Earnings Call: Q2 2018

Aug 7, 2018

Ladies and gentlemen, thank you for standing by. Welcome to Quidel Corporation's 2nd Quarter 2018 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. As a reminder, this conference call is being recorded. 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 Steward, our Chief Financial Officer. Our Q2 2018 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 7 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, August 7, 2018. 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 6 months ended June 30, 2018. 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 will open the call for your questions. I'll now hand the call over to Doug for his comments. Thank you, Ruben, and good afternoon, everyone. There are many positive things to report on this quarter. So let's get started. In terms of the integration of the Alire assets, we achieved the 2 key milestones for the quarter that we said we would. We officially opened the shared services center in Galway in June and currently have a staff of 20 people employed in functions such as IT, finance, legal, customer support and technical support. And as planned, we went live on August 1 in Europe without a hiccup. European orders are now through our global ERP system and distributed from our 3PL warehouse in the Netherlands. And we're out from under our TSAs with Abbott for order to cash and distribution in those countries. The last milestone, the last major piece of the business to be integrated is China, which we expect to move over in early 2019. And finally, in terms of synergies, we are confident in $11,000,000 in cost reductions as we exit 2018 with potential upside depending on how quickly inventory at the older higher cost sells through the channel. At this point, we are anticipating a bit better gross margins in 2018 the overall business than we had originally forecasted, due in large part to improvement in manufacturing yields for the Triage products. During the quarter, we used $60,000,000 in cash to pay down a portion of the initial $255,000,000 term loan that was used to finance a part of the Alira asset transaction. At the end of the quarter, the outstanding balance was $83,200,000 In addition, we entered into separate privately negotiated exchange agreements with a small number of holders of our convertible senior notes. We exchanged roughly $38,600,000 in principal amount of the notes for 1,300,000 common shares. The remaining principal of the convertible bonds is now $58,500,000 down from the initial $172,000,000 In summary, since we closed the transaction in October of last year, we have delevered significantly and have reduced our risk. In terms of the performance of the acquired businesses, I would say it's going reasonably well. Revenue for the Triage and Beckman BNP Businesses at $69,900,000 exceeded expectations. The U. S. Is holding steady consistent with our model and ex U. S. Notably China is doing well. In the quarter, there was favorable timing of orders that occurred in a few smaller countries that are likely not reproducible that should not necessarily be included in our run rate. Based on all the ins and outs, I think that we are comfortable in saying that our run rate for the businesses in aggregate is about $67,000,000 a quarter at this point, a bit better than we had in our deal model. The legacy Quidel business performed nicely as well, although influenza fell off quite quickly, at least relative to Q2 2017 when higher positivity rates in testing persisted through April. The setback of $4,500,000 in revenue, although not wildly significant, would have been hard to solve for in previous years, given the large contribution to profitability of our influenza products. In the new Quidel, this is obviously now less of an issue. Our Solana and I. L. Products grew in the quarter, up $1,300,000 $1,200,000 respectively, versus the prior year quarter. In addition, the launch of SOPHIA 2 is going well with more than 10,000 instruments shipped, although in fairness that number includes filling the back order that was created due to the confluence of a couple of events. The significant prevalence of influenza in Q1 and the FDA reclass of rapid flu tests. And we recently replaced a number of analyzers in the field to facilitate a software enhancement for Virena users. Absent an uptick created by the launch of new Sofia assays, the annual run rate of Sofia II analyzers is probably 8,000 instruments per year. In terms of product development, our R and D teams continue to work and deliver at a nice pace. We have 19 development programs in Phases 1 through 4 and 13 programs that we're exploring in Phase 0. We don't have enough time to review everything that we're working on, but I will highlight the 3 larger potential growth drivers. First, we made significant progress with Strep98 in the last few months. Our confidence in our ability to develop and manufacture a Sofia Group A Strep assay that exceeds a sensitivity of 98% relative to culture, while maintaining a high specificity is now quite high. Clinical trials are planned to be held during the next respiratory season with our submission to follow in Q2 2019 and approval in time for a launch in Q4 2019. We continue to believe that the market opportunity for a rapid confirmatory Group A Strep assay is large and likely to be meaningful for us over our 5 year planning cycle. 