Good day, and thank you for standing by. Welcome to the QuidelOrtho Conference Call. At this time, all participant lines are in listen mode only. For those of you participating in the conference call, there will be an opportunity for you to ask questions at the end of today's prepared remarks. Please note this conference call is being recorded. An audio replay of the conference call will be available on the company's website shortly. After this call, I would now like to turn the call over to Juliet Cunningham, Vice President of Investor Relations.
Thank you. Good afternoon, everyone, and thanks for joining us. Today's news release, corresponding presentation, and webcast are all available on the Investor Relations section of our website. Joining me on the call this afternoon is Brian Blaser, our CEO, Joe Busky, our CFO, Jonathan Segrest, our EVP of R&D and Chief Technology Officer, and Tammy Ranalli, SVP and our Business Unit Leader for Point of Care and Molecular Diagnostics. This conference call is being simultaneously webcast on the Investor Relations page of our website. To aid in the presentation, we have also posted supplemental information on the Investor Relations section of our website. The conference call and supplemental information may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Statements that are not strictly historical, including the company's expectations, plans, financial guidance, and future performance and prospects, are forward-looking statements that are subject to certain risk and uncertainty, assumptions, and other factors. This includes the proposed acquisition of LEX Diagnostics and the expected impact of that acquisition. Actual results may vary materially from those expressed or implied in these forward-looking statements. Information about potential factors that could affect our actual results is available in our annual report on Form 10-K for the 2024 fiscal year and subsequent reports filed with the SEC, including risk factors and sections in the supplemental information. Forward-looking statements are made as of today, June 3rd, 2025, and we assume no obligation to update any forward-looking statement as accepted by law. Now, I'd like to turn the call over to our CEO, Brian Blaser.
Thank you, Juliet, and thank you all for joining us on short notice. Since joining QuidelOrtho a year ago, I have been working with our management team on a disciplined, comprehensive review of our strategy to improve profitability, growth, and shareholder value. Today marks an important milestone as this afternoon we announced a significant step toward reshaping our product portfolio and redirecting our investments for the future. More specifically, we announced our intention to acquire full ownership of LEX Diagnostics upon FDA clearance for closing consideration of approximately $100 million. In addition, we announced that we are discontinuing the development of the Savanna platform. Let me start with a discussion of LEX Diagnostics and our interest in this technology, followed by our rationale for discontinuing our investment in Savanna.
LEX Diagnostics is a molecular diagnostics company focused on delivering fast and highly accurate test results at the point of care. LEX innovative molecular platform can deliver results within minutes. It takes about six minutes for a positive result on its respiratory panel that can detect and differentiate Flu A, Flu B, and COVID with excellent performance. The LEX platform integrates seamlessly into point-of-care workflows. It brings the sensitivity of PCR with its proprietary thermal cycling technology to urgent and acute care settings, physician office labs, hospitals, and other decentralized settings. It provides a highly competitive value proposition centered on speed, performance, and cost. We also see near-term opportunity to expand the menu beyond flu and COVID, moving further into the respiratory space, as well as applications in women's health and other assays.
We originally invested in LEX Diagnostics in December of 2023 with the exclusive option to acquire the company up to or shortly after it receives U.S. FDA clearance. LEX is expecting to file a dual 510(k) and CLIA waiver submission to the FDA in the coming days, with clearance expected in late 2025 or early 2026, depending on FDA review timelines. Since our initial investment, our team has conducted a comprehensive review of LEX's technology alongside our Savanna platform, with a focus on critical factors such as clinical performance, incremental investment, and market potential. After extensive review, we concluded that LEX offers important performance advantages for our customers and provides the clearest path to growth. The LEX platform will fit perfectly within our point-of-care portfolio and offer an expedient route to commercialization to create long-term value for our customers and shareholders.
