Earnings Call: Q4 2019

Feb 12, 2020

Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation 4th Quarter and Full Year 2019 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 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 and Randy Stewart, our Chief Financial Officer. Our Q4 and full year 2019 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, February 12, for a period of 24 hours. Please note that this conference call will include forward looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ significantly from these stated expectations. For a discussion of risk factors, please review Quidel's annual report on Form 10 ks, 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, February 12, 2020. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for the 3 months and full year ended December 31, 2019. 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 your questions. I'll now hand the call over to Doug for his comments. Thank you, Ruben, and good afternoon, everyone. As I reported at a recent healthcare conference, we were expecting strong Q4 revenue, so there's no surprise. At $152,200,000 we were just slightly ahead of the $151,000,000 to $152,000,000 that we had suggested. The strength was driven by an early start to the influenza season in which very unusually, flu B was the dominant strain. And now, as you know, we're in the middle of another influenza A epidemic across most of the United States. Sofia and Solana Q4 revenues were favorably affected, of course, but we also saw a pickup in QuickVue revenue as customers who may have purchased generic flu tests in the past because of price returned to our QuickVue brands because of ease of use factors and the importance of a shorter turnaround time when patient volumes are high. For many of our larger multi site customers, our proven ability to scale during an epidemic, leveraging our supply chain to manufacture millions more flu tests when needed, has also been a compelling reason to switch back to QuickVue. Molecular product revenue, which was also helped by the early start to the influenza season, was up 21% to $7,100,000 Cardiometabolic revenue contributed to the strong quarter as well, up 5% on both an actual and a constant currency basis as the unfavorable foreign exchange impact that we saw in the 1st 3 quarters was largely mitigated in the 4th. For the year, overall, revenues were roughly $535,000,000 in line with our expectations for 2019 despite soft influenza revenue in Q1 and the delay in regulatory plans for the new Triage toxicology panel. Equally important, we had a number of operational accomplishments in the year. The global integration of the Triage businesses was completed in November, delivering $20,000,000 in annual synergies, which was ahead of our plan. We reduced our debt by another $98,600,000 also a little earlier than we had expected. The R and D, clean reg and instrument systems development teams made significant progress in 2019 as well. All of the 20 or so R and D projects that we are working on are important, and I'll be happy to discuss any of them as you like during the Q and A, but I want to mention 3. First, the Savanna cross functional product development team did achieve a couple of critical milestones. 1, the first 6 assay panels that were previously discussed in our presentations are complete. I can review those again if you want, but there's no change at this point to our initial menu strategy. And 2, the cartridge design was finalized and cartridges are now being manufactured, clearing the way for the integration of assays and cartridges with the instrument, which is currently in development. 2nd, Sniffles, our next generation SOPHIA platform, is still on track for U. S. Clinical trials during the respiratory season next winter. And third, we're expecting the publication of the APACE study data that demonstrates the excellent performance of Triage high sensitivity troponin in a major cardiology journal any week now and hope to finalize our U. S. Clinical trial design for the product this spring. Moving forward to 2020, we expect increasing efficiency and productivity of the sales and marketing teams globally, leveraging key account and distributor relationships to sell an increasingly broader product offering. While we expect to continue promoting our flagship products and believe that there is still more share to be gained, in 2020, we are counting on seeing traction and getting help from the newer products, Sofia Align, Triage Toxicology, Hisense Troponin in Europe, Triage PLGF and the new Sofia GI products. These products should account for about $10,000,000 in incremental revenue. Before turning it over to Randy to review financial detail for last quarter the year, I should make a brief comment on the potential impact of the novel coronavirus in China. Most important, none of the numerous employees we have in China has been ill and none of the several employees returning from trips to China has been ill. Routine trips to China like my own have been postponed until the spring. Shipments of our products this quarter have been received by our repacker and distribution partners, and we have additional product from China that cleared customs this morning. If there is a risk to our ability to ship and recognize