Earnings Call: Q3 2020

Oct 29, 2020

Ladies and gentlemen, thank you for standing by. Welcome to Quidel Corporation Third Quarter 2020 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'd now like to turn the call over to Mr. Ruben Argueta, Quidel's Director, 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 and Randy Stewart, our Chief Financial Officer. Our Q3 2020 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 October 29 for a period of 24 hours. Please note that this conference call will include forward looking statements within the meaning of federal securities laws, including our anticipated revenues for Q4 2020. Forward looking statements by their nature involve material risks, assumptions and uncertainties. In particular, our expectations and assumptions around the impact of the COVID-nineteen pandemic on our business, results of operations and financial condition and that of our suppliers, customers and other business partners are uncertain and subject to change. Many possible events or factors could affect our future financial results and performance, such that our actual results and performance may differ materially from those in the forward looking statements. For a discussion of such factors, please review Quidel's most recent annual report on Form 10 ks, including the section titled Risk Factors, Registration 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, circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for 3 9 months ended September 30, 2020. 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, and we'll open the call to take your questions. I'll now hand the call over to Doug for his comments. Thanks, Ruben, and good afternoon, everybody. Welcome to my 47th consecutive quarterly earnings call. I hope that you and your families are well and safe during these challenging and uncertain times. At the moment, America faces the prospect of a third wave of COVID-nineteen infections, as indicated by a rise in the number of daily cases, now up to 23 infections per 100,000 residents. The spread of the novel coronavirus has migrated from metropolitan centers to suburban areas and even to the countryside. The weather is getting colder and the flu season is still looming. As we face the potential for a 3rd wave and another rise in infections, our company understands the need for increased testing and continues to rise to the challenge in the fight against COVID-nineteen by expanding access to affordable, highly accurate diagnostic testing throughout our communities. I couldn't be more proud of our people, those deemed essential as well as those working from home. With the way that they've embodied the Quidel spirit through dedication, determination, perseverance, singular focus, quick problem solving ability and a team first mentality, all the qualities that are a bedrock of our company's culture and allow us to tackle a challenge like COVID-nineteen head on. We had a record quarter in terms of revenue, consistent with our preannouncement and a record in terms of profit for the quarter. To be efficient, I'll let Randy provide more detail on revenue and margin in a minute. Here are the revenue drivers for Q3 at a high level and what we can expect in Q4. First, the rapid point of care operations and supply chain teams in San Diego exceeded expectations. Line 2 was converted to SARS antigen production and the nasal foam swab issue that slowed the kitting process has been resolved, which together enabled us to reach the level of 2,100,000 kitted SofiaSARS antigen tests per week. We believe we can sustain that level of production throughout the Q4. While shipments in Q3 of Sofia and Filmeda should have been and were lower than the prior year quarter, we have manufactured and shipped several $1,000,000 of our Sofia Influenza tests already this quarter as well as several $1,000,000 of our Sofia ABC combination tests. We expect at this point to move to 80% ABC combination tests and 20% SARS antigen tests in December. We placed approximately 5,000 SOPHIA II instruments in Q3 and expect to exit the year with about 75,000 analyzers on the ground. With recent increases in instrument production, we expect to satisfy most of the pent up demand from the traditional laboratory segment by the middle of Q1 2021 and can then begin providing instruments more routinely to newer market segments and opportunities, which are endless. I will mention quickly SARS antigen when I talk about pipeline, but we're expecting a meaningful revenue contribution from this new product in Q4 as well. 2nd, the molecular operations and supply chain teams in Athens, Ohio were rock solid in Q3 and poised to both meet increasing demand for AlireSARS in the 4th quarter and to ramp up production of Solana SARS following EUA clearance from the FDA for that new product. 