As part of our evaluation and after careful consideration, we decided to discontinue the development of our Savanna platform. Despite our best efforts, the results we achieved in our recent clinical trial for the respiratory panel did not meet our high standards of performance. In considering the incremental time, cost, and risk associated with further development of Savanna, we decided that this was not an effective use of company resources. This decision is consistent with my previously communicated views on our investment plan for Savanna. It was not an easy decision, and we made it with deep appreciation for the tremendous effort that has gone into developing the system over the last several years. I want to emphasize that all existing Savanna customers will be supported while we work closely with our customers and partners to facilitate an orderly transition.
In summary, today's announcement reflects an important step in reshaping our company for the future. We are confident that the steps we are taking now will accelerate our growth in molecular diagnostics and, more broadly, reinforce our position as a leader in point-of-care diagnostics. Now let me hand it over to Jonathan Segrest, our Chief Technology Officer, to provide some added context on our decision on Savanna, as well as greater detail on LEX Diagnostics' technology and platform. Jonathan.
Thanks, Brian. I'm excited to talk today about the realignment of our molecular diagnostics strategy. It's been a very rewarding first several months here at QuidelOrtho leading the R&D organization, and I look forward to helping accelerate our growth in this important space.
Before I share further details on the innovative LEX technology, I'd like to talk a bit about the journey we've been on with Savanna and how we came to this decision. As you know, we have been focused on a four-target respiratory panel on Savanna: Flu A, Flu B, COVID, and RSV. We learned a lot from last year's clinical trial and submission process that we took into this latest round of development for the updated assay. One of the team's focus areas was on sensitivity of the COVID target in particular, and we made some nice enhancements there on both the PCR assay design and the overall cartridge fluidics. Taking that enhanced assay into this year's clinical trial, we were pleased to see improved COVID performance along with other improvements to the assay. However, we did encounter RSV performance issues.
Part of this was the underlying prevalence of RSV during the season, which had a negative effect on our data. As a result, we were left with a Flu A, Flu B, and COVID-3 f Savanna assay as our RSV sensitivity just did not meet our high-performance standards. In parallel, we were performing an extensive evaluation of the LEX platform as an extension of the collaboration we have had with them since late 2023. As they were completing their own clinical trial for a Flu A, Flu B, and COVID-3 f LEX assay, we were seeing impressive clinical performance, and this created a natural decision point for us.
As we considered the merits of both the LEX and Savanna platforms, along with our projections of market opportunity and the incremental investment required to fully commercialize each one, it became clear that LEX was a better value proposition for the business and for our customers. Further, as Brian mentioned, we see a better strategic fit for LEX within our point-of-care portfolio. I hope that provides some insight behind our decision-making process. Now we would like to turn to the LEX system, including some of its specific advantages and why we are excited about the platform. As mentioned, we have thoroughly reviewed the LEX development progress, are impressed with the clinical data, the differentiated capabilities of the platform, and the team behind it. The LEX team invented and patented a novel thermal cycling technology that combines exceptional speed with high sensitivity, all without compromising quality.
At the core of the LEX technology is a PCR molecular engine, making it unique in enabling fast assay speeds with the gold standard in molecular chemistry, which is PCR. In combination with novel chemistry and reagents, the underlying technology of the LEX platform enables a very high level of capability. From a workflow perspective, the LEX system is fully automated and is enabled by a swab-to-result process that does not require any liquid handling or extra hands-on steps. This makes it one of the most efficient and intuitive platforms to use. In summary, the LEX system employs a fast, highly accurate, compact, and easy-to-use design that is ideal for CLIA waivers and professional applications in hospitals, urgent care and acute care facilities, and physician offices. We look forward to LEX filing their dual 510(k) and CLIA waiver applications with the FDA in the coming days.
With that, I will now hand the call over to Tammy Ranalli, SVP and Business Unit Leader for Point of Care and Molecular Diagnostics. Tammy will expand further on the exciting market opportunity and our commercial strategy.
