Q4 2020 Chembio Diagnostics Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Chem Bio fourth quarter 2020 earnings conference call and webcast. At this time all participants are placed on a listen only mode and we will open the floor for your questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Philip Taylor, Sir the floor is yours.
Okay.
Thank you operator before we begin let me remind you that the company's remarks made during this conference call. Today March 11, 2021 may include predictions estimates or other information that might be considered forward looking.
These forward looking statements represent <unk> current judgment for the future. They are however, subject to numerous assumptions risks and uncertainties many of which are beyond <unk> control, including risks and uncertainties described from time to time in <unk> SEC filings, including those under risk factors and elsewhere.
<unk> filings with the SEC.
Including its annual report on form 10-K for 2019 and its quarterly report on form 10-Q for the third quarter of 2020, and subsequent form 10, Qs <unk> results may differ materially from those projected <unk> undertakes no obligation to publicly revise or update any forward looking statement made.
I encourage you to review all of the company's filing with the SEC concerning these and other matters.
With that I'd like to turn the call over to Rick Eberly, President and Chief Executive Officer.
Thank you Phil.
Thank you for all of all you joining us today today I'm delighted to discuss our strong fourth quarter performance.
Providing an update on the strategic repositioning initiated upon joining <unk> in March 2020.
And review the status of our product portfolio expansion.
The old will cover the detailed financial results.
I will conclude and open up the call for questions.
Given this was a challenging here we were pleased that because of the team remained resilient and.
We were able to finish the year with a strong fourth quarter revenue performance.
Before talking about these numbers and our business strategy I would be remiss, if I did not acknowledge the range of challenges we encountered throughout the year.
Nevertheless, our team, which I am very proud to be of part of remain focused upon executing EBIT.
The man overcoming those challenges along the way.
Hey, Michael its core values spell of the acronym rapid.
As we were in the rapid testing business.
<unk> stands for relentless.
Team's achievements during 2020 are a testament to our relentless perseverance through many challenging times as a result of the global pandemic.
We achieved top line product revenue growth.
We executed on product development and regulatory submission time lines expanded our relationship with the biomedical advanced research and development authority for BARDA, which is part of the department of health and human services and advanced our commercial and operational capabilities.
Revenue for the fourth quarter was $10 2 million, including product revenue of $6 $9 million.
Representing growth of 62% and 39%, respectively compared compared to the prior year period.
Now I would like to take a step back and talk about what attracted me to join <unk> of approximately one year ago.
I will articulate the opportunities I still see for the company and how we have repositioned the business to execute on them throughout the incredibly dynamic and challenging year.
I'm now even more convinced that there is significant value can be realized for the DPP platform.
Hi.
As a reminder, and for some of our newer shareholders one of the call today.
<unk> proprietary DPP technology platform provides high quality of rapid diagnostic results of 15 to 20 minutes using a small drop of fingertip blood for alternative easier to collect samples such as nasal swabs.
For example, multiplexing the DPP platform can attack of the eight distinct test results for the single patient sample delivering greater clinical value of it other rapid tests for.
The <unk> applications can buy was easy to use portable DPP micro reader optical analyzer that reports accurate results in approximately 15 seconds.
The system is well suited for decentralized testing, where rapid results enabled patients to be evaluated while they are on site.
Objective results produced by the DPP micro reader reduce the profitability of the types of human error that can be experienced individual interpretations required by many rapid tests.
With these differentiating features DPP test systems are ideally suited for testing more patients in more locations more often.
We are all seeing the value of this decentralized testing model.
When I joined combined it was focused on international tender driven programs funded by National Health systems <unk> Ngos.
Any of these arrangements where in a region that could not afford premium technology.
The situation created lower ESP, the pressured margins and the inherent nature of these tenders reduce business performance visibility.
To expand the product portfolio of beyond the HIV and Leverages Dpp's capabilities. The company focused on disease states in underdeveloped markets.
This work resulted in the powerful validation of the technology, but with commercialization of potential constrained by the same inherent market dynamics.