revenue this quarter, it would be in the next shipment. If for some reason there were a problem and we were unable to ship, our total downside risk for the quarter would be about $5,000,000 And with that, I will summarize by saying that Q4 was really good. 2019 was fine, in line with expectations, and we're really looking forward to 2020 on a number of fronts. Camaraderie in this company is terrific and the morale and happiness of our employees has never been higher. Wydell has truly become a great place to be and the recruiting of extraordinary talent from the outside has been increasingly easier. Randy? Thank you, Doug. Good afternoon, everyone. As we reported earlier today, total revenues for the Q4 of 2019 were $152,200,000 as compared to $132,600,000 in the Q4 of 2018. This 15% increase came from revenue growth across all 4 major categories. We realized 29% increase in rapid immunoassay revenue, 5% growth in cardiac immunoassay revenue, 21% growth in molecular diagnostics solutions revenue and 7% growth from specialized diagnostics solutions. In the quarter, there was not a significant foreign currency impact. For the Cardiac Immunoassay business, revenue was $65,800,000 as mentioned, a growth of 5% in the Q4 of 2019. Of the $65,800,000 $33,600,000 was derived from the Triage business and $32,200,000 from the Beckman BNP business. We placed an incremental 292 Triage METERPRO instruments in the quarter as we continue to close smaller volume accounts on the Triage side of the business to offset lost customers to the higher volume multiplex systems. Cardiac Immunoassay realized revenue growth in all major geographies. North America increased 5%, China increased 6%, and Europe, Middle East, Africa grew 3%. North America and China realized growth on the Beckman BNP side, somewhat offset by declines in the Triage business. Europe, Middle East, Africa realized strong growth in Triage, somewhat offset by declines in the Beckman BNP business. For the year, on an as reported basis, Cardiac Immunoassay revenue was $266,500,000 equal to last year. On a constant currency basis, Cardiac Immunoassay revenue grew by 2% over the prior year. Of the $266,500,000 total Triage business revenue was $139,900,000 a decrease of 6%, and the Beckman BNP revenue was $126,600,000 an increase of 7%. From a geographic perspective for the full year, cardiac revenue in North America was $137,300,000 China was $61,400,000 and Europe, Middle East, Africa was $43,700,000 Rapid immunoassay product revenues increased 29 percent to $64,900,000 in the 4th quarter as compared to $50,400,000 in the previous year. Within this category, Sofia products grew 38% to $46,600,000 while QuickVue product revenues increased 11% to $17,100,000 driven by influenza. Total influenza revenue, which includes rapid immunoassay, DHI respiratory and molecular diagnostics, grew 44% in the quarter to $50,300,000 The influenza rapid immunoassay revenue was $45,000,000 with approximately 80 3% of the revenue derived from the Sofia platform. Total stroke revenue was up 1% and RSV was up 29%. Revenue in the specialized diagnostic solutions category increased 7% in the 4th quarter to $14,300,000 driven by a 42% increase in respiratory related DHI revenues as well as a 4% increase in our specialty microtiter business. Our Molecular Diagnostic Solutions category increased 21% in the quarter to $7,100,000 due to a 29% revenue growth in Solana. We continue to see strong growth from our Solana platform, specifically with the Strep A and influenza product lines, driven by the severe and earlier than typical influenza season. We are seeing strong growth from our Solana C. Difficile and HSV VZV products. For the year, our molecular franchise grew by 12%, driven by a 25% growth from Solana. We believe there is continued strong demand for the Solana platform and that Solana will continue to be the driver of molecular growth going forward, driven by incremental Solana instrument placements and increased assay utilization. Gross profit in the 4th quarter increased $12,700,000 to $94,800,000 primarily driven by improved product mix and higher revenue in the quarter. Gross profit margin in the Q4 of 2019 was slightly improved at 62.3%. For the full year, we achieved GAAP gross margin of 60%, a performance on par with last year. Excluding intangibles, gross profit margin for the full year was 61% with a breakdown as follows: legacy Quidel business gross margin was 66%, triage gross margin was 51% and Beckland B&P gross margin was 63%. R and D expenses increased by $2,300,000 in the Q4 as compared to the same period in 2018. The increase is due to greater investments made on our new product platforms, including Savanna. We expect R and D expenses in 2020 should be equal to or slightly higher than in 2019 and will be in the range of $53,000,000 to $56,000,000 Sales and marketing expense in the 4th quarter increased by $1,600,000 as compared to the same period last year due to increased spending on expanding our international sales organization, product promotion costs and higher freight costs, offset by lower transition service fees as we have completed the globalization of our commercial team. For the full year 2020, we expect sales and marketing expense to be between the range of 20% 21% of revenue. G and A