2nd, we are also encouraged by the performance data we are seeing thus far with our next generation triage troponin assay, which we expect to launch at the end of this year in Europe. And third, we showcased many of our products, including some in development at the AACC in Chicago. I think the new form factor of Savanna and the new smaller cartridge design was a big surprise for many who visited the booth. We continue to hear that there is a big gap in the molecular space that the Savanna menu of affordable smaller syndromic panels as well as individual assays will address nicely. And we look forward to introducing the product in Q4 twenty nineteen in Europe and in the first half of twenty twenty in the United States. I should also mention that we had a couple of FDA submissions under active review during the quarter. Sofia Whole Bloods Lyme is awaiting CLIA waiver pending the FDA's review of follow-up studies that were performed during the quarter. We hope for clearance in August, a little later than planned and are ready to go from a marketing perspective. We believe that this has the potential to be a nice growth driver for us in the U. S. With growth driven largely by our introduction of a CLIA waived assay. And after addressing questions throughout the quarter, solana pertussis, paraprotussis was recently cleared. The addition of paraprotussis makes the assay unique and we do have interest from pediatric hospitals. Although in fairness, this is more of an opportunistic regionalized market in parts of the U. S. That are not appropriately immunizing children. In summary, we had another nice quarter, a quarter that reflected the continued progress we're making. We've said at our Analyst Day earlier in the year that we expected to achieve revenues for the year of $520,000,000 with a gross margin profile in the high 50s. 2 quarters in, allowing for some variability in Q4 to account for the timing of the respiratory season, I am comfortable in saying that we will do slightly better than that given better visibility to the performance of the acquired businesses. And finally, to the many Quidel employees on the call or who will listen to the webcast later, thanks for everything that you do to make us successful. We know that there are so many things that need to be done, especially at the moment, but you're getting them done on time and your work is appreciated. There has never been a greater time to be at Quidel. Thanks to your efforts. Randy? Thank you, Doug. Good afternoon, everyone. As we reported earlier today, total revenues for the Q2 of 2018 were $103,200,000 This compares to $38,300,000 in Q2 of 2017. The significant increase in revenue was driven by the $69,900,000 in incremental revenue from the acquired Triage and BNP businesses. It is rewarding to realize the benefits of the hard work and efforts by our integration and commercial teams in a very short time period. Our integration continues to be on track as Doug mentioned. As illustrated by the second quarter triage in Beckman BNP revenue, we are well down the path of completing our commercial team integration. Rapid immunoassay product revenues decreased to $16,700,000 in the Q2 of 2018 versus 22 $1,000,000 in the prior year. Within this category, Sofia product revenues decreased from $7,900,000 to $5,100,000 and QuickVue product revenues decreased 27% to $10,100,000 The rapid immunoassay revenue decrease was mostly due to a $4,500,000 decline in influenza revenues over the Q2 of 2017 as demand for influenza and respiratory diagnostic products softened in Q2 following the exceptionally strong flu season in the Q1. This can be seen in our distributor inventory levels, which declined significantly in the Q2 from Q1 2018 levels. Compared to 2017, inventory levels were relatively constant overall. Triage inventory levels are in line with prior quarters. Cardiac Immunoassay revenues at $69,900,000 exceeded internal expectations for the 2nd consecutive quarter. Couriage grew 1% from Q2 of last year to $38,300,000 led by growth in Asia Pacific and Europe, Middle East Africa regions. The Beckman BNP Business grew 6% from the Q2 of 2017 to $31,500,000 led by growth in the U. S, Asia Pacific and Europe, Middle East, Africa. Our integration efforts have been key to the success that we're seeing internationally. Revenue in the Specialized Diagnostic Solutions category decreased 3% in the Q2 to $12,700,000 primarily due to lower complement revenue in the U. S, mostly driven by timing of orders. Our Molecular Diagnostic Solutions category increased 22% in the quarter to $3,900,000 due to 103% growth in Solana revenue. We maintain our internal expectations, achieving total molecular revenue greater than $20,000,000 for the full year. Gross profit in the Q2 of 2018 increased $38,800,000 the result of the incremental cardiac immunoassay revenue from the acquired Triage and BNP businesses. Gross profit margin in the Q2 of 2018 was approximately 56%. This compares to 49% in the Q2 of last year. Net of amortization of intangibles, the legacy Quidel business gross margin was 48%, Triage gross margin was 59% and Beckman BNP Business gross margin was 67%. R and D expense increased by $5,700,000 in the 2nd quarter as compared to last year. This increase is due to the incremental expense for the Triage and Beckman BNP businesses for the development of a toxicology panel and troponin assay as well as increased investment for the Savanna molecular diagnostic platform. We do anticipate an incremental increase in our R and D spend for the back half of the year and now estimate that our R and D expense in 2018 should be in the range of $54,000,000 to $55,000,000 Sales and marketing expense increased