Q2 2021 OraSure Technologies Inc Earnings Call
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Thank you for holding the conference call will the beginning shortly thank you for your patience once again, thank you for holding Inc.
Conference call will be the beginning shortly.
Thank you for your patience.
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Yeah.
Welcome to the Orasure technologies incorporated 2021 second quarter earnings Conference call. My name is Adrian and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
The question and answer session Yeah of course.
Please press Star then 1 on you touched on the phone I'll now turn the call of of Scott Gleason head of Investor Relations at Orange for Mr. <unk> you may begin.
Thank you good afternoon, and welcome to works for technologies second quarter 2021 earnings call.
Scott if I'm, the senior Vice President of Investor Relations Communications presenting for worst for today are Dr. Stephen Tang, our President and Chief Executive Officer, and Roberta for Luca Our Chief Financial Officer. As a reminder, today's webcast is being recorded and the slide presentation accompanying the webcast can be found on the Investor Relations website the.
Before we begin you should know that the call may contain certain forward looking statements, including statements with respect to revenues expenses profitability earnings or loss per share and other financial performance product development performance shipments and markets business plans regulatory filings and approvals expectations of.
The strategies.
Actual results could be significantly different factories.
Factors that could affect results are discussed more fully in the company the SEC filings, including its registration statements. Its annual report on form 10-K for the year ended December 31, 2020, net quarterly reports on form 10-Q, and its other SEC filings. Although forward looking statements help to provide complete information about future prospects listeners should keep in mind that forward looking.
Or solely based on information of vehicles management as of today. The company undertakes no obligation to update any forward looking statements true reflect events or circumstances. After this call with that I am pleased to turn the call over to Dr. Stephens Inc.
Thanks, Scott and thank you to everyone for joining our call today.
This quarter <unk> saw an exceptionally strong recovery in our core business and excluding COVID-19 product revenue, we grew 122% year over year and 48% sequentially.
And while we still have of ways to go at the beginning of the return to a more normal activity for our customers is a welcome sign and so we looked for the second half of fiscal year 2021.
The strengthening of our core allowed us to achieve strong financial results. Despite the anticipated slowdown of molecular solutions Covid revenue as PCR test volumes declined in the U S.
This quarter, we also achieved a major milestone with the receipt of 3 emergency use authorizations easier ways for our Impella swab COVID-19 rapid tests in the U S, which we continue to believe will be a very important driver of incremental revenue and a source of growth for the company.
The launch of our Entellus swab test demonstrates the ability of the company to develop launch and market new products in the coming year, we will talk more about our renewed focus on innovation and our product pipeline is 1 of our strategic areas of focus.
As we reflect on our strong quarterly results and our numerous COVID-19 launches I would like to personally thank for assurance dedicated employees around the world for.
Worked tirelessly to get us to the exciting point in our company's journey.
I would now like to discuss our strategic priorities, which include capitalizing on the COVID-19 testing opportunities.
Spanning our sample collection and molecular services business and the new sample types and testing modalities.
Spanning our growth global reach and driving innovation with the focus on achieving higher growth for both the internal R&D and M&A.
First as we look at the COVID-19 testing opportunity. This quarter, we received 3 EU ways for our Intel Swab of COVID-19 rapid test for over the counter OTC professional point of care and prescription home use we.
We believe and tell us for.
The competitively differentiated primarily because of the test is remarkably simple to use.
Just swap your nostrils with the gentle swab swirled the swap in the tube and see your test results in minutes.
Unlike other rapid Covid test there was no confusing steps no batteries, no electricity needed and no mailing samples to a lab.
We like to say, it's as simple as swab swirl and see.
For sure knows the simplicity is absolutely crucial to adoption and the ongoing use by consumers and clinicians.
The insurers confidence in the results and enables testing absolute anywhere, including outreach testing to underserved communities exactly where our HIV and HCV tests are used today.
As is customary in medical device and diagnostics the conversion of customer leads to purchase orders it takes time.
And recall that we were limited in our ability to promote this new product prior to receipt of our 3 he weighs in early June.
So while we are in the initial phases of customer acquisition. We did begin shipping orders in June and continue to receive orders in July.
Currently have customer inquiries, representing over $25 million, including inquiries from over 15 countries that will accept FDA EUA product with appropriate country specific specific documents and labeling.