expenses increased by $2,000,000 in the quarter, primarily due to higher facility costs and information technology spend, offset by lower fees for professional services. We expect G and A expenses to be between $55,000,000 $60,000,000 for the full year 2020. As it relates to the provision for income taxes, the full year 2019 effective tax rate was 5.5%. This 2019 overall tax provision rate includes beneficial impacts from equity compensation that occurred during the year and from the generation of federal and state research credits. In 2018, the company had the one time impact of releasing $13,400,000 of this valuation allowance against its net deferred tax asset balance as it became more likely than that that these deferred tax assets will be utilized before they expire. As a result, we've reported an income tax benefit of $10,800,000 for fiscal year 2018. Due to the uncertainty of the beneficial impact from equity compensation, we expect the 2020 effective tax rate to be in the range of 19% to 20 1% of pretax income. For the full year, we achieved net income of 72,900,000 dollars GAAP EPS of $1.78 and non GAAP EPS of $2.97 a very rewarding year. As we said since our Analyst Day in 2018, an important part of our capital deployment strategy has been to aggressively delever debt reduction through opportunistic convertible bond exchanges and utilizing our excess cash to reduce the balance on our revolving credit facility. As of today, we have completely paid off the remaining balance on the revolving credit facility of only $13,000,000 remaining on our convertible bond debt, which matures this December and plan to make our 3rd $48,000,000 payment to Abbott in April. From a balance sheet perspective, our company is well positioned for M and A, licensing or other partnership opportunities in support of our longer term growth objectives. And with that, we conclude our formal comments for today. Operator, we're now ready to open the call for questions. Our first question is going to come from the line of Jack Meehan with Barclays. Thank you. Good afternoon. Nice quarter. I want to start with a 2 parter on flu. So as you reflect on the recent respiratory season, Doug, I was curious if you had a sense for how market share might have shifted, just what you were seeing? And then for Randy, as you look in the crystal ball, just what are you thinking about pacing into the Q1? It's unclear at this point exactly how much share we gained. We'll do some work on it after the quarter closes and we may have a better answer for you when we do the Analyst Day the 1st week in April, Jack. But as I mentioned, there was a bit of share shift back to QuickView. And clearly, we've been placing SO via analyzers as well. And I won't point to the competitive manufacturers, but specifically we can name the folks where that share came from. And so I think when the analytics are completed, we'll be able to show more precisely what we think this year being actually ended up being. But we know but we strongly suspect, let's put it that we strongly suspect that we've gained share. What I would say is we're shifting everything we make at this point and we've not been back ordered. And I can't say the same is true for others. And then Randy on the Q1? Yes. In the Q1, as Doug mentioned, it's been pretty strong to date. And rather than giving you some guidance on it, I think probably the most astute thing to do is we're having our Analyst Day on April 8, and we can certainly then give you a lot more insight as to how we how the flu revenue was in Q1. And then perhaps a better idea on revenue guidance for the year. Sounds good. Maybe on Triage then, as you just reflect on the year down 6% for the year on Triage specifically, can you just assess what you think might have been going on between market and competition? And then an update on the commercial efforts behind toxic psychology? First, we'll just start with what's happening with triage generally. It does depend on geography, of course. But here in the U. S. And in China, what we see is the volume of the triage accounts get larger and larger and larger to the point where it's no longer practical to do it on a triage meter pro analyzer and those accounts then opt to go to a larger immunoassay analyzer in the main lab. Often that's Beckman and we pick up the volume there, but equally often it's not. So when you lose an account like that, that needs to be offset by the continued sales of people now having volume enough to start the Triage Engineer Pro. So it's a bit of a churn as we've learned over the last couple of years. And I think we're getting ahead of it. And I do think that the introduction of the toxicology product is helping reintroduce that. We're certainly seeing the introduction of the TriageTrue high sensitivity product in Europe as one effective tool. And then to the toxicology piece, what I can say is that we've spent a lot of time making sure that we're addressing all the accounts that we should. The data that we see in salesforce.com shows that the funnel is building. I think the reps in the field have a very good understanding of where to go and where they're at in each of the accounts. And more specifically, when I've traveled over the last couple of weeks with salespeople, there's quite a bit of focus on toxicology. And I would say, except in one specific I visited, there's a lot of interest in triage toxicology. And by the way, we count where there wasn't an interest is because the volume is too high. So I think an acceptable response by the customer, we'd love to do it, but we couldn't do it on your platform. That's where we're at, at this stage. But Jack, I think the funnel looks good and we're still forecasting to deliver what we thought at this stage of the year. Sounds good. Last question. Have you baked the cake yet for the Savanna instrument? Or when is that going to take place? And what needs to be finalized before you get there? Well, as I mentioned in my comments, we're ahead of schedule on the assay development. 