3rd quarter revenue of liraSARS driven by orders from just over 120 North American customers in a handful of international sites was better than we had suggested. And 4th quarter, lira SARS revenue looks to be about a third higher sequentially. We're expecting a meaningful revenue contribution from Solana SARS in the 4th quarter as well. In terms of our ongoing COVID pipeline, we will go into some detail at our Investor Day, which is scheduled for November 12. In the meantime, here are a few high level notes. First, in Q4, we expect to launch our Sofia serology assay, another first of its kind, into a limited number of sites to do studies with the intent to demonstrate the clinical utility of the point of care fingerstick combination assay that tests for IgG antibodies to the nucleocapsid protein and to 2 distinct epitopes, S1 and S2, promisingly, has shown similar performance in terms of agreement with PCR and Sofia SARS antigen. We are executing on a plan that should get us to a manufacturing capacity of 15,000,000 QuickVue SARS tests at some point per month in 2021. In terms of molecular products, we are expecting to launch the launch of SARS and Lyra ABC in Q4. Initially, we intend to manufacture about 1,000,000 Solana SARS tests per month for about 700 or so of our existing Solana customers. Each Solana instrument can perform 12 SolanaSARS assays at once in 25 minutes. The data generated by the SolanaSARS isothermal molecular assay show remarkable agreement with extracted PCR. We expect that demand for a mod complex assay with this speed and performance to be quite high. In terms of our core business and pipeline, I'll save that for the Investor Day, which should allow more time for your questions today. During our time together on November 12, a few members of our executive team and I will cover 3 topics. First, we'll take you through what our long range plan looked like before COVID, a plan that resulted in 12% compounded revenue growth over a 6 year period. I'll provide an overview, then we'll jump into the details. Doctor. Tammy Ranalli and Doctor. Johannes Kaila will bring you up to speed on the Savanna program. As you'll see, Savanna is destined to become the next flagship product for Quidel and is expected to be a key growth driver for the company. Bill Firenze, who heads up our Cardiometabolic business unit, will provide an update on TriageTrue, our high sensitivity troponin assay, and Doctor. Varon Acrull will talk about our non COVID Sofia product line. And I'll summarize by talking about the longer term collateral benefits of what we're doing with COVID and how that de risks our longer term growth plans. Next, we'll provide an update on the entire COVID pipeline and we'll describe our expectations for those products over the next couple of years. Karen Gibson will give you an update on the Snipples program, and we'll talk about use cases for the product in the market segments that seem to be the best fit. And finally, we will talk about bigger and more aspirational ideas. Doctor. Varon Akroll will discuss Project LEAP FROG and how this advanced technology could address many diagnostic testing needs at the point of care or even at home. We'll talk about our vision for home testing and the democratization of point of care testing for many routine conditions. And Randy Stewart, our CFO, will talk about our financials over the LRP and our thinking around capital deployment. It should be a great half day and I look forward to bringing you all under the tent, so to speak. In summary, the 1300 employees at Coidel had a great quarter and we're poised for a great year end and an even better 2021. I realize that some of our larger competitors dismiss us and think we are punching way above our weight, but this company was built for what we're doing today. We have extraordinary strategic, technical and commercial competencies and the ability to scale to much greater heights. And most important, we are happy. Randy? Thank you, Doug. Good afternoon, everyone. As Doug stated, we had another very strong quarter that exceeded our own expectations. Our employees have truly risen to the COVID-nineteen challenge by delivering new products to markets and continuing to expand production for newly launched COVID-nineteen antigen and PCR products, making a profound difference in people's lives and livelihoods. Through the dedication and hard work of our organization, we've positioned the company for a strong end of the year and beyond. As reported, total revenues for the Q3 of 2020 were $476,100,000 This compares to $126,500,000 in the Q3 of 2019. The 2 76% increase in revenue was driven by significant growth in our rapid immunoassay and molecular categories, driven by considerable demand for our COVID-nineteen diagnostic products. We did realize minimal declines in demand for the cardiometabolic and specialized diagnostic solutions product categories. Foreign currency had a positive impact of $500,000 in the quarter. Rapid immunoassay product revenues increased $294,500,000 to $337,000,000 in the Q3 of 2020. Within this category, Sofia products grew $303,200,000 to $331,900,000 of which $317,900,000 was attributed to SofiaSar's antigen sales. QuickVue product revenues decreased $8,700,000 to 4,000,000 In September, we did not realize the ramp up of distributor purchases of influenza, strep and RSV heading into the respiratory season as we have seen in previous years. We intentionally prioritized our production and shipments towards the SARS antigen test. As a result, influenza rapid immunoassay revenue was $7,900,000 with approximately 90% of that revenue derived from the Sofia platform. For the Cardiometabolic Immunoassay business, revenue was $64,800,000 a 3% decrease versus the Q3 of 2019. More importantly, this category was up 10 point sequentially and we are optimistic that the cardiometabolic category has stabilized. Of the $64,800,000 in revenue in the 3rd quarter, dollars 32,700,000 was derived from the Triage business and $32,100,000 from the Beckman BNP Business. Year over year, the revenue decline was realized in 2 of the 3 major geographies. However, sequentially, growth was observed in these 3 major geographies, a very encouraging the $200,000 mostly driven by a decline in our respiratory products from our cell culture business. Our molecular diagnostic solutions category increased $58,300,000 in the quarter to $63,000,000 driven by $57,800,000 in sales of our LIRA and