Earnings Call: Q2 2021

Aug 5, 2021

Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, instructions will be given for the question and answer session. I would now like to turn the call over to Mr. Ruben Argueta, Fidel's Director of Investor Relations. Please go ahead. Thank you, operator. Good afternoon, everyone, and thank you for joining today's call. With me today is our President and Chief Executive Officer, Doug Bryant our Chief Officer, Randy Stewart and our Vice President of Finance, Kristin Kaltrider. Our Q2 2021 earnings release is now available on ir.quidel .com, our Investor Relations website. We will also post our prepared remarks on the Presentations tab of our IR website following the conclusion of this call on August 5 for a period of 24 hours. Please note that this conference call will include forward looking statements Within the meaning of federal securities laws, forward looking statements by their nature involve material risks, assumptions and uncertainties. In particular, our expectations and assumptions around the COVID-nineteen pandemic impact and response on our business, results of operations and financial condition and that of our suppliers, customers and other business partners are highly uncertain, Such that our actual results and performance may differ materially from those in the forward looking statements. And subsequent quarterly reports on Form 10 Q as filed with the SEC. Furthermore, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast of 2021. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference except as required by law. Today, Quidel released financial results for the 3 6 months ended June 30, 2021. If you have not received our news release or if you would like to be added to the company's distribution list, please contact me at 858-646-8023. Following Doug's comments, Randy will briefly discuss our financial results. Then we'll open the call to take your questions. I'll now hand the call over to Doug for his comments. Thank you, Ruben, and welcome to everyone on the call. We really appreciate your time and interest in Quidel. I understand that several We will try to be respectful of your time and be as succinct as possible. I want to start by recognizing the entire Quidel team for their tireless Dedication and skill, the past 18 months have been a grueling test of all of our systems and teams from our R and D and clinical teams, of course, To our production floors, to our supply chain and all other functions, including HR, finance, Regulatory Affairs, Sales and Marketing, Legal, Business Development and International, of course. Not only have they met the pandemic test, they aged it. Our product platforms and offerings have never been more robust. Our productivity is up across the board and our market penetration Consumers at retail and online, the Quidel name, our branded assays and analyzers are accessible and sought after. The net effect has been transformational for our company and positions us exceptionally well for long So to all my colleagues at Quidel, I say again, thank you. Turning to the Q2 of 2021, you See from the press release that while revenue is down 12% versus the prior year quarter, the pace of our business remains impressive With revenues of nearly $177,000,000 we'll unpack all the numbers in a moment, but what stands out to me as The leading indicators of the quarter relative to our longer term strategy are the following. We delivered solid 24 growth in our core business. We further broadened our installed base of Sofia analyzers. Demand for our SARS products continued with Quidel shipping over 8,000,000 tests in a quarter across all platforms. And we established a strong beachhead for COVID testing in the retail segment. The implications of each will And well beyond a single quarter. Please recall that in Q2 of last year, we saw a significant rise in COVID-nineteen and Influenza revenue that largely resulted from the onset of positive COVID-nineteen cases in North America, The emergence of testing for COVID-nineteen and the introduction of our Lyra and Sofia COVID-nineteen testing products. We were early to market with molecular testing and the first to market antigen test. Demand was high and competition was limited. By contrast, in 2021, there was essentially no flu season and the market for SARS antigen testing has become much more competitive. As a result, while demand for COVID-nineteen tests in Q2 of this year was still present and perhaps stabilized, Revenue was lower when compared to the surge orders that we saw in 2020. But if you drill down a bit further, you'll see that the top line numbers To ensure the underlying strength of our rapid immunoassay business. In Q2 of this year, we sold 6,600,000 SARS amphetamine tests as compared to 3,100,000 tests in the Q2 of last year. We saw significant shift in product demand. We shipped fewer Sofia SARS antigen assays to the Professional market and saw significant demand for our quick Usars antigen tests, about 4,800,000 tests, which weren't available in Q2 2020. Of course, our CRYF U tests are priced lower coming in during the quarter at an average of just under gladly because over the course of a year, we've succeeded in democratizing testing and pushing the boundaries of access beyond the professional point of care setting to include retail and at home testing. We're quite proud of that achievement And believe it's the forward edge of a broader home testing trend that will continue to drive earnings over the