Q3 2022 Lucira Health Inc Earnings Call

November 14, 2022

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Good afternoon, ladies and gentlemen, and welcome to the Lucerne Health third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. As a reminder, this conference call is being recorded I would now like to turn the conference over to Greg had got a check from the Gilmartin group.

Thank you Jonathan and good afternoon, everyone earlier today, we serve health released financial results for the third quarter ended September 32022, a copy of the press release is available on the company's website.

Joining me on today's call is Eric <unk>, 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.

Encourage you to review the company's past and future filings with the SEC, including without limitation the risk factors section in the company's most recently filed annual report on Form 10-K, and subsequently filed quarterly report on Form 10-Q, which identify the factors.

That may cause actual results or events to differ materially from those described in these forward looking statements.

These factors may include without limitation statements regarding product development and manufacturing product potential the regulatory environment sales and marketing strategies capital resources or operating performance with that I'll turn the call over to Eric.

Thank you Greg Good afternoon, everyone and thank you for joining us and welcome to the third quarter of 2022 earnings Conference call.

<unk> had a solid third quarter in which sales were $34 $4 million driven by demand for our PCR quality molecular COVID-19 test. This represents a 130% increase over sales in the same period last year and a sequential revenue increase of 32% over the second.

<unk> this year on.

On November 11th we executed a marketing agreement with Pfizer to increase awareness of the risks of COVID-19, and the availability of treatment.

Our partnership will provide financial and promotional support.

Through <unk> connect test users, who are positive for COVID-19 can immediately find high quality information about the disease and its treatment options and access a health care provider consultation. In addition, <unk> has partnered with telehealth marketplace estimate.

Care to offer all lose Sarah test users and immediate and affordable option to speak to a doctor about their test result, without leaving home.

If a consumer test positive for COVID-19 analysts Eric test.

Telehealth visit is completely free and can typically occurred within 15 minutes of scanning ones test results.

Sarah connect Dot com.

Our knowledge there is no other offering out there that combines such convenience speed and affordability.

<unk> tests are onetime use with no additional investment and equipment required a referral service can be utilized whenever needed without subscription. We believe that this combined offering good for public health and good for business.

Eric connect was built to seamlessly and immediately connect patients to the resources they seek at the moment they need it the initial diagnosis.

These developments provide the opportunity to partner with pharmaceutical manufacturers brick and mortar locations and virtual health care providers to ensure patients can immediately access high quality information from reputable sources.

Please Sarah test users have the ability to rapidly confirm a diagnosis speak to a doctor to determine the best next course of action to get to better and request a prescription.

All without leaving home or spending valuable time and resources on multiple trips and appointments.

Turning to some of our operating results in the quarter cash decreased to $39 8 million primarily related to funding our operations and working capital in advance of the anticipated launch of the combination of COVID-19 in influenza test kit in the fourth quarter of 2022 to <unk>.

Combination of COVID-19 in influenza test kit is a molecular test that demonstrated 99% accuracy for COVID-19 and influenza b and his comfort comparable to highly sensitive lab based PCR assays.

As of today, we anticipate having sufficient inventory of COVID-19, and combination COVID-19, influenza test kits to fulfill anticipated demand and the current respiratory season in our primary markets of the U S and Canada.

During the quarter, we received Canadian regulatory approval in the form of an interim order during Q3.

We have not yet received authorization from FTA, despite having submitted our EUA in may of this year and maintaining strong advocacy.

Throughout the review process by our DC based regulatory attorneys.

The user operation of the combination of COVID-19 in influenza test kit is identical to that of our COVID-19 tests and while our EUA submission contains all of the clinical data that was previously agreed on a pre submission with FDA. The agency informed us in early November that they would grant only.

Point of care approval at this time.

The FDA has agreed to allow us to amend this point of care.

To transform it to OTC use once additional prospective clinical data has been obtained through ongoing clinical trials.

<unk> product is designed primarily for OTC use and the delay in obtaining the OTC EUA will significantly impact sales.

Consequently, cash in Q4 of 2022.