Thank you, Jonathan. I'd like to provide you with how we see the market opportunity for LEX and the relative differences between what we had originally planned with Savanna. While there are some similarities between LEX and Savanna, there are important differences in their respective end-user markets. There have been changes in these markets that have influenced the decisions we announced today. Molecular diagnostics is one of the most attractive and fastest-growing markets in the IVD space. It's roughly a $9 billion market growing in the low double digits. This market is currently split between centralized hospital-based testing and decentralized testing that takes place in a variety of settings across ERs, clinics, and physician offices. The centralized hospital space is oriented around the need for moderately fast, broadly syndromic panels as an alternative to core laboratory molecular testing, which generally has much longer turnaround times.
This is an attractive segment growing at mid to high single digits and was our original target market for Savanna. The decentralized molecular testing market is smaller today than the core laboratory molecular market, but expanding at double-digit rates as demand for faster near-patient testing has continued to accelerate. Clinicians in this space value speed, ease of use, and cost. We see this market continuing to expand as testing volume shifts from the centralized environment closer to the patient. The LEX platform, as Jonathan described, was custom designed for applications in this segment. As we evaluated the continuing shift taking place from the centralized to decentralized molecular testing and considering our strengths in the point-of-care diagnostics, we determined that the LEX platform provided us with the best opportunity to establish a leadership position in the near term.
One of the key factors in our decision process was the relatively long and expensive development cycle required to commercialize Savanna's larger, more comp LEX panels. As Jonathan also mentioned earlier, the LEX system provides a targeted multip LEX molecular solution with a turnaround time of under 10 minutes for healthcare providers, many of whom are more frequently seeking access to both molecular as well as immunoassay testing platforms. Access to a testing platform that combines the ease of use of an antigen test with the performance of best-in-class molecular tests and has a turnaround time that lends itself to two point-of-care applications has long been a sought-after capability. Now, while there are some other competitive molecular platforms out there in this space, none have offered the combination of multip LEX testing in under 10 minutes with a workflow as simple as the LEX platform.
We believe the proposed addition of LEX will strengthen our comprehensive portfolio across the continuum of care, adding a best-in-class molecular solution to our broader product offerings, including our industry-leading Sophia, QuickVue, and Triage product lines. This unique combination of solutions will allow QuidelOrtho to capitalize on our strong position in point-of-care and truly meet the needs for healthcare providers and patients alike. We intend to launch the platform initially with the Flu A, Flu B, COVID assay in 2026, and we are planning on a limited launch immediately upon FDA clearance and expect a steady acceleration of placements into the future as we increase our manufacturing capacity. In addition, the platform's capabilities go beyond just flu and COVID testing. We anticipate a robust pipeline driving menu expansion, first with group A strep and RSV, and later with women's health and other assays.
We expect the proposed acquisition of LEX to provide a superior platform for QuidelOrtho to achieve our objectives in advancing molecular point-of-care testing, while also providing an opportunity to integrate cutting-edge rapid PCR technology into our diagnostics portfolio. I'll now pass it over to Joe Busky, our Chief Financial Officer, to discuss the financial details.
Okay, thanks, Tammy. As Brian mentioned, we've been looking at LEX as a potential alternative to Savanna since late 2023. We're excited about the potential to acquire LEX, as we believe it will enhance our value prop by driving incremental revenue growth and improving profitability. As stated in our press release, QuidelOrtho intends to acquire the full ownership of LEX Diagnostics for payment at closing of approximately $100 million. As background, we originally invested in LEX Diagnostics in December 2023 for an initial investment of $20 million and an additional milestone-related investment of $10 million in 2024. These investments were structured as a convertible loan with an exclusive option to acquire the entire company up to or shortly after the 510(k) FDA clearance of its respiratory panel, which we expect to occur in late this year or early next year, depending on FDA review timelines.
