Good afternoon. Welcome to IDEXX's 2024 Investor and Analyst session. I'm Jay Mazelsky, President and CEO of IDEXX, and a warm welcome to those of us who may be joining in the room and virtually through our webcast. It's a proud and great moment in IDEXX history as we introduce the latest point-of-care analyzer to our VetLab family, the inVue Dx Cellular Analyzer. Today's agenda, we have 45 minutes planned. Let me just spend a moment and set it up. It's going to be a combination of both prepared remarks from the leadership team, as well as a brief question and answer session at the end. I'll kick it off. I'll provide an overview of the industry, the product opportunity, the clinical use cases, and the impact we think we're going to have on practice productivity. I'll be followed by Dr. Martin Smith.
He's our Chief Technology Officer. Dr. Smith will speak to the technical and clinical insights that have informed the product development process, leveraging our global pathology network that has produced this transformational instrument. Dr. Mike Erickson, who heads up our point-of-care diagnostics business, will follow and talk about the inVue Dx in the hands of the veterinarian within their practice and how it will inform better medical decisions and clinical workflow. Just a quick reminder that the disclaimer is available on our website. Now, let's get started with the opportunity. We're blessed to be able to support such passionate veterinarians who care for the animals we love. This is, we believe, represents a long-term growth opportunity as an industry. It's supporting the professions with several strong, sustainable, secular tailwinds. We've talked about this strengthening pet-pet owner bond and the impact that that's had.
The pet owners, those of us, dogs and cats, consider members of our household and willingness to prioritize care on their behalf, none more so than the younger demographics, who in a few short years will be the majority pet household owners. And then the huge step up we've seen in the number of pets as during the pandemic, and that has sustained in 2022 as the pandemic ended, not just in the US, but really globally, and the impact that that's going to have as these pets age through various life stages. Dr. Hunt, as part of our August Investor Day, talked about pets living longer, 12% and 14%, respectively, for dogs and cats in the US, but we think globally consistent everywhere where pets seek care.
Then the role of innovation, not just on a product side, whether it's diagnostics or therapeutics or specialty diets, but also innovation in care delivery models and the way that that provides greater access to pets for higher quality care. That's the backdrop, as veterinarians who are really surging to meet the increase in pet population and demand against this capacity-constrained environment, and they're looking for partners and solutions to be able to support them. At IDEXX, we think is in a terrific position to be able to provide technology and software to do just that.
So when we talk about our offering, we talk about the patient and the customer, as you can see from the graph, at the center of everything we do, supported by best-in-breed modalities, whether it's point of care within a clinic or a reference laboratory, but connected seamlessly to cloud-based software and applications that provide clinical insights in an easy-to-use, seamless way. Now, today, we're going to spend our time on the point of care side, because that's where the inVue Dx Cellular Analyzer fits. And here it is. Right beside me, you've seen it. It's a, I think, a terrific example of a point-of-care analyzer, which follows the first principles we've laid out for these type of solutions. For example, it's very, from a workflow standpoint, seamless. Load and go without a slide, which tends to be very time-intensive and technique-sensitive. And Dr.
Erickson will speak to that. Technology, which is truly transformational, the ability of combining advanced optics and AI algorithms informed by 10 million patient images and growing, trained through a global network of pathologists and really fit, fit for purpose. The all those pieces which really fit within the workflow of the practice that supports better medicine, better medical outcomes, and increased staff productivity. And I could spend time talking about the technology and the workflow improvements. I think it's probably easier just to show you a video which will do that for me.
Introducing the IDEXX inVue Dx Cellular Analyzer, an AI-powered load-and-go platform designed and built to provide objective, quantitative, and consistent cytology and morphology results. Seamlessly connected to the IDEXX VetLab Station, IDEXX inVue Dx is a simple-to-use, slide-free platform that removes steps and saves time running daily tests like ear cytology, blood morphologies, and, coming soon, fine needle aspirates. One of the biggest pain points practices face today is finding the time to consistently prepare a quality slide. With the IDEXX inVue Dx, there are no more slides, no more time-consuming prep, and no more variability or inconsistencies in sample prep. Instead of today's lengthy and manual slide preparation process, a patient's sample is simply mixed with a reagent and stain, saving valuable time. Leveraging an innovative cartridge design and workflow, the sample is easily loaded into the analyzer.