Other than the DPP HIV syphilis test internally identifying and pursuing organic product development opportunities for the U S market was not a priority.
The U S market offers premium prices for advanced technology, and well defined disease states and sales channels. There are many potential customers across decentralized healthcare settings, where multiplex tests improve clinical decision, making at the point of care. In addition, with our balanced approach of direct sales and leveraging leading health.
Care distributors U S sales team kind of efficiently access these customers at scale.
Our strategy is focused on building our U S customer base with recurring revenue from high value diagnostic tests our.
Our objective is the winning customers by selling DPP micro readers used to analyze the results for a broad menu of current and future tests.
For establishing these accounts offers the potential to realize recurring revenue that facilitates increased visibility on future business performance.
This is where we see the greatest opportunity for the company.
In 2020, we took steps to optimize our resources to support this business model commercially we have built a comprehensive U S. Based team of professionals with diagnostics experience. We are active in both the direct and distribution channels to access all of the decentralized testing markets, where we see potential demand.
For our products for <unk>.
All of the U S market more comprehensively, we've added new commercial leadership distribution management sales marketing and customer service professionals.
Building deeper and new relationships with large national distributors like Fisher healthcare Mckesson and Henry Schein is a priority and we will help that will help broaden the reach of our expanded sales force, we built our organization to suit the needs of different customers across various decentralized markets.
Internationally. The distribution is a core component of our commercial strategy. We are working on building of new and improved distributor network to better leverage of Iran. Visa of approvals with our subsidiary in Brazil.
Our CE Mark approvals in Europe, and country specific opportunities elsewhere. As an example, <unk> diagnostics led by industry veteran CEO of branded apparel, there's now of our distributor exclusive distributor in the UK and Ireland.
Commercially and operationally our resources are aligned to be more effective with current and future product portfolio.
Of course, as we move forward, we are hyper focused on driving the development and regulatory approval of a diverse portfolio of tests that will bring value to the U S market.
I'll start with the FDA PMA award of our DPP HIV syphilis test, which illustrates all of the differentiated features provided by Kim buyers TPB platform from a single finger stick blood sample for HIV and syphilis are discretely detected at the high sensitivity and specificity in only 15 minutes.
It is the very first rapid tests approved in the U S to aid in the diagnosis of Boe of infections.
Access to simple as testing is vital because congenital simple transactions increased by 185% from 2014 for 2018 and untreated syphilis in pregnant women of May result, in stillbirths oriented debt and up to 40% of cases.
Additionally, patients with active and the surplus of infections are 2% to five times more likely to contract HIV if exposed.
Our initial target customers of our 15000 moderately complex physician offices hospitals and clinical labs across the country. We.
We are pursuing the CLIA waiver for the test, which if awarded would expand the market meaningfully in the traditional HIV testing locations that provide the opportunity to take meaningful share in the U S HIV testing market.
The DPP HIV syphilis test provides both clinically differentiated value and dual reimbursement under welded volume CPT codes with a single test and a single pair of critical items.
Now I will provide an update on our portfolio of COVID-19 test systems, which comprised of COVID-19 of antigen test.
With 19 antibody test and our multiplex respiratory panel, which is currently under development that simultaneously of discreetly for tax antigens for Sars Cov, two flu a flu of big.
Operating systems to deliver the differentiated features of the DPP platform.
What are the care diagnostic test for COVID-19 have per route have proven to be extremely effective and understanding of the controlling the spread of the virus. The information of these tests provide the clinicians enables quick decisions to be made with the patients still present by contrast lab based PCR tests are run and centralized good day.
Can take days of produce results and have a constant back down to the volume of testing from the complex sample preparations required.
This delay between testing and diagnosis can COVID-19 patients.
Those around their net risk.
BARDA recognizes the importance of point of care testing <unk> DPP platform.
We were awarded two grants from BARDA for the development and regulatory submissions for both of the DPP Sars Covid two antigen test system, which we will refer to as our COVID-19 antigen test the entity.
