Q1 2022 Co-Diagnostics Inc Earnings Call
Thank you I am Andrew Benson and joining me. This afternoon are members of the code diagnostics management team, including Dwight <unk>, Chief Executive Officer, and Brian Brown, Chief Financial Officer.
We will begin the call with management's prepared remarks, and then open up the call to questions from our analysts before we begin we would like to inform the listeners that certain statements made by co diagnostics. During the course of this call may constitute forward looking statements any statement about company expectations beliefs plans objectives assumptions of future events or performance.
Our forward looking statements for example statements concerning 2022 financial and operational guidance the development regulatory clearance commercialization and features of new products plans and objectives of management and market trends.
Forward looking statements include statements concerning the Companys forthcoming PCR testing platform, which is subject to FDA review and is not yet available for sale. The company believes these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual result.
To be materially different from any future results expressed or implied by such statements important factors, which could cause actual results to differ materially from those in these forward looking statements are detailed in code agnostics filings with the S. E C Kodak.
So diagnostics assumes no obligation and expressly disclaims any duty to update any forward looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events.
Additionally, the company may discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earning release earnings release out shortly before this call which may contain reconciliation to these non-GAAP financial measure.
<unk> presented to their most comparable GAAP results.
At this time I would like to turn the call over to co diagnostics, Chief Executive Officer Dwight Egan Dwight.
Thank you Andrew and thank you all for joining us on this call. We will provide an overview of our results for the quarter.
Updates on key financial performance metrics and a discussion of progress against our strategy. Then we will take your questions.
The first quarter of 2022 soco diagnostics achieved continued solid sales with strong gross margins and we are proud that we have been able to exceed expectations.
This quarter was a momentous period in the company's history.
As we continue to integrate Idaho, Molecular Inc, and advanced conceptions, Inc, providing co diagnostics with all existing and future assets and intellectual property related to our upcoming Kodiak at home point of care diagnostic platform.
We previously announced that the acquisition is expected to streamline the commercialization of this new Coty ex PCR platform, we have expanded the manufacturing space to incorporate production lines for sample cups as well as production lines for the device.
The device has been designed with highly specialized optics and other innovative features to accommodate multiplex assays as we expand its future suite of products to include additional respiratory S. T I and other infectious diseases utilizing the company's patented co primary technology.
We are proud to be named as one of only six semi finalists in the disruptive Technology award in connection with the 2022 a a C C annual scientific meeting in clinical lab Expo in Chicago later this July.
A a C. CS disruptive technology award competition recognizes innovative testing and disruptive technology solutions that improve patient care through diagnostic performance or access to high quality testing.
We are honored to be considered in this search for the next innovative testing solution that will transform patient care.
Under the experienced and capable leadership with Doctor Kirk Ryrie. The final optimizations of the new PCR platform are underway and we are confident that pending FDA review, we will be able to launch a product that has revolutionary ramifications for the molecular diagnostics market worldwide.
We are on track for commencement of clinical trials by our second quarter earnings call. This August in anticipation of submission of the device to the FDA. Following the successful completion of those trials.
We would like to emphasize that.
We believe this PCR platform will come to represent the highest level of utility for at home point of care applications extending far beyond COVID-19.
While we have used different working names for this platform in the past like icon and your test P. C are more important than the name is the fact that it facilitates gold standard PCR results in around 30 minutes.
Utilizing a disposable sample collection cup or cartridge that is considerably less expensive than other molecular non PCR COVID-19 product offerings.
In addition, a significant benefit of the platform is its ability to multiplex.
That is to test for numerous disease states with one sample.
Ultimately, we anticipate end users will be able to differentiate between diseases that have similar symptoms to the multiplex syndromic panels that the company expects to introduce over time.
Syndromic testing as a process by which an individual or their physician simultaneously tests for multiple pathogens with overlapping symptomology, which is a limiting factor of other non PCR molecular technologies.
This allows individuals' and caregivers to perform one test to see if patients are suffering from Andy one of multiple causes rather than having to test for each potential underlying reason for the illness.