LIRA Direct SARS CoV-two products. Despite these being gap filling products in the sense that these reagents have no proprietary instrument and are used as a second or third option. We are seeing good growth from these products and believe that we will continue to see added growth as more small and midsized labs continue to bring PCR testing in house. In the quarter, total influenza revenue, which includes rapid immunoassay, DHI Respiratory and Molecular Diagnostics was $9,000,000 Gross profit in the 3rd quarter increased $307,800,000 to 3 $83,600,000 and gross profit margin was 81%. This improvement was driven by the demand for the SARS CoV-two assays, which drove improved product mix. In addition, higher volumes contributed to increased manufacturing overhead absorption. Q2, we realized a significant improvement in our profitability profile because over the short term, we do not incur material variable operating cost increases. In the 3rd quarter, total operating expenses measured as a percent of revenue declined by 28 percentage points versus last year and sequentially declined by 16 percentage points to 16% of revenues, helping improve our operating income in the quarter to 65% of revenues. We see this trend continuing into the 4th quarter as well. We continue to invest in R and D with the goal of launching additional COVID-nineteen diagnostic assays, advancing on our Savanna initiatives as well as introducing new Sofia assays and next generation platforms, expand training in new markets such as nursing homes and occupational health and significantly broadening our customer base. For the full year, we're currently estimating R and D spend to be in the range of $80,000,000 to $85,000,000 and our G and A spend for the full year should be in the range of $65,000,000 to $70,000,000 In the quarter, we recorded a $10,400,000 loss on extinguishment of debt. This was a result of retiring in cash $5,900,000 in principal of our convertible notes. The current principal outstanding balance on the convertible notes is 6 $800,000 As it relates to the provision for income taxes, we recorded 60 $3,500,000 in income tax provision in the quarter and the effective tax rate was 21%. All items adjusting our tax had an insignificant impact, including discrete tax benefits from excess stock compensation. We are currently estimating a full year effective tax rate between 21% 22%. This rate is approximately 2 percentage points higher than previous estimates due to the increase in pretax income versus prior years. We successfully completed this quarter our contract with the NIH in support of increasing our manufacturing capacity. The total contract value is for up to $65,000,000 The contract has a performance period of 1 year beginning July 2020 with key deliverables and milestones that would directly support the addition of new immunoassay manufacturing lines as well as outfitting a new distribution center. As part of the agreement, the company will provide to NIH SOPHIA II instruments and COVID-nineteen assays. As of the end of September, we had $77,500,000 in cash and cash equivalents. During the Q3, the company generated $70,500,000 in cash flow from operations. This number would have been larger had it not been for the approximately $244,000,000 investment in accounts receivable and inventory as we accelerate our growth to support increased production of SARS assays. In the quarter, company also invested $22,700,000 in capital expenditures. At the end of the current fiscal year, we anticipate having in excess of $500,000,000 in cash on the balance sheet, no convertible debt outstanding and no outstanding balance on our revolving credit facility. In short, we have a very strong capital structure, access to credit, good cash flow, which places us in a great position to support our future chain, aggressively ramping up our manufacturing capacity and pursuing M and A. And with that, we conclude our formal comments for today. Operator, we're now ready to open the call for questions. And your first question is from the line of Brian Weinstein with William Blair. Please go ahead. Hey, guys. Good afternoon. This is Andrew Brackmann on for Brian. Thanks for the questions and for all the color. Just to start, one for housekeeping. I may have missed this, but did you give guidance for Q4? And if so, could you just break down Sofia Antigen as part of that? We said previously, actually in the preannouncement that revenue for the Q4 will be at least 800,000,000 on average around 2,000,000 tests per week, and that would be inclusive of all the products. So whether it's the combination assay or it's SARS antigen only, the total would be 2.1 1,000,000 tests per week. Okay, thanks for that. And then recognizing it's the end of October and a number of crosswinds to consider. But as we sit here right now and thinking about 2021, the outlook there, so we'd be assuming sort of demand for COVID testing across your portfolio sort of persist at least through 2021? And then along with that, should pricing remain relatively stable? It seems to be the question of the day and the week, Andrew. I would say there's not enough known yet about this virus, about immunity. In particular, we don't know enough about reinfection. I could say though that we're certainly being asked by a number of folks, including the government, to ramp up production to really high levels. And so I think it's the expectation that this is going to persist well beyond 2021, whether it's 2022, 'twenty three, I couldn't say at this stage. But at this point it feels to me like this will not abate in terms of the level of tests required certainly