Any veterinary professional can use it efficiently and consistently with little or no training. With a fascinating look inside the analyzer, there are advanced custom optics and a high-speed camera that takes thousands of images across multiple fields of view in just seconds. Immediately, the advanced optics begin to focus on the cells and structures settling in a liquid reagent, intact in their native state. Looking at a cell in 3D allows a multidimensional interrogation of cell structure, size, and other features, capturing details never before seen in alternative methods. The analyzer flashes bright field and fluorescent wavelengths of light in rapid succession, capturing intracellular data of each individual cell. Advanced algorithms stitch together individual images, illuminating critical insights related to cells and their characterization.
Unique AI learning models, built and trained by IDEXX's global network of board-certified pathologists from over 10 million patient sample images, work to identify abnormalities and summarize a full picture of cellular health. Within 10 minutes, a diagnostic report, including images, interpretation, and next step guidance, is available on the IDEXX VetLab Station and VetConnect PLUS. The unique and innovative slide-free Load and Go technology of the IDEXX inVue Dx Cellular Analyzer provides clinically actionable insights and frees up time for today's busy veterinary practices.
You know, when I first saw some images as output from the analyzer and spoke with the R&D team and pathologists about that, I couldn't believe what I was seeing, and I asked them, "Are these animations, clip art?" And actually not. These are the images being generated by the instrument, by the analyzer, and in a few short minutes, Dr. Smith will explain exactly how we get there. So let me just quickly set the stage in terms of the overall opportunity. This is a slide we share with you at Investor Day, the global placement opportunity for existing premium point-of-care instruments on a global basis, 218,000. The inVue Dx Analyzer is on top, presents an opportunity.
On top of that, we'll begin shipping in Q4 of this year, and we believe that there's a five-year, 20,000-unit placement opportunity, which will have a significant impact on our CAG business over that, over that time period. So let me now turn it over to Dr. Smith, our Chief Technology Officer, who will go much deeper on the technical and clinical insights which... and those that inform the development of the inVue Dx. Martin.
Thank you very much, Jay. Hello, everyone. Real delight to be here. An absolute privilege, actually very humbling, actually, to represent a very dynamic and amazing team that has brought this technology to fruition. You can see here my dog, Eddie. If you look closely at his hindquarters there, that's facing you, might see a little bit of a lump there. So, like every good pet parent, when we saw that lump, we took him to the veterinarian. Multiple biopsies later, multiple visits later, we got a diagnosis. The product you're hearing about today is designed to bring that episode to a single visit and a result in minutes. Now, my session, I'm gonna talk about the capabilities within IDEXX and how we've leveraged those capabilities to actually develop a product like inVue Dx. So, let's start by looking at some of the capabilities in-house.
We have lots of capabilities, but I call out three main ones here. First, our instrument platform development. You're aware of all of the instruments that we have within IDEXX, and inVue Dx is the newest member of that family. Think about the optics, think about the electrical engineering, think about the consumables. All of those items are developed within this group and go into the instruments that you all recognize. Now, instruments drive assays, and so we have a very large assay development team that you can see here on the page. Think about the biomarker discovery. What are the entities that are actually representing a disease state? And how do we define and describe the reagents that are gonna see those biomarkers in a relevant way?
And then we, of course, need to present those assays in a format that's gonna be able to run on those instruments. And then lastly, our software group. You're aware of the software products that we have at IDEXX, but we also have cloud connectivity, data science, data engineering, machine learning, all within this group. Now, capabilities like this don't just appear. Very, very specific, significant investment over decades of time actually bring us to this differentiated state that we are in today. So that's a little bit of the what. Let's talk about some of the how, and this actually represents how we would develop any product at IDEXX, and so let me take you through that. First of all, it starts with the technology. We invent, we in-license, we identify various technologies that we need to bring to mature state.
So in the case of inVue Dx, what are the optics? What are the AI pieces? What are the cell biology items that we need to bring to a mature level? Now, technology on in itself is okay, but you've got to have relevancy. Do the veterinarians understand what we're doing? Will they enjoy the product? Does it fit within their workflows? And so all of these technology maturations are layered through a whole ecosystem of expertise... pathologists, radiologists, DVMs, people that understand the workflow within our reference lab, within our clinics, user experience people, turn the technology into a relevant, very applicable sense of product offering. And from day one, the whole thing is designed for manufacturing. We have a deep, deep pedigree for design for manufacturing assembly. And right here on the page, actually, you can see the inVue Dx within our Westbrook main site being built.
Really important that that integration is there from the beginning, all the way through the operations piece, making sure that we deliver products the same every time, over and over again, to the highest levels of quality and the levels of delivery our customers have come to expect. So let's talk a little bit about how those capabilities have now been leveraged for the inVue development. Now, this is a cellular analyzer, so we need cells. We need samples. We've got 40 years of very deep customer engagement and intimacy, and so we have that customer network that we can draw from samples. And then you look at our reference laboratories, millions of samples of different types every week coming through. We have an abundance of samples when you bring those networks together, and that's desperately important as you think about a development like this.