Our patented co primary molecule has unique properties associated with multiplexing P. C. R and we intend to bring the full power and capabilities of our proprietary technology to our new Kodiak Pcr platform.
With the forthcoming product launch of the platform. We believe the company will be at the epicenter of at home point of care testing throughout the world.
We have been aggressively setting the stage for our product launch through attendance at multiple international and met domestic conferences as we position ourselves to participate in a whole new field of at home point of care testing for a range of pathogens. One we are cleared to begin marketing activities for the product.
We have made significant additions to our ability to service a worldwide launch of our new platform.
This includes backend support preparedness for logistics e-commerce customer support sales and marketing.
The company commissioned a comprehensive marketing study that is helping to guide the forthcoming implementation of our product offering. We have also added new senior level employees consultants and engineering talent at both the parent and subsidiary companies. While also engaging a new advertising agency with significant health care experience.
And in international reach to represent our Kodiak PCR platform through product launch and beyond.
You will begin to see the look and feel of our forthcoming product offering on our website and other appropriate digital media exposures. All of these require compliance with certain regulatory constraints with which the company will carefully adhere.
Co diagnostics believes that in addition to ultimately representing the future of at home and point of care testing, our new powerful platform also has the potential to help build a cloud based pathogen surveillance system.
Future outbreaks.
All while giving individuals' the power to know their COVID-19 or other infectious disease status anytime anyplace anywhere.
We are also excited about the centralized lab customers, who we have served in over 50 countries and growing.
This is what currently drives ourselves and remains a large focus of our R&D efforts as we grow the product pipeline for this business segment, along with expanding our worldwide network of capable distributors and participating labs.
For example, we are continuing our active development of a multiplex STI panel to detect and differentiate between four prevalent causes of sexually transmitted infections for which analytical performance testing is currently underway in collaboration with clinical partners.
Malaria test designed for to differentiate between the different species of the parasite known to be resistant to treatment.
And the expansion of our logic smart a b C tests to include respiratory stinkball virus or our S. B.
As a platform technology company, our co primary platform has wide ranging applications and other assays are being developed for several pathogens of significance in dentistry and mental health.
Analytical performance is being evaluated for these assays with partnerships in each of these areas along with our ongoing development of a liquid biopsy assay for detection of cancer associated mutations present in human blood.
Progress in our agricultural vertical also continues including our work with Bayer crop services and L. G C.
And the company's mosquito abatement verticals also seeing a record number of laboratory installations, along with continued purchases from our existing customers.
Overall, we believe that our strong profits and solid balance sheet, our positioning co diagnostic dwell for these.
And other future growth initiatives as significant investments in talent and R&D continues.
The results this.
This concludes my initial remarks, let me now turn things over to Brian Brown for a review of the key metrics and numbers Brian .
Thanks to white.
Thank you for joining today's call.
As the White mentioned our record performance during the first quarter was stronger than forecasted.
In addition to the encouraging results. This quarter. We also made significant progress on the commercialization strategy for the Kodiak P C. Our home testing platform.
We are encouraged with the progress we have made both from an operational and financial standpoint and remain excited for the future.
Now to review our performance during the first quarter of 2022.
For Q1 revenue increased 13, 5% to $22 7 million as compared to 20.0 million during the prior year period.
This increase in revenue on a year over year basis was primarily driven by increased global sales of our logic Smart COVID-19 tests.
Gross profit for the year increased 15, 5% to $19 4 million compared to $16 8 million in Q1 of 2021.
Our gross margin percentage of 85, 5% for the quarter increased from 84.0% in the prior year period.
The 150 point basis increase in gross margin from last year reflects continued improvement in our manufacturing processes.
Record revenue and gross profit performance driven by increased sales of our largest smart COVID-19 tests enabled us to achieve significant year over year growth.
Total operating expenses for the three months ended March 31, 2022 were $9 6 million, an increase of $3 2 million compared to $6 4 million in the first quarter of 2021.
The year over year change was driven primarily by a $1.6 million increase in our research and development expenses over the prior year period.