until sometime in 2022 beyond. Okay, that's helpful. And then, I don't want to steal your thunder for a couple of weeks from now, but as we think about the end market dynamics here, how should we be thinking about the use case for antigen testing between symptomatic and asymptomatic testing sort of evolving over time? And I guess along with that, how should we be thinking about any potential asymptomatic claims for your products here moving forward? Thanks. Well, 2 questions and one there. But I see asymptomatic testing becoming more routine. I think we're seeing in the PAC-twelve and the Big 10, as an example, comfort around daily testing and the desire on the part of both conferences to keep their contact sport athletes safe, and I think we're going to see data coming out of the University of Arizona that may be published sometime soon. We'll see some studies that we're working on with the NIH that will be published as well. So I do think that as a country, we're going to get comfortable with the idea that even though I don't have symptoms, routinely testing is probably a pretty good idea, whether it's folks going to school, whether it's grandma and grandpa who need to know whether they can safely have their kids come visit, whether it's our employees. Currently, we're testing every Wednesday. I got swabbed yesterday. I assume that I didn't get a call, so I guess I'm negative. But we're testing everybody who comes in here every Wednesday. And right now, the prevalence is low. I guess we have actually had one positive. But we think that that's what we need to do to keep our employee safe and I see that going on for some period of time. So asymptomatic testing seems like a reasonably good strategy. Obviously, the number of people who are symptomatic could decline over time, and that would be helpful. But I do see that asymptomatic testing is going to become pretty important moving forward. And we don't know what's going to happen on the serology front. We still don't know really what the benefit of all that is at this stage, but we're going to learn more moving forward. So thanks for that question, Andrew. Your next question is from the line of Stephen Ma with Piper Sandler. Please go ahead. Great. Good afternoon. Thanks for taking the questions. Sure, Steve. Hey, so maybe just to continue on this question about asymptomatic testing and how big the market could be. But as I start seeing universities is doing a lot more testing, back to work, you see like Major League Baseball, sports teams doing this more. And it does seem like we are going to asymptomatic testing. What do you think the sort of the run rate is going to be? Because I've heard a lot of numbers thrown out by think tanks at 3000000 to 5000000 tests per day. But if you get some color on what you think the run rate will be? Yes, I can only talk about the conversations we've had. I can't talk about ultimately what the total market might be. We certainly have not spent that amount of time and frankly I don't know if we're smart enough. But I can tell you that from the calls that we've taken and I've said this publicly before, just if I add up the number of tests being requested by different organizations, whether it's entertainment, sports, large employers, just that number of calls and the sum of that, that adds up to about 685,000,000 tests per year. So is that real? I don't know. I'm just telling you that that's what we do know. We've taken these calls from these types of people and some people have sent us T shirts and hats and all sorts of things trying to get us to chat with them about how we could do this for them. $685,000,000 is the number I have right now of who's requesting from me to do their testing. I hope that's helpful, Steve. Yes, no, no, that's helpful. Yes, and I did notice, yes, there was a a couple of 2,000,000 tests per day days a couple of weeks ago. Okay. So my next question, it's a 2 part question. More along the high throughput testing reimbursement, it seems that Medicare lowered the rate to $75 with a $25 kicker, if they can meet some performance parameters. So could you maybe address what you think the load if there's going to be similar pricing pressures on the low throughput side? And then the second part of the question, have you considered pricing of your combo asking if you can give us some color on your thoughts on pricing? Sure. So on the first question regarding reimbursement, it is true that the laboratory reimbursement, the folks who are being reimbursed for actually running the test is going to be reduced in some instances from is from 100 down to 75. By the way, just on that, and I don't see how that has any impact whatsoever on pricing. Certainly hasn't had an impact on pricing on PCR tests at this stage. When you think about it so in other words, that leaves a lot of margin for the lab after paying for labor, buying your product, performing the test, that still leaves a lot of margin for the lab. So I see no impact on the pricing there. Similarly, I wouldn't see any we certainly at $23 a test are significantly below what the reimbursement is. So if the reimbursement were adjusted downwards slightly, I wouldn't see that that would have any impact there as well. At the end of the day, the price in the market today for these products isn't necessarily driven by reimbursement, it's just driven by demand. And so there's no reason to look at price differently. I think from our perspective relative to other competitors in the market, we are priced appropriately. We're at the low end. And so I don't see any price pressure, particularly when you consider that we I know I'm