Q1 2021 Lucira Health Inc Earnings Call
Yes right.
Great, Okay, great and disappointing and the first and listening.
David Brown.
And your company name.
And I are our a I E R. A.
Thank you John your line.
And so on.
Ask a question during the session you will need to press star one on your telephone and please be advised that today's conference is being recorded.
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I would now like to hand over the conference Speaker Paul today.
Mr. Greg that check.
Please go ahead, Sir you may begin.
Thank you Delfin and good afternoon, everyone earlier today Lucier, our health receipt released financial results for the first quarter ended March 31 2021.
A copy of the press release is available on the company's website.
Joining me today on todays call are Eric and Glsen, President and Chief Executive Officer, and Dan George Chief Financial Officer.
Before we begin I'd like to remind you that during this conference call. The company will make forward looking statements regarding future events.
We encourage you to review the company's past and future filings with the SEC, including without limitation the risk factors section of the company's annual report on form 10-K, and quarterly reports on form 10-Q.
Which identify the specific factors that may cause actual results or events to differ materially from those described and these forward looking statements.
These factors may include without limitation statements regarding product development product potential the.
The regulatory environment sales and marketing strategies capital resources or operating performance with that and now I'll turn the call over to Eric.
Thank you Greg Good afternoon, everyone and thank you for joining us and welcome to the first quarter 2021 earnings conference call, our first as a public company.
We will start today's call with an overview of loose Sarah and the accomplishments that made the company. What it is today I will then discuss our company strategy and how its implementation has led to significant progress this quarter, followed by a discussion of our future opportunities.
Dan will then transition into a more detailed walkthrough of our first quarter financial results.
Since our inception in 2013 with Sarah has been developing our technology and paving the way towards revolutionizing at home testing for infectious disease.
Founding vision was to put lab quality molecular testing and a small easy to use form factor that would fit and the palm of the hand for use anytime anywhere and that would produce results on the spot. We have always believed that if testing where available and.
And easy to use.
Individuals would proactively test.
Enabling earlier treatment or core and team showed the test result positive or faster peace of mind should result negative ultimately we believed that this would serve the public health.
Just as a point of care testing wasn't important innovation that augmented central lab testing, we believe that anywhere anytime testing with high consumer usability under and over the counter label represents an important next advance provided that test accuracy is may.
Maintained.
As testing demand increase during the first wave of COVID-19 infections last year and the United States. We all witnessed the logistics issues that were caused by the mobility of the testing equipment and this resulted in traffic jams and testing centers and the risky circulation of potentially infectious individuals within the.
General population.
Home sample collection kits helped to alleviate some of the challenges the long wait time to results remain an issue.
It was during this time that we shifted our focus from our initial plan to bring and influenza test to market to prioritizing the COVID-19 test kit first.
Our company launched our flagship product the COVID-19, all in one test kit on November 17th 2020 upon FDA EUA authorization for both point of care and prescription at home use and this was the first and remains the only prescription at home.
Granted the accuracy of our test was demonstrated in our community testing study, which at the time included symptomatic individuals. This was subsequently expanded to also include asymptomatic individuals and the study that supported the recent over the counter EUA.
When compared head to head against high sensitivity PCR Central lab tests, and excluding samples with very low levels of virus that possibly no longer reflected active infection, our test kit achieved 98% accuracy, 97% PPE.
And 98% NPA.
As we entered 2021, our company had a near term strategy that supported our broad vision of supply and accurate accessible timely testing our goals were one submission of and over the counter EUA and expansion of current point of care and prescription at home EUA to also include.
<unk> asymptomatic individuals to commercialization of our test kits through various sales channels and formation of strategic partnerships three expansion of manufacturing capacity for creation of and easy to use platform to reported test results and five.
<unk> continued development of the test menu.
Following initial commercialization of our COVID-19 prescription at home test kit, we focused efforts on making our test kit more accessible through OTC labeling to that and we submitted an application to FDA for and over the counter EUA, We also submitted and the application.
To expand the initial prescription EUA to include asymptomatic individuals and.