Why is this? Without samples, you can't develop a consumable very well. Without samples, you can't develop and understand what optics constraints you need to be able to deliver. Without samples, you can't design and fashion your AI models, and it's AI that is doing the interpretation of the images that are being presented here, and so we have to get all of those samples so that we can develop those models. Now, models in and of themselves, what are they? They don't actually mean very much. You have to cycle it through a position of truth and meaning and ground that in the absolute reality of what's being seen.
And so we're very fortunate at IDEXX that we have a very deep global network of board-certified pathologists, and for the millions of samples and tens of millions of images that we've seen, they're looking at those, too, and they're making sure that those AI models represent truth, represent trust, and absolutely are accurate so that we deliver the right result every time. And of course, then the whole thing feeds into our software ecosystem that you would expect any product from IDEXX to fall within. Okay, let's start to get into the meat of some of this. These are actual images straight off the analyzer. Have a look at the right-hand side panel there. That's red blood cells, and I'm gonna make a pretty important point here. Any good product development is one that interrogates valuable problems within a workflow. And how do you do that?
Well, you interrogate an existing workflow, and you look for things like pain and frustration and repeat work and so on. So we looked at the classic pathology slide-making event, and a thing just hit us between the eyes, and the question was: Why are veterinarians and pathologists looking at cells in the same way that they have done for 100 years or so? Flattened cells on a microscope slide that then just put into a benchtop microscope. Why are they doing that? We asked the question: Why can't you look at cells in their natural three-D state? And I sort of joke a little bit, as if you could walk around the vein and look at the cells yourself. And we asked that question, and it came back to us that, yes, that's a valuable thing to do.
So there was our pursuit of that technology, to be able to deliver cells in their natural 3D state. You saw in the video the consumable. It's a microfluidic-designed consumable, simple load and go. Put it into the instrument, it presents the cells in their natural 3D state. You couple that presentation with some very cute optics, that's able to take planar images almost simultaneously and then renders that image in the 3D fashion that you see in the image on the right-hand side there. What you're looking at are red blood cells, a healthy, plump, 3D red blood cell, looks like a donut. The boxed image there is a cluster of platelets. Very easy to see what's going on. It's as if I'm inside the vein. Okay, so what's going on? I load a sample. I put it into the instrument, as you saw in the video.
AI then takes over. It instructs the optics to go around the image, in, out of focus. It starts to take measurements. It's measuring size. It's enumerating. It's getting ratios of nucleus and cytoplasm. It's looking at density. It's taking a ton of quantitative information. It then starts to classify those cells. Okay, here are your platelets. Here are your red cells. Here are your various kinds of white cell. And once it's got that classified state, it goes inside those categories, and it starts to ask questions. Are they normal cells? Are they abnormal cells? What's the ratio of abnormal and normal? What's the nature of the abnormality? Are there specific features there that would represent a specific kind of disease state? All of this classification, all of that enumeration, then goes into an interpretive event. What are we actually seeing? What disease state is actually there?
That image interrogation takes seconds. Once we've got the image interpreted, we go through an event and an image rendering is seen in a report like you see on the right-hand side. You get that in about 10 minutes. Okay, let's look at a real case. A canine comes in, the owner is reporting that the dog's eaten something weird. It's funny how dogs will do that, right? This is a very, very common situation. If a dog has eaten something weird, I'm thinking toxicity. If I'm thinking toxicity, I'm thinking, "Okay, how's the red cells looking? Have I got an anemic situation?" So we took that blood sample, and as you can see on the left-hand side, we present it in the classic microscope way. Mike's gonna talk about how that's actually done. On the right-hand side, you can see that same sample in the inVue technology.
Just look at those red blood cells in their 3D state. I'm looking inside the cell, and this is really important in anemia. If I'm looking for anemia, I'm trying to count a thing called a Heinz body. This is an inclusion of proteins. If you've got an anemic shock or a toxic shock, those proteins denature and clump up, and they're inside the cell. Remember, we can go in the cell now, not flattened, inside the cell, and our proprietary dye mix is actually popping those inclusion, Heinz bodies, out as purple dots. Very clearly easy to see. Now, I can count those dots. I can get an enumeration.