biased, but I would suggest that Sofia SARS antigen is the premium brand. And so I think we're priced about right. So I don't see any price pressure for us certainly and I don't see it for the PCR folks either. And then pricing on the combo, which was your second, we've said before that we are going to be at end users somewhere around $35 realized that net sales would be lower as we would obviously pay a rebate to our distributors. So net net, we would be just under $30 I suspect. Your next question is from the line of Alex Nowak with Craig Hallum Capital. Please go ahead, sir. Great. Good afternoon, everyone. We've seen some big partnership announcements. Hey, good afternoon. We've seen some big partnership announcements with Quidel and some others like the PAC-twelve and the Big 10. But I think the two places that make the most sense to see us see in every single store is someone like a CVS or Walgreens. So maybe not those 2 directly, but could you just speak to any more of the retail oriented partnerships that you're in discussions with? That's a great question, Alex. It's a logical place for Sofia. It's a logical place for Sniffles as well. And we'll talk more about that at Investor Day. But please remember that when we started here, we said that we were going to do what we could do for the greater good to get testing democratized into the communities closer to the patient, primarily at the onset to make sure that health care providers and first responders were being tested. So therefore, we felt obligated to be in the segment that we would call the professional segment. That's hospital labs, large clinics, urgent care, and all those who logically testing. We were constrained, as you'll remember, Alex, by the number of boxes we were producing at instruments we get from Australia to about 2,500 a month. And you would have seen that not so far from you all, in Wisconsin, we are manufacturing as many as 7,500 instruments per month there, so for a total of 10,000. We're nearly there. We think we'll be at that level sometime in November. And at that time, as I said in my prepared remarks, we should be able to move into those other segments like retail. So you can imagine that we've been contacted by everybody that you can name and probably some that you don't even know about. So we do think there is a robust retail segment. We think we have a product that fits that segment super well and we will be pleased when we can actually ship them the instruments that they're asking for. That's great, very helpful. And then expanding on the asymptomatic testing, assuming routine asymptomatic testing does take hold, clearly an at home test is going to be necessary. So you touched on it a little bit, but can you just expand on Quidel's plans for home testing and how that product would work, it's going to be over the counter and then when we could see something launched here by Quidel? Step 1 is the QuickFuse SARS antigen approval in the traditional point of care segment. Very quickly after that, we will conclude work in the at home segment. It is our intent to be in that segment. It's one of the reasons why we feel like we need to make the investment to get to 50,000,000 tests per month And we're highly interested. I think it is a watershed moment in the evolution of diagnostic testing. I do think moving forward that you'll see more and more at home applications for routine conditions, and we want to be at the forefront of that. So I do know that there are others that are interested in it. They should be. We certainly are and we plan to be there as quickly as we can get there. So QuickView will be our entry there. And we're debating on sniffles. Do you really want an instrumented system at home? I suppose we could. We do have one very large retailer that I won't name today that has been chatting with us about our various instrument platforms, including Sniffles, and we'll see what transpires moving forward. We're not at the stage yet where we would announce exactly what our intent is, recognizing that our transcript gets So describing the game plan today, I'd love to, but I think it's just a little premature. No, understood. But maybe I'll ask, when do you would you expect to get to a $50,000,000 run rate on QuickView, if you're willing to share it? I think there's some variability there depending on the rate at which our engineering companies can fabricate the equipment that we need. We've placed orders. We're trying to find other folks that can scale to do the same thing. It's not really our effort or our timeline, it's more the timeline of the folks that are building the equipment for us. We certainly have an existing footprint right now that will accommodate some of that. And I think we can get to 100,000,000 tests per year right away. So that's about 20% of what we need. What we need is the remaining 80%. And that's where we're at. So I haven't named the month yet, just because we have a plan. I've seen the plan. We're executing the plan. Can we pull it forward? I hope so, but it will be sometime in 2021 when we're at that level. That's great. Really appreciate it. Thank you. You're welcome. Your next question is from the line of Jack Meehan with Nephron Research. Please go ahead, sir. Thank you. Good afternoon. Hey, Doug and Randy, I was wondering if you could give a little bit more granularity just bridging from the Q3 to your expectations for the 4th quarter for some of the key products? Were you expecting for the ABC test, the amount of conversion toward that? And do you have anything built in for QuickVue in the Q4 and Solana and the new assays coming in? Yes. Thanks, Jack. I