long haul. Now let's look at our core business, Excluding COVID-nineteen and influenza assay products, we were up 24%, as I mentioned before, to nearly $92,000,000 As compared to $74,000,000 in the Q2 of 2020, as we began to see a return to normal testing for cardiovascular, Strip A and our MicroTiger businesses. Growth of our core business is important going forward as we strive To maximize the utilization of our Sofia instrument placements, adding new assays such as our suite of gastrointestinal assays and expanding into new segments within diagnostics. We envision leveraging Our rapidly expanding platforms to broaden our footprint and create a demand funnel for a wide variety of future tests and diagnostic Products that can be employed in numerous settings, including hospitals, physicians, offices, Emergent Care Centers, pharmacies, retail and other institutions. One recent success of note is that We received EUA for our miniaturized artificial intelligence enabled Sofia Q device. Sofia Q will make access to our Sofia test easier and more affordable for professional point of care customers. Longer term, It could create a retail pathway for our full portfolio of Sofia tests for influenza, RSV, Strep, Lyme disease and other conditions. So the combination of our expanded installed base and continued demand For our Sofia and Sofia II instruments, with the expected adoption curve of Sofia Q positions us favorably to be the brand of choice for addressing future flu, strep and respiratory disease seasons and whatever else comes At the start of the call, I noted the terrific work of our R and D operations and clinical teams. During the quarter, they continued to advance Savanna, our Multiplex molecular diagnostic analyzer, which we believe will be our next flagship product. We recently received We are building out our instrument and cartridge manufacturing and expect to launch in Europe in the fall, with U. S. Clinical trials expected to Once approved, Savanna will enable professional customers to analyze up to 12 pathogen plus controls in a single assay run-in fewer than 25 minutes. As I said before, Customer feedback is fantastic, and I am confident Savannah will be a big part of our quarterly discussions in the future. Let's turn now to the subject that has been a big part of our discussions over the previous 5 quarters, COVID-nineteen. While we are actively working to expand our diagnostic platforms and product mix in other areas, COVID-nineteen Testing remains a significant near term opportunity. You've probably seen our announcement with the State of Delaware to provide testing to students and faculty. It is a testing as a service model that we have replicated in other states as well. We also are pursuing a variety of Other opportunities with schools, employer groups selling in select U. S. And ex U. S. Markets and evaluating other nontraditional markets. While we expect to close more accounts with employers and have several promising partnerships in the pipeline, They involve a good deal of blocking and tackling and are very hard to predict or value, especially when guidance from CDC and the landscape of COVID testing seen to evolve daily. Recently, the warning from public health officials that vaccinated people can become infected and Spread the highly transmissible delta variant of COVID-nineteen appears to be a near term driver for more masking and testing, especially as schools and offices look to reopen in the fall. Regarding the delta variant, I can report that preliminary studies confirm that Quidel's rapid antigen tests are effective in detecting the delta variant. We're continuously monitoring the COVID-nineteen situation as well as monitoring other circulating strains as the global pandemic continues to evolve. While our ability to pick up the delta, Verint and testing to detect the delta variant will likely be tempered by continued competition and pricing volatility. So I can't give you much guidance on where all of this could go beyond what I've shared in the past. And that is for the moment, we expect to achieve revenue Up $20,000,000 to $25,000,000 per month for RSR's related rapid antigen and molecular diagnostics business. But if there's market upside for testing, I should point out that we do have a premier portfolio of testing solutions and a highly capable sales and distribution team. We are certainly well positioned to compete for whatever opportunity presents Last week, we announced that we are transitioning our Beckman BNP business to Beckman Coulter, concluding the ongoing litigation that followed our purchase of the business from Elear in October 2017. This agreement is a major step forward for both For Quidel, it eliminates an uncertainty, locks in the economic benefit for the duration of the contract and lets us focus on expanding our core businesses and executing on our longer term strategy. It eliminates market risk and creates a stable cash flow For the remainder of the existing BNP supply agreement term. As a reminder, we purchased the asset for $280,000,000 in 2017 to be paid over 6 years and have now secured annual payments, which effectively are EBITDA of between $70,000,000 to $75,000,000 per year through Quidel and Becca. Lastly, I'd like to talk about M and A. I can't reiterate enough that with respect to acquisitions, Strategic fit is very important to us. We continue to actively look at opportunities Within our funnel or as I said before, tongue in cheek, we're kissing a lot of frog. The headline