On April 2021, we received the over the counter EUA for the companies lose share of checkout test kit with the release of this test kit, we address the need and the market for a PCR quality affordable accurate over the counter test lose share of checkout is now available to individuals.
And without requiring a physician prescription or health care professional oversight, allowing users to detect a positive result, and as few as 11 minutes or to confirm and negative result, within 30 minutes and on April 26, We also announced that health, Canada issued an authorized.
Nation with conditions for our Lucerne chequered COVID-19 test kit those conditions were to submit final bilingual labeling, which we expect to complete shortly.
To drive commercialization and increase accessibility, we have formed key strategic partnerships. We have partnered with converged technology solutions to develop and efficient way to deliver results to the user with the text Lucy system <unk> developed the Lucy pass should provide users.
And easy way to receive a digital verified test result customers simply text the word Lucy L. UCI 244544, and then follow the simple steps to upload their results and.
All test results are digitally verified through Lucy's secure portal once users have a lucy pass on their phone. They can show their negative test result at entrances to conferences workplaces arenas and for travel and leisure.
With an easy way to access results and place we have begun forming direct partnerships with organizations that plan to use the lose share checkout test kit on a large scale. For example, we recently launched a testing program with the Golden State Warriors to facilitate the safe reopening of the Chase Center in San Francisco.
Most recently, we have commenced and agreement with Amazon for the sale of our OTC share and ticket test kit on line significantly increasing our opportunities to reach our customers nationwide.
Amazon not only provides and easily accessible marketplace, but offers proven distribution channels, allowing our product to be and your hands more quickly we see programs and partnerships such as these as being a key driver of sales and the upcoming quarters, we see programs and <unk>.
<unk> such as these being an important contributor to future sales growth given.
Given the uncertainties surrounding the current COVID-19 environment, we have prioritized flexibility and nimbleness to match, the expanding and evolving testing landscape. We continue to evolve our products to fit current needs and as noted in our technical brief posted on our website.
We perform routine surveillance of emerging Sars COVID-19, two strains by periodically evaluating and silica reactivity against sequence databases. These evaluations have shown that the six emerging variants are reactive to our COVID-19 test kit.
Looking to the future. The company has created a clear path to growth that includes one continued commercialization of our COVID-19 test kit for both OTC and prescription use two formation of new programs and partnerships with sports teams large venues travel and leisure distributors and other entities.
<unk> three investing in manufacturing capacity and scaling to match demand for international opportunities and five test menu expansion.
We are excited about our future and look forward to the upcoming quarters I will now turn the call over to Dan George Our CFO for a detailed discussion of our financials.
Thanks, Eric and Hello, everyone. Please refer to our press release issued earlier today for a summary of our financial results for the first quarter of 2021.
Overall from a commercial perspective, we had no activity in Q1, and 2020 and Q1 2021 represents our first full quarter of such activity.
Revenue for the first quarter of 2021 was $4 5 million. Our revenue was primarily driven by sales to health care professionals and physicians through our point of care and prescription at home authorization.
Gross loss was approximately $900000 for the first quarter of 2021 and gross margin was negative 19% our gross loss and negative margin were primarily result of manufacturing capacity that has been established for anticipated commercial growth.
Sales general and administrative expenses were $6 1 million for the first quarter of 2021 compared to approximately 600000 and the same period and 2020.
The increase was primarily related to increasing head count and third party services to facilitate commercial launch and public company compliance.
R&D expenses were $6 3 million and the first quarter of 2021 compared to $2 7 million and the same period and 2020.
The increase is primarily related to activities to support new products validation and manufacturing activities and EUA submission.
And from operations was $13 2 million and the first quarter 2021, compared to $3 4 million and the prior year period, the increase and operating loss resulted from our gross loss and increases and operating expenses as previously described.
Net loss was $13 3 million and the first quarter of 2021 compared to $1 7 million and the same period and 2020.
The increase is related to the operating loss previously described partially offset with a change and other income and expense primarily resulting from grant income recognized in Q1 and 2020 associated with our influence activities.