DPP respiratory panel.
The first part of the ramp total approximately $630000 and as for the development and issuance of the EUA for the COVID-19 antigen test the.
Second award total of approximately $12 7 million and as for the development of an issuance of an emergency use authorization of application for the rapid DPP respiratory panel and the preparation and receipt of the <unk> NK clearance for the rapid COVID-19 antigen test.
Receiving the five 10-K would also provide traditional permanent FDA regulatory clearance.
We appreciate the collaborative relationship we have built with BARDA there.
Support and guidance have been very valuable in helping us quickly develop high performing tests.
To date, our COVID-19, the antigen test has received the visa approval for distribution in Brazil by a wholly owned subsidiary and in January of 2021 of being CE marked for distribution in the EU.
In January 2021, we also obtained CE mark for the Sars Covid two IGN IGT, the antibody test system, which we will refer to as our COVID-19 antibody test.
As I mentioned previously to take advantage of these approvals we are working on building new distributor relationships in Europe, Brazil, and elsewhere to help commercialize these products.
Now I'd like to provide an update on our regulatory filings in the U S.
In the U S. We submitted applications for our COVID-19 antibody test.
Cover of 2020, and our COVID-19 antigen test in October of 2020.
We completed the development of these tests and submitted their respective <unk> the head of the timelines we had communicated.
In December 2020 of the FDA notified us that it was declining to review the COVID-19 antibody test based on the Fda's benefactor of prioritization guidance under this guidance.
Review of the system was not a priority for the FDA because for example, the SBA determined that authorization of the test would have relatively limited impact on testing of accessibility for testing capacity the.
EBITDA of supplementary advise us of the type of the nature of information it would need the received in the subsequent BLA application in order for the COVID-19 antibody test to be prioritized for review.
To be clear of our COVID-19 antibody test was not reviewed by the FDA.
The way the application that we submitted included data that net the performance requirements laid out by the agency where.
We are confident in the quality of our test in view of the and visa approval and the CE Mark as validation of its performance. We are continuing to evaluate whether to commit further resources to the testing of development that would be required in order to seek to submit a new FDA EUA application for COVID-19 antibody test systems.
Turning to the after of Covid, making antigen test in January 2021 of the FDA notified us that it was declining to review of the COVID-19 antigen test based on its updated prioritization guidance under which review of the system was not a priority.
The FDA of supplemental.
Because of the type of nature of information it would need to receive in the subsequent EUA application in order for our COVID-19 antigen test to be prioritized for review and we were engaged in testing and development in order to submit the new EUA application.
We appreciate the Fda's guidance and Bard is continued support and we are completely committed to the gathering the specific or information required. We're confident we have the plan the resources and technical capability required to resubmit the EUA.
We will not be for Rob providing guidance regarding the end of the timeline for achievement of the Resubmission based on the uncertainty of the changing regulatory process and priorities. We look forward of sharing news about any FDA or regulatory awards in due course.
Now I will talk about the DPP respiratory panel development is progressing well again. This is a great example of diversity of our DPP platform and its ability to multiplex.
Differentiating COVID-19 flu a flu b can assist health care providers and patient management and improved resource utilization.
We believe the clinical utility of this test will extend well beyond the pandemic phase of COVID-19, and in the future of respiratory virus seasons.
To capitalize on the current demand for our respiratory panel products and leverage our expanded U S. Commercial organization, while our DPP systems are under development. We recently signed an in licensing agreement to distribute the respiratory panel test.
Discussions of point of care EUA approved respiratory panel for the detection of Sars Covid two antigens flu a flu b we.
We believe it will complement our COVID-19 portfolio because it will be sold across the same overlapping decentralized markets as our currently available point of care HIV test and other COVID-19 products in development.
We are launching this respiratory panel this month.
Our commitment to the decentralized COVID-19, making testing the market is strong and we are excited to be able to offer customers. This high performing test is the first component of our planned future portfolio.
Our COVID-19 tests combined with the DPP HIV syphilis system.