here is that our cash position remains So to wrap up, Q2 of 2021 proved to be another very solid quarter and an important step forward in our long term game plan. We have fielded a mix of products and partnerships and are benefiting from the tailwinds of macroeconomic trends. When we add in the talents and spirit of our team, it gives us every confidence that Quidel will deliver continued growth and success as we advance diagnostics to improve human health. Randy? Thank you, Doug. Good afternoon, everyone. And as Doug stated, we had a Solid quarter and we continue to make good steady progress on executing on our longer term goals and strategy. As reported, revenues for the Q2 of 2021 were $176,600,000 compared to $201,800,000 in the Q2 of 2020. Foreign currency had a positive impact at $2,800,000 in the quarter. The decrease in revenue was due to lower influenza revenues, a shift of SARS product mix as well as price reductions for some of our Syres products. Influenza revenue was down in the quarter because there was no Flu season in early 2021. Influenza revenue in the quarter was 1 point $18,700,000 in the Q2 of last year. Included in the influenza revenue number for this quarter was $300,000 in ABC revenue. This combo product was not yet available in the Q2 of 20 We will be reporting the Sofia ABC with our flu revenue moving forward. Total Syrins revenue in the quarter from all products was $83,400,000 and this compares to $109,000,000 last year. Rapid immunoassay product revenues were $60,100,000 in the Q2 of 2021. Within the category, Sofia products were $27,500,000 of which $23,700,000 were attributed to SofiaSARS antigen sales. QuickVue product revenue in the quarter was $32,000,000 of which $28,600,000 was attributed to the QuickVue SARS test. With regard to demand, distributor inventories for Sofia antigen were 62% lower In Q1 2021 and distributor inventory of SOPHIA ABC test were 11% lower than in Q1 2021. As of the end of the quarter, we had very little quick view inventory with our distribution partners. For the cardiometabolic immunoassay business, Revenue increased 32% and was $71,700,000 in the Q2 of 2020, split $36,000,000 For the Triage business and $35,700,000 for the Beckman BNP business. On the part of Triage, Diagnostic Solutions category decreased $1,400,000 in the 2nd quarter to $10,400,000 driven by decline in sales of our cell culture respiratory products due to a non existent respiratory season. Our molecular diagnostic solutions Category decreased $20,700,000 to $34,500,000 and our lirasars COV-two products were $27,200,000 of that total. Solana revenues grew to $6,500,000 in the quarter And Solana SARS COV-two assay generated $4,000,000 of the $6,500,000 in the quarter. Gross profit in the quarter decreased to $106,200,000 and gross margin was 60% of revenue for the 3 months ended June 30, 2021. This compares to gross profit of $148,800,000 74 percent gross margin for the ended June of last year. The decreased gross profit and gross margin were driven by a shift in product mix From selling primarily Sofia Stars in the professional segment to selling large volumes of less profitable QuickVue and Proportionally more of the less profitable core products as well. One time costs associated with Expediting product and supply chain challenges added an incremental 4 percentage points to our cost of sales The majority of these costs are not anticipated to continue into the back half of the year. Based on the projected product mix, we're estimating gross profit margins to be in the mid-60s for the next couple of quarters. On the spend side of the business, we continue to invest in R and D and specifically our Savanna platform. We are also Spending in support of our longer term initiatives such as new Sofia assays that can leverage our large installed base of instruments, Next Generation Platforms and Sofia Q to name a few. In the 2nd quarter, R and D expense $22,600,000 and a large portion of which was focused on Savanna instrument and cartridge development. We're still expecting R and D expense for the full year to be approximately $100,000,000 Sales and marketing Expense for the Q2 increased $10,500,000 to $38,100,000 with the biggest driver being higher marketing and advertising And associated with the launch of our QuickVue at home OTC COVID-nineteen test. The incremental marketing spend was approximately $6,000,000 higher than it was in the same period last year. We also realized increased travel and meeting costs. Back half of the year, we will continue to invest in our sales and marketing as we develop more partnerships and increase marketing dollars in support of our broad product portfolio as well as promoting other markets that can significantly broaden our customer base. As it relates to the provision for income taxes for the quarter, we recorded $2,600,000 in income tax expense resulting in effective tax rate of 12%. The tax provision this quarter is impacted by lower pre tax earnings for the quarter relative to We're currently estimating a full year effective tax rate ranging between 20% 21%, and this would exclude any potential impact of legislation, which remains uncertain. As of the end of June, we had $593,000,000 in cash and cash In the quarter, the company invested $130,000,000 in capital expenditures and for the full year We're expecting to spend approximately $250,000,000 in CapEx, net of the NIH RadX reimbursement. Also in the quarter, spent approximately $103,000,000 to repurchase 950,000 