6 of the 7, actually there's 8 now, that the panels that we're working on are done. The 7th is in progress and so is the 8th. So that looks really good. We did finalize the cartridge design. We have one manufacturing line going as fast as it can. At this point, we have plans to build 2 other manufacturing lines for the cartridges. And the aim there is to have enough cartridges built in order to do the clinical trials. We're in the process of instrument development, which will go faster than the other components, but still there's a lot of work to be done. And effectively, we'll be integrating all the pieces of that and we'll have a clinical trial box by the end of the year. And we will be in a clinical trial by the end of the year. So we're still on schedule for that And let's just see what happens after that. Now of course, a lot to happen between now and year end. And inevitably, something will pop up that we need to solve, which we don't know about. But I'm pretty confident at this stage that most of the issues that we have in front of us are unknown. Sounds good. Congrats on the progress. Thanks, Jack. And our next question is going to come from the line of Brian Weinstein with William Blair. Hey, guys. Thanks for taking my questions. As we think about 2020, just putting some pieces together here, you did $535,000,000 this year. I think, Doug, you said $10,000,000 from a host of new products. Cardio probably grows, what, mid single digits, that's going to add another $15,000,000 or so. So, plus whatever you're going to get from Saloon in the other parts of the base. I mean, is there a reason why they shouldn't be well over $560,000,000 next year in terms of revenue? I would suggest that there's certainly upside to the $550,000,000 And as we get through the end of this quarter and see where we're at, we'll head into the Analyst Day, as Randy just mentioned, on April 8. And we'll tell you about what we're working on, of course, but we'll give you a much better idea on where we think we're going to land for the year. And it wouldn't surprise me if it's north of 550, yes. Okay. And then I think at the investor conference earlier this year, I think you said the way to think about Q1 flu is similar to Q4, which would be just right around that kind of 50,000,000 Did we hear that right? I heard what you said to Jack's question, but I think you did comment on it previously. So I just want to go back and A, did I hear that comment correctly? And B, would that still be just directionally the right way to think about it? Yes, I would say that that's comfortable. Okay. And then a question for you on gross margin. I'm sorry, go ahead. I'll leave you to interpret what that means. I'm sorry to be vague, but it looks really good. We're shipping everything we make right now, okay? And as you know, the limit when it stops and stops. So if it continues to the end of the quarter, it could be I don't want to use the word extraordinary. I'll just say it will be it would be a good quarter. Okay. I appreciate that. Thanks. And then on gross margin, you talked about I think it was overhead absorption was one of the issues that might have held it back, at least that's what I think you said in the press release. But it would seem that with all the volume you guys are putting through with Flu that you guys should have seen potentially better gross margin than what you guys posted. Can you just go back through kind of the pluses and minuses with gross margin and how we should think about in a strong flu quarter, how flu does contribute to gross margin? Well, flu is a strong contributor to gross margin and the high volumes that we're pushing through the factory right now would suggest that we're going to be fine there. I think the issue that we had before was actually more on the cardio volume that we had assumed that we were going to do. So and I know you know how to do standard costing, Brian. So effectively, the drag, if you will, is that we had overestimated what we thought we were going to manufacture and ship out of the factory. Again, the other piece of it, Brian, is there's a little different mix, a little lower margins in the Rustle World products versus what we see in North America. So that had a little bit impact. But as Doug said, some of the rigs manufacturing was where the overhead absorption was under absorbed. Plus remember, there's also FX impact. So that had a negative impact. Full year was approximately I think it was $4,800,000 negative FX impact as well. Of which you're talking about $4,600,000 for 3 