We believe the recent propagation of new variance has renewed the focus of global governments on a multi pronged strategy to kind of the pandemic consisting of vaccination protection and frequent testing of.
The study conducted by the National Institutes of Health and recently published in the journal of infectious diseases indicated the antigen testing when conducted every 3 days.
Incentives the equal to that of PCR lab based testing.
This supports the need for for regular fast and frequent testing, which will be needed in remote locations and at home.
1 of the most crucial requirements for this type of testing is the ease of use and that's where Intel as Bob provides a real benefit.
Our country's response of the pandemic is well characterized by the CDC program of protect test and vaccinate.
We continue to believe the testing will be a critical component of the 3 tiered response to counter the COVID-19 pandemic.
As new variants, such as Delta Atlanta propagate across the globe, there's been increasing demand for testing in multiple global markets.
Additionally, students returned to schools and employees returned to work, we believe testing will be vital for ensuring safety and hygiene for all.
We've already seen several announcements around programs, incorporating both vaccine and vaccine the individuals'.
Additionally, large funding pools of become available from the federal and state governments, including the Cdc's $2.3 billion of funding for underserved and rural communities for which our test is ideally suited.
In addition of $1.6 billion from the by the administration to address testing and mitigation and vulnerable communities.
And $10 billion for the by the administration to fund back to school testing.
That adds up to $13.9 billion of federal funding to enlarge part address testing and congregate underserved and vulnerable communities places where vaccination rates are low and COVID-19 variance are now surging and our Intel of Swab test is ideally suited.
Lastly, as it pertains to COVID-19, I want to provide an update on our oral fluid antibody tests.
The FDA recently responded to US declined a further review of our submission as they focus on areas of higher priority.
However, we will continue to offer this product as a research use only test with several laboratories interested in COVID-19 antibody surveillance and research applications.
Next I would like to highlight 1 example of how we're trying to expand our sample collection business.
As you know we built the saliva sample collection portfolio by generating data to disrupt the standard of care for sample type often blood and then co clearing our collection devices with relevant assets and the genomics space.
We are now pursuing a similar strategy with first void urine collection with our Nova furnace subsidiary.
As we look to bring the non invasive benefits of urine sample collection to new markets.
This quarter, we had a significant publication and gynecologic oncology demonstrating the ability of Kali paid for.
For sure it's proprietary urine sample collection technology to facilitate testing for human papilloma virus HPV.
Using first void urine samples from patients.
In the study of approximately 500 women the.
Sensitivity and specificity of colleagues the collected first void urine samples was shown to be similar to the sensitivity and specificity of clinician collected cervical samples using abbott's real time high risk HPV assay for the detection of neoplastic.
We have additional clinical studies in process with other major HPV test manufacturers that we expect to come out later this year.
While there is still a significant pathway to full product validation regulatory approval. We believe <unk> has the potential to transform cervical cancer screening to a better less invasive and more cost effective modality, where women can have the sample collected for cervical cancer and other sexually transmitted diseases in the.
Privacy of their own homes.
The market potential for HPV screening represents greater than 30 million tests per year in the U S alone, making this a significant future opportunity.
In regard to Cali for use for oncology. We also saw Mdx helped 1 of our top customers using the <unk> cancer screening receive a draft local coverage determination from Palmetto GBA, a Medicare administrative contractor or the select mdx urine test for prostate cancer risk.
Estimates.
Typically these types of reimbursement coverage decisions are catalysts for more significant commercial adoption of laboratory tests.
This was also a record quarter for our microbiome business and both the service and kit side with over $6 million of total revenue.
We now have over 50 commercial customers in microbiome testing, including over 30 biopharmaceutical companies conducting over 20 ongoing clinical studies.
We're working with all of the top 5 companies in the microbiome space as well as 5 of the top 10 pharmaceutical companies in the United States.
Early data around microbiome based therapeutics has been positive.
Some of these studies are beginning to advance to the phase III stage with FDA, which will lead to increasing revenues as the number of samples evaluated increases.
We also believe eventual regulatory approval microbiome based therapeutics will lead to further research investment in this area, which will benefit our business.
Building on the growth of our microbiome business in the second half of this year, we plan to offer a new got Mad is transcriptome collection kit and met of transcript on service and support of our customers' microbiome research.
This is an important step for the strategy of expanding sample types analytes and services as we pursue our multi on the strategy.