In our well regarded point of care of PMA approved and CLIA waived HIV tests represent a comprehensive product portfolio that can provide.
Provide value to a wide range of decentralized ethylene locations across the U S and globally.
The pandemic has proven the value of point of care diagnostics.
Our DPP test systems are easy to use and did not require infrastructure such as central reference laboratories. They are duly suited for testing patients across a wide variety of the centralized locations such as doctors' offices minute clinics urgent care centers hospitals nursing homes and skilled nursing facilities.
We believe that the global visibility that the pandemic has provided the point of care diagnostic testing bodes well for a future adoption throughout the health care system.
As I mentioned previously in Brazil, we received the visa approval during the fourth quarter. The Mark of our COVID-19 antigen test through our wholly owned subsidiary and we are commercializing the product through state local and pharmacy markets.
Also working with me and maintaining of our longtime partner with support for the federal market to Cross register their approval of the product with the abuser.
Over the course of 2020, we have made significant changes to our organization that repossession is to focus on U S based test demand.
This is reflected in our product development of <unk>.
BARDA funded regulatory priorities and our expanded commercial organization.
Our plans for 2021 are built upon this groundwork.
Our objectives are clear number one.
What's the point of care EUA approved and licensed respiratory panel product in the United States.
Number two get our COVID-19 products approved and on the market in the United States.
Number three obtain CLIA waiver to accelerate the initial uptake of our DPP HIV syphilis sales.
Number for begin development of our expanded portfolio of DPP tests, covering respiratory viruses sexually transmitted disease, gastroenterology and insect vector diseases.
And five build upon our automation transition initiatives and achieve operational excellence throughout the organization.
At the beginning of my remarks, I'll share a number of thoughts about how I approach joining can buy of nearly a year ago and through all of the underlying issues of the pandemic itself together with the successes and challenges <unk> faced throughout the year my overriding thesis for creating value at <unk>.
<unk> has not changed.
Much has been revenue in the past few weeks about what the future of COVID-19 testing looks like given the vaccine programs current down with the downward trend of cases, and overall <unk> demand in the U S.
So let me be clear Ken.
<unk> is committed to the broader point of care testing business for the long haul are.
Our product portfolio strategy is to launch the in license respiratory panel of this month.
Pursue CLIA waiver for the PMA approved DPP HIV syphilis test and complete our ongoing dedicated work with BARDA on the respiratory panel and COVID-19 antigen test.
As discussed the COVID-19, the antigen test is funded by BARDA, the complete clinical trials and achieve of five 10-K regulatory approval providing of permitting clearance beyond when COVID-19 as an emergency.
Can become the standard cash used in seasonal upper respiratory of diagnostics.
That transition from emergency use the routine patient care illustrates why we are focused on our market and channel positioning strategy in the U S.
While others are pursuing global markets, including over the counter and at home testing <unk> staying focused on the health care channels, where we can maximize our expanded U S commercial organization and the proven differentiated capabilities of our DPP platform.
The basis for this strategy is compelling and clear.
We believe this is where the long term sustained market will exist for each of the disease States I listed.
<unk>, our current products, who is presently under development and in clinical trials and future products that we will develop in these areas.
We believe that while tangential markets made available all of these disease states will continue to be diagnosed and treated in traditional decentralized point of care clinical markets.
From our current market position, we can drive the company towards profitability and sustained growth with incremental market share gains in these high average selling price well established diagnostic channels.
I will now turn the call over to Neil for details on the 2020 financials.
Thanks, Rick.
First I would like to begin with a logistical item is a matter of corporate housekeeping, we anticipate filing an S. Three shelf registration within the next few business days.
Moving on to the financial results for the three months ended December 31, 2020, total revenue was $10 2 million representing growth of 62% compared to the prior year period.
The net product sales for the fourth quarter of 2020 were $6 9 million, an increase of 39% compared to the prior year period.
The government grant license and royalty and R&D revenues combined for the three months ended December 31, 2020 for $3 4 million, an increase of 143% compared to the prior year period.