The additional approximately $100 million will be paid at closing, which we expect to occur in early 2026. We expect to fund the acquisition using a combination of cash and our revolving line of credit. We may also pay up to $40 million in additional purchase price based on an earnout component payable for up to six years following the closing of the acquisition. In conjunction with the discontinuation of the Savanna product, we will be recording a one-time non-cash write-off of approximately $130 million-$150 million in assets, primarily related to manufacturing equipment and inventory, which we do not expect to negatively impact our adjusted EBITDA or adjusted EPS 2025 guidance. Turning now to our full year 2025 financial guidance, we are reaffirming the guidance we provided on February 12th of this year.
While we expect to realize approximately $25 million of annualized incremental P&L benefit from discontinuing Savanna platform development and approximately $11 million in the second half of this year, we are not changing our 2025 financial guidance due to the very fluid macro environment conditions. We will continue to assess the situation, and we plan to provide updates on our progress on future earnings calls. For the balance of this year, most of our LEX-related investments are expected to be in manufacturing CapEx and working capital to build inventory in preparation for limited commercial launch to meet the respiratory season in the first half of 2026. We anticipate this additional cash investment will be completed without any change to our existing free cash flow and debt leverage targets in 2025.
Looking beyond 2025 and pending LEX FDA clearance, we are committed to bringing the LEX platform to market in early 2026. We will evaluate the scope and timing of additional R&D and go-to-market investments as part of our full year 2026 guidance. Now, I'd like to add some color on top-line growth expectations for LEX of approximately one point of annualized incremental growth beginning in the second half of 2026 and margins that will be accreted as the product volume scales, all very similar to the modeling that we expected with the Savanna product lines. We believe the LEX menu can be built out faster than Savanna, hence our decision to realign our molecular strategy. And to be perfectly clear, there is no change in our long-term margin targets of mid to high 20s adjusted EBITDA margin by May 2027.
Our capital allocation priority is unchanged and continues to be debt paydown. The purchase price for LEX will also not change our debt leverage ratio targets in 2025 or beyond. We're confident that this transaction can drive significant value for our shareholders, customers, and partners. And with operator, can we please open up the line for questions?
If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, it is star one. Our first question is from Jack Meehan with Nephron Research. The line is now open.
Thanks. Good afternoon, and thanks for all the updates. I had a couple of questions on LEX. Maybe I'll ask them one at a time. The first is, could you just elaborate a little bit more on the performance advantages you see with LEX, specifically the six-minute turnaround time? Maybe just that's a lot faster than competing point-of-care systems have on the market. Maybe talk a little bit about what's the secret sauce there for a PCR-based instrument to pull that off?
Yes, Jack, thanks for the question. The LEX technology uses this rapid thermal cycling PCR technology. I think Jonathan is probably better suited to talk about some of the specific advantages. I am going to turn it over to him to provide a little context there.
Yeah, thanks, Brian. Thanks, Jack, for the question. I think I would reiterate that really what LEX has done is wrap this really novel fast thermal cycling technology around PCR. I think historically people have thought about PCR chemistry, while highly sensitive, is a little bit slower than some of the other chemistry options that might be out there. I think when you take a look at what LEX has done thoughtfully with their design between the consumable, the comp LEXity or simplicity in the consumable, the instrument, and the chemistry choices, they've got, again, a gold standard PCR engine that fundamentally just goes really fast, which delivers that patient result much faster in these decentralized settings. I think that provides a bit of color to your question.
Thanks, Jonathan.
Okay. One more, just the menu right out of the gate. It's going to be flu, COVID, Wyno, RSV for LEX. Was that part of their trial? Did they run into any similar issues as you saw with Savanna, or was there some other strategic reason that isn't on the initial test?
Hi. The current platform with LEX is limited to a multip LEX of three plus a control. They really could not add in RSV in the current platform. Future development of the platform, we have the capability of expanding to slightly larger multip LEXes. In order to get speed to market, they really just needed to focus in on the three-p LEX with the control. That was basically around the decision for doing Flu A, Flu B and COVID.
Thanks, Tammy.
Okay. Thank you.