Another important strategic component of our molecular solutions business is expanding our long term competitive position of the market.
Investors have asked US about recent low tech of COVID-19 collection devices launched by other companies I believe is important to highlight the unique features of our products.
Our devices are designed for remote sampling collection of for genetic sequencing.
In addition to the well proven easy to use consumer friendly form factors.
The features of these features proprietary patented designs and chemistries capable of stabilizing of variety of analytes under a broad range of storage conditions, allowing shipment of storage at ambient temperatures.
Because of the DNA and RNA is preserved sample collection and our devices are suitable for surveillance related sequencing for variant detection as an example.
While there are lower cost devices from the market that can be used for COVID-19 sample collection, they do not match our benefit profile.
We continually innovate on both of our physical design and chemistry and as a result have significant intellectual property protecting our technology, many with explorations extending out many years.
We are increasingly pursuing regulatory approvals in conjunction with our strategic customer relationships.
Just the clearance received for our oral fluid collection device in conjunction with helix for.
Their whole exome test this year.
Finally, we have established long term contracts for some of our key customers, providing long term visibility and we're increasingly adding a broader range of services to customer agreements such as fulfillment and customization services.
Importantly, our customer base in these markets has become increasingly diverse we have over 6000 customers now with no single customer representing greater than 7% of our revenue in fiscal year 2020.
Consequently, we believe we are in an extraordinarily strong competitive position.
1 of the global leaders in this market with our ability to address diverse markets such as consumer genomics clinical genomics in home testing, which are growing in the mid teens with our ability to expand our solution set to additional high growth areas and simple modalities.
Moving on to our strategy to expand our global reach and presence we continue to see strong adoption of our ore quick HIV test internationally.
Given by double digit annual growth since 2016 of our HIV self testing the only regulatory approved oral fluid self test for HIV in the world.
We are already using our established distribution channel for HIV for the new Intel of Swab of COVID-19 rapid tests.
Where we have inquiries from several countries as COVID-19 continues of spread outside the U S.
Across the offshore portfolio, we continue to expand our global reach and now have over 400 product registrations in 95 countries.
This not only applies to the diagnostics, but also the molecular solutions. We're also looking to increasingly expand outside the United States with our collection kits using our COVID-19 collection devices.
Finally, I'd like to discuss our strategic priority of driving innovation with the focus on higher growth spaces for internal R&D and M&A.
I would like to provide some additional details relating to our business development efforts, where we've been very active in assessing a number of opportunities and new technologies.
From a prioritization standpoint, we're focused on companies and technologies, which build upon the foundation of our existing business strategies and diagnostic and molecular solutions.
That would allow us to leverage our infrastructure and market expertise.
In diagnostics, we recognize orasure strength and what sets us apart is our expertise and simpler more effortless testing.
With COVID-19, we saw of real time, just how important this type of testing really is.
So as we think about the future of diagnostics for sure is ideally positioned to drive additional self testing and more effortless testing at the point of care.
We are actively investigating new technology platforms second expand our menu of tests on a global basis and provide long term competitive differentiation.
With the molecular solutions business, we're really looking at innovative solutions, which can expand our capabilities from a sample collection format.
Spanned our reach into new high growth emerging areas of testing.
Further strengthening our competitive positioning and expand the scope of data and services, we can offer our clients.
We ended the quarter with $229 million in cash and cash equivalents and we believe there is significant opportunity to drive further growth and stockholder value through external M&A.
Overall I'm extremely excited about the outlook for the next 12 months at Orasure. We're currently conducting our annual strategic review, which will incorporate both broad and Charles stakeholder input side.
Syed expertise in order to ensure we're taking full advantage of the strategic opportunities in front of us.
We will look the share of the output of this review with investors. When the review is complete along with the broader look at the innovation occurring within our organization.
And with that I'm pleased to turn the call over to Roberto to discuss our financial results and outlook.
Thanks, Steve I'm happy to review, our financial results for the second quarter.
First from a top line perspective, we delivered total revenue of $57.6 million from the second quarter of 2021 compared to $29.3 million in the prior year representing year over year growth of 97%.
As a reminder, last year's second quarter was the most heavily impacted by the COVID-19 pandemic. However, it's the previously noted our core business. Excluding COVID-19 product revenue grew 122% year over year, and 48% sequentially this quarter, representing a significant recovery and demonstrating meaningful progress in key areas.