quarters, Brian. Got it. And then last one for me, I promise is, as far as China goes and corona, do you import anything that goes into your manufacturing process or anything else from China that could be affected if those factories are down? So is there any raw materials or anything else that you guys bring here that we should be thinking about? No, we don't. Thanks for the clarification. Thanks. Our next question will come from the line of Tycho Peterson, JPMorgan. Hey, thanks. A little bit odd, we don't have guidance, but I guess we can wait until April. But just a probe on a couple of things. For cardiac, your comps are notably easier. So is mid single digit the right way to think about it in light of the easier comps? And what's the latest on the toxicology panel delay? Yes. You saw we're right at 5 now. So I want to be conservative, I'd call it 4 to 5. It's depend obviously on the existing base business, but you've also got toxicology in there And there's a couple of other things, PLGF could be helpful. Yes, and what we do in Tropon in Europe is another factor. So there's a few variables there, but I would say we're comfortably in the 4% to 5% range. Okay. But on the toxicology, you talked about having to retrain the commercial team. So what's just the latest on where you are in the toxicology rollout? Yes. Let me clarify because I've had to do this a couple of times now. The main driver to the mess was the FDA delay in approving the product. We had assumed that we would have approval early in Q2 and we had rolled out to the sales team and the sales meeting that was around that time. So I don't think it was so much of retraining of sales force as it was a resource allocation issue because in Q3, our sales people spend a lot of time working with customers to make sure that we retain our food business. And we also like to place more Sofia's as you might imagine. So I would say it was more of a resource allocation than a training issue. But having said that, all that is behind us. Our guys are out there actively addressing every single opportunity that's out there. And I believe I just heard a little while ago that we expect very shortly to have contacted virtually every customer that's a possibility here in the next quarter or so. So I think we're in good shape. The funnel looks good. We track calls. We track progress. We track opportunities. We try to assess things under what we call 30, 60, 90 day forecast. And as I look at it, I think and I judge what people are telling me, I think we're in pretty good shape to hit the numbers that we suggested. And then can you talk a little bit more on the molecular acceleration? You just saw 21% versus 6% last quarter. Can you just maybe talk to drivers and sustainability there? Well, yes, remember, we make a Solana influence assay. We make a PCR assay under the brand, Lyra. Those certainly were healthy in the quarter, those products. And honestly, strep is also a big contributor. Our share and molecular ship is quite good. And so we've done pretty well there as well. So yes, the products that we have out there are certainly not by good respiratory season. And we did get some traction with CVS and HSEVD as Randy also mentioned. So I think the Solana business looks pretty solid right now. The other thing that was a factor for us that I thought may have impaired our growth, particularly in the larger accounts, is the front end of the whole process was a little bit too laborious for some people. And so we've recently completed the development of what I would call a front end engineering solution that should be helpful and we're rolling that out now. So I don't think we're done growing the Solana. We've got about 1100 or so instruments out there. I suspect that we'll continue to grow that throughout this year assisted by some improvements to the ease with which our customers can actually run the assay. So but to your point, Q4 21% looks big, but there's a lot of respiratory in there. And then on live, can you talk you talked at the time of the launch about getting into new POC customers. Can you talk to the degree to which that's open up new doors? And then also your confidence in locking down the clinical study design before the season hits in the fall? For are you talking for Troponin? No, I'm sorry. I was talking about Lime, yes. Lime exclusively. So Lyme right now for us is a market growth concept. The whole idea of getting physicians, some of whom don't even test at all for anything to begin testing customers, particularly in the upper Midwest and the Northeast. So we have a number of marketing programs, PR, word-of-mouth, symposia, all sorts of things that we're working on to create both awareness by physicians and awareness by people who could be tested. So it's still early phase, but I would say that we're expecting a reasonably significant uptick, a couple of $1,000,000 or so more in line this year than we were before. And we're also expecting some collateral benefit on flu RSV and strep as a result. And what was the last question, Michael, with regard to clinicals? The clinical study, yes. You're doing clinical studies for Lyme, right, before the season in the fall? Yes, yes, yes. So we are doing a Tier 2, and we're in discussions right now with the FDA on what that study looks like