shares. Also relating to capital deployment in April, we made our annual $48,000,000 payment to Abbott for those Alire assets. We have a remaining balance of only $88,000,000 on our deferred and contingent consideration to be paid over the next 2 years. As Doug mentioned earlier, we announced an agreement with Beckman Coulter on the Beckman BNP Business And I'd like to add a few more details. As consideration for the arrangements, Lydall will receive from calendar year $5,000,000 payment is dependent on sales volume of the Beckman BNP assay. Such minimum and maximum payments will be prorated for 2021. The minimum payment is not dependent on sales of the Beckman assay. The proration for 2021 is based on the period commencing on the date of the initial transition to Beckman due December 31, 2021. The initial commercial transition is expected to be completed by the 1st September of this year. Quidel will continue to provide Bechtman services in connection with the business, including continued supply to Bechtman of the Quidel antibody used in the manufacture of the BNP assay. The payments under the master agreement are expected to be EPS and cash flow neutral to the existing supply agreement through calendar year 2029. Waddell's reported EBITDA under the master agreement is expected to be similar with the EBITDA derived from the Beckman BNP business prior to entering into the master agreement. The Beckman payments going forward will be recorded as product revenue in Quidel's financial statements. And with that, we conclude our formal comments for today. Operator, we will now open the call for questions. The first question is from the line of Alex Nowak with Craig Hallum. You may proceed. Great. Good afternoon, everyone. Jumped in between a few calls here, so I may have missed some of this in The kind of first question I have here is, I know COVID is highly variable and you got the Delta variant coming back and You also have to rebask the mandate to put it back. But when you go to this upcoming respiratory season, what does your glass ball Say about flow, is flow going to come back? What are you hearing out there in the field? It's basically just like with COVID, I think unforecastable. We're seeing nothing in Australia. We would have expected that we would see RSV in advance by About a month of season and in Australia they had a very, very robust RSV epidemic. I don't I mean to smile when I say that, that they had pretty big outbreak, but not followed by foot. So I don't know what that means for us at all, Alex. I will say that we are going to monitor very closely a couple of leading indicators of influenza such that although we do have some inventory of the combo product remaining, we feel like we can Within a 3 week period, ramp back up and manufacture the volumes that are required. And I won't go through Leading indicators just recognizing that every competitor is reading our transcripts just as we are reading. So but we're going to try to monitor very closely Our supply chain and manufacturing teams are ready to roll. In the meantime, we're Gearing up for all the other products, including our various COVID platforms as well. Okay, understood. Makes sense. And then actually just on competition, a lot more Players have really come online in the market the last 18 months. You've got a variety of different players with varying volumes. So how do you view the competitive environment for COVID testing, but just going beyond that, how do you think the competitive dynamic has changed in the last 18 months for the flow market, the strep market, RSV, etcetera? I think we're in good shape. And I would say that I don't believe that the entrance of these smaller competitors will have much of an impact Given the fact that very high percentage of Sofia placements are on contract for multiple years, Most at 3 years for committed volumes for all products, including COVID, influenza, RSV, stress And other so very high percentage of people that came online for COVID-nineteen testing entered into longer term agreements that include So there, I think, I would say in the professional segment, which would include mainly hospitals, urgent care and larger physician Office practices were in pretty solid shape. The situation on retail And employer testing and schools and all that, obviously more fluid. We think that we're in good shape there. We've been doing quite Well, but that's where I think the entrants could have an impact if they're going to, but it would not Likely be in the traditional setting where most flu testing is done. All right, understood. Thank you. Sure. Thank you, Mr. Nowak. The next question is from the line of Casey Woodring with JPMorgan. You may proceed. Hi, guys. This is Casey on for Tycho. Thanks for taking my questions. Maybe first one just to follow-up on the last question on competitive dynamics. Can you talk a little bit about market share on the COVID side? Just listening to Bechtin this morning, I they sold more than $200,000,000 in Veradigm Antigen tests. That's compared to Sofia, which did $24,000,000 in the quarter. So maybe can you talk about share gain or loss this First of all, we didn't do $24,000,000 test. And I don't know what I have no idea what BB sold or whatever. So I don't have an answer. Revenue, I mean. Okay. Maybe we can huggers. Yes. I don't know. No, we didn't like your question. Yes. We did $83,000,000 in the quarter, Casey, for all in COVID. I don't know how that compares against We don't obviously don't have an