Such as domestic and international diagnostics, our consumer genomics sample kits and microbiome kits and services.
Total diagnostic revenue in the quarter was $19.3 million versus $10.4 million from the previous year, reflecting 85% growth.
Importantly, this quarter, we saw an improvement in domestic HIV HCV and risk assessment testing revenue as we start to return to pre pandemic levels.
Our international diagnostics business saw a 9% growth in the second quarter versus the prior year and grew 8% in the first half of 2021 when compared to 2020.
The strong growth was achieved despite 2 important headwinds.
First there were expected changes in the Bill and Melinda Gates Foundation subsidy for HIV self test, which have impacted revenue growth year to date.
This subsidy ended the June 30 of this year pursuant to the terms of our agreement with the foundation and has been tapering downward for some time.
In addition, as COVID-19 has now spiking across Africa, with many major countries and locked down our NGL customers of experienced in the country distribution challenges, which then caused delays in Q2 orders.
Looking at our molecular solutions business total second quarter revenue was $38.3 million, increasing 103% versus the prior year.
We saw a strong rebound in customer activity in the consumer and clinical genomics areas.
Over the 19 revenue and molecular solutions increased 36% year over year to $11.5 million, but declined by 58% sequentially as PCR testing rates in the U S decreased and customers lowered inventory positions.
The non COVID-19 portion of the molecular solutions business grew 61% sequentially.
Looking back to the pre pandemic period in the second quarter of 2019, our molecular solutions business grew 45% relative to the that period, excluding COVID-19 revenue demonstrating strong growth in the base business.
Now I'd like to discuss our financial results beginning with our gross profit percentage.
Most profit percentage in the second quarter was 53, 2% compared to 59% in the same period last year.
The decline in overall gross profit percentage of reflects 3 factors. The first was product mix and the diagnostics segment, the higher proportion of revenue coming from the lower margin international business, coupled with the decline of the Gates Foundation subsidy.
The second factor was the significant hiring of equipment purchases to date for the Intel of swap launch, which do not yet have associated positive offsets from a revenue perspective.
Finally, we did see higher material and labor costs in the quarter.
From an expense standpoint total operating expense in the quarter was $28.9 million compared to $26.7 million in the second quarter of last year, reflecting operating expense growth of 8%.
In the quarter, we generated operating income of $1.8 million.
Compared to an operating loss of $9 form of $4 million in the previous year.
Moving to the bottom line, we generated a net loss per share of <unk> in the second quarter of this year compared to a net loss of <unk> 16 per share in the same quarter last year.
Cash used in operations for the quarter was $3.4 million.
Moving on to our financial outlook.
Given the continued volatility in the unpredictability around COVID-19 testing, we are providing top line guidance for the third quarter with some additional color on our full year outlook.
For the third quarter, we expect revenue of $45 million to $50 million. Additionally.
Additionally, we anticipate full year, Intel swab revenue of approximately $30 million with the preponderance of that occurring in the fourth quarter.
This would position us to deliver full year revenue of approximately $230 million.
I'll review, a few of the assumptions underlying our third quarter guidance.
First for Intel of Swab, although we currently have an installed capacity of 55 million tests per year manufacturing, we faced some manufacturing challenges with respect the tech transfer.
Although we are confident in our ability to rapidly resolved. These issues they will impact the amount of product available for sale in the third quarter as.
As the COVID-19 pandemic continues to evolve in the U S. We have net.
Noted a declining pricing environment and are also factored that into our projections. Despite.
Despite these issues as we previously discussed we have been receiving significant inbound interest and expect our book of business to continue to expand throughout the quarter.
With respect to our molecular collection kits for COVID-19, PCR based testing, we're assuming a significant sequential decline decline in revenue given the current PCR based testing trends.
However, given the proliferation of new viral variance for the upcoming for cold and flu season, increasing international sales and funding for back to school programs for PCR testing is predominantly used for younger children. We believe there will likely be a rebound in our PCR kits sales for COVID-19 testing products. This fall so ultimately the assumption could for.
Conservative as we look to our fourth quarter, we would anticipate significant sequential uptick in revenue as <unk> revenue has become much more pronounced.
Although our third quarter outlook is conservative we are focused on establishing a revenue baseline that is achievable with the potential for upside if we outperform our current assumptions.