because we could mimic what's done currently, which is the Western blot. And certainly, we could launch a product that had all the proteins that are done by Western blot, so it would be a test treatment. So we could mimic the Tier 2 product. We've decided to do instead is something novel. We'll talk more about it at the Analyst Day, and why we think that, that's a better result. But we actually think that rather than continuing with this testing process, which is willfully inadequate, We think we've come up with something clever that's actually going to be better, and we're presenting that to the FDA here shortly. So if you don't mind, I'll just hit the pause button on that question and say that we'll provide a lot more detail on that on April 8. Last one on M and A, just curious odds of getting a deal done for first half of the year or so. How do you how would you characterize the funnel? Well, as Randy pointed out, we're certainly in good shape to do one. And we've been looking at a number of targets and some of them are interesting. And I'm hopeful that we can announce something reasonably soon, but I can't speak to the Tanya, of course. Thank you. Our next question is going to come from the line of Bill Quirk, Helper Sandler. Great. Thanks. Good afternoon, everybody. Hi, Doug. Hi, Doug. Hi, Doug. So first question for me, Doug. I'm just thinking about the Sofia pipeline here for 2020, obviously fairly full. Can you just remind us about how we should think about the pacing of the filings or the approvals for those over the course of 'twenty? Sure. The first one likely to be submitted would be the C. Diff assay for toxin AB and GTH. And then as I mentioned before, we've got a number of other assays that we have in development as well. So in the Q3, I expect that we would be closer to submission with Campylobacter, shigatoxin, H. Pylori, lactoferrin and the parasite panel. So those are the ones we're working on. We expect them all to be submitted this year. But all of them are pretty much a back half with CIDP potentially being early through the quarter. Okay, got it. Sorry, go ahead. I'm looking at Randy asking, do I miss one sometimes? I'm getting to the age where I start with the good stuff. Yes. But we don't know that. We may be closer to being able to start the trial for the 4 member respiratory panel, which just to remind you, that's where they'd be RSV and human metapneumo. I think what we may do is file a 510 or start a 510 clinical trial and then move later to the CLEA waiver just so that we can start the trial and get data. So we could actually depend on this flu season, but as we might be able to get started here reasonably soon on that. And then as we go into the next winter, start the CLIA waiver trial. So that's the other one that Sophia does. I was forgetting that Randy just reminded me. Okay. No, I got it. Appreciate it. And it sounds like Randy is due for a higher bonus this year, to help out. Separately Thank you, Bill. You're welcome, Randy. Separately, just thinking about the Alire cost the Elear cost synergies, you hit your targets. How should we be thinking about anything additional on a go forward basis? Thank you. Well, you should definitely think that there is more. And we still think there's work to do in the Somers Ridge facility to improve yields. And I don't know that we have a really solid idea, but a couple of million maybe more, Bill. I'm just that's a swag at this point. There's a lot more to be done, we believe, and we've got consultants working with us right now to see if we can get more done. But it's sort of in that range of possibility, I would guess. Okay, very good. Thanks guys. Appreciate it. And our next question is going to come from the line of Alex Nowak, Craig Hallum Capital. Good afternoon, everyone. Doug, can you just provide some more details on the concept of Project Snippets here, if that cannibalizes any of the existing business? And which markets does a smaller, cheaper Sofia box open you up to? So question number 1, Alex, was Will Smiths cannibalize some business? And I would suggest, sure, it would. At the same time, by the time we launch, many of our boxes would have fall off their 3 year depreciation schedule. So it's not really relevant necessarily. And in fact, swapping out now with sniffles at a significantly reduced cost will be fine. I think the biggest opportunity would be in the great ability to democratize testing and to put these analyzers just about anywhere where you want. Even then physicians today who have a SOPHIA in the central part of their office practice, imagine that you could have a little sniffle fence around each of the exam rooms, which would dramatically reduce the overall turnaround time. Right now, the assays are short, but you still have to take the swab and move it to where the SOPHIA is. So if you could eliminate all that time, the transport time, the setup and all that by simply doing the test while the patient is sitting on the filling paper. That would be done dramatically better. And then also the same would be true in urgent care centers. You can imagine putting these in each one of the examiners there versus going to a centralized lab. So or on the floors in hospitals, etcetera. So when you get the cost down that low, I think there's just