Consistent with past earnings calls I am sharing these non product sales figures on a combined basis. In addition, effective with this period, we are separately presenting government grant income and R&D revenue within total revenues on our income statement, while the government grant income and R&D revenue are related to the timing of NK.
And <unk> of program performance obligations, which do not always occur in a certain period, but we continue to current for certain of the expenses.
Gross product margins during the three months ended December 31, 2020 declined by approximately zero point $7 million compared to the prior year period the.
The decrease reflected continued impacts from unfavorable geographic sales mix operational inefficiencies related to manufacturing production schedule changes and the qualification during the quarter of certain of our automated equipment or.
Our margins were also impacted by the write off of expired and therefore obsolete HIV product.
During 2020, we continued to invest in transitioning towards the automation of our manufacturing processes all of which are now based in the United States are true.
Transition from manual to automated assembly is intended to add capacity reduced variable costs and improved product margins.
Particular focus on the validation and implementation of the automated lines occurred during the three months ended December 31 2020.
I'll talk more about this in a few minutes.
R&D cost increased by $1 3 million.
Primarily due to the clinical trial costs related to the development of our COVID-19 tests.
Selling general and administrative costs increased by $3 $6 million, primarily due to legal costs costs from expanding our U S commercial organization and facility costs related to the COVID-19 pandemic.
Net loss from the three months ended December 31, 2020 was $7 1 million or <unk> 35 per diluted share compared to a net loss of $3 9 million or 23 per diluted share in the prior year period.
Now turning to full year 2020 financial results.
The extensive economic disruption caused by the COVID-19 pandemic exacerbated by the market and regulatory complications, we faced and seeking to develop and commercialize a portfolio of COVID-19 test systems was reflected in our operating results for 2020.
As total revenues were $32 5 million a.
A decrease of 6% from 2019 and net product sales were $24 8 million of <unk>.
Decrease of 14% from 2019.
Government Grant license and royalty and R&D revenues combined for the year ended December 31, 2020 were $7 $7 million, an increase of 37% compared to the prior year period.
Gross product margins. During the 12 months ended December 31, 2020 declined by approximately $5 $6 million compared to the prior year period and.
In 2020, we invested in developing and offering products to address the COVID-19, pandemic, which have average selling prices greater than those of our legacy products. As previously discussed. We also continue to invest in transitioning towards the automation of our manufacturing processes to reduce our reliance on manual labor and improve our product margins.
The decrease in gross product margin was comprised of <unk> 9 million from unfavorable product sales volume and $4 $7 million from unfavorable product margins.
The portion related to unfavorable product margins of three primary drivers for.
We incurred the cost of product sales for COVID-19 antibody test that were returned by customers in the U S. Following the fta's revocation of the EUA for that product.
Second the ratification precluded planned sales of COVID-19 antibody test the customers in the U S for the remainder of 2020 and resulted in the deferral of certain customer opportunities for the sales of these systems outside the U S.
This negatively impacted our sales mix as we experienced significantly lower sales in the U S, where we have our highest average selling prices relative to regions outside the U S, where we experienced a higher mix of sales and geographic regions with lower average selling prices.
And third we experienced operational inefficiencies, including those triggered by the relocation activities related to qualifying automated lines for production of certain products and the write off of expired and there for obsolete HIV product, which together resulted in increased cost of product sales as we shifted much of our production.
From COVID-19 products back to the legacy products.
Okay.
R&D cost increased by $1 million, primarily due to clinical trial costs related to the development of our portfolio of COVID-19 tests included those bonds, including those funded by BARDA as Rick described earlier selling.
Selling general and administrative costs increased by $44 $9 million, primarily due to legal cost of of rising subsequent to the replication costs from expanding our U S commercial organization and facility costs related to the COVID-19 pandemic offset in part by cost savings from Retrenching, Our Malaysia facility.
During 2020, we incurred severance and related costs totaling $1 1 million.