by $14,500,000 in the Q2 of 2018 as compared to the Q2 of last year. This increase was largely due to incremental personnel costs associated with the International Triage Business. For the full year of 2018, we expect sales and marketing expense to continue to be in the range of 20% to 21% of revenues, driven by the full year impact of an expanded and multinational sales force supporting both the legacy products as well as the Triage and BNP businesses. G and A expense increased by $4,700,000 in the quarter, primarily due to additional costs associated with the Triage and BMP businesses, a one time cost associated with change in fair value of acquisition contingencies of $700,000 increased compensation costs and legal fees. Acquisition and integration costs were $4,900,000 driven by integration activities again associated with Triage and BNP Business. As Doug mentioned, on August 1, we converted a majority of our European business onto Quidel's global ERP system. This was a significant milestone in our integration initiatives and timeline, and we are still tracking to our annualized $11,000,000 cost synergies as we exit 2018. These synergies, as we have stated previously, will be realized through manufacturing yield improvements, labor efficiencies and scrap reduction, and also elimination of redundancies in some of our functional organizations. In the 2nd quarter, interest expense was $6,800,000 of which $1,500,000 relates to our convertible senior notes, dollars 1,900,000 relates to our senior credit facility and $2,600,000 relates to the deferred consideration associated with the purchase of the BNP business. Of the $6,800,000 $2,600,000 relates to the cash portion of the interest expense. We also recorded a loss on extinguishment of debt of $2,400,000 related to the $60,000,000 early payment on the senior credit facility and the extinguishment of $38,600,000 in aggregate principal of the convertible senior notes. In the quarter, we recorded income tax benefit of $5,800,000 We continue to book a full valuation allowance against our net deferred tax asset value due to 3 years of cumulative losses. Within the quarter year to date, we continue to realize a significant discrete income tax benefit from stock compensation expense. With the passage of the 2017 Tax Cuts and Jobs Act, we believe our effective tax rate for 2018 should be in the range of 18% to 20% of pre tax income before consideration for the discrete tax items and the reversal of the valuation allowance. From a balance sheet perspective, in the quarter, we reduced debt by an additional $98,600,000 and by $280,600,000 in the 1st 6 months of the year. As of June 30, 2018, our leverage ratio was below 1.5 times and the company had $38,700,000 in cash on the balance sheet. And with that, we conclude our formal comments for today. Operator, we're now ready to open the call for questions. Thank And our first question comes from the line of Alex Nowak with Craig Hallum Capital. Your line is now open. Hi, this is Blaise Beecher on for Alex. I was wondering if you had any update on the Beckman Coulter lawsuit and if they've indicated anything about settling at all? No, there's no change. And I would add that we're as confident in our position as we ever were. And no, there's not been any further discussion. Okay, great. And then just one more. I know you had given top line guidance, but with all the non GAAP add backs in Q1 and Q2, EPS estimates are kind of all over the place. So any chance you could give us a ballpark EPS guide so we can start to narrow the consensus range? No, we've given although we don't provide guidance, we've given general range of revenue for the year, just given the unfamiliarity of everybody to the new acquired businesses. The volatility of the flu business though makes it pretty difficult for us to give guidance. Okay. Thank you. Thank you. And our next question comes from the line of Jack Maheen with Barclays. Your line is now open. Good afternoon. I was was hoping you could drill a little bit into the cardiac number this quarter. It seemed like BNP posted really good results. So, what are you seeing in terms of the cross selling? Do you think you're being able to target some of the accounts better? And just any way to quantify that would be helpful. I do see some cross selling synergies and I would say that in the U. S. In particular, we're seeing some opportunities in the emergency departments and also the freestanding emergency departments. We're also working some opportunities on the urgent care side that includes both the legacy opportunity as well as the new Elear assets. In terms of quantifying, I think what we're seeing is more accurate understanding of the actual demand in places like China and smoothing of the inventory fluctuation that we saw earlier. At the end of the day, I think, as I said in my comments, we believe pretty confidently that we're in that range of $67,000,000 per quarter, which would take into account several ins and outs that we're beginning now to understand. But I think we've got a pretty good handle on it right now, and I think that $6,000,000 to $7,000,000 moving forward is pretty solid. Got it. The one product update you didn't mention was the new tox panel, I think Randy mentioned in terms of the R and D, but just could you just reiterate kind of the forecast there? And if I look into the second half of twenty nineteen, do you think numbers can actually improve beyond the high single digits? What could the TOCs panel mean in terms of the opportunity? Well, I'll