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spk01: Good day, and welcome to the Co-Diagnostics, Inc. fourth quarter and full year 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Andrew Benson, Head of Investor Relations. Please go ahead.
spk06: Thank you. I am Andrew Benson, and joining me this afternoon are members of the Co-Diagnostics Management Team, including Dwight Egan, Chief Executive Officer, and Brian Brown, Chief Financial Officer. We will begin the call with management's prepared remarks and then open up the call to questions from our analysts. Before we begin, we would like to inform the listeners that certain statements made by co-diagnostics during the course of this call may constitute forward-looking statements. Any statement about company expectations, beliefs, plans, objectives, assumptions of future events or performance are forward-looking statements. For example, statements concerning 2021 financial and operational guidance, the development, regulatory clearance, commercialization, and features of new products, plans, and objectives of management and market trends are all forward-looking statements. The company believes these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future result expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in co-diagnostics filings with the SEC. Co-diagnostics assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. In addition, the company may discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release out shortly before this call, which may contain reconciliations to the non-GAAP financial measures presented to the most comparable GAAP results. At this time, I would like to turn the call over to Co-Diagnostics Chief Executive Officer Dwight Egan. Dwight?
spk05: Thank you, Andrew, and thank you all for joining us. On this call, we will provide an overview of our results for the quarter and for the year, updates on key financial performance metrics, and discuss progress against our strategic initiatives. After, we will open the line for questions. Our performance in the fourth quarter contributed to what was an impressive year for co-diagnostics, both from an operations and execution perspective. The dedication of our team, along with our innovative product portfolio, drove strong sales and gross margin performance. We remain committed to improving the health of our balance sheet, which remains strong, and has allowed us to opportunistically invest in growth opportunities that will drive future shareholder value. Most recently, we completed the acquisition of Idaho Molecular, Inc. and Advanced Conceptions, Inc., providing co-diagnostics with all existing and future assets and intellectual property related to the company's proprietary and innovative at-home point-of-care diagnostic device. The acquisition, first announced on December 22, 2021, is expected to streamline the commercialization of our COTI-X YourTest PCR device as it nears completion. The device has been designed to accommodate multiplexed assays as the company expands its future suite of products to include additional respiratory, STI, and other infectious diseases, utilizing our patented co-primer technology. We strongly believe this technology will enable us to reach a broader and more diverse universe of customers. We remain committed to investing in the platform and recently welcomed two new team members that will further oversee the product's development. Dr. Kirk Ryrie and Dr. Carl Witwer, pioneers of rapid and real-time PCR and key personnel in the platform's development to date, were named president of the wholly owned subsidiary and chairman of the company's scientific advisory board, respectively. The chief science officer of CoDiagnostics' newly acquired subsidiary is Mark Poritz, PhD, a Harvard University and UC San Francisco educated molecular biologist with more than 30 years of experience in the application of PCR and related methods to gene cloning, drug discovery, infectious disease diagnostics, and aptamer selection. While at BioFire Diagnostics, Dr. Poritz led the molecular biology development for the FilmArray IVD platform. Dr. Poritz has served as a reviewer for more than 30 different NIH, NI, AID study sections focusing on infectious disease diagnostics. We are also pleased with the recent addition of three new members of our scientific advisory board. Starting with Dr. Ann Wiley, a research scientist of epidemiology at Yale School of Public Health. Dr. Wiley validated and optimized saliva for SARS-CoV-2 detection and developed SalivaDirect, a simple, scalable, and importantly, cost-effective method to help alleviate SARS-CoV-2 testing demands. Dr. Karen C. Carroll, M.D., Professor of Pathology and Director of the Division of Medical Microbiology at Johns Hopkins University School of Medicine, joins us, contributing significant knowledge and experience in medical microbiology and infectious diseases. Finally, we welcome Noriko Kusakawa, Ph.D., and former ARUP Laboratories Vice President of Innovation and Strategic Investments. We are excited to welcome these impressive individuals to the Scientific Advisory Board, and we're confident that their knowledge, guidance, and expertise will help us achieve further growth and profitability. As we move forward with our new team, the strategic vision of co-diagnostics is built on the following four pillars. Number one, COVID-19 with its variants will be a permanent endemic disease. along with the many other endemic infectious diseases circulating throughout the world, just like they did before COVID. As COVID-19 continues to spread, the virus has more opportunities to mutate, potentially resulting in mutation characteristics that increase its spread. Other infectious diseases will also need to be diagnosed and differentiated from COVID-19. Dr. Michael Osterholm recently commented on a blueprint to a new normal in dealing with COVID-19. He said, we're not going to get rid of COVID. It's not going to happen. He also said we can do much better with testing. We believe we are well positioned to address the ongoing testing needed for this disease, along with the many others that exist