international product that would be shipped out of China Okay. And then just looking in terms of next year's earnings power normalizing for COVID, if I look at the 2019 of around $3 per share, how does that fare for 2022? What sort of upside is there to that number for the base business? Well, Casey, I mean, we're such a different environment now than we were in 2019 with the installed base increase, everything else. So we really haven't All base increase, everything else. So we really haven't stated an EPS expectation for 2022 off the core business. Okay. And then maybe last one on capacities Are you guys still building towards that $800,000,000 annual run rate by the end of the year? And is excess capacity or inventory a concern At all, given this quarter's kind of testing run rate? Yes. Certainly, at this moment, Casey, we don't have excess capacity. We're actually Trying to ramp up. We've got QuickFeet at home to build. We've got Sofia to build across various different products. Of course, we're ramping back up with molecular manufacturing as well. So at the moment, I wouldn't put us in the position of having excess We are bringing on more and more equipment beginning this month with an expectation of being online before the end of the year. We do have a home for most of that capacity, but I think it's important for you all to consider and maybe that's been That maybe not explained well enough on our end, but all the capacity that we're talking about has already been paid for. And we are in neutral between the two sites, McKellar and Rutherford. And so there is no increase in infrastructure cost per se. What we will have, Bill, if we choose to increase our manufacturing volume, What we will have is a fungible environment that in which we hire more people And we secure more volume inputs in our supply chain in order to manufacture more products. So when you ask the Question like that, it implies or yes, it does imply that you think that there's some sort of problem with us building capacity. We will have And basically, it's been funded by COVID. So from our perspective, we got basically increased capacity for free. Plus it gives us the global reach we We can reach whatever we want at this stage based on the ability to manufacture more products Should we choose to do so? We're not obligated, obviously. And I wouldn't say that hiring people is an overnight thing, but I think you've seen others in our industry ramp up terms of their employment base pretty quickly, and we feel like in this environment, in this particular county, that we can do Thank you, Mr. Woodring. The next question is from the line of Jack Meehan with Nephron Research. You may proceed. Thanks. Good afternoon, guys. I wanted to start and talk a little bit about Sophia, sorry if I missed this in the prepared remarks, but how many Sofias are in the field today? And do you have an estimate for How many are active versus some that are out of use as COVID has waned? Yes, I can. First, I'll start with a number that's around 71,000 SOPHIA analyzers out there. Most were installed in 2020 with a contract They still will be using the analyzer for things like influenza, strep, to a lesser extent, Lyme, RSV VE is another big category for us. So we still have a footprint that should pull through More volume. We certainly took a lot of customers away from a couple of key larger players. And we can Expect then that that install will be a beautiful asset when we launch other products moving forward. So your point is a good one. The 2020 volumes that they are purchasing, running through those portfolios are obviously going to be down. But we now A different business, as Randy said. It's a completely different business than 2019 now because of a number of things. 1, A more robust supply chain and manufacturing operation, but as well a much larger asset and customer base into which we're now Got it. And I just want to understand this dynamic of placing the instruments with the contract For additional tests, just when I look at the SOPIA revenue in the quarter, dollars 27,500,000 of which about $24,000,000 was COVID. So it implies about $4,000,000 was non COVID. So why are customers not utilizing these instruments for Other testing, how does the contract work? Well, Jack, I mean, if I just when I say this to you, you're going to go, Obviously, there is no flu in Q2. There's no stress. There is no respiratory season in Q2. If this were a normal prior to COVID year, you wouldn't have asked the question because you would have known that Q2 is our low watermark. We don't do much respiratory testing in Q2. Okay. And if just thinking about as you go into the fall, I think there is a view that at least at the point of care, combo testing Could become more prevalent, just if you add a little bit more flu, there could be more demand for that. We are seeing some RSV outbreaks across the country. So I was wondering today your combo test is flu AB COVID, just the path to adding RSV to that? Yes. So we have a program, as you know, to add that. It will be on the Molecular platform, but it will also be on the Sofia platform. And your point is a good one that we are seeing a bit of demand for that. In fact, about half of our inventory That we have on hand for the combo assay itself on Sofia SARS COVID excuse me, SARS flu, About half of that inventory already shipped. So whether that will be renewed will depend on if there is indeed a flu season, I think. Got it. And last one on Savanna. I think I heard