We ended the first quarter 2021, with $189 8 million and cash compared to cash of $58 2 million at year end 2020 day.
The increase the increase and cash is primarily related to net proceeds received from our initial public offering.
I'll now turn the call back over to Delfin for Q&A.
Thank you Dan and.
As a reminder to all our participants to ask a question or if you wish to ask a question. Please press star one that gets on the phone.
Please standby, while we compile the Q&A roster.
And our first question coming in from Derik de Bruin from Bank of America.
Hi, This line.
Hi, This is ideal for day to day. Good afternoon. Thank you for taking my question.
Hi, Ivy.
So firstly just wanted.
Wanted to get more details on on OTC launch.
And we wanted to see if you could share more about your pricing strategy. There. If there is any bundled deals being offered on.
Now we are entering into a more competitive market.
Wanted to get any clarity there.
Yes, Hi, Ivy. Thank you for the question.
So we have a multi pronged strategy with with the over the counter label and by the way when the company was founded the vision Oes prioritized over the counter for this product and it's very much a consumer product.
And with Central lab accuracy.
So the <unk>.
Strategy is both direct to consumer.
And that was the reason for the Amazon partnership as well, we sell product on our own website with share of health Dot com.
And also other opportunities that are mainly in the <unk> category.
So some of those involve distribution deals.
<unk> with <unk>.
With distributors.
And the U S.
And some of those will also involve <unk>.
Distribution deals outside the U S. When the time comes.
And.
Some of the <unk> deals our two organizations.
Such as the one associated with the Golden State Warriors to reopen the Chase center and similar.
Deals like that so what benefits the company from.
Volume deal is to be able to have some insights over time as to what the delivery schedule will be and that's of course challenging.
For all involved in COVID-19.
Although I think we all.
FERC, a long tail and.
And COVID-19 is endemic.
But to the extent, we price the product at $55 on Amazon and on our website that includes shipping.
And to the extent that there are volume deals put in place we reduced price slightly.
And I'm going to not named specific prices.
Because.
Those are.
Subject to negotiation.
With different.
Different partners, although there is consistency.
The partnerships.
To the extent that partners can provide visibility over time, then that's a value to the company from our internal planning standpoint.
Great. Thank you and my second one.
It's on the <unk>.
Recent agreements to supply to the spin you'll see the cash.
For the Golden State Warriors, So that's pretty interesting opportunity. There just wanted to see if you could talk about.
And what's the general arrangement, there and help us think about how to quantify the size of opportunities.
And all our markets and.
And it goes into a question of.
How much visibility you have in terms of.
Morris.
More sizeable contract and how should we think about the revenue.
The term going forward. Thank you.
Yes. Thank you Ivy. So so first of all we are grateful to the Golden State Warriors for selecting loose era.
The partnership with the Warriors means a lot to us and.
And we have.
Put our hearts and to delivering quality product to the warriors and to where your fans.
On.
<unk> operation of the partnership was such that product was shipped to certain fans homes.
Mostly season ticket holders.
I had the priority and.
And what.
And what the great beauty of the loose era checkout kit is that it's easily run very simple one page instructions at home and and then Lucy pass has created on one's phone as I described and the opening remarks. So the Lucy pass was then.
And in the case of the warriors because they wanted aggregated data on fans.
Lucy pass also integrates into other platforms and so in this case.
As you can see on the on the video and the Warriors site.
Integrated into clear health pass and so clear health pass that integration made it very seamless for users.
Appeared to users if they were just obtaining and Lucy pass when in fact that.
And went directly into a clear health pass on a user's phone so and that case. It was the clear health pass that was shown at the gate.
And trends.
There is there is.
Some variability in demand for sports teams like the warriors and it depends on local regulations in some cases.
People, who are vaccinated and can prove that and gain entrants without a negative COVID-19 test and other.
And other cases.
It's a hybrid.
People, who are vaccinated, they come and one entrance people who have a negative.
Lucia test come in and other entrants.
We.
We.
Price to very close to our $55 ASP.
For for this whole process with the warriors and.