just start with where we're at. We're planning on submitting somewhere in the Q4 the data from our clinical trials to the FDA and probably sometime by the middle of 2019 will be in market. It's pretty hard to understand how quickly the ramp up will occur. But if I understand, we have more demand than we're able to fill right now. And so I would suggest that we'll see a reasonable uptick almost immediately after launch. At one time, the total business was worth somewhere around $50,000,000 to the company. I'm not sure how we might get to that level and at what rate and at what time, but I think it's a reasonable expectation over time that we would move over the next couple of years towards a number that approach that. Great. If I could squeeze in one final one. I know you met with a bunch of large health systems last week at AACC. What was some of the feedback you got on the new Savanna platform? Well, people love the size. Right now, it's at 8x8x7 inches I think. And I think we have an opportunity actually to get a little bit smaller. People love the cartridge. The cartridge is simple. And as you probably noticed when you saw it, Jack, it is what it is. It's right there. It's modular, it's tight, it's small, it's got a great graphical user interface. And effectively, it's going to do what customers really want, which is the smaller syndromic panels with the opportunity to run individual assays as needed. And I think also for the panels that have multiple things, there'll be an ability to select what you want, what you don't want as well on some of those. So overall, we left the meeting quite positive and feel very good that there's going to be receptivity to the product once we launch it. It is a U. S. Meeting. So in fairness, it's a lot of U. S. Input. I don't have a flavor yet for how it will play ex U. S, but there's similar needs and demands out there, and I would think we'll do well when we launch ex U. S. Early in the process to be followed by the U. S. Launch in the back half of twenty twenty. Great. Thank you, Doug. Thank you. And our next question comes from the line of Tycho Peterson with JPMorgan. Your line is now open. Hey, thanks. I'll start with a couple on Sofia too. I think even backing out the shorter flu season, rapid immunoassay still declined a little bit year over year. Can you maybe just comment on that? And then also how discussions are going with retail pharmacies as we think about alternate sites ramping? And any updates on the timelines for the SOPHIA 2 assays with sensitivity improvements? Sure. We'll start with the quarter itself. Yes, flu is a big driver, but remember that respiratory just generally ties to flu. So we have in that overall category RSV, which is growing in importance for us and also strep. So we can walk you through at some point how that breaks down, but at the end of the day, it's those three products. And Then Tycho, I think you were asking about the pharmacies and that continues to be an area of focus for us. I think that longer term we do see movement of patients into the retail clinic setting for sure. We do have 15 states that allow pharmacists to already to test and treat for various routine conditions. I think that's going to change over the next couple of years and certainly we're positioned as if it's going to happen and we're positioned in the event it does happen. But for the moment it's a great question because in the moment we spend a lot of time on it, but it's not a big percentage of our total quite yet. Okay. And then I guess on Triage BNP, obviously, you've kind of raised the annual run rate here to $270,000,000 Can you just maybe talk the sustainability of the momentum? And as we think about selling Triage Metapro to your existing U. S. Urgent care touch points, how much penetration have you achieved at this point? How do we think about that ramping? Well, again, we just acquired the business in October, so we're a few quarters in. I do see that we are closing boxes. And the value of each of those we'll see we'll also see what the gap between close and reagent reorder is and how all that ramps up. But we are seeing an acceleration in our placement rate which is encouraging. Again, it's too early to raise the checkered flag, but I'm encouraged by what we're seeing so far. And on the 270, I know that you're taking the 5 and multiplying that by 4, going from the 250 to 270 which I think is a reasonable math exercise. Again, I guess we can sign up for something in that range, but it's still early. Okay. And then I guess lastly I know you had the question last quarter on China tariff, I assume no change in your view there. I just want to make sure given that that's still topical. No, the review we've done internally actually mirrors what we're hearing from the advice we're getting at ADOMED and who are in contact with the USTR. So far nothing in our space is affected. Okay. Thank you. Thanks, Doug. Thank you. And our next question comes from the line of Brian Weinstein with William Blair. Your line is now open. Hey, guys. Thanks for taking the question. Sorry for the background noise here. Did I hear you right? Did you say Triage was up 1%? I wasn't sure if I heard that. And if so, where do you see that particular business growing at longer term? You did hear correctly, it's 1% Q2 over Q2. And we're still thinking lowtomidsingledigits. I think stable U. S. Offset by Asia Pac. Ultimately, we also are thinking about a bit of growth in Latin America as well. So is the 1% in line with what you guys are thinking? I'm