appreciate that question because we did say at least $800,000,000 And so the first bucket is Sofia SARS, SOPHIA ABC and SOPHIA FLU. There again, we won't be making more than 2,100,000 tests per week of any one of those or all of them. So the max is 2.1, we'll spread it between those 2. Obviously, we've made some flu product, we've made some combo product. There will be demand, obviously, for some people with legitimate reasons to run just the SARS products, so we're mindful of that. For example, customers that are serving the pre surgical market, they don't need to run flu, so let's not make them buy a flu test. But for folks that are symptomatic in the upcoming flu season, we're going to hope to persuade them to buy the combo product exclusively. And then we're planning on even force converting if we have to a portion the market. Clearly, there are some folks that need to run Sofia Flu exclusively or separately, if you will. That would be the Sofia 1 customers that haven't converted to Sofia 2 yet. So obviously, we have an obligation to give those people instruments, and we will. That's our intent. So that's the major bucket of growth. The cardiovascular business, we expect to be nearly back to what it was before all of this. And I think we're going to do something in the mid-60s, right, maybe $65,000,000 or so is what we have scheduled for the Q4. So that should be back in line. Another big increase, as you may have heard on my prepared remarks, is we're getting another third increase in terms of our sales of lira SARS. So I won't force you to figure the math out. We should come in somewhere around $80,000,000 for lira as well. As you can see, that's a pretty big lift as well. And then we do have some new products, Sofia's serology, which I wouldn't model a lot there. We don't intend to do anything more than the studies that we need to demonstrate the clinical utility of that particular product, recognizing that we are testing for antibodies not only to the nuclear protein but also to the 2 spike proteins. We think that's meaningful, but we're going to need to show it. So we're running those tests and then we're going to launch these 2 products, Sofia SARS I'm sorry, QuickView SARS. And we do expect meaningful contribution from that product. That product is at the FDA under active review right now. Solana SARS, we're in the final stage of the validation data that we need to submit to the FDA, and we're expecting a reasonably big contribution there to an audience that already has the instrument and essentially knows it's coming. So the timing of that will affect where we're at. We've risk adjusted all of that and that's how we get to $800,000,000 So I don't think it's going to start with a $9,000,000 So let's not get carried away. But I think we're comfortably going to start with an 8. Thanks. That's all helpful. On the new product front, it'd be great to get an update as to where maybe the progress you've made since the Q2 on Savanna? I'm sorry, Randy, what are you saying? No, we just want an update on Savanna, which will give him a lot more detail on the analyst. We will provide. What I will tell you is this just briefly. We have engineering confidence build units. We put those all the sub components through their paces. The instrument itself is performing extraordinarily well. We did have a little bit of a challenge with the drawer that receives the cartridge. You can imagine, remember the old CD days where you put a CD in and you just touch the drawer and it pulls it in. So you have a motor that's actuated by you pressing, you had to press a little too hard. But we've changed that. So we've changed the motor, we've changed all that. Other than that, everything else is going to move forward into the alpha units. And it's those units we're building now that we'll use in the clinical trials will be in customer sites and actually in some cases they'll just keep those instruments. And we expect to build 73 analyzers that will be doing clinical trials in at least 3 or 4 major sites throughout the country very early in the Q1. Sounds good. And then last one But more than just follow, Jack, when we talk to you on November 12. Okay. Looking forward to that. And Randy, the build on the balance sheet for accounts receivable, do you think that I heard the commentary around cash flow for the year, but do you think that continues to build as sales expand or is there an opportunity to given your positioning in the market to maybe pull that in a little bit and improve? Yes. Talk about the McKesson a little bit as well, Randy, because we had expanded the Yes. For a short time period, Jack, we had provided some extra terms to our distribution partners as they were ramping up as well. That now has gone back to more normal terms. So we're going to get back to more normalized DSO terms that are in the 45 to 50 day period. So that's where we will see as a DSO perspective, a reduction here between now December. Thanks, Randy. And that is all the time we have today. Please proceed with your presentation or any closing remarks. Well, that's all we had for you all today. I would just say thanks everybody for your support and, of course, your interest in Quidel. We had an excellent Q3 as you saw. We're expecting an even better Q4 and we're in really good shape to achieve our growth objectives over the next few years. You'll see more detail on that on the 12th November. And I'll just say thanks again for being on with me on my 47th earnings call. Congratulations, Doug. Thanks. All right. We'll talk soon everybody. Thank you. Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Goodbye.