And I think it's worked very well there was also some on site testing for those who didn't have a chance to test at home or had any other issues.
And that worked well as well.
And the revenue run rate, if you could shed any light there.
So we're actually not.
We're not doing any.
And forecasting.
At this point Ivy Ware.
I would say that we're extremely excited by the reaction to the OTC labeling.
And to the loose error checking test kit.
And.
Have a day.
Amount of incoming interest debt.
And we're working very hard to respond to.
But.
But that said.
I think we need a few quarters to understand what our baseline is so that we can then begin to forecast from there.
Great. Thank you I'll jump back in the queue.
And our next question is coming from Mr. Brian Weinstein William Blair.
Go ahead Sir.
Hey, guys. Good afternoon. This is griffin on for Brian Thanks for taking my questions.
Just first one here can you give us an update on the discussions you are having with them.
Customers and the professional health care, setting and potentially have a longer testing tail can you talk about shutter and and Cleveland clinic on the IPO and once they use the product how has that been and and what are your expectations for this professional setting moving forward.
Yes. Thank you.
And I appreciate the question.
So when we when we entered Q1.
And the prevalence of the pandemic was higher and locations, where some of the institutions health care institutions or with whom we are working.
And and so we and also we had only the prescription label and Q1.
As we took our first orders for product, we had expectations that that.
There was going to be durability throughout Q1 of those orders and of the usage of the product and the and.
And the health care practice in large institutions than prevalence dropped and and so did consumption.
Our test by the way the benefit of our test and emergency departments and respiratory clinics.
And pre procedural screening for example is the rapidity with which it produces a result on the spot 11 minutes for a positive for example.
So that's.
Huge benefit, particularly as there are patients and an emergency department, who are suspected of being positive and who the institution would prefer to have isolated as quickly as possible from and infection control standpoint.
So.
So one of the dynamics was that we did not see reorders.
From the institutions from which we thought we would see in Q1, but then Conversely, we brought up online ordering for health care professionals with prescription writing rights on our website.
And we had some fill in in the quarter Phil.
Phil and ordering by health care professionals I suspect, we would've had more had there been more awareness.
Blue Sara.
I think we suffered from being our best kept secret, but when people found our product and found us. They were they were delighted by it and we have quite a bit of reorder activity in Q1 by health care professionals. So on.
And from our website, where accounts <unk> practices.
Psychiatry offices.
And T practices for example.
And and very pleased by the early <unk>.
<unk> signal there.
But.
Yes, I would just say that going forward.
Prescription use remains very important to the business.
But I will say that we have we have resource our marketing efforts toward over the counter since having received.
And that label.
And in April and thank you.
Okay.
And then just on the Amazon channel and are realizing that products and selling manner.
And just started selling there, but <unk> been and e-commerce for a little while from <unk> can you just talk about any feedback you've gotten and the ecommerce channel and on some.
Early expectations for the Amazon marketplace.
Yes, we're seeing we're seeing good uptake through Amazon and we're really grateful to Amazon for for the partnership and.
I think we have a high rating.
At the moment on Amazon and.
Again, we'll be we'll be taking steps to increase awareness, but.
I must say out of all the press releases that we've put out.
And this year it was the Amazon press release that at least had the most generated the most incoming E mail to me. So I think it was quite exciting to people to see that.
Okay and then just just last one from me it seems like a combo flu COVID-19 test.
And could potentially be pretty important and the symptomatic testing market moving forward just given the similarities and symptoms. So just can you give us an update on the pipeline and from time on there, particularly for the combo product.
Yes, no. Thank you for the question, we're excited about that as well and Thats.
And in development right now we have the assay the flu assay developed and were.
<unk>.
Iterating the device design.
Simple changes to accommodate both assays. So so we're excited about this.
We will be having some meetings with FDA to determine the regulatory path, whether this will be EUA for the combo test or whether it will need to be a 500 10-K, and then that will inform.
That will inform the timeline.
But.
Maybe I won't speculate on what the timing could be but I will say that the product.
Anticipating.
Being able to be in and clinical trials.