I can then start to get a sense of severity, and not only that, I can bring the patient back tomorrow, do the exact, and I mean the exact, sample prep, put the sample in the analyzer, and count those Heinz bodies again. Did it go up? Did it go down? Is my treatment working? Is it not? And just think about all the features of disease that I'm gonna be able to do that with, and this is the power of the technology. Look at the traditional slide. Yeah, I can see purple dots, but it's not, it's not as objective as the inVue. I can't make this quantitative suggestion. It would be very difficult for me to track an episode of therapy, for example. Okay, I talked about 3D cells. I talked about the ability to go inside a cell and see it.
Well, you've got to actually have the technology that allows you to do that, so let me talk a little bit about that. You saw in the video multiple layers of optic interrogation. We've got multiple fluorescence, we've got bright field, we've got UV, and simultaneously, those types of images are taken from the same portion of the slide or the consumable, almost in seconds. Now, the AI then takes those images and stitches them together and makes a composite image that you see in the right-hand side here. The left is all those individual interrogations, the right is that composite look. It brings it all together into a 3D image. It brings it all together in color, and I'm seeing features I would not be able to see in a classic slide under a microscope.
I'm seeing things and determination of cellular events in their natural state that's gonna give me some more medical insight than I perhaps wouldn't have been getting in the classic way. Mike will go into a little bit more detail of that. Now, you're familiar of our Technology for Life mission. inVue Dx is exactly the same. inVue Dx is IDEXX's advanced optic, AI-driven, cellular analyzer. You wanna look at cells in a diagnostic event, this is the technology that would do it. No matter what cell you wanna look at, this is the consumable to do it. No matter what cell you wanna look at, this is the instrument to do it. You install this technology, you're set for life as we bring our roadmap to fruition, and that roadmap starts this year. We're launching with ear swab and blood morphology.
Now, ear swab's a very interesting sort of case, very, very common. Mike will talk about that. Here you can see an image of an ear mite. Scary-looking beast, but we're also looking at other things in that ear swab. Maybe some blood cells and white cells that might indicate damage or an infection, and if there is an infection, what's causing that infection? Is it bacteria? Is it yeast? Is it fungus? We can see all of those things with the exact same technology that I've just described. And I should make a point here, from a microscopy standpoint, an ear mite and a yeast, they're nothing like the same size. They are eons apart in terms of their size. Our consumable, our optics, is able to handle that dynamic range of difference. Very, very unique. We talked about blood morphology. I gave you the anemia example.
Here again is another image. Note the 3D red blood cell donuts, and right in the middle there is a white blood cell. You can see the blue nuclei inside. Easy to see. It's as if I'm walking around the vein. And then coming next, we have our fine needle aspirate application. You can see the 3D cells, the cells that you would see within lumps and bumps on the animal's skin. Okay, and with that, I'll hand it over to Mike Erickson, who's gonna give us some overview of the product itself and the interface with the customer. Thank you.
Thank you, Martin. It is such a privilege working with Martin and with all of my colleagues at IDEXX to deliver an innovation like IDEXX inVue Dx that we know will benefit millions of pets around the world. Now, you heard from Martin how inVue Dx works through the technology lens. I want to bring it back to our customers and the problems that we're solving for them, and the impact that this first-of-its-kind platform will have for pets, for practices, and for IDEXX. Now, inVue Dx is just the latest example of IDEXX innovations delivering new platforms that expand real-time insights at the point of care. And as I shared at our Investor Day in August, we're not interested in being incremental when we talk about new platforms. We do this when we're confident that we can deliver foundational leaps forward in point-of-care capabilities.
Catalyst One, SediVue Dx, ProCyte One, these are all examples of this. And now IDEXX inVue Dx, a first-of-its-kind platform that eliminates the slide and expands what's medically possible for in-clinic cytology. A number of our customers have gotten an early view of inVue Dx as part of our development process, and in their words, this is a game-changing technology for their practices. inVue Dx addresses the many challenges that they face every day when it comes to in-clinic cytology, with messy workflow and software integration and training. In fact, one of our corporate partners pointed to all of the time that they have to invest across their hundreds of hospitals to train their veterinary technicians on how to make slides and how to use the microscope, and how inVue Dx would enable them to recover a lot of that capacity.
Just think about that for a minute and think about that multiplied across our industry, where we know there's such a critical shortage of veterinarian and technician talent. Now, in order to appreciate some of the feedback that you see up here a little bit better, it's helpful to understand what practices' current experience is with in-clinic cytology. Every practice does cytology. Every practice has at least one microscope. Analyzing cell samples at the point of care is a daily and essential diagnostic process. However, doing it today is very challenging for a number of reasons. First off, it requires making slides, and this is a hands-on process. It's time-consuming, and it's technique variable across practices and even across practitioners within a practice. And all this variability can impact the results.