Net loss for the year ended December 31, 2020 was $25 5 million or $1 34 per diluted share compared to a net loss of $13 $7 million for 81 per diluted share in the prior year period.
Adjusted for noncash items, our net loss for the year ended December 31, 2020 was $18 2 million.
As Rick and I have discussed on prior calls our team continues to execute a program to reduce expenses and better align our cost with revenues, including by eliminating positions that are no longer required by our strategy associated.
The associated with that during the first half of 2021, we are reducing the number of employees dedicated to manually assembling our products and expect to take the restructuring charge during that period, ranging from <unk> to <unk> 2 million.
To date in 2021, we have executed changes representing approximately $2 million of cost savings on an annualized basis.
On the balance sheet cash and cash equivalents as of December 31, 2020 totaled $23 $1 million.
Net working capital as of December 31, 2020 was $27 4 million.
During the year ended December 31, 2020 cash used in operations totaled $18 9 million.
Primarily due to the net loss adjusted for noncash items, and a $6 $5 million increase in inventory associated with the combination of noncancelable purchase orders subsequent to the ratification of the antibody test and building raw material inventory for the COVID-19 antigen test.
Finally.
While we do not intend to provide quarterly guidance going forward given the current state of operations amid the pandemic and where we are in the quarter, we want to provide an update on our expectations for the first quarter we.
We expect first quarter 'twenty, one first quarter 2021 product revenue to decrease sequentially compared to the fourth quarter of 2020, but to be roughly offset by a sequential increase in non product revenue.
I'll now turn the call back to revenue for concluding remarks.
Thank you Neil.
Our DPP platform technology offers clinicians in every setting across the health care system.
The ability to decentralize and improve access for diagnostic testing for.
Patients and clinicians are fully realizing the clinical utility of point of care testing.
We continue to believe the outlook for our technology has never been more promising therapeutic.
There are free of challenges on the regulatory paths of our respective COVID-19 tests, but our commitment to this market is unwavering.
We understand the Fda's priorities can change as we learn more about the virus and the testing landscape evolves.
Our team has the resources the technical capability the demonstrate why the DPP platform is highly differentiated theres a large lead in market for decentralized testing.
We're confident our DPP test will provide value for our customers.
Bolstering this confidence is the fact that we have achieved several more regulatory approvals for test using the DPP platform.
We received CE, Mark and visa approval for our COVID-19 antigen and antibody tests.
Surely the DPP HIV simple SaaS received FDA PMA approval. We also won two awards totaling $13 $3 million from BARDA that represent another strong validation of the DPP technology.
Over the course of this year, we plan to build on that success.
Our goal of the regulatory front is to achieve the EUA approval and five cleared box of NK clearance for our COVID-19, the antigen test.
The approval for our DPP respiratory panel and of course.
The waiver for the DPP HIV syphilis test these approvals can enable a shift in the geographic and product mix that would lead to improved margins.
I would like to take this opportunity to welcome our newest members to the <unk> Board of directors.
First Dr. David <unk> joined the board of Directors in December 2020.
Dr. <unk> brings applicable expertise in public health and infectious disease management to our leadership team.
We are confident that his perspective and insights will contribute meaningfully to our long term value creation strategy as we enter the next phase of growth for <unk>.
Secondly, the goodness VAALCO joined the board of directors in March 2021.
Given the Mr. Vis VAALCO has extensive network and commercial experience in the industry, David will add meaningful insight to help maximize the value of our DPP and other technology platforms in the market.
We look forward to the collaboration and contributions from both Dr. Ashton and Mr. <unk> VAALCO.
<unk> is the performance driven organization that strives to attract and retain top customers and talent every day operational excellence excellence is our expectation internally and from this foundation. We are confident we can deliver customer satisfaction profitable growth and shareholder value.
Finally, I would once again like to thank our employees for their steadfast commitment to our organization, we look forward to providing updates in the future as we continue to execute our strategy. Thank.
Thank you all for joining us today.