in the prepared remarks, there are now U. S. Clinical trials Yes. We've already completed a number of trials. Our issue really is on the 510 products, Jack, it's not on SARS or the respiratory viral panel. So the issue with us right now is that we're competing with Automobile and appliance manufacturers were the same sort of chip components and our third party manufacturer Struggling to access all the things necessary to create the volumes of instruments of Savanna that we want to have At launch. So right now, I had a pretty lengthy conversation yesterday with our Head of R and D. We think we're in good shape to start the I can take Krausz here imminently. He thinks he has enough instruments. But to actually complete everything that we need to across all of the products that we It's going to require more and so we're monitoring all that closely. We're exercising supply chains. We're trying to help out our 3rd party manufacturer who has a pretty constrained limited number of folks that they normally work with. We're trying to help out there. We also were engaged in a conversation with federal government a couple of days ago during which we said, please can you help the industry, not us, not quite out, Can you help the industry, please, to make sure that we get our fair share of what's necessary to build these Equipment that effectively could improve public health. So we'll see what happens there. But that's Really what's happening now, I mean, from a scientific perspective, from an assay manufacturing perspective, we're in Awesome shape. From an instrument building perspective, we're holding our breath right now, Jack. The next question is from the line of Andrew Cooper with Raymond James and Associates. You may proceed. Hey, guys. Thanks for the question. I was not around, so hope this hasn't been asked. But one I did want to ask just on the BNP side Are you precluded from selling your version after 2029? What does Yes. I appreciate you asking the question because I think there is a little bit of a disconnect. This whole situation that we've gone through in the last few weeks to resolve this is not nuanced at all. It's pretty darn straightforward. We make an antibody that is supplied to Beckman who puts it in their kit. And as part of the agreement they entered into with BioSight years ago, we sell that product For use on their analyzer. You can question why they would have entered into the agreement in the first place, At the end of the day, they benefited because they were able to have a BNP assay on their equipment when they It didn't have access to the IP related to that particular biomarker. So it was a win for BioSight. It was a win for Vecman. That agreement was scheduled to end X number of years after the last country was entered into that product. That last country occurred a while ago, which meant that the agreement was meant to expire in 20 20 Regardless of whether we settled this litigation or not, it was meant to expire in 2029. So there is no terminal value. There never was. There won't be moving forward and it doesn't change. We don't have any terminal value now, but we didn't before So there is no difference there. So we really don't have an agreement that says we can or cannot make our own DMP because of course We already deal with Triage and it's a big product for us. We also have a way to put it on our leapfrog product, We're, as I probably have suggested before, we plan on making all the cardiovascular products, including Hisense, Trebonne, BNP and other things all available on this next generation platform. So I appreciate the question, Andrew. It's a very good one. There's nothing about this that precludes us from moving forward with our own BNP other than the one we already have on Triage. We could I mean, if we can put it on whatever instrument we come up with, including obviously, There's not a lot of value in making a product for somebody else who already has a BNP, so I don't see us doing that. But for our own Next generation immunoassay analyzer, we will have the cardiovascular products, including BNP. Does that make sense? Or do I need to further Clarify, Andrew. No, no, that's helpful. That's helpful. I won't ask anything on Leap Frog quite yet on this call, but maybe just to sneak one more in. When we think about the pattern we've seen from ordering and where the demand comes from, I still have been a little bit surprised by molecular versus antigen and frankly QuickVue, I think is a different place, especially as we start thinking more about combo products. I know it's sort of unanswerable, but how do you think about maybe a shift in that demand if we do start to see flu pick Back up or how that evolves into the back half of the year in terms of QuickVue versus Sofia versus Just any color you could offer there would be great. Yes. That's an excellent question. You're right. It may not be completely answerable, but what I would say is that if there is a respiratory season And people feel ill. I think there is reason to believe that there will be demand for influenza testing, RSV testing, but also COVID. I think an influenza season will likely drive a little bit more volume. We said before that we think that there's an underlying We're at $20,000,000 to $25,000,000 a month for us. And I don't know whether things have changed as a result, but certainly in the Last couple of weeks demand seems to have ticked up dramatically. And internally what we're doing is trying to make a decision about Which mix of