Our next question is from Tycho Peterson with Jefferies. Your line is now open.
Hey, thanks. Understanding your reiterating guidance here for the year, but how do we think about kind of the operating margin benefits from discontinuing Savanna and how much will you kind of put back into investment in the new LEX platform from an R&D perspective?
Yeah. So the way we're thinking about that at this point, there is some upside here from discontinuing the development of Savanna. We're kind of holding that as we take a look at the macro environment. We would expect as we go to ramp the product toward the back half of 2026, as we move up a more significant ramp, that we'll start to see the benefits of the higher margins on that product as well as the growth potential.
Okay. And then timing of pushing into women's health and kind of further menu expansion that you alluded to?
Yeah, I would say not going to provide specific details on that yet. Our main focus is going to be the ramp-up of this current panel in 2026 and 2027, but we'll be looking to add content onto the platform as quickly as we possibly can, given the opportunity there.
Okay. And then just lastly, I guess, did you lock up management? Is that important? Are you keeping the U.K. footprint? Maybe just anything else on the integration?
Yeah. We're not actually announcing the acquisition today. It's really the intention to acquire, which will be contingent on approval. We'll be working with LEX here leading up to their approval to work out the details associated with the transition of the business. Clearly, there are leadership and other technical talents that are going to be important to the success of that platform moving forward, and we'll be interested in bringing those people into our business.
Thank you.
Our next question is from Casey Woodring with JPMorgan. Your line is now open.
Great. Thank you. Just my first one is, how should we think about any potential for cannibalization between LEX and Sophia? You mentioned that LEX combines the ease of use of antigen testing and performance of molecular in the decentralized setting. Just wondering why this would not take Sophia's place? Also just curious on the cost differential between LEX and Sophia and maybe LEX and other molecular peers in that decentralized space? I have one follow-up. Thank you.
Yeah, thanks, Casey. Maybe I'll ask Tammy to expand on this a little bit, but I think what we're seeing is in the short time that we've had these molecular platforms on the market, we haven't seen a whole lot of cannibalization of our Sophia testing in favor of that. What we do see are customers who want to have both technologies. I don't think it would bother us too much if there was a little bit of cannibalization just given the favorable margin potential for the molecular product versus the antigen product. Tammy, I don't know if you can add anything else there.
Yeah, I agree. I think what we found in talking to those customers is that they really are looking to have both options available to them for testing customers of different profiles with molecular versus antigen. The ability to go into that customer site and provide the continuum of care, basically the antigen test as well as the molecular platform side by side, is a great advantage for us. While in some spaces, perhaps in the acute space, you may see more of the cannibalization as they shift to molecular, we feel this will be a great opportunity for us to go and capture some of that.
Got it. That is helpful. Maybe just one more. Brian and Jonathan, the prior team was the one that invested in LEX initially. Just curious on what they saw back then and what you are seeing now that gives you confidence in the platform. The initial LEX investment came when Savanna was pretty close to launch. Just curious if the LEX box was viewed as complementary to Savanna or if the thought had always been that LEX would be kind of a hedge against Savanna? Thank you.
Yeah, it was really a parallel path that we were evaluating as we were moving through our progress on Savanna. I think it was a prudent step to put the LEX product in the mix given the challenges that Savanna had had over the last several years. We were not really able to talk about it much until we got a little further down the road with the performance data and into their clinical trial. What I can say is that their clinical trial results were very strong. I think we have got a lot of confidence in the submission that is going in and pending approval. Jonathan, I do not know if you would say anything more about the technology here, but we have exercised the technology considerably over the last year that I have been on board and are pretty happy with what we see.
Yeah, I would just add, I think the team invested when the technology had hit the maturation point at the end of 2023. What's different now is, as Brian already reiterated, we have the clinical data in hand as well as some of the other verification data. The proof is in the pudding there and the data, and we're looking forward to their submission coming.
Okay.
Thank you.
Thank you.