On.
And.
And the not too distant future. So that we're going to do everything we can do to try to accelerate this product so that it will be ready, but but it will not be contributing commercially and this year.
And.
I would say best case.
It would take another it would be another flu season before it is contributing commercially.
Great. Thanks for the color guys.
Sure. Thank you.
Okay. That's on a reminder to all our participants to ask a question on if you wish to ask a question. Please press star one on your telephone.
And now our next question is coming from Mr. David Sherman. Please go ahead Sir.
Hi, guys. Thanks for taking my questions.
First one just on on the.
The <unk> channel I was just wondering with the current trajectory of the pandemic the degree to which cities are reopening has there been any kind of re prioritization on your and is to target customers and sectors of the economy that youre going to pursue.
Yes, Hi, David Thanks for the question.
We are.
There's quite a bit of testing thats going on daily and the country today COVID-19 testing.
View, the <unk> opportunity as incremental to that.
Can tell you and our own our own facility, we had been testing twice a week, we alternate between twice a week and once a week, depending on prevalence or or and incident.
A positive women.
Within testing associated with our facility.
And since the over the counter label, we have switched to using the share of tests. So we give employees Lucia tests. They tested home on the prescribed days and then they bring their Lucy pass through the door. So we've been having similar conversations with.
And with potential <unk> partners.
And.
I would characterize this as quite interested.
And in performing testing and.
And it spans the gamut from those organizations that really want to be sure and and so want to test with a testing program likely share as to some organizations that are making testing for employees optional which is interesting.
From a safe workplace standpoint to organizations that are thinking it through have teams dedicated to deciding what kind of testing they're going to do if any.
But within the first category.
We're we're fielding quite a bit of incoming interest.
And having productive discussions so.
I would say that.
From a sales standpoint, including myself, we spent quite a bit of time on these discussions.
Every week, it's been it's been exciting.
Got it and in terms of just sort of.
Working assumptions you guys have thinking through some of these customers.
Do you envision most are going to want some kind of test run with the product and.
What's sort of the assumptions as to what the timeline is from a test period to actually signing a contract.
Yes, that's a great question and what we've found is that.
Folks start small and they do pilot these programs and then they.
And then they think about increasing.
We're still early in this rollout.
People tell us debt.
The numbers could be could be sizable.
And once they see how this works.
And I will also mention just anecdotally that.
Dan and I are sitting in a room together and we don't have masks on because we've tested earlier today before showing up here.
And that's the case within our facility, our though within our facility we still wear masks.
Most of us are vaccinated.
However, we have had a recent positive test among.
One of our employees and so that's just underscores that the vaccines alone do not solve the problem there and a really important advance and we're grateful for them.
But testing is going to remain important and that's the feedback that we've been getting on the <unk> side as well.
Okay great.
And then just one more from me on the Amazon partnership.
Could you just talk about on.
Are they handling the.
Shipping logistics or is it coming from you guys still is there plans for that to be in their hands, if it's not and.
And then is there.
Land and place for them to handle kind of order logistics across sort of all of your business channels down the road.
So so we have a great partner for our three pls.
And at the moment, our partner is fulfilling so Amazon is handling the order entry.
We are having discussions about.
About a transition to.
To include to maintain on our own three PL, who we're very happy with.
But in addition to to have fulfillment by Amazon and so that's.
And that's a discussion and I cant characterize where thats going to come out yet but.
But certainly on our minds. So thank you for that question.
Okay, great. Thanks for taking my questions.
Sure. Thank you.
And our.
Our last question.
It is coming from Derik de Bruin from Bank of America go ahead.
Hi, Andy again, thank you for letting me back in queue.
Ken.
Just a few follow up questions. So first on the expense side.
And maybe into a question of cash runway.
So I.
I mean right now the <unk>.
And they still ramping up.
And I just wanted to see what needs to happen to get you into the podcast.
Gross margin and <unk>.
And based on the cash runway right now is there.
Color you could provide on opex for the year and.
Are you seeing and color would be helpful. Thank you.
Yes.