Again, I wanted to reiterate that we appreciate the Fda's guidance.
<unk> continued support of our of Covid tests, and we are committed to gathering of the specific information required.
We have a plan of the resources the technical capability.
Wired to submit the irrespective of the new ways. At this time, we will not be providing commentary of our guidance regarding the submission timelines for achievement of the Resubmission based on the uncertainty of the change the regulatory process and priorities.
We look forward of sharing news about any FDA for regulatory awards in due course.
With that operator, please open the profit please open up the call for your questions.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask the while posing your question. Please pickup your handset if you're listening on speaker phone to provide optimal sound quality.
Your first question is coming from Kyle No. Sir your line is live.
Great Good evening and thanks for all of the updates here.
Sorry, if I missed this but what percentage of product sales came from international markets and can you talk a little bit about our commercialization efforts of thing going in the U S. Markets. For example are you selling more antigen test an antibody test any color here would be great.
Yes. The trial. Thank you for the question.
In terms of product revenue, we haven't broken that out.
Between the U S and international and for Q4.
The Neil can provide some additional color on that.
I would like to say Kyle is that in terms of the of our international commercialization efforts.
We're very focused in the EU and neighboring neighboring markets like the UK, and Ireland and South Africa in terms of pursuing those markets.
We talked a little bit about Brazil.
The prepared remarks.
But we're very very active in marketing the product in Brazil to the state.
In local and pharmacy markets given the severity of the pandemic as everybody is reading about in Brazil.
We've got a great distributor partner in Brazil, who is helping us market the product.
The pharmacy markets as well.
We're also expanding our <unk>.
Commercial organization in Brazil in order to build the infrastructure there long term true.
Not only have distribution in Brazil, but into the neighboring region.
And then finally, Kyle we're working very very close we would be in the in juniors.
As you know they've been of long term partner of <unk> for the last 15 years. So we're working very very closely with them.
To get the cross registration of the product approved by and visa.
The BMA Juniors can begin to also provide the antigen test in Brazil.
No.
In terms of United States, we talked a lot about of our commercial organization.
We've been very very focused on.
Obtaining customers and obtaining new customer opportunities for HIV syphilis test.
And now as we announced today, we have an in licensed product for the respiratory panel, which will be launching very very shortly and we're very excited about adding that to our HIV.
Product portfolio in the United States.
So the old I'm going to provide any additional color on when the revenue distribution, yes sure the thanks.
Thanks, and hi, Kyle the in the.
Geographic breakdown in our 10-K, which will be filed a little later this afternoon for the quarter revenues in the United States were just under $860000, which represents 13% of our product revenues in the fourth quarter.
And by contrast, just as a couple of data points from the first and second quarter of this year U S sales were 21% and 42% of our net product sales. So you can see how that connects in with some of the comments I made as well as it relates to the unfavorable geographic mix.
Got it no that's helpful. I appreciate it now.
And Rick.
So what are the next steps for required for attaining a CLIA waiver for the HIV syphilis test sounds like you've got some nice traction there.
Partner up and running.
But and I know you want to talk about timelines, but I'm just kind of wondering.
What's next there that you have to do.
Yeah Kyle.
Sure.
Very excited about the the customer uptake in the moderately complex market as we talked about.
We're seeing customer.
Customers in the public health sector, certainly the obgyn market.
As you know.
Really giving us.
Some positive signs that the product kind of great clinical utility.
In that market and so we have filed for a CLIA waiver.
For the FDA as we said we would do after receiving the PMA approval by the FDA.
We're now under the timing of the FDA and.
We will work with them to answer any questions along the timeline as they review of our CLIA waiver submission okay great.
So thats already filed.
And then can you provide an update on.
And the latest situation with manufacturing you provided some nice color I'm just kind of wondering about capacity, how many automated lines are up and running to the extent you can share and.
Maybe what percent of your output is still from manual just kind of any any color on on that would be great.
The trial as Neil talked about in his.
Our prepared remarks.
We made tremendous progress in the fourth quarter and getting our automated lines not only validated and operational.