Most of which can be attributed to further investment in the development of the codex PCR home testing platform.
Sales and marketing expenses for the quarter also increased from the prior year same period to $2 6 million.
The year over year change was primarily driven by higher third party commissions on international sales.
Additionally, we continue to invest in our people and processes, including our sales and marketing team as well as marketing mediums.
As we disclosed in our recently filed 10-K as part of the consideration given to our recently completed acquisitions. The acquire he's received contingent consideration based on the achievement of certain milestones.
At each quarter and we are required to re measure the value of the contingent consideration.
The Remeasurement calculation at March 31, 2022 created a gain of $3 $4 million that has been recognized as other income on our income statement.
For the first quarter of 2020 to income before taxes increased 32, 3% to $13 1 million as compared to $9 9 million achieved in the prior year same period.
Income tax expense for the quarter was $1 4 million, representing an effective tax rate of 10, 6%.
Our effective tax rate will generally differ from the U S. Federal statutory rate of 21.0% due to state taxes permanent items and discrete items.
Specifically for this quarter the rate is lower than we have experienced in the past due to R&D credits and the tax treatment of the gain on Remeasurement discussed earlier.
First quarter net income for 2022 was $11 7 million or 34 cents per fully diluted share compared to net income of $7 9 million or <unk> 26 cents per fully diluted share in the prior year.
Adjusted EBITDA for the quarter was flat on a year over year basis coming in at $11 4 million for Q1 of 2022 in Q1 of 2021.
Operational expenses incurred during the quarter for our new subsidiaries offset the year over year increase in revenue and gross profit.
We remain committed to improving the health and flexibility of our balance sheet. Our diligent approach during fiscal 2021 allowed us to Opportunistically close on two acquisitions during the fourth quarter, both of which are key to the continued development and future manufacturing of the codex PCR home testing platform.
Cash cash equivalents in marketable securities increased to $97 4 million at March 31, 2022 up from $89 9 million at December 31, 2021, representing an increase of $7 $5 million.
Our highly liquid no debt balance sheet enables us to execute on our strategic growth plan.
We continue to invest in our people processes and research and development as we look to scale and expand to new verticals to solidify our future.
In March we announced the authorization of a $30 million share repurchase program. We believe this element of our capital allocation strategy is aligned with our commitment to return value to our shareholders. This this authorization also reflects confidence in our balance sheet and strong cash flow generation capabilities.
Italy, we believe that this authorization provides us with an opportunity to strategically allocate capital in a way that demonstrates our positive outlook for the future of code diagnostics.
The dedication from our team to deliver solid performance remains on full display our record performance during the first quarter would not have been possible without their many contributions.
As we look to the balance of fiscal 'twenty 'twenty. Two we remain encouraged by the demand for our products and the operational and scientific teams, we have established to support our future growth.
Turning now to our visibility around the outlook for the balance of the year.
While we experienced strong demand for our products during the first quarter of 2022 changes in our operating environment and markets have restricted our near term visibility. We will continue to navigate the near term environment with caution, but as a result will not be providing quarterly guidance at this time to.
To be clear, we remain very confident about the long term potential of our business and the demand for our products our ability to accurately forecast logic Smart COVID-19 test sales through the balance of the year has diminished due to decreased mass mandates in the United States continued emergence and spread of new variants and persistently low vacs.
Nation rates in many parts of the world. Furthermore, we are experiencing sizable fluctuations in order patterns from our customers that are not cleanly captured in a particular quarter as testing requirements continue to vary across the many geographic regions we serve.
As a result has become difficult to predict and expected level of precision the cumulative impact of these and other factors on our future financial results. Despite these dynamics.
Dynamics, we continue to believe that we are at an important point in our growth trajectory that will enable us to expand into new verticals, new markets and innovative molecular diagnostic solutions, such as our forthcoming co Dx PCR home testing platform.
With that I'll turn the presentation back over to Dwight.
Brian We will now take questions from our analysts operator.
Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question Press Star then two at this time, we will pause momentarily to assemble.
Our roster.
Yeah.
The first question is from.
G Chen with H C. Wainwright. Please go ahead.
Yeah.
Just a quick question on your at home PCR testing device I didn't know if I.
Understood quite accurately but is it just did you just changed the name from the icon test or are there also like.
Functional and capability related changes as well to the device have been late.
To like look at multiple pathogens that central so I'm, just trying to figure out the difference between.
You know what has changed or is it just is it just oh.
The change in the name.
Thank you for the question E. The change is just as to the name.
We've gone through an evolution as the product has been developed.
First focus groups and trade marking.
And other issues that have made it so during that period, we have made.
Few different name changes in terms of the working title of the device.
And we are now concentrating on the Cody X P. C. R home platform, although we referred to the device it'll be the codex P. C. R home device and when we talk about the cartridge or the collection Cup it'll be the codex P. C. R.
Collection kit or.
Or test.
So it's just a name change.
From the get go we.
<unk> designed this particular instrument to be responsive to multiplexing capabilities.
It's one of the unique properties of P. C R as compared to other non PCR based molecular systems that are identified COVID-19.
When you look at our product offering our perspective product offering you'll notice that we will be including the syndromic panels that they include multiple disease states at one time as opposed to just a single.
Pathogen or maybe one or two pathogens, which are limitations that are placed by using technologies, such as isothermal Atlanta technologies.
So the the name change is what we're referring to when we talk about these changes.
Excellent. Thanks, a lot and a quick follow up on the logic Smart detection test I know you spoke about.
The fact that you can I mean, it's not.
No. It was not the right time like a guidance but.
Are you already seeing a decline in the number of orders for the test or is it mainly a fluctuation in the total number of orders and the timing of customers our customer orders and in the same in the same context. I was also I know you spoke about it during your prepared remarks, but.
Maybe if you could summarize how you could leverage the existing co primary technology for other indications like will also be very helpful for understanding. Thank you.
We have a little bit of a problem hearing all of the question that you just answered.
Or that you just asked.
So if you wouldn't mind would you. Please repeat sure most important part of the question, although we can do it.
Sure sorry about that so with the logic smart detection test are you already seeing a decline in customer orders are.
I will refrain from providing a guidance mainly because it's tough to predict the environment moving forward and in the same context I was wondering if you could I know you spoke about it during your prepared remarks, but I was wondering if you could you know essentially summarize how you could leverage your coal co.
Primary technology for other indications.
I mean, you know COVID-19 testing decreases throughout the rest of this year.
Yeah. Thank you for the questions. This is Brian I can respond to the first the first question that you asked.
It's more about the timing and being able to forecast the timing of orders is the bigger issue, it's not necessarily yet.
It's a demand issue that we're seeing it's more of just timing of being able to accurately forecast, what's coming in and the last thing. We want to do is provide a guidance that we're not confident in and so that that's one thing you'll note going forward as if we're not confidence in in in providing guidance then we won't provide guidance.
As to the second question that you've asked with respect to.
Multiplex pathogen syndromic panels.
The intention of the company is to provide a number of different.
Syndromic panels over time, as we announced in our last call.
Have a very sophisticated and able scientific advisory board, which has such luminaries as Dr. Carl what were chairs that board.
Doctor and wildly from Yale University School of public Health, who is an expert on saliva technologies and P. C. R.
We have Dr. Carole from Johns Hopkins University.
Apologies.
Nora Cocuzza kawa from that was previously a rep laboratories here in Salt Lake City and of course, our founder Dr. Brent Satterfield, So we have done.
We've done extensive study and research into the types of diseases in panels that we want to have available on the new device.
And that's what's guiding our development with our scientific teams. The first test that we come out with will be the COVID-19 test because it is a primary differentiator at present time.
But subsequently you'll see a more robust multiplex respiratory panel that will include things like flu, a flu b COVID-19 and perhaps RSV all in a single test.