almost no end to where we could do it. And then certainly we're counting on markets like China and others where volumes are significantly higher. And I think this is a perfect product for expanding beyond the traditional slices that we have done in the past. Thanks, Doug. Really appreciate that. That's very helpful. And then then I don't have perfect math here, but if I peel away flu in the immunoassay business, I see the non fluassay declining about mid single digits over 2019. That's the growth in that business used to be pretty consistent, but I'm just curious what's been driving the declines there recently? Go ahead and answer, Andy. Yes, Alex. What we're the biggest downside that we're seeing a decline is in our HCG product. We continue to see it being commoditized. Private label probably has the largest share now in that market in the U. S. And so that's where you're seeing a decline that offsets some of the growth in our strong RSC and food business. Yes, it truly is a generic market, whether it's in the professional segment or I see over the counter and in the grocery stores you can see generic products versus the branded versions. And so that's just a it's a commodity as you plan on it. So unfortunately, we've been in that market for a long time and we've seen it where we had pretty high volumes and it's just sort of slowly gone away. I mean, how much revenue is left there? I mean, should we expect declines for or enough material declines that we see on the revenue line next year or 2020? Yes. I think you'd just continue to see a, I don't know, mid- to high single digit decline. But we're under we're probably only doing 7,000,000, 8000000 tests a year now where it used to be double that about 5 years ago. Okay. That's helpful. Just kind of modeling this out. And then I know you had to adjust the protocol here for the STRF-ninety eight test. So I'm just curious what is the current time line there? It could go you didn't mention it as one of 3 products in the prepared remarks. And just remind us, where what is the share what is your share in that market? And then what sort of price premium should you be able demand for a confirmatory product there? Sure. First, we're manufacturing on the immunoassay side now $17,000,000 $17,000,000 Randy says $16,000,000 I'm the CEO, I say 17. He's the CFO, he says 16. So 16,000,000 $17,000,000 test is what we manufacture today. The price point, unfortunately, is such that our gross margins are well under 50%. So you certainly wouldn't want to jump into the business at this point on that side. Strep 98, on the other hand, if we're successful, enables somebody in a very short a physician in a very short period of time to not have to reflex a negative result. And frankly, most of the results are negative. 80%, 85% of the strip tests are in a physician's office probably negative. So there's a lot of value there. We do have 2 ideas in mind and we're going to have to work through that up here as we move closer to launch. One is with sniffles, is it a compelling enough package together that I should just launch into the market with the existing reimbursement rate. And then just price it modestly higher than it is today. I don't know whether that's a couple of dollars higher or what it is, but certainly well below the reimbursement rate. And there's a trade off there. One is, so I get a lot more volume, but I'm going to forego some of the margin that I would have gained if I priced it like a true confirmatory test. The other option, of course, is to go in and expect low volume, but don't allow reimbursement. In other words, don't cross walk it, this product over to the current neoassay code. And if we did that, we could potentially have pricing that was significantly higher, closer to where our molecular tests are priced. So in other words, in the teens. And if that were the case, obviously, the gross margin would be high, but the volumes would be low because we would be doing outcome studies in order to justify with payers why we needed a reimbursement that was significantly higher than what we have today. So those are the two options that we're exploring. We're doing the investigation on that. We'll probably again provide more analysis when we talk about our overall portfolio and strategy during the Analyst Day here in April. Where we're at in terms of product development, the product, of course, performs great. We're working through the clinical trial at this stage. We'll continue to run samples. I think we still have a little bit of runway before the end of this respiratory season. We'll see what we have. We have to have for the FDA a set number of positive samples. And of course, we need to demonstrate the sensitivity and specificity that would be required to call this confirmatory assay. So that's where we're at. Thank you. And at this time, we do not have any further questions. And I would like to turn the call over to Mr. Doug Bryant for closing comments. Sure. Well, thanks everyone for your support and of course your interest in Quidel. We did have a great year and we're in terrific shape to achieve our growth objectives over the next few years. Placeholder was sent out on Analyst Day, April 8. Encourage you to participate if you can. And thanks again everybody for being on the call.