today. Pillar number two, Inexpensive at-home and point-of-care diagnostics will be utilized everywhere worldwide. Dr. Scott Gottlieb, former FDA commissioner, asserted that testing needs to be operationalized with regular testing and reliable protocols to normalize society. To go back to school, to go back to work, or to travel, regular testing with reliable protocols will need to be done. We agree with Dr. Gottlieb and believe at-home testing will become ubiquitous. and that the at-home rapid test is probably the biggest paradigm shift and change in regulation of medical products to come out of the pandemic. Dr. Gottlieb goes on to say, this is going to open up a whole new field of at-home testing for a range of pathogens. I want to repeat that. This is going to open up a whole new field of at-home testing for a range of pathogens. Going on to pillar number three, The CoDx YourTest PCR platform is the exact prescription for addressing a whole new field of at-home and point-of-care testing for a range of pathogens, meaning infectious diseases that can be detected with real-time PCR enhanced with multiplexing. Finally, pillar number four, CoDiagnostics believes the CoDx YourTest platform includes certain key differentiators compared to other less robust at-home and point-of-care systems. Codex test results are PCR gold standard results compared to less accurate antigen test results. Moreover, going forward, our system will facilitate significant multiplexing results compared to other non-PCR technologies that, while molecular, are too expensive and do not provide the same robust multiplexing opportunities as real-time PCR. Many diseases present with similar symptoms. Syndromic panel testing or testing of several infections with one patient sample with a single test, such as flu A, flu B, RSV, and COVID, will provide more robust testing with multi-target differentiation from a single sample than is possible in non-PCR-based testing protocols from our competitors. To reiterate, the CODI-X YourTest PCR platform takes about the same time and will cost about the same as antigen tests. but the results are gold standard PCR instead of the less reliable antigen tests. Compared to other non-PCR molecular tests, the COTIX YourTest PCR platform will cost significantly less and has more robust multiplexing capabilities. Our platform delivers all three testing objectives of affordable testing, fast and gold standard accuracy. It then goes further to provide robust multiplexing enhanced by co-primers, our patented and proprietary PCR technology. We believe that our new powerful platform represents the future of at-home and point-of-care testing. We continue to invest in the platform and expect that it will drive significant growth and expand our market reach. There is a substantial domestic and international market that remains for COVID-19 testing. especially for advanced and innovative technologies such as the Codex YourTest PCR platform. Our team is highly focused and committed to bringing this exciting device to commercialization. The time required to prepare the device for clinical trials has, unfortunately, been extended. This extension is due to a number of factors, including a major user factor study, that was conducted in order to meet regulatory requirements for a device with an even broader market potential. This study is required in order to simultaneously submit for clearance for both direct saliva and swab samples. Receiving this clearance is critical because the use of swabs will be necessary to collect samples from the throat, such as for Strep A, or from other sample sources associated with STIs. As our knowledge and understanding of COVID has continued to mature, it has presented opportunities to future-proof the device and testing platform. We are firm believers that if a device requires the fewest possible changes to clinical practice, it will accelerate the adoption of the device by experts. Our goal is to deliver a device that is accurate and reliable and becomes a standard in PCR testing. We have focused our efforts on optimization that will enable our instrument to achieve the highest possible standards of performance. Our world renowned design and engineering experts have brought incredible innovation and expertise to this device. And our goal is to position the company as a platform that will significantly contribute to the ongoing science of real time PCR applications in at home and point of care settings. The company is currently executing on final optimizations preparatory to a clinical trial, which we expect will soon enable submission for regulatory authorization. Having the right submission that will facilitate the broadest range of market opportunities once authorized is our most critical objective. We believe others have developed short-term solutions to permanent problems. With our platform, we are planning on providing a robust permanent solution to permanent problems. Our strategic objective to get it right with the Codex YourTest PCR platform should enable the company to play a significant role in syndromic panel testing covering a large number of ongoing pernicious infections. Immediately upon receiving regulatory authorization, the company expects to conduct sales campaigns to a vast number of potential clients, which include outreach to the public sector, including, as applicable, to schools and college campuses, enterprise sales, including airlines, theme parks, cruise ships, restaurants, entertainment venues, the healthcare sector, including doctors and dental offices, and the residential individual consumer sector. Company infrastructure is currently being enhanced to address our product launch. We are also very excited about the centralized lab segment and distributor network covering more than 80 countries. The hard work and dedication of our team to deliver superior service is unmatched and has driven over 170 million in sales over the last two years as we have leveraged our patented co-private platform to provide state-of-the-art diagnostic products to this important business segment. In addition to our suite of COVID-19 diagnostics that have been developed over the last two years, these diagnostics include other coprimer-based IVD products developed either in our U.S.