With that I will turn the call back to Steve.
Thanks for Boto as the company, we arent exciting point in our history and the progress we made from our fundamental perspective is beginning to become evident in our financial results.
This quarter, we demonstrated the increasing strength of our core franchise with non COVID-19 revenue of $46 million.
Representing almost a 200 billions of dollars annual run rate that would be an historic high for our total revenue.
We have now entered the commercialization phase with Intel of swap we remain confident that Intel of swab will be a significant driver of revenue growth and free cash flow and also of long term product for the company as we ultimately entered the endemic phase of the disease for them.
Molecular solutions business is also increasingly strong footing as we build out new products and service capabilities, increasing the number of sample types, we can accommodate and expanded the new fields of testing and end use markets growing in the mid teens.
Finally, we are invigorating, our innovation engine of the.
The company and look to introduce new technologies for internal R&D external collaborations and M&A.
Overall, we believe we are poised to emerge from the pandemic of stronger more innovative and faster growing company.
And with that I'd like to turn the call back to Scott for questions and answers.
Thanks, Steve operator, we're navigating ready to begin the Q&A portion of our call. We would ask that you limit your questions to 1 question and 1 follow up to ensure broad participation.
Thank you we will now begin the question and answer session. If you have a question. Please press star 1 on your Touchtone phone.
If you wish to be removed from the queue. Please press the pound or the hash key.
If you're using speaker phone you may need to pick up the handset first before pressing the numbers.
Again, if you of a question. Please press Star then 1 on your Touchtone phone.
First question comes from Vijay Kumar from Evercore. Your line is open.
Hey, guys congrats on the frontier and thanks for taking my question.
My first question on the guidance here, Stephen but BARDA.
I guess.
The $30 million of antigen testing revenue.
What are you assuming for <unk> in Q4.
I look at your CTO of revenue guide of 45 to 50.
The implied Q4 is about 65, plus if all of the antigen revenue sort of flowing through in Q4 than the base implied basis.
<unk> 30, 35 ish that seems to be a pretty dramatic decline versus the pre pandemic level.
What does maybe walk us through the second half of assumptions between base versus the crude.
The tailwind.
Yes.
Sure. Thanks for the question Vijay So I'll start off and then Steve can jump in.
So as we mentioned in the prepared remarks, we expect that the preponderance of the $30 million in entellus Schwab revenues in the second half of the year will occur in the fourth quarter.
So given that we haven't given exact guidance on how much we expect in the third and fourth quarter specifically.
But youre right. There is a decline in the remainder of the business from the second to third quarters. The biggest driver of that decline is our lower COVID-19, molecular collection kit revenue expectations.
As we stated in the prepared remarks, we've taken a conservative outlook based on current demand trends.
And Additionally, we're making some lower assumptions for some of the core products and diagnostics and molecular solutions following strong growth in core demand in the second quarter.
Which could have been driven by restocking or initial distributor purchases.
Purchases.
So.
We do expect to see a slightly lower third quarter to the second quarter and some parts of the the base business definitely of stepped down in the molecular collection devices.
And as we discussed in the prepared remarks for some of the challenges in.
The tech transfer of the Intel of swap of manufacturing have delayed the availability of product such that we'll see most of our entellus swab sales for the year in the fourth quarter.
That's helpful out for Burrito, and Steve maybe 1 for you.
Some recent article on the.
Perhaps some of them.
Other corporates for companies have an approach for sure.
I know.
You don't comment on market speculation.
But can you.
The article didn't mention that.
Offshore and have started the strategic review of process of can you colors. If you started the strategic review process of the business.
Well the J I think of as you know we wouldn't comment on the veracity of any rumors and so we're going to stand by that.
Gotcha.
Maybe 1 last 1.
I could.
Our gross margin, so maybe where does the 1 time of share in <unk> and should second half be the loaf of fees or should that normalize to 60 plus.
So the biggest driver of the step down year on year in gross profit percentage was the increase in our HIV international sales, which tend to be lower than the average of our gross profit percentage across the company.
Coupled with the decrease in the Bill and Melinda Gates Foundation.
Supplement to those revenues.
As we see growth from Intel of swap over the course of the second half, which is likely to be of higher margin projects, the product and which we're likely to get better pricing on as we get deeper into the year, we should see some movement in the gross profit percentage.