Secondly, once you make slides, you have to read them on the microscope, and this is a subjective and difficult process that requires a lot of training in order to do this well. In fact, our really talented pathologists in our IDEXX Reference Labs train their entire careers in order to be able to confidently and reliably read and interpret cells. Lastly, you could do the work to make the slides, read them on the microscope, but then actually fail to charge the client for that work and fail to capture the image in your medical note to refer back to or maybe to share with the pet owner after the fact. That's because the microscope's not integrated with the practice management software. It's not integrated really with anything in the practice.
And so if we map out this hands-on work that I'm describing for slides, you get to kind of a simplified flowchart view like this. You can see the steps. Depending on the specific application, 10-20 minutes to prepare slides. That doesn't include the time on the microscope. Now, usually, practitioners will run through this multiple times to get several slides, making sure that at least one of them is good on the microscope. And just knowing how busy practices are, you can appreciate that oftentimes they'll get disrupted midway through the process and have to put it down and then step away and come back, pick things back up. The worst-case scenario is to do the work to make these slides and get to the microscope and then realize that none of the slides are actually good to look at.
In fact, 1 out of 10 slides that are prepared in-clinic and sent to our IDEXX Reference Labs don't contain a diagnostically relevant sample on them to be read. So, there are, of course, slide scanners out there and related technologies, some of which use AI, but all of these rely on hands-on slide making and conventional microscopy as their inputs. inVue Dx's slide-free, load-and-go workflow eliminates the hands-on work and repetition and delivers accurate results in 10 minutes. When it comes to these results, the novel way that inVue Dx analyzes cells expands the diagnostic value that's possible from in-clinic cytology. And that's because of what Martin described. inVue Dx sees cells in their natural state. It applies precision staining and advanced optics and deep learning AI all together to deliver actionable insights.
Things like automated cell typing, including 35 unique parameters just for blood morphology, accurate cell sizing, cell counting, 3D shape characterization, all of which enable more confident diagnoses. For example, identifying certain types of cancers depends on not just typing the cells, but also the distribution of the sizes of those cells. It also means deeper elucidation of feature sets for the nucleus and the cytoplasm, which again, are critical determinants of abnormality and drive more actionable insights. And with inVue Dx, all of this information gets quantified, which takes out the eyeballing and the guesswork, but even more importantly, it enables accurate tracking over time. A treatment's been applied. Is the pet getting better? You want to be able to objectively see that in a change in the diagnostic results without any dependency on slide preparation....
Now, as Martin shared, we're applying this technology to well-established cytology categories that have significant need for point-of-care enablement. Our first two categories at launch are ear swabs and blood morphology. Up next are lump biopsies or FNAs, and there's a long runway of technology for life extensions beyond that. But let's talk about ears. Ear issues are one of the most common presenting complaints for pets that come to the veterinary practice. One out of five pets have ear issues, 30 million globally every year, and about two-thirds of those have their ears sampled and looked at on the microscope. That's about 19 million pets. But that also means that about one-third don't get looked at, and they probably all should get looked at.
Ear issues can be really uncomfortable, even painful for the pet, and you have to precisely know what's causing the ear issue in order to apply an appropriate treatment and bring some relief to the pet and by extension to the pet owner. And when a dog shows up as part of a wellness checkup with itchy, gunky ears, that can blow up the schedule for the entire day. Wellness appointments tend to be booked back-to-back, but now you have to disrupt that process to step away and make slides and go through that process that I described. And then ear rechecks are really important. Is the treatment making a difference? You want the dog to come back, and it's difficult to objectively assess that change in the results when there's so much variability in the process.
So that's ears, but let me talk about blood morphology. Every veterinarian appreciates the clinical importance of blood morphology, and they're trained on this. For every sick pet and for any pet that has an abnormal CBC or complete blood count result. And today, this is done in-clinic through a combination of a blood smear on a slide and a microscope, together with a point-of-care hematology analyzer, like, for example, the IDEXX ProCyte Dx or ProCyte One analyzers. And it turns out that our ProCyte analyzers have the amazing ability to recognize when a blood smear is required, and they notify the user of that. And that actually happens in two out of three runs on the ProCyte. If you kinda look across all the point-of-care hematology globally, that's well over 20 million times every year.