sorry, repeat that, Brian? It's 1% in line with what we were thinking? Yes. The 1% though is just an anomaly on the quarter because it does appear that in Q2 of 2017 that was the highest triage revenue of that calendar year. So there did look like there was a little bit of distribution play in there as well. So for us to get a 1% gain, I think, is actually pretty positive versus last year where there was some distribution loading from what we could tell. In one country I think you had that add an assay to the bag of the triage accounts, which started. So, I wasn't sure if you were referring to cross selling, which way you were referring to it when you're answering a prior question. So can you just kind of update us to that program in particular? Well, we're doing both, Brian. It's both, right? There's adding assays onto boxes, triage boxes that is and we've got an active program comp plan that's tied to it. And then we also have cross selling that occurs between the 2. There's a lot of Sofia placements at accounts where they can use a Triage, Meter Pro and vice versa. Okay. And then on the the last thing for me is you had previously talked about EBITDA of 32% to 34%, and I think it was a free cash flow number. I think it might have been $45,000,000 to $55,000,000 I didn't hear you reiterate that. Is there any change to that or should we think that there's some upside potentially there as well? I think with the quarter, it just gives us a little more confidence on the upper side of that range. Okay. That's it for me. Thanks. Sorry about the background noise. That's okay, Brian. No problem. Thank you. And our next question comes from the line of Bo Quirk with Piper Jaffray. Your line is now open. So I guess first a couple of questions that have been kind of hit on in the past. I apologize about that. So BNP, certainly understand that Doug, you want to point us to a $67,000,000 run rate. But how should we be thinking about the growth for that? Because clearly, it's been doing better in your hands certainly than you suggested when you initially purchased the asset. I guess we are being a little conservative Bill to be honest. But when I see the multiple ins and outs that we're trying to take account for, any of which could move the number one way or another. I'm still feeling like it's a little early. Could I see how it's a couple more than that? Certainly, it has been. But without going into great detail about what inventory is moving where and all those things and timing of orders in 4 or 5 countries. And I got $1,000,000 that came out of 4 small countries that I'm not really sure that's reproducible as an example. So the 69.9 feels to me like 68.9 already. So you can see how I'm a little bit cautious And I certainly don't want to be in a position where I'm missing numbers when we're actually doing pretty well. Fair point. And then secondly, with respect to cross selling, you've largely highlighted kind of opportunities in the U. S. Can you talk a little bit about outside of the U. S? Certainly, the legacy Lear business had fairly broad distribution, particularly in Asia Pac and Latin America. And can you talk to us a little bit about how we should be thinking about leveraging some of the Quidel products into those countries and then the associated timing with that? Thank you. Sure. That's an interesting question. If we just focus on China for a second, we already know that for some time now the organization there has been selling both the Triage product line as well as Beckman BNP, which is a little bit unusual. They're a little bit ahead of the curve in that regard. There also we're awaiting for FDA clearance on Sofia and I know that team is anxious to get their hands on that product also. So there are going to be opportunities ex U. S. I think it probably is as easy there as it is here to cross sell. And so should we think about that being in addition to the tox products being one of the growth drivers for 2019 or a little too early and we should be focusing or thinking rather that this is more of a 2020 phenomenon? Thanks. No, I think you're going to see some growth in 2019 and I'm anxious to have the tox product on the market. But I think there's other opportunities as well. And again, I'll just reiterate that we think we can get to mid single digits pretty quickly with this business. We think that in the not so distant future overall we can get back to as a total organization to a point where we're growing the top line by 10% overall. So and I think you're going to see some evidence of that in 2019. I think you have to wait till 2020 for it. Perfect. Thanks guys. Thanks Bill. Thank you. And your next question comes from the line of Mark Massaro with Canaccord Genuity. Your line is now open. Hey, guys. Thanks for the questions. You indicated at your Analyst Day plans to acquire $150,000,000 to $250,000,000 of revenue by 2023. I wanted to get a sense of your business development initiatives, understanding that there are a couple of companies evaluating strategic alternatives right now. Can you just speak to your pipeline and what you think could make a good fit or maybe not a good fit? Sure. Your question is timely. We just had a review last night on the topic. And if we think about a baseball analogy, we've got 4 initiatives that are at bat and probably 5 and that we're working. And those would involve all manner of partnerships up to and including equity investments. So again, we're actively working 4 to 5. I would say there's another handful that are on deck and there's a few in