You'll also see a sexually transmitted infection syndromic panel that includes for the most prevalent diseases associated with sexually transmitted infections and then we'll go on from there. This device goes way beyond Covid. It is designed to be able to meet the needs around the world are various a pernicious disease.
These days and I have to go to a pre COVID-19 environment.
And imagine that.
Molecular diagnostics was a very robust environment pre COVID-19 and it will continue to be so after COVID-19.
But for the next several years and probably until the end of time Covid will be.
Necessary differentiator when you're testing for anything else because yes, you want to know if you've got the flu, but you really want to know if you've got COVID-19 and so these multiplex panels, we think will be the thing that distinguish our product at the end of the day not only from being the gold standard PCR standard but.
Also the ability to multiplex very robustly going forward.
Thank you so much that it was very helpful as.
As we think about Hum product and lastly on their mean time to jump in and add one other thing because I think you also asked about <unk>.
Our co primary technology, specifically as it relates to these multiplex panels and what I would say about that in there. You know you can read about the co primaries in the journal of molecular diagnostics, where it was a featured item.
Where we demonstrated a two and a half million fold reduction of nonspecific amplification arrows, which are commonly known as prime or dimers.
And so what we have in this new device is not only the ability to multiplex because of its PCR technology, but were also accentuating that with our co primer PCR technology, which kind of puts us in a class by ourselves in terms of how robust our multiplexing is big.
Cause of the fact that we eliminate for all practical purposes, the formation of primer dimers and a P. C. R. A T.
Fans action so.
This is this is a very important flagship technology Arco primers and as I mentioned in my remarks, we intend to bring the full power.
And and and.
The capabilities of that to the floor.
Excellent. Thank you. So my dad was so that was very helpful.
Lastly on the regulatory front.
From where are you with the FDA submission and I know I'm, assuming you have to collect a lot of clinical evidence.
So I'm just wondering if there's like a certain timeline.
Regarding.
Your FDA discussions and the subsequent approval.
We are working.
On a.
Certainly an internal timeline with Exxon expectations about the conclusion of our optimizations, where we put the product into clinical trials and then subsequently to the FDA for approval.
It's an all hands on deck environment in <unk>.
In doing these optimizations and preparations for this process.
So you know where we're not putting out a discrete calendar number for you except to say that as we have said in these prepared remarks.
But by the time, we talk again on our.
Second quarter results.
That we expect to be in our clinical trials at that point and that's that's kind of the point in the whole process, where we lose control of the timing.
And we don't know exactly how long the clinical trials will take and we certainly don't know how fast.
The F D. A is likely to respond to us.
So.
We are on track to do what we're expecting to do from an internal standpoint, we're incredibly enthusiastic about the capabilities of this device. We have said on more than one occasion that we knew we wouldn't be the first ones to market with an at home application, but we wanted to be the.
First to get it right.
And by that we mean, we want to be the first to have a gold standard PCR device that is capable of.
Multiplexing with Syndromic panels.
That can be fast in about 30 minutes inexpensive.
That's so that it's affordable.
And also a accurate.
And that's what we've been focusing on the most so that when we actually go out with a product is the most optimized product that it can possibly be.
And also serves the the broadest breadth of customer base that we can envision because we anticipate a worldwide launch here not just the domestic launch and as we mentioned in our prepared remarks, we were doing conferences in many many places of the World recently, we've been in London, we've been in.
Portugal, we'd been in Brazil.
We will continue to attend.
Notable conferences around the world as we begin to introduce this product.
Excellent. Thank you so much for taking my questions and.
Looking forward to speaking again during our next earnings call.
Thank you.
Thank you.
The next question is from Jim Sidoti with Sidoti and co.
Please go ahead.
Hi, good afternoon, thanks for taking the questions.
I just I just wanted to be clear on the guidance I mean based on all the factors you laid out it sounds like you don't expect.
The demand for COVID-19 testing to go go away in 2022, you're just not sure.
Well, you'll get yours, but you could still think there'll be some level of demand for the remainder of the year is that accurate, yes, you're absolutely right.
Okay.
Can you talk about.