Unfortunately, outside of certain contexts, specialty hospitals, oftentimes the blood smear gets skipped because of just how challenging it is to do with slides in the microscope. But the combination of inVue Dx and ProCyte completely changes that. These IDEXX instruments work together in tandem such that the results from ProCyte merge with and are enhanced by the results from inVue Dx. You can run them in parallel, you can run them sequentially. Either way, it's completely seamless and all of the results flow into VetConnect PLUS. This is the industry's first completely automated and truly comprehensive point-of-care hematology solution. It takes the work out of doing something that clinicians already believe in, and it delivers even deeper hematology insights. And this is only possible because of what Martin talked about. It's only possible because at IDEXX, our platforms are purpose-built for veterinary.
They're purpose-built to work together like this. And of course, this also means that our global footprint of nearly 40,000 ProCyte analyzers is fertile ground for placing inVue Dx. And inVue Dx will of course, plug and play into our existing IDEXX VetLab analyzer ecosystem, which is in use by over 60,000 practices around the world. There are many benefits of this approach for customers. Full integration with VetConnect PLUS for all of their results from the reference lab and their instruments in one place. Full two-way integration with their practice management software, whether it's IDEXX software or non-IDEXX software, for full charge capture and integration into the patient workflow, and full connectivity to IDEXX's proprietary SmartService network, which connects all of our instruments around the world for seamless software updates and continuous monitoring of instrument health.
Just like our other instruments, you'll notice that inVue Dx does not have a screen. In the practice, when they want to look at results coming off of inVue Dx, they'll use the IDEXX VetLab Station. That's that large screen in the middle of the slide there. That's the one-stop control panel and workflow engine for all of our IDEXX instruments. And with all the innovation that we packed into inVue Dx, we took the opportunity to also completely update the IDEXX VetLab Station. This new IDEXX VetLab Station experience supports inVue Dx's advanced cytology functionality, and it also delivers 2x faster workflows across the entire VetLab suite.
So, so we know from our customers that these innovations I'm talking about in instruments and software, they're adding value where it's needed most, and this value extends to our customers and it extends to IDEXX and to our shareholders. This is a framework that Jay shared at Investor Day, describing how new platforms like inVue Dx generate value, both direct economics, which grow over time as we build footprint and inspire utilization, and also the multiplier benefits, which begin accruing on day one. When we translate all of this back into an economic value view, it's clear that inVue Dx is a compelling opportunity and value creation opportunity. Let me just remind you what I shared about Catalyst at Investor Day.
We've more than doubled the economic value of every Catalyst since 2014, when we launched Catalyst One, through a combination of menu expansion and growing utilization. If we look at inVue Dx, we anticipate that in the nearer term, each placement will generate between $3,500 and $5,500 of vet lab annual consumable revenue based upon its near-term menu and utilization. And like Catalyst, the economic value of every inVue Dx instrument will grow over time for our customers and for IDEXX, as we deliver on its Technology for Life promise. And so in wrapping up, on behalf of Jay and Martin and Brian and all of my IDEXX colleagues, I could not be more excited to bring this transformational innovation to the industry and to our customers.
It's often said in our industry that new products tend to redistribute work in the practice, and sometimes they actually even add to the practice workload. We're just trying to think about it differently at IDEXX. Whether we're talking about innovation in our instruments or our reference laboratory services or our software, we're innovating to remove work and to give capacity back to our customers, all while enabling step change advancements in diagnostic standards. inVue Dx's combination of revolutionary workflow and expanded cytology insights will fundamentally change how point-of-care cytology is performed in practices all around the world. There's a long runway for growth and continued Technology for Life innovation that delivers compelling value for our customers and for IDEXX. So with that, we have some time for questions now, so Brian will join us in the front.
We have time for a few questions. Raise your hand, and the IR team will bring the microphone around. Erin?
Great, thanks. In terms of the 20,000 number, how did you get there? What's your target customer base, and how do we think about broader market share gains versus tapping into your existing customer base? And then also with the $3,500-$5,500 in terms of consumables flow-through, I guess, how does that expand over time with the menu expansion? And then, and, and what does that assume in terms of consumables utilization?
Yeah, let me talk a little bit about the sector opportunity, and I'll have Brian comment on the economics. You know, I think we have a deep appreciation for the clinical use cases of both, you know, ear cytology and blood morphology in terms of how often they do those, you know, those exams, and also the cadence of being able to place both new category. We have some experience with SediVue in doing that, and then existing categories, where we've come out with a new analyzer, like in hematology, with the ProCyte One.