Our board of Directors has initiated a review of strategic alternatives, including a potential sale merger or other strategic transactions.

Our financing strategy at.

At the same time, we are reducing costs and this unfortunately impacts our workforce companywide.

Several weeks ago, we took action to reduce our workforce and notified 56 employees.

60 day termination period and today, we notified an additional 97 employees have a similar timeline.

The decision to reduce workforce size was a difficult one.

Not only are we disappointed to see these hard working employees leave the company. The personnel reductions will also delay execution of product pipeline programs.

The combined reductions enforce represents an approximate 68% decrease of our workforce and are expected to result in 26 four.

Million.

Annual cost reductions.

Before I turn it over to Dan I'd like to recognize and thank the employees and contractors hopefully Sarah that have worked tirelessly on behalf of the Companys mission.

I will now turn the call over to Dan George our CFO for a detailed discussion of financials.

Thank you Eric.

Please refer to our press release issued earlier today for a summary of our financial results for the third quarter of 2020, Q and a discussion and reconciliation of our non-GAAP financial measures.

Net sales for the third quarter of 2022 were $34 4 million.

130% increase over the third quarter of 2021.

Our net revenue was primarily driven by sales directly to consumers businesses and distributors health care providers and international customers.

GAAP gross loss and negative gross margin for the third quarter of 2022 was $99 $6 million and 202 hundred 89% respectively.

Compared to a gross loss of negative gross margin for the third quarter of 2021 of approximately $1 $5 million and 10% respectively.

Our increasing GAAP gross loss in gross margin was driven primarily by a one time noncash excess inventory related charge of $107 2 million due to a significant reduction in sales forecast, resulting from an unanticipated delay in FDA approval of our COVID-19, and influenza test kit is declining.

19 testing demand.

non-GAAP gross profit and gross margin that excludes the excess inventory related charge and other noncash charges such as depreciation stock based compensation.

$9 $5 million and 28% respectively.

non-GAAP gross profit and gross margin for the same period in 2021, or $2 4 million and 16% respectively.

R&D expenses were $9 $1 million in the third quarter of 2020, Q compared to $14 3 million in the same period in 2021 R&D.

R&D expenses incurred during the third quarter of 2022 were primarily related to new product development clinical activities and validation and manufacturing activities.

Third quarter of 2021, R&D expenses were primarily related to the redevelopment of our manufacturing and quality release.

In preparation for launching our Dominican Republic manufacturing facility at our contract manufacturer.

Selling general and administration expenses were $17 6 million in the third quarter of 2022 compared to approximately $11 8 million.

In the same quarter of 2021, the increase was primarily related to increasing personnel related costs and third party services.

Will it take commercial activities and public company compliance.

GAAP net loss was $126 9 million in the third quarter of 2022.

Third to 27 5 million in the same period in 2021.

Increase in GAAP.

Net loss was primarily related to a onetime noncash inventory related charge of $107 2 million.

non-GAAP net loss was approximately $15 4 million in the third quarter of 2022 compared to $18 4 million in the same period in 2021.

We ended the quarter was $39 8 million in cash and cash equivalents compared to cash and cash equivalents of $106 million at the end of 2021.

A decrease in cash was primarily related to purchases of inventory and capital equipment, partially offset by the closing of the first tranche of our debt financing agreement of $30 million.

In addition, the significant decline in our near term revenue forecasts requires us to seek additional capital sooner than anticipated.

As Eric mentioned, our board of Directors has initiated a review of strategic alternatives, including a potential sale.

Merger or other strategic transaction and as are our financial our financing strategy.

I'll now turn the call back over to Eric for closing comments.

Thank you Dan. Thank you all for your time this afternoon and for your interest in the share of health, both with Cerus accurate test platform as well as the <unk> connect are important offerings that accelerate the move of infectious disease testing and result in treatments into the home.

We envision an improvement to public health that will result from this important transformation and the way the diagnoses or performance.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

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The conference will begin shortly to raise Johan during Q&A you can dial one one.

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Q3 2022 Lucira Health Inc Earnings Call

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