Inventory it seems to bounce around quarter to quarter and ended this quarter.
Pretty considerably from the from the year or what why is it so much fluctuation in your inventory levels.
Again, it's really goes it goes back to the timing of orders I mean, we tried the best we can to produce tests.
That have the longest life possible for our customers and so a lot of the inventory that we do create is real time.
We will create orders and ship them out immediately so it's really based on the timing of orders that come in and and.
Then then we build inventory in preparation for those orders to come. So it's really just there's no no rhyme or reason for the timing, it's just really based on orders.
Okay. So I mean.
Inventory levels at the higher end, but it seems like maybe you were expecting to have a.
A fair number of orders in the relatively near term to use up that inventory.
You can ask that question, but we've already said, we're not providing guidance.
I'm, just trying to get directional trends here.
Clinical trial.
It's not like for a medical device, where you have to go out and find patients can do procedures I assume you have yes.
Samples known samples that you're going to run the device with can you just talk about how that will work and how many samples do you think you'll need to run.
Okay.
Well the the number of samples required for an emergency use authorization are significantly smaller than the number of samples that would be required say for five 10-K clearance.
So.
We certainly anticipate that we'll have plenty of opportunity to have sample availability.
We are engaged with a very top firm in the country to conduct our clinical trials.
They've also done some other work with US as we are prepared to do this and go through this process, including a representation before the F D. A.
So you know in terms of getting samples, we we have a country right now the latest stats ive seen in the last few days would integrate indicate north of 70000 cases, a day confirmed cases that are being experienced in the United States of Covid.
And certain sources believes that that is wildly understated that it may be.
Eight times that amount, which puts us well over a half a million cases, a day currently being experienced because of new variants that continue to emerge. So I don't think we're going to have any trouble getting.
Samples for R.
Our trials.
Alright, and then last kind of Big picture question.
Yeah. He quotes today to market cap was $135 million. So you have $97 million cash you just reported a profitable quarter. It doesn't sound like you think demand is going to fall off to nothing over the next quarter or two you know what.
What do you think that the street is missing from your story right now.
Well I think that's a great question, Jim and I I.
We believe that we're very much on the right track.
And a doctor Scott Gottlieb, who is the former.
Commissioner of the FDA.
<unk> recently to important thing that we would call your attention to one is that home testing will become ubiquitous or universal.
That's point number one.
Point number two as he said that home testing.
<unk> represents the.
The biggest paradigm shift in medical devices.
Hum sort of courtesy of Covid.
The F D. A has agreed.
Agreed to get behind.
They the F D. A he said during his days would've never ever considered allowing this that is the ability to test for severe disease.
What was that just COVID-19, which has killed approximately a million people in the United States alone well over that worldwide.
The fact that the FDA is counting and seeing the home testing of such a.
Devon, staying pathogen shows what kind of a paradigm shift has occurred.
Dr. Gottlieb says with Covid. They just got over it and then he of course talked about the the result of all of that is that he.
He said this opens up a whole new field.
Of at home testing for a a.
Significantly larger range of pathogens.
And so that's why we have prioritized with our scientific Advisory Board.
Be very pathogens that we think are the most necessary at the point of care or in a in an at home setting which includes primarily upper respiratory.
And what's going on in sexually transmitted infections certainly includes things like strep.
And May also ultimately include Lora gastrointestinal so we have a prioritized hierarchy of development with our scientific teams keeping.
Keep in mind that you know in these two acquisitions that we just completed.
That we brought on board are we more than doubled our employee base. So let's start there and we brought on a capable scientific horsepower in the form of people like Dr. Carl what were Dr. Kirk Ryrie, who were both the co founders of bio fire, which was purchased by being Mary you are these people and many many other.
Who have come along with them represent a significant.
Horsepower.
<unk> of horsepower in scientific strength, and we've really brought on top talent to accomplish these tasks and and as I mentioned, we've also commissioned and have completed a very comprehensive market study that is all guiding what it is we're producing in our lab. So that as soon as we have this device out.