So we're very comfortable based on practice, overall practice economics, clinical use cases, absolute number of exams, in believing that that 20,000 unit placement opportunity over five years is very much in line with what we've been able to do before and supported by existing clinically relevant use cases. Brian, would you speak to the economics of the $3,500-$5,500 and-
Yeah, we shared some of the key parameters on what we're expecting for the direct benefits from the launch today. I think our five-year view on instrument placements is 20,000, as was noted in the presentation, and the initial menu range of, you know, consumable revenue of $3,500-$5,500 per unit. And I think that, you know, we have a track record here of being able to build new platform revenue streams. You can see that with the progress that we had with SediVue. We have over 17,000 SediVue placements that hit our initial goals for the consumable revenues that we shared in 2015, prior to our launch in 2016.
So we have a track record here of executing against these kind of goals, and as Mike highlighted, these platform capabilities have the opportunity to add additional menu over time, as we've been able to achieve with Catalyst. So we see this as another major incremental revenue stream for IDEXX that we look forward to building over time.
Hi, thanks for the question. Nathan Rich from Goldman Sachs. Maybe just following up on Erin's question, you know, how do you see the current utilization being split across kind of the three initial areas, you know, ear cytology, blood morphology, and aspiration? And then, as we think about, you know, this is obviously a different way to interpret images than what vets are used to, do you anticipate there being a learning curve in using this system, as you think about adoption?
Yeah. So as of now, we're not, we're not breaking out, you know, the, the different proportion between ear cytology and blood morphology, and in future, maybe perhaps over time, we'll, we'll speak to that. The one thing I, I would say in terms of ear cytology, you know, we know that that's, that's something that practices do today in the millions. You know, one in five come to practices with those, you know, conditions that need to be looked at. Approximately 19 out of the 30 billion already involve looking under a microscope. That tends to be time-intensive. And so we think that, you know, that that's a, a well-established, well-characterized marketplace. As Mike showed on his slide with blood morphology, we, we pegged that more as an opportunity where about 20 million-
... op, you know, tests or slide opportunities exist, but they're doing far less today. What ends up happening in the clinic, even though they'd like to do it, they don't want to spend the time doing the slide, in many cases, multiple slides. So our assumption over time is that there is some market or sector development involved in being able to do that. And then the second part of your question was?
Just the image rotation.
Yeah. Yeah, so these—it is a bit different. Veterinarians are used to looking at 2D, you know, we call it squished images, as part of a slide. But if you take a look at textbooks within, you know, veterinary medical school and university, there—they do see that in natural state. They know that, for example, red blood cells have a concavity dimension to it and look a little bit like a figure eight. So they've gotten used to looking at something very different from what they've learned from a practice standpoint. In our experience with pathologists and veterinarians, in the, you know, initial work with them, is that they catch on very, very quickly. The other thing that I would say is the instrument actually identifies, it labels what they're looking at, so the training piece is pretty automatic.
Mike Ryskin, Bank of America. Thanks for the presentation, guys, really helpful. Two quick ones. One, you gave the 35-55k number, but just to dig into that a little bit, anything you can say in terms of economics? The vet clinic, they've got obviously a COGS component and a, you know, and time factors into that too, but how should we think about cost per run to the clinic with the inVue? Maybe you can compare it to SediVue or, or any precedents. And then, the second one I'll ask, at the same time is, timing of launch. You said Q 2024. I think you just said Q4. You're unveiling it now. It looks like you've got the box kind of ready to go, and you're manufacturing it. What are you still working on?
Is it the AI that's being trained in the back or sort of, you know, why is it not ready till later in the year?
Yeah, I'll cover your second question first and then have Brian speak to the, you know, economics of it. You know, we have a tried-and-true product development process, where when we actually launch an instrument, it's as bulletproof as you can get. And if you take a look at the ProCyte One, for example, when we launched that, the mean time between support events, four or five years. So this thing works within the practice environment. Practice environment is always a little bit different than what you experience on, you know, on the bench in the R&D facility. So we want to make sure that not only does the instrument work, that it's bulletproof from the standpoint of all the, you know, sample preparation from a plug-and-go standpoint, that it connects not just our software solutions, but all the software solutions in the marketplace.
And that from a manufacturing, manufacturability standpoint and a resiliency standpoint, we get very, very few customer support. So it's a conservative position, but we know it works, and we know our customers are very pleased, you know, by that. Brian, speak to the economics.
Yeah. For the recurring revenue, we should see the similar high gross margin type of returns that we've achieved on other platforms like SediVue. I think it reflects the insight and the technology, the innovation that's embedded in the instruments. We obviously will have instrument revenue as well. I think our initial estimates for pricing is kind of low teens type pricing. Instruments are a less significant driver over time of the economics, but that's also an incremental revenue stream as well. And as always, any type of innovation that we're bringing to market gives us the opportunity to engage in dialogues with our customers about all the capabilities that IDEXX can bring, and you know, this is another example of new that we're bringing to the market.