-based laboratory or our joint venture in India, including tests for diseases like tuberculosis, Zika, dengue, chikungunya, malaria, hepatitis B and C, and human papillomavirus. We also continue to see our mosquito abatement coprimer product experience even wider adoption allowing municipal mosquito abatement districts to better serve the public good by identifying the presence of diseases like West Nile virus, western and eastern equine encephalitis, and St. Louis encephalitis in mosquito pools and targeting the areas where those diseases are found. We will continue to prioritize R&D efforts as we grow that product pipeline along with expanding our worldwide network of capable distributors and participating labs. Among the other exciting and innovating product offerings that are actively in development include a multiplex STI panel to detect and differentiate between four prevalent causes of sexually transmitted infections for which analytical performance testing is currently underway in collaboration with clinical partners. Additionally, a malaria test that was designed to differentiate between the different species of the parasite known to be resistant to treatment and also an expansion of our Logic Smart ABC test to include respiratory synctile virus, or RSV. As a technology company, our co-primer platform also has applications that extend far beyond COVID and infectious disease. These include liquid biopsy for cancer detection, the development of which is ramping up as we position the company to take part in this historic and challenging development in human healthcare. The exquisite specificity of coprimers has been shown to have excellent capabilities in the detection of cancer-associated mutations present in human blood. And a panel has been developed that detects six of the most common single nucleotide mutations of the EGFR gene associated with non-small cell lung cancer. This panel is undergoing performance verification with clinical samples, which will also have applications for the paper authored last year, that will be subjected to peer review after the conclusion of the study. Other assays have been developed for several pathogens of significance in dentistry, mental health, and veterinary medicine. Analytical performance is being evaluated for these assays. We continue to make progress in our agricultural vertical, including in our work with Bayer Crop Services and LGC. We signed a contract with Bayer pursuant to an ongoing proof of concept project using our patent pending NGS library prep technology. Bayer is now offering products based on our proprietary co-primary technology to the agricultural market. Overall, we believe that our operational and executional enhancements, including investments in talent and R&D, continue to yield positive results and are further positioning co-diagnostics for future growth. Every action we have taken since becoming a public company has been deliberate. Our strong margins and healthy balance sheet have positioned us well to fully realize our vision and continue to expand our menu of state-of-the-art molecular diagnostics. The Kodiak's YourTest PCR platform has been designed from the beginning with the ability to operationalize testing on a regular basis in at-home and point-of-care settings. We believe it is the optimal solution not only for COVID, but for other infectious diseases that we intend to add to our testing menu over time. It is inexpensive, fast, accurate, with gold standard PCR results and capable of multiple syndromic testing going forward. We believe that our history of remaining ahead of the curve since the onset of the pandemic will continue to drive this trajectory of growth. I would like to conclude my prepared remarks by thanking our employees, distributors and customers for their dedication and action in helping to deliver tremendous results for 2021. This concludes my initial remarks. Let me now turn things over to Brian Brown for a review of the key metrics and numbers. Brian? Thanks, Dwight.
spk07: And thank you, everyone, for joining today's call. As Dwight mentioned, we made significant progress during fiscal 2021. I'm encouraged with the progress we made during the year, both from an operational and financial standpoint, and remain excited for the future. For fiscal year 2021, revenue increased to $97.9 million as compared to $74.6 million for fiscal 2020. The increase in revenue on a year-over-year basis was primarily driven by increased global sales of our Logic Smart COVID-19 tests. Gross profit for the year increased to $86.3 million compared to $58.0 million in fiscal 2020. Our gross margin percentage of 88.2% for the year increased from 77.7% in fiscal 2020, reflecting continued improvement in our manufacturing processes and a shift in our product mix as compared to the prior year. Record revenue and gross profit performance, driven by increased sales of our Logic Smart COVID-19 tests, enabled us to achieve significant year-over-year growth. Total operating expenses for the 12 months ended December 31st, 2021, were $40.2 million, an increase of $23.9 million over the $16.3 million in fiscal 2020. The year-over-year change was driven primarily by an $11.8 million increase in our research and development expenses over a prior year period, most of which can be attributed to the investment in our Codex YourTest PCR device. Sales and marketing expenses for the year also increased to $13.4 million from $4.7 million in the prior year. The year-over-year change was primarily driven by increased third-party commissions on higher international sales. Additionally, we continue to invest in our people and processes, including our sales and marketing team and marketing mediums. For the full year, income before taxes increased 7.3% to $45.6 million as compared to $42.5 million achieved in the prior year same period. Income tax expense for the year was $9.0 million, representing an effective tax rate of 19.7 percent. Our effective tax rate will generally differ from the U.S. federal statutory rate of 