So as we head into 2021, and we're well into 2021 we.
We will continue to utilize our validated and operational automated lines.
We also are looking at possible expansion of the automated lines.
As well as we go out throughout the year.
One of the things we will do is continue to balance our fully automated lines as well as our manual production lines.
Is it dictated by product mix geographic product sales and the various regulatory approvals, we need to get for certain automated products. So the old anything to add.
Yes, just a couple of things of.
One is I'll reiterate.
Right the comp.
Meant that I shared during the prepared remarks about the actions that we've taken thus far in 'twenty one.
Related to.
I guess, reflecting our confidence in the capabilities of the automated lines and that is that we've executed changes in our head count debt generate annualized savings of approximately $2 million.
Secondly, as is described in the 10-K that will get filed as we have issue purchase orders for additional automated production lines and Thats just part of the transition that we're moving towards something to keep in mind is that the qualification of those lines for different products for different gene.
<unk> is under different regulatory authorities.
Vary from place to place product of product et cetera, so that as those of us the multiple dimensions that we manage as we decide where and how we build any particular product and order.
As we move along the day in day out.
Okay. That's helpful. Thank you for all of the updates both of you.
Thank you.
Thank you. Your next question is coming from Bruce Jackson Your line is live.
Thank you for taking my question, if we could.
Go back to the the.
Automated manufacturing lines and the gross margins.
How do you see the gross margin profile unfolding over the course of the year and all the the <unk>.
Increased automation have any impact on the gross margins.
Yes, so Bruce thanks for the question.
We're not providing any forward looking guidance as it relates to specific numbers.
We have in the past described the.
The the benefit on the margin standpoint that automated lines provide relative to the manual production.
Of course.
Overall volume and average selling prices have a significant.
Contribution to where the margins shake out as well and and those of the factors that will impact where we ultimately end up.
Okay, Great and then.
Getting back to the CLIA waiver for the HIV syphilis test.
Can you give us maybe a rough idea of how long that process might take I know that we're dealing with the FDA and that it's somewhat unpredictable, but are we talking like nine months of year year and a half for getting the CLIA waiver can you just help us maybe.
Put some put some time around that debt estimate.
Yes, Bruce the.
Clear waiver it does have the statutory time to it in terms of the review process.
But.
That does not include any additional time.
Where there is the.
Much for specific questions to be answered.
The <unk> the response to our CLIA waiver submission. So that's why the timing is a little.
The uncertainty and why we are not providing any guidance on timing because we can't predict what the FDA.
Response profit is going to look like at this point.
But we are index statutory time for review under CLIA waiver waiver submissions.
And like I said before.
At some point.
When we receive CLIA waiver will provide debt.
The information.
Okay Fair enough and then last question you've got several programs ongoing in the companion diagnostics area.
Anything new to report any of those programs.
Yes, we don't have any news to report on that.
At this point.
<unk>.
We do have some ongoing.
Working net area.
Neil do you want to talk more value.
Breakout of that revenue.
Yeah sure so yeah.
Can actually as I shared see the breakout between the the revenue from those programs versus the government programs on the face of the income statement.
You can see where that's coming in addition.
As Rick described and as we talk about in the MD&A.
I think youll be able to read the light of this evening.
As part of the focus which I think is maybe the theme here is the focus that Rick talked about on developing and launching our products in our portfolio.
Our of shifting very much towards doing exactly that and away from.
I'll call it outsourced R&D development the <unk>.
Work that we did in those areas have unquestionably provided substantial validation over the capabilities of the platform.
As they were all inbound interest and in many respects we're very successful.
And at the same time, we see that the highest and best use for our people is to develop products, where we're controlling the products. We're controlling the timeline and we're controlling the commercialization of associated with them.
Alright, Thank you very much.
Thank you Bruce.
Thank you there are no further questions in the queue at this time.
Okay.
Let me wrap up and say thank you for everyone's time and attention today, we look forward to future updates of a good evening.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.