Alright, thanks, guys.
Sure.
And our next question comes from Patrick Donnelly from Citi. Your line is open.
Great. Thanks for taking the questions guys.
Just on the tech transfer issues impacting entellus Schwab manufacturing.
I thought of you guys were already manufacturing at risk. So can you just talk to I guess when the problem of rise and also I guess the path to resolving it.
Are you already through it sounds like obviously with <unk> being bigger and maybe we have a little bit to go here, but just talk through I guess, the steps necessary to get us to that $55 million of manufacturing capacity or just in general higher capacity.
You guys are doing internally there.
Yeah, Patrick I'll start.
So we have been increasing our capacity as we've been sharing quarter by quarter.
We currently have installed capacity to produce 55 million tests per year, and we're installing additional equipment to expand the 70 million tests per year this quarter.
Our current production as we announced will be significantly lower than that until we can resolve the tech transfer issues, we have been manufacturing at risk the.
Of the issues that we're facing are 1 of scale up.
As we are getting more volume online and trying to address.
Issues in Inc.
Creasing that scale. So these are switched.
Situations, we have seen before and other product launches.
Fortunately the Intel of swab.
M D.
Design and platform is largely similar to our or quick HIV and HCV and Ebola platform. So we've seen this type of situation before.
So we are working to rapidly resolve that which hopefully will open up more capacity in the fourth quarter.
Okay. That's helpful.
And then I know you mentioned orders from 15 countries, who kind of accept the EUA approval.
Approval.
Can you talk about just broadly the opportunity of U S.
What key markets are you still pursuing additional approvals in.
Maybe just some timeline timelines around the bigger ones that we should keep an outflow.
Well, it's been it's shifted I think as the pandemic has spiked in certain parts of the world and so as you would expect countries that accepts the FDA EUA.
As part of the authorization to sell in their country.
And where the virus pandemic of spiking or <unk>.
Clearly the ones.
The need right now so that's where we're receiving the most interest in the hotspot countries.
<unk> and I mentioned the.
Have the ability to accept the EUA beyond that we're looking at broader geographical coverage like the European Union.
Quite frankly, we didn't expect interest this soon for our product.
Primarily this would be the domestic product, but it turns up the interest is purely global.
We're adjusting to that.
Addressing 1 of those.
Of those needs.
Okay. It's a good problem to have so.
Maybe last quick 1 just on the long term contracts for the sample collection of encouraging to hear that you guys establish some of those.
I know competitive noise has been something that you guys have it talks about the investors always asking about so I mean was this in response to that any change in terms of the pricing, we should think about or any metrics you can give us in terms of.
What percent of customers are locked in I know you said there were some some key large ones. So I'm just trying to get a feel for for.
What that looks like thank you.
Well, so we have not seen significant price changes in the consumer genomics area.
We're pleased to see is that it's a rebound of not only the commercial genomics, but also of the academic genomics businesses.
So we haven't announced what percentage of our revenue base of our customers are locked in per se.
But it is the significant amount.
And I think that the issues we had.
Few years ago with customer concentration are behind us and so I think the.
It bodes well for the continued growth in the consumer genomics area.
Yes, we said remember on the although we have for 6000 total customers.
Really just the top ones that we have kind of of the longer term contracts with but it's more about kind of the.
Multiple strategies that we're engaged in in terms of getting regulatory approvals in conjunction with the customers.
Spanning the IP portfolio and so it's all of those factors kind of combine that we think build of very defensible position for that business.
Makes sense. Thank you guys.
And your next question comes from Frank Jenkins from Lake Street Capital. Your line is open.
Yeah. Thanks for taking my questions guys.
So not sure if I heard it did get on the call of a little bit late but.
I was curious about the broader capacity expansion plans that were put in place last quarter have those changed at all of timeline or size wise.
Hi, Frank Thanks for the question so our capacity expansion plans as far as installed capacity remain on track. So we do expect to for example for entellus swab have installed capacity at the end of the third quarter of 70 million units per year and again that includes non COVID-19 applications of <unk>.
Approximately 17 million units a year.
And the.
Juruti of investment for all of our capacity the capacity expansion efforts is largely committed so we do expect to continue.
The capacity expansion.
On the same track as we've previously described.