products makes the most sense. Right now, I would say that in order to sustain a presence in the retail segment, Whatever region we launch in, we want to make sure we don't run out. So we are going to preferentially make the QuickVue OTC We're also going to pursue a combination product that could be useful. Because we're 510 cleared already for an influencer product by QuickVue, It should be possible to get that done. So that could be something interesting. Sophia, you've got so many placements out there and now We're beginning to shift to distributors in the Professional segment in a meaningful way. That product That's a different production line though, set of production lines, which is now somewhat helpful. So we should be able to meet the demand there. On the molecular side, I Can't tell you for sure. I just think that the demand for molecular testing for us at least Has plateaued a bit. And I would just say there's not a stain on molecular testing necessarily, but it Clearly has some disadvantages relative to a test that can tell you that indeed you're infectious. So I don't know what that's going to mean for us, but I'm not counting a lot of molecular uptick moving into the fall. And we never saw an influenza testing. I mean there's a certain segment of the population Of hospitalized patients where you would expect to see molecular influenza testing, but that really hasn't grown much Thank you, Mr. Cooper. The next question is from the line of Brian Weinstein with William Blair. You may proceed. Hey, guys. Good afternoon. This is Griffin on for Brian. Thanks for taking my questions. Just first, I want to understand the dynamics in The core business is a bit better here, pretty flat sequentially in that low $90,000,000 range. So anything to call out there? And then How should we be thinking about growth in the core business moving forward, especially in the non COVID rapid immunoassay line? It's not flat. It's up 24% over the prior year quarter. It's up 24%. I'm sorry, sequentially. 90 Sequentially. Yes, sir. Sequentially. Yes, because Q2 was always sequentially down. Remember, due to the lower restructuring, we always see Q2 as really the low quarter of the 4. In a business like just to be helpful, in a business that has a Large portion that's tied to a season. It's almost not meaningful to look sequentially because You could say the same thing next quarter if you wanted to go, why is Q3 so much bigger than Q2? Well, it's because people are going to start buying respiratory products. I mean, you're saying you have essentially started getting Q4. Why did it get off again? It's just because we're heading into the season, right? So that's all you're seeing there. There's nothing more than that. Okay. Appreciate that. And then on Savanna, I think you guys are targeting somewhere around $300,000,000 for that product in its 3rd full year following launch. So just how should we think about that ramp and Any color on utilization expectation can be appreciated. Sure. I am very comfortable with the ramp Provided I get supply of boxes. And I mentioned earlier, I think when Jack was asking a question that We're worried a little bit about the inputs into the production scheme and our suppliers Our manufacturer is doing a great job, but they can only make as many instruments as they can get the parts for. So Notwithstanding that any delays there, which we're going to try to minimize, of course, but notwithstanding any sort of delay, I'm pretty comfortable way we've ramped this. The good news is the asset development team is actually Exceeding expectations, doing a fantastic job. We're running the assays on our own people and The Savanna instrument performed extraordinarily well. The curves look terrific On the assays, and we're pretty confident, to be honest with you, but except for I got to get instruments. Yes. Okay. Thanks. Yes. Go ahead. I'm sorry. Sorry about that, Randy. Go ahead, please. No, that's all right. I was going to say, yes, and we obviously are rolling out those 5 or 6 assays over the next 12 months as well. Yes. And I just could squeeze some more on M and A. Can you just refresh us on what you're looking for? You previously talked about digital health capabilities and some infrastructure. Any change to that? No, that's certainly interesting to us. And again, as I said in my prepared remarks, it's more about fit. And can I leverage the asset I'm acquiring? Can I leverage my own infrastructure such that 1 plus 1 is more than And I'm not a big fan of science projects? I'd like to see revenue and margin and I'd like to see that we think that we can grow it. I'm not And something that flattens us out. So that limits the number of things that we think, Limits the number of frogs that are going to turn into a prince. Appreciate the answers guys. Thank you. Sure, Gordon. Thank you, Mr. Weinstein. That is all the time we have today. Please proceed with your presentation or any closing remarks. Well, thanks everyone for your support and of course your interest in Quidel. I do realize that so many of you have so many names you're covering today and I've been reading some of the reports on a daily basis and I'm thinking, oh my god, it feels like you're you guys are in school. You got to do a project every night. And So I'll hang up real fast so you can go write your report and happy to take questions here in the next couple of hours as we need to. Thanks again, everybody. Goodbye. Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Goodbye.