Our next question is from Lu Li with UBS. Your line is now open.
Great. Thank you for taking my questions. I think the first one is, I wonder if you also look into other technology in the market when you were making the decision between LEX and Savanna?
If we were evaluating, your question is if we evaluated competitive platforms in the market, yes, we did. We view the value proposition here with LEX to be quite significant given, again, the speed of the test, certainly, but also the cost profile of the test as well. I do not think there is really another product on the market that has the kind of ease of use profile that this product has. Again, Tammy, I do not know if you care to provide some additional color on the competitive landscape there.
Yeah. I mean, we did look at a number of different products that were in development over the post-COVID time, and we were continuing to be impressed with the capability of LEX in particular because many of those other platforms were isothermal. I mean, having had a lot of experience in isothermal, it had some good technological capabilities. But you know PCR is still a gold standard. What LEX was able to do with PCR you know as the molecular engine and get performance, speed, and quality of result, we really felt confident that that was the right solution for our portfolio.
Thanks, Tammy.
Got it. Thank you. My second question is really on the press level. It seems like right now the version is only limited to three plus a control. Do you think that will kind of limit your initial opportunity getting into the market? That will be my questions.
I think the way we are looking at it is with Savanna, we were pursuing very broad syndromic panels that, quite frankly, were going to be challenging for us to get to market and expensive to do the clinical trial work. This is a much more targeted system. Initially, it's got the 3+ a control capability. We see the potential to broaden that. We will be focused on adding content here that's very targeted, but likely doing it faster than we would have with Savanna.
Got it. Just final quick question. Do you still need to invest into kind of the FDA submission or maybe any clinical trial before they get approval? Just any incremental money that you need to invest at this point?
Yeah. Thanks for the question again. No, they're completing. They've done their trial is complete. The data analysis is complete. They're in the very, very final stages of their submission preparation. There is really no incremental investment other than what's going to be required to respond to questions from FDA as it goes through the approval cycle.
Got it. Thank you.
Our next question is from Patrick Donnelly with Citi. Your line is now open.
Hey, guys. Thanks for taking the questions. Maybe just to pick up on when we finished that, I think, was Brian. In terms of the final stages of submission prep, it sounds like you guys have kind of taken a look at the data and feel pretty confident. I guess what are the key hurdles left for the approval? Just given the amount of delays we saw with Savanna, your guys' confidence level, any dialogue with the FDA? I just want to see how comfortable you guys are on the timeline they're giving out here on the FDA piece, given what happened with Savanna.
Yeah. Thanks for the question, Patrick. Again, we've done an extensive review of this data, as you can imagine. The data is very strong. The submission is a strong submission. We feel confident that this product will be approved. Really, from my point of view, I mean, there can always be something that happens in the review process. I think this is really just a matter of working through with the FDA on any questions they have about the technology and the specific questions on the submission. We're looking forward to seeing how that works out and supporting them along the way if necessary.
Okay. Joe, maybe just a follow-up on the guidance. It sounds like, again, I think you said an $11 million benefit in the second half in terms of costs. Have you guys seen anything that's given you pause in terms of, I think you mentioned, just given the market backdrop? Is it more things are volatile out there? Let's put this in the back pocket. Maybe it edges you higher in the guidance range. Obviously, it's a pretty wide range. I'm just trying to get a little more color as to how you're thinking about what this impact means for the guidance range. Again, is there something in the last month or two you saw, or is it more conservatism and just layering this in?
Hey, Patrick. Yeah. There is about $11 million of Savanna spend in the second half of the year that would potentially be upside to the guidance that we've given. Given that when we say current macro or fluid current macro conditions, we're really talking about tariffs here. I think you probably hear all the same news I do, and that is that the "tariff pauses" could come to an end in July or August. We've got now ongoing court action with the tariffs. There are still threats of retaliatory tariffs primarily coming from the EU. There is just too much noise around it for me to want to raise guidance at this point. These are things out of our control.