You know we're onto the next clearance for the next Syndromic panel and this will just continue.
Time after time as we fill out the menu for our new at home and point of care.
Master platform. This is a beautiful platform you know you'll get a chance to see it more and more up more up close in the coming weeks and months as we have more exposure on our website and other things.
To show you just how this device looks and works and how it positions itself on a bathroom or kitchen counter and so on and so forth.
I cannot tell you how excited we are about the.
What this device means in the world and I'd really point you to those three benchmark comments from Dr. Gottlieb because we believe that our company is at the epicenter of those three comments.
Going forward, Jim Jim the other thing this is Brian the one thing I will mention too is I.
You know iterate it about the acquisitions I mean, the other thing to remember and we've disclosed. This is this those acquisitions were done with strictly equity. So you know those those very bright intelligent scientists that we brought on in those groups that we brought on they believe in what we're doing just like we believe in what we're doing if the market.
You don't get on board than then they will get on board at some point.
Okay, Alright, yeah, it's a puzzle, but thank you.
Yeah.
Thank you.
The next question is from Theodore O'neill with Litchfield Hills research.
Please go ahead.
Thank you very much and congratulations on a good quarter.
Brian . This question is for you I'm reading the Q and.
In the first quarter, there was less than 2% of sales where third the sale of third party manufactured equipment consumables and.
And I know, it's a small number but will those be well that would those sales be replaced by the codex.
Product and the reason I ask is because I assume the margins would be better rather than fill a third party.
Three years.
No.
It's a fair question those really represent lab devices that we sell currently that are really designed for a different application than what our new device will be used for I think it's a different application. So they won't be replaced by it necessarily.
Okay. Thanks very much.
So I think that the addition, the additional comment I would add to that is that you.
You know we continue to pay a great deal of attention to our our lab based business, which drives most of our current sales and we have set up a terrific reputation around the world.
Literally in more than 50 countries and continually growing both in terms of countries, we serve and distributors that are representing our product and and the decentralized lab environment is going to maintain a critical place in the whole development of the foregoing.
Ecosystem and.
And I think you have to just think for a moment what happens in places like India or other countries that may be.
Developing countries when you give them a device such as our codecs.
At home and point of care platform that enables a very small lab to all of a sudden become a molecular lab.
There are tens of thousands of labs that currently do not have molecular lab status that can become molecular labs for important disease states.
Because of the product offering that we're coming out with so we won't be neglecting our our our lab centralized lab business as I explained I think in our last call going you should look for to verticals to be explicate in our reporting one is our centralized lab business and the other will be what happens as a result.
Our forthcoming at home and point of care device.
Thanks for the clarification.
Thank you.
This concludes our question and answer session.
I'd now like to turn the conference back to Joe.
Egan for closing remarks.
Well, thank you again to our analysts and everyone else joining us on this call we've never been more excited and optimistic about what the future holds for code diagnostics.
And we've never been better positioned for success than we are today.
You know two years ago. This month, when we first conceived of our Kodiak P C. Our home platform.
We only had the slightest understanding of the importance. It would have not just to our company, but potentially to the world at large.
Think that our gold standard PCR diagnostics tools right on your kitchen counter which were inconceivable at the beginning of 'twenty 'twenty are now on the cusp of becoming widely accessible.
Following our product launch speaks to the enormity of what we've already accomplished so far and the bright future in store for code diagnostics as we close in on our ultimate vision of making P. C are accessible and affordable around the world.
This is truly an infection and inflection point in history, and we were honored to be able to play an active role in improving the state of health care across the globe with our new platform and existing centralized laboratory business segment. Thank you again, and we look forward to bringing you more exciting updates on our next earnings call three months from now.
Good day everyone.
Thank you Conor.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
Okay.
[music].
Yeah.
[music].
Yeah.
Uh huh.
[music].
Okay.
[music].
Yeah.
Yeah.
Yes.
[music].
Okay.
Yeah.
[music].
Yeah.
Oh.
Yeah.
[music].
Yeah.
[music].
Okay.
[music].