We had tremendous success if you look at the introduction of ProCyte One over the last 18 months, and the dialogues that that's opened up that's helped to advance development of our Catalyst business and our SediVue franchise, our other platforms, our premium hematology business. So I think there will be incremental multiplier benefits that should flow from this as well.
Great. Thanks. Jon Block with Stifel. Maybe just the first one, a clarification, Brian, on the low teens ASP, is that realized? You know, just because it's something like $360. So in other words, would you be getting $13,000-$14,000 per your $20,000 in terms of what's flowing through the P&L?
That, that's a reasonable estimate. With the new revenue account, and it came out a few years ago, most of that's upfront, Jon.
Okay, and this might be where Mike was going, but I'll just follow up. Can you help us with... I believe, like, the slide, you know, the workflow is obviously laborious, but, you know, the cost there, I would think, is pretty low. How will this work out for the practice in terms of the $3,500-$5,500? Like, what's the, the price per test, if you'd be willing to share that, versus the current method? You know, what, what will they be calling out-of-pocket, and I know they're getting a bunch of benefits on the other end, but how does that work?
Yeah. So we're not communicating today what the price per test is, but what I would say is there's a couple of dynamics here at work. One is, in a lot of cases, the practices decide not to do the slide because it's just too laborious or, you know, they do it, and then it sits there, and they don't charge, capture, or bill, invoice the customer for it. So there's a lot of lost economics connected with that. And, Mike, would you like to... Because you guys did some, I think, interesting market research on that.
Yeah, both of those points, there's a lot of leakage around what Jay just described. The other point, I'll go back to what I mentioned when I was on stage, John, around just all the investment that goes into training on the microscope, and we've heard that loud and clear from our customers. I mentioned a corporate account sharing feedback on that. So when you look at this through the total value proposition and total economic view, it's really very compelling for practices and for large practice networks.
Okay, and last one, I promise. Brian, when we think about the ramp to 20,000, do we use SediVue as the analog? And then, you know, we recently did some work looking back at SediVue, launched in 2016. We eyeballed the recurring revenue in 2018, so call it year three-
Yep.
-at $20 million. That was the 3,500-4,000 or around-
I think it was three, 3,000 to 30, 4,500. Was that right? Yeah.
It was in the U.S., less, less so internationally.
Right.
Okay, so I guess maybe the question or the punchline is, when we think about the ramp here, what, 2026, 2027, by the time this is like 100 basis points accretive to your CAG DX recurring, it looks like it'd be de minimis in 2024, small in 2025. But as we think about that ramp, 2026, 2027 until we get the 100 basis points accretive to growth?
Yeah, we'll obviously share a lot more as this advances. Going back to your SediVue adva-- you know, example, we had, I think, a little. We launched in Q2 of 2016. We had a little over, I think it was close to 1,600 placements in year one. I know that ramped to, I think, 2,500 in year two. So you have benefits, obviously, as you're building the instrument base, and then the recurring stream flows from that. So I think, I think early on, it was a little more significant, you know, in terms of helping the growth rate. And that all of these platforms kind of build into the overall recurring revenue story, right?
You know, kind of sustaining the high retention rates that we have, the ongoing innovation adds to our growth. So it's, for our growth model, it's less about incremental ideas, it's more about, you know, reinforcing the overall growth model, and this is just another example of bringing innovation to market that will help with that over time.
Just a quick question. It's kind of building on a question Mike asked about the economics to the practice. Specifically, do you think, or can you give the breakdown in terms of in-clinic versus reference lab, how much it's done? I'm trying to think about cannibalization, and I'm also trying to think about, you know, maybe the... Is the practice getting more economics because they're doing, with this, more in-clinic and can charge a premium to clients?
Yeah. So we don't, we don't think there's gonna be really cannibalization. You know, if you take a look at ear cytology, very, very few ear cytologies are sent out to the reference lab. It's in, like, the low thousands, that, that type of thing. Our, our experience has been that testing begets testing in the case of ear cytology. This, this automates and I think improves upon a, you know, process today that is labor-intensive, capacity-constrained, and, and not always clinically, from an output standpoint, satisfying. You know, in the case of blood morphology, what you see is specialty practices may, may do that, and they submit to the reference labs, but we think it's, it's largely additive.
That when they do a CBC within the practice because they want to do real-time care measurement, and they see an issue, as Mike said, two in three cases probably require a morphology. We think that's all additive in terms of what's being done today.
Thank you, everyone. That ends the Q&A session.
All set. Thank you very much.
Thanks, everybody.
Great. Thank you.