Got it okay that makes sense and then I just wanted to ask a little bit more of a broader question about the base business and it's not meant to pin you down on any forward looking growth rates or anything of that nature, but just wanted to kind of level set everybody on how we should think about the base business and there's obviously a lot of moving pieces there, but maybe.
Talk a little bit through broadly how you think growth rates could look across the infectious disease versus molecular solutions and maybe go into depth in some of your higher growth areas and some areas that you feel could produce some outsized growth in income a little bit under the spotlight as you look out over the back half of this year as well as into 2000.
'twenty 2.
Yes, <unk> I'll start I think as we highlighted on the call we still see strong growth in internet of our international HIV.
That was strong first half growth over last year that continues to grow, particularly the number of units outside the U S. We of.
Sold over 23 million HIV self testing 35 countries so far.
So we expect that to continue.
Saying a renewed growth as we've talked about in the.
The consumer genomics area.
Particularly in disease risk management companion animal.
And and.
And lifestyle areas.
We talked about the fact that the microbiome.
Franchise, which includes sample collection kits and services.
Having had a record quarter in their own right and we had strong growth expectations for the microbiome business before the pandemic of those look like they're continuing so those are some of the areas that I would highlight.
Obviously, we're just at the tip and the beginning of the COVID-19, Intel swab.
Commercialization process, so that that will be a growth driver as well.
Got it Okay. That's helpful and that's all for me. Thanks.
And your next question comes from Brandon Couillard from Jefferies. Your line is open.
Hey, guys. This is Matt on for Brandon. Thanks for taking the question first of all is just for Steven can you maybe talk a little bit of boats. Since you got the test approved.
Back in June the evolution of your talks with customers or potential customers in.
Big retail players academic education, setting, which you've had success with your question kits in the past just where you're seeing the mode of most interest and then talk about kind of the durability of that as we look into the back half of the year and into 2022.
Certainly Matt.
So the conversation specifically tell us what had been a very active very robust many inbound inquiries.
A lot of those have to do with back to school and back to work programs overall kind.
Of course separately the sample collection area of for COVID-19.
The strong base of back to school programs as well. So those continue I think that what we've seen since we received our EUA as of June 4th is that we are at the kind of at the low point in testing from.
From June 4th until today.
And it's only in the past the week or so where the concerns about the delta variant.
The testing not only vaccine and vaccine the boss of vaccine the people who come to the front. So we are seeing the pipeline increase over time.
Now since the since the product launch.
I think there's been clearly a focus on asymptomatic testing.
And serial testing of the words selling products that can be used to test the single person.
In 1 instance, and then testing them and again 24 of 36 hours.
That's going to become increasingly important.
To avoid quarantines and shutdowns and so I think we've entered clearly of new phase of the pandemic and that's true it's driving.
Great demand for Intel swab and as.
The other products are on the market are used and the differential quality of our product which is ease of use.
Less of an amended of on hands time for a customer to.
To do the test itself.
All of those attributes are really going to be difference makers. So this is the dynamic market and I think it's coming our way quickly and we will see that.
For the rest of the year and I think we'll see an exit rate into 2022.
Which should be very favorable to us.
Super Thank you.
And your next question comes from Jacobs Jacobson from UBS. Your line is open.
Hey, Thanks, good afternoon everybody.
Maybe just 1 follow up on the capacity side, just on collection kit capacity at.
It sounds like from the Roberta his comments are committed to building. This out. So can you just talk about the portion of of that capacity that you need for non COVID-19 purposes, maybe what could drive the non COVID-19 side higher as we looked out of couple of years and then if we see limited COVID-19 collection kit sales.
Or maybe the sales remain limited in the near and medium term what would the plans for that capacity ultimately be.
Thanks for the question Jacob Yes, so we remain on track with our molecular collections kits capacity expansion.
As you saw in this quarter.
Which was the quarter, where the COVID-19 application of those collection kits decreased sequentially.
The academic and commercial consumption of the of the kits increased.
So we do think that there is pretty good.
Elasticity between the 2 applications.
And we continue to drive growth of both consumer and academic use of those kits. So we expect that to the extent that we're not using them for COVID-19, there will be other applications that we can put those kits too.
Got it thanks for Arrow BARDA, and then maybe for Steve.
And just maybe kind of moving back to the non COVID-19 side on microbiome, obviously, a really strong quarter. There I guess record quarter. Maybe can you just remind us of the microbiome assets that you have their capabilities and kind of your outlook for that end market.