the hole. And I would say that I don't know if you want to call them strikeouts, we've crossed you off the list. So we're actively involved. I won't go into the list. I would tell you that the number of things that we're looking at, Mark, last night I told the guys, maybe we're looking at too many. So I like the baseball analogy and we're going to work to 4 or 5 that are at bat right now pretty hard and see if we can run those to ground. It sounds like your funnel And the second part of the question, Mark? I was just going to say, it sounds like your funnel is about as hot as the Boston Red Sox right now. Well, I would just say and I don't want to be this is just we're having a great year and the other night watching the Red Sox come from 41 down in the 9th was spectacular. I would agree with that. So I wanted to ask another question on Savanna. Certainly, the 8 inches prototype marks a significant reduction, more than 2x reduction on the size of the first one that you showed 2 or 3 years ago. I know at Analyst Day, you talked about how Savanna certainly could be formidable in health clinics. But it seems like hospitals are also potentially a compelling opportunity. Cepheid's GeneXpert has a number, thousands of placements in mid size and even small hospitals. So can you just give us a sense there was a question earlier about conversations with large health systems, but just give us a sense for which market you think could be bigger for Savanna over the next 5 years? Well, we do love the hospital segment. And I think that the small footprint, the modularity of the product, the syndromic panels that we hear over and over again are in demand is going to give us an opportunity in the hospital. And you mentioned the Cepheid product. There's only 1 PCR chamber in that cartridge, which without making too fine a point is a significant disadvantage relative to the Savanna cartridge, which has 4 PCR chambers. So we're able to do a lot in with 4 chambers that the Cepheid product cannot. And I just add one more thing. You all probably know this, but our success with Sofia in the hospital segment over the last couple of years has been dramatically better than our success in the physician office segment. Our market share gain in the hospital segment has been spectacular. It's a fair point. A question for Randy, just housekeeping. I think I heard you reiterate cost synergy targets. So then I think I heard you say $11,000,000 for 2018. Is it right to also assume $15,500,000 run rate for the end of 2019? I think we said all in $20,000,000 total for as we kind of in the 3rd full year. So I think it's more $20,000,000 Mark than $25,000,000 at this point. Got it. And just one last one from me. Go ahead. I'm sorry. You're talking about synergies, correct, Mark? I'm sorry. Yes, cost synergies. Yes. We'd be looking at $20,000,000 as we exit 2019. Great. And then final one for me. I know you guys had guided for up to $520,000,000 of revenue for full year 2018. I think you said, Doug, last quarter that you thought it was certainly achievable last quarter. Given the stronger performance from the Triage, Alire assets, can you just comment how you're feeling about the setup at this time? Well, again, as I tried to suggest in the script, we're very confident obviously in the 5 20 now. The visibility that we've had over the 1st 2 quarters of this year in terms of the BNP and the triage products causes us to have confidence that it's going to be north of 520. What I did say also is that even if we allow for some variability in Q4 with the start of the respiratory season which has always been a difficult call for us. So even with an offset if you want, even if you want to risk adjust Q4, I think we're still going to be north of 5.20. That's it for me. Thanks guys. Thanks Mark. Thanks Mark. Thank you. And we do have a follow-up question from Alex Nowak with Craig Hallum Capital. Good afternoon, everyone. Jumping in between a few calls here, so apologies if this was already mentioned. But can you just remind us where we're at with the transition of Abbott's teams to your own international infrastructure in APAC? And are you still confident that we won't see any sort of sales disruption in either APAC or Europe? So I assume, Alex, that you're talking about our ability to move off of the TSA with Abbott on the sales side. And so that's an interesting question because we do break it into 2 parts. And in China, which is the biggest driver to Asia Pacific at this time, all the salespeople that we need for that country at this time are already on the ground. And in addition, the back office infrastructure that we need for China is already there. And Randy, you're going over the drop in next week, okay. So on the sales side, we're in really good shape. Now order to cash, which I mentioned during the script, we're still working on and we expect to be in a position where all the revenue from China and many of the countries in Asia would go through our ERP and through our distribution system early in 2019. Okay, very good. Thank you very much. Sure. Thank you. And I am now showing any further questions at this time. Please proceed with your presentation or any closing remarks. Well, thanks everyone for your support and for your interest in Quidel. We had another great quarter, and I believe that we're well positioned to achieve our growth objectives. I will say everybody at this company is super enthusiastic right now, and it's a lot of fun. Take care, everyone. Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Goodbye.