that segment, it's one of the reasons why we feel like we need to make the investment to get to 50 million tests per month.
And we're highly interested I think its a.
It is a watershed moment in.
The evolution of diagnostic testing I do think moving forward that you'll see more and more at home applications for routine conditions and we want to be at the forefront of that so I do know that there are others that are interested in it.
They should be we.
We certainly are and we plan to be there as quickly as we can get there so.
So quick view will be our entry there.
And we are debating on Sniffles do you really want an instrument that system at home I suppose we could.
We do have one very large retailer that I won't name today that has been chatting with us about.
Our various instrument platforms, including Sniffles, and we'll see what transpires moving forward I, we're not at that stage, yet where we would announce exactly what our intent is recognizing that our transcript gets routed around to every one of our.
Competitors that there were so.
Describing the game plan today.
I'd love to but I think it's just a little premature.
No understood, but maybe ill ask when do you would you expect to get to a 50 billion run rate on a quick view, if you're willing to share.
I think there is some variability there depending on the rate at which our engineering companies can fabricate the equipment that we need we have placed orders were trying to find other folks that can scale to do the same thing it's not really.
Our effort or our timeline, it's more the timeline of the folks that are building the equipment for us we certainly have a an existing footprint right now that will accommodate some of that.
And I think we can get to 100 million Sestriere right away. So that's about 20% of what we need what we need is the remaining 80% and.
That's where we're at so I haven't named a months yet.
Just because we.
We have a plan I've seen the plan, we're executing the plan.
Can we pull it forward.
I hope so, but it will be sometime in 2021 or at that level.
That's great really appreciate it thank you.
You're welcome and let's say.
And once again, if you do have a question. Please press Star then the number one on your telephone keypad. Your next question is a friend of mine Jack Meehan with me Brian Research. Please go ahead Sir.
Thank you good afternoon.
Hey, Doug and Randy I was wondering if you could give a little bit more granularity just bridging from the third quarter to your expectations for the fourth quarter for some of the key products where are you expecting for you know the a b C test the amount of conversion towards that.
Do you have anything built in for quick view in the fourth quarter and Salon on the new assays coming in.
Yeah. Thanks Jack.
I appreciate that question.
Because we did say at least 800 million and so.
The first bucket is Sofia, Sars Sofia, ABDC and Sofia flu.
There again, we won't be making more than 2.1 million tests per week of any one of those are all of them. So the Max is 2.1 will spread it between those two obviously we've made some flu product we've made some combo product.
There will be demand, obviously for some people with legitimate reasons to run just the Sars product. So we're mindful of that for example customers that are serving the pre surgical market. They don't need to run flu. So let's not make them by a flu test but for folks that are symptomatic.
And the upcoming flu season, we're going to we're going.
And I hope to to persuade them to buy the combo product exclusively and merger we're planning on.
Even force converting if we if we have to a portion of the market clearly there are some folks that need to run Sofia flu exclusively.
Or separately, if you will that would be the Sofia one customers that haven't converted Sofia two yes. So obviously, we have an obligation to get those people instruments and.
And we will that's our intent so that's the major buckets of growth.
The cardio vascular business, we expect to be nearly back to what it was before all of this and I think we're going to do something in the mid Sixtys right, maybe 65 million or so is what we have scheduled for the fourth quarter, so that should be back.
In in line. Another big increases you may have heard on my prepared remarks is we're getting another third increase in terms of our sales of lira Sars. So.
I won't force you to figure the math out.
We should come in somewhere around $80 million for lira.
As well as you can see that's a pretty big lift as well and then we do have some new products Sofia, Surajit, which I wouldn't I wouldn't model a lot there.
Tend to do anything more than the studies that we need to demonstrate the clinical utility.
Of that particular product recognizing that we are testing for antibodies not only to the nuclear protein, but also to the to spike proteins. We think that's meaningful but we're going to need to show. It. So we're running those tests and then we're going to launch these two products Sofia Sars.
I'm, sorry quickie Sars.
And we do expect a meaningful contribution from that product that product is at the FDA under active review right now.
Salon Sars were in the final stage of the validation data that we need to submit to the FDA.
And we're expecting a reasonably big contribution there to an audience that already has the instrument and essentially knows it's coming so.
The timing of that will affect where we're at obviously, we risk adjusted all of that and that's how we get to 800.
So I don't think its going to start with a nine so let's not get carried away.
I think we're comfortably going to start with today.
Thanks, that's all helpful.
You know on the new product front would be great to get an update as to where.
Maybe the progress you've made since the second quarter on Savannah.
Well, we're we're really wants to hear.
I'm, sorry, Randy where he said no. He just wanted an update on savanna, which will give them a lot more detail analysts we will provide what I will tell you is this just briefly.
We have engineering competence build units.
We put those all the sub components through their paces.
The instrument itself is performing extraordinarily well.
We did have a little bit of a challenge with the drawer.
That receives the cartridge you can imagine you know remember the LCD days, where you put a CDN and you just touched the drawer pulls it in so you have a motor that actuated by you pressing.
You have to press a little too hard at.
And but we've changed that so we've changed the motor we've changed all that other than that everything else is going to move forward into the alpha units and it's those units were building now.
That will use in the clinical trials will be in customer sites and actually in some cases, they'll just keep those instruments.
And we expect to build 73 is it 73 analyzers that we will be doing clinical trials.
And at least three or four major sites throughout the country very early in the first quarter.
Sounds good and then last one follow up Jack when we talk to you on November 12, Okay.
Okay looking forward to that and Randy the build on balance sheet for accounts receivable do you think that I heard the commentary around cash flow for the year, but do you think that continues to build as sales expand or is there an opportunity that you know given your positioning in the market to maybe.
We pull that in a little bit and improve.
How about the Mckesson thing a little bit as well Randy because he had expanded the.
The.
Yes for a short time period tax we had provided some extra terms.
Our our distribution partners as they were ramping up as well.
Now has gone back to more normal terms, so we're going to get back to more normalized EPS on terms that are in that 45 to 50 day period. So that's where you know we will see as the DSL perspective reduction here between now and December.
Okay.
Thanks Rami.
Hi.
And that is all the time, we have today. Please proceed with your presentation or any closing remarks.
Well that's all we have for you all today I would just say thanks, everybody for your support and of course, you're interested in quite Dell.
We had an excellent third quarter as you saw we're expecting even better fourth quarter and we're in really good shape to achieve our growth objectives over the next few years, you'll see more detail on that on the 12 November and I'll just say, thanks again for being with me on my 47 earnings call.
Congratulations Doug.
Thanks.
All right well talk soon everybody.
Thank you ladies and gentlemen, we thank you for your participation and ask that you. Please disconnect your lines Goodbye.
[noise] Goodbye.
[music].