Sure Jacob So our microbiome assets include the sample collection kits as well as the service businesses, which we acquired a few years ago. So that's traded under the company name diversity, Jim It actually is the merger of the diversity of gin and core biome assets, which we acquired separate.
A few years ago. So that's a company that has a.
The cap certified laboratory, which essentially does the wet chemistry all of the way through to the machine learning enabled data treatment to characterize what is in that microbiome sample. So it's the the type.
The percentage of number of <unk>.
<unk> in that sample.
A lot of of the work is being done in the gut microbiome area, but we're also moving into the skin microbiome and industrial hygiene areas and so as.
As we've stated on the call.
We have a large customer base.
For that service business.
The several top biopharmaceutical companies.
Alex moving into phase III clinical trials and so.
It's been a promising area of for some time and I think what we're starting to see as much more commercial activity on the services side, which coupled with the sample collection kits I think is going to be high growth for us for the foreseeable future.
Got it thanks for taking the questions guys.
The remainder chance of the queue. Please press Star then 1 on your Touchtone phone and our next question comes from Andrew Cooper from Raymond James Your line is open.
Andrew Cooper of your line is now open this year of mute could you on your phone.
Sorry about that double mute.
Thanks for the questions and I appreciate the the chance here, maybe just first I think the area of the biggest differentiation versus <unk>.
Our model was in that genomics space outside of Covid.
We know there was the big promotion event late June.
Is there anything to call out to think about in terms of moving from that was it just kind of broad based growth or anything kind of 1 time ish to think about when we think sequentially and that genomics space.
So I'll start and for just.
Nothing nothing to call out I think theres a normal seasonality.
Our.
Both our product business and the royalties we received for the collection kits for consumer genomics is driven by events.
Like Amazon Prime day, So I think that that's been the same for.
For several years now Amazon Prime day.
Was different in 2020 than it was in 2021, so that that could be a slight difference but.
I don't think theres anything inherent to that I think we're seeing overall strong demand, particularly as academic labs reopen and as people become more interested in.
The health and what we call the disease risk management is which is the genetic linked to disease. So nothing that I would call out the Roberto you sort of anything else you want to add to that.
No I think you've touched on everything.
The key there is that there were no 1 time events. It just represented organic growth.
Andrew 1 thing I'd just highlight when you look at that business from.
From the kind of pre Covid numbers. If you go back to 2019, we set out of about 45%.
Supply is kind of of 20% CAGR I think 1 trend you have seen is that business has become more diverse as we've had more customers.
Obviously with some consumer genomics headwinds for some time I think the consumer genomics side as you can see on the news is starting to do a little bit better and so I think we're kind of starting to see the growth there of the opportunity and the market kind of come through in the numbers as well.
Okay, Great and maybe just 1 more kind of focused on Intel of swab.
I like hearing the $25 million of inquiries you referenced is there any sort of timeframe that you can put around what folks are looking out at and how to think about that in context of talking about $30 million for the year and more <unk> loaded.
How should we think about the duration of some of these conversations and.
What the structure might look like as they start to roll into the.
Roll into the model and roll into the results.
Yeah, So Andrew I think overall, there is very strong demand.
And I think it's because we're entering this new phase of the pandemic. So.
I think the forward looking view to me is much more intense from the backward looking view because the backward looking view.
Includes this lull in testing in the second quarter for just about everybody.
I think as we get more serious about how we can avoid.
Quarantines and shutdowns.
The need for testing will become much more apparent and the need for self testing will become.
Important on top of that and then on top of that the attributes of Entellus lab, which are its ease of use.
And the confidence of use of it can have in the results that will factor in as well. So that's that's the costs we have looking forward.
The.
Some of the opportunities that are that are coming in the where share included in that 25 million dollar pipeline that we've talked about our near term and some of our longer term and better yet some of our even.
Short term and long term, which suggest.
A reoccurring sales over time, so we haven't given specifics on that but.
Our pipeline is actually increasing week over week.
As the concerns about delta variant become very very apparent.
Yeah.
Great I appreciate the question.
And we have no further questions I'll turn the call back over my remarks.
Thank you everyone for joining us day.
We appreciate your participation on the call.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating and you may now disconnect.
Yeah.
Okay.
The year.
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