<unk>.
From a gross margin perspective, a lot of it's a factor of a volume and cost reduction initiatives that we have in place right now so as Eric mentioned before.
We just launched in the Dr and the Drs can make up the lion's share of our volume that has a much lower cost environment and what we're currently manufacturing today.
That coupled with the fact that we're currently working.
Volume and negotiations with our suppliers in terms of working down materials cost.
Along with.
Volume based tooling that we're putting in place will be the three I would say three cost initiatives that will drive down our direct cost.
And then and then volumes will take care of overheads right. So currently and Q1.
2021 are negative margins were primarily built speak that were primarily a factor of us having and infrastructure in anticipation of gross so we've made investments.
And both in people and facilities to facilitate future growth. So we're poised to facilitate that going forward.
I would say from a from a cash perspective, although we're not giving guidance. We've we've modeled a number of different sensitivity scenarios.
And we foresee no liquidity issues at all and the near future.
Great. Thank you and can.
And you talk more about your distribution channel, especially for the ecommerce sales.
Is it going to be selling into the channel where on Simon So any details would be helpful. Thank you.
So we remain.
We maintain the inventory and we distribute through our three PL both from orders that come in from Amazon orders that come to our website and in some cases, we have integration with other partners. So for orders that come in from them, but but we are fulfilling all the orders now and if you want to.
Yes.
Assuming you're referring to direct over the counter distribution and through Amazon all of that all of that is fulfilled through us. We do have some distribution agreements as well, but title and risk passes to those distributors upon shipment.
So all of that inventory leaves our books once we actually ship that product.
Great and I have and last one maybe more bigger picture on day.
Impact of vaccination.
That's doing the post assets rolling off.
How much of an impact do you expect.
Maybe compared to our previous expectation on that.
Going to have in terms of either volume or.
Our pricing impact and how youre going to utilize your capacity since your IPO process of ramping that up and more specifically.
Maybe for that go to and what are your steel.
The audience and defense on a if they're works no debt.
And do they still need to be tested.
Right, so and so certainly the impact of vaccines, there will be some impact on testing volumes, particularly in the classic testing channels.
We're seeing.
And.
I wouldn't be surprised if there is.
Okay.
But there's over 1 million tests per day being performed now there is pockets of the population that don't wear masks that are not taking the vaccine. So we.
And the vaccinations may have spread through the easier too.
Vaccinate individuals' at this point.
The next phase is going be more difficult to the extent that our our borders remain open and this is really a global issue and it's not just a U S issue.
And so.
And the vaccines are not 100%. So there is some risk assessment for organizations. So.
Let's see what was the Golden state.
Portion of the IV tell me again, the Golden State question will vaccine and people need testing that and that is a function of yes.
Sorry.
And the local regulations and policies and.
I would say that thats and flex as well.
And this local governments are still assessing.
And I want to add I mean, we've done some research and in terms of people who've been vaccinated.
Certain people want testing there is an attitude toward the treatment of COVID-19 and that there is a population out there that exists regardless, regardless of being and Nokia weighted theyre not they still want to be tested and they want to know that people around and thats been tested as well. So there is that population out there that.
And that by allowing this decentralized testing allows them and opportunity to test.
And at their at their convenience, yes. It's interesting you know the media has shifted from testing to no talk of testing, but theres still a lot of testing going on so I think it's.
It's not over and it's not going to be over as is our viewpoint and I think we're well poised.
Two to help serve the ongoing need for testing.
Great. Thank you very much.
Thank you.
And that's it for the question and I'd answer session.
And now I would like to hand back.
Closing remarks, Mr. Eric I'm sorry.
We have one question out here.
He.
Okay.
Prices on them.
Alright, and closing remarks, I'd like to hand, it back and so Eric Angleton.
Thank you delfin.
I want to thank everyone again and for your time this afternoon and for your interest and lose share of health. We are very excited about the future at Sierra and we look forward to speaking to you soon thanks.
And this concludes today's conference call. Thank you for your participation and everyone. You may all now disconnect have a great day.
[music].