The last thing I'd want to do is to raise guidance and to potentially have something happen in the macro that would cause us to take it back down. That would just not be a good situation. We are going to let things settle. We'll do an earnings call in early August. We'll definitely have an update at that point. At that point, we'll also know a little more about what we want to invest for LEX potentially this year to prepare for the commercialization. It is just a matter of maybe looking at it a little bit longer and holding where we are right now. That is the thought process.
Understood. Thank you, guys.
Thanks.
Our next question is from Andrew Cooper with Raymond James. Your line is now open.
Hey, everybody. Thanks for the time and for the questions. Maybe first, just can you give a little sense for how you think about the CapEx here? You put a lot into starting those manual lines and starting to onboard those automated lines for Savanna. Where are you on that front for LEX? And what sort of spend do we need to think about on the CapEx side to get to the scale you'd like to be to drive that sort of growth you talked about in the second half of 2026 and beyond?
Yeah. Hey, Andrew, it's Joe Busky. They have LEX, meaning they have manual line capability now that would be able to handle the volume that we're talking about for early 2026. There's really not a whole lot of need for a lot of investment right now. We're going to try to get ahead of it. That spend will likely come in 2026 as we think about what additional manufacturing capacity we need for 2027. I think what we'll do is once we get the FDA clearance and we get the acquisition completed and we give our 2026 guidance, we can talk a little more about what that investment looks like. Jonathan, do you have anything you want to add to that?
Yeah, I would just add it's as much about the consumable assembly that you asked about as it is the reagent. With Savanna and LEX, both are lyophilized PCR reagents. We do have some synergy there with the capacity we built around the reagent side.
Thanks, Jonathan.
Okay. That's helpful. Maybe just to ask one on sort of the performance again. You called out true PCR versus LAMP or some of the other technologies that we've seen kind of deliver at least positive results relatively quickly as well. Can you give a sense for, I mean, is this behaving like lab-based PCR in terms of the performance you've seen? Is there any sort of falloff as they miniaturize and speed up the heating and cooling for the thermal cycling?
Yeah. This is Jonathan here, it is a great question. We're really not seeing any of that falloff that you're asking about. Again, the core reagents themselves are PCR-based, so we see the sensitivity that you would expect out of that kind of reagent chemistry. The other thing that's enabled on the LEX consumable is this direct swab workflow. You really get a sort of high concentration of target, in this case, Flu A, Flu B, or COVID virus into the assay, which really helps drive that sensitivity as well. It is, I would say, lab-quality PCR reagents inside, but still kind of driving that point of care workflow. The other thing I would add, qualitative statement, but as we have seen the clinical data, it's worth noting that was against a comparator device that was also PCR-based, high sensitivity in the space as well.
That gives us extra positivity around the clinical data.
Okay. Great. Look forward to seeing that when it's hopefully in a label. Lastly, I think somebody else tried to ask on sort of the pricing structure here, but can you give us a sense for how this stacks up in your view from a cost perspective when we think about bringing that true PCR to the point- of- care and what's appropriate from that perspective to still give you a good healthy margin?
Yeah. Andrew, this is Brian. The cost structure of this at volume is very attractive. This product has got a very nice business case. The margin profile of this product definitely will be accretive as we've planned. It will allow us to very competitively price the product versus others that are on the market today.
Perfect. I appreciate it. I'll follow up offline. Thanks, everybody.
Once again, if you'd like to ask a question, it is star one on your telephone keypad. Looks like there are no more questions, so I'll pass the call back over to the management team for closing remarks.
Okay. Thanks, operator. Thanks, everyone, for joining this call on short notice. We are excited to implement our strategy to accelerate growth in molecular diagnostics and look forward to the day that we will welcome LEX Diagnostics and its technology into our portfolio. We believe this proposed acquisition will create meaningful value for all of our stakeholders. We look forward to updating you on our progress in the coming quarters. Thank you very much.
That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.