21.0 percent due to state taxes, permanent items, and discrete items. Income tax expense for fiscal year 2020 was less than $100,000, resulting from the release of our valuation allowance in Q3 of 2020, offset by our Q4 2020 tax expense. Full-year net income for 2021 was $36.7 million, or $1.23 per fully diluted share, compared to net income of $42.5 million, or $1.52 per fully diluted share in the prior year. The decrease year-over-year was primarily the result of increased income tax expense compared to the prior year. Now turning to a new metric that we will provide on a quarterly basis. For the full year, 2021, and for each quarter moving forward, we will provide adjusted EBITDA as a key financial metric. Adjusted EBITDA is defined as earnings before interest taxes, depreciation, and amortization with an add-back for stock-based compensation and any material non-recurring expenses. This metric will be beneficial for our shareholders as it more accurately represents our operating results for each respective period. For the year ended December 31st, 2021, we generated 52.1 million of adjusted EBITDA, an increase of 14.9% compared to adjusted EBITDA of 45.3 million in the prior year. We remain committed to improving the health and flexibility of our balance sheet. Our diligent approach during fiscal 2021 allowed us to opportunistically closed on two acquisitions during the fourth quarter, both of which were key to the continued development and future manufacturing of our Codex YourTest PCR device. Cash, cash equivalents, and marketable securities increased to $89.9 million at December 31, 2021, from $47.3 million at December 31, 2020, representing an increase of $42.6 million, or 89.9%. Our highly liquid no-debt balance sheet enables us to execute on a strategic growth plan. We continue to invest time and money into our people, processes, and research and development as we look to scale and expand to new verticals to solidify our future. Net cash provided by operating activities for the year ended December 31st, 2021, was 41.1 million compared to operating cash flows of 28.2 million in fiscal 2020, The meaningful increase in cash flow from operations is a reflection of the efficiencies we've gained, as well as the process enhancements we continue to make throughout the organization. Just over a week ago, we announced the authorization of a $30 million share repurchase program. We believe this element of our capital allocation strategy is aligned with our commitment to return value to our shareholders and also reflects confidence in our balance sheet and strong cash flow generations. Additionally, we believe that this authorization provides us with an opportunity to strategically allocate capital in a way that demonstrates our positive outlook for the future of co-diagnostics. Our team's dedication to the success of our business was on display during the year. Our strong performance would not be possible if it were not for their many contributions. As we look to the balance of fiscal 2022, we have established the right operational and scientific teams that will support our future growth. Turning now to our guidance. During the first quarter of 2022, we have experienced strong demand for our diagnostic products. These demand trends provide us with visibility and confidence in the near term and enables us to provide a financial outlook for the first quarter ended March 31st of 2022. Our first quarter guidance assumes the following. Revenue in the range of 21.0 million to 22.0 million a 7.5% increase at the midpoint compared to the first quarter of 2020, diluted EPS in the range of 17 cents to 20 cents based on 32.4 million diluted shares outstanding, and adjusted EBITDA in the range of 9.0 million to 10.0 million. Again, adjusted EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, with an add-back for stock-based compensation and any material non-recurring expenses. Before I turn the call back to Dwight, I want to reiterate the gratitude and appreciation we have for our dedicated employees and customers. Without their hard work and support, we would not have been able to achieve the strong financial performance we did during fiscal 2021. Moving forward, we have a strong foundation that provides us with momentum to achieve further growth. We are enthusiastic about the opportunities that the Codex YourTest PCR device platform will provide once regulatory approval is received. We remain committed to continue investing in people, processes, and research and development, and focused on building upon the platform we have already established, which we believe places us in a position of strength to capture market share during 2022. I'll now turn the presentation back over to Dwight.
spk05: Thank you, Brian. This concludes our prepared remarks. The remarks, operator, we will now take questions from our analysts.
spk01: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time we will pause momentarily to assemble our roster. Our first question comes from Yi Chen with HC Wainwright. Please go ahead.
spk03: Thank you for taking my questions. The first question is regarding the repurchase program. Could you share with us how many shares have already been repurchased? And also, do you think it would be better to save the cash for additional acquisition opportunities? Thank you.
spk07: Actually, Dwight, if you don't mind, I can answer this question. Go ahead, Brian. Yeah, we haven't purchased any shares back because we're in a blackout. So we certainly can't do that during a blackout. So that's answer to number one. Number two is, you know, we're looking at both the need to commercialize the Codex YourTest PCR device in addition to share buyback. So we're managing both of those needs. And so we've done our analysis on our end and know what makes the most sense for us on both things. We know that it's going to require cash to be able to commercialize the product, so we're making sure we have that still with us so we can make that happen because that's our number one goal.
spk03: Got it. And could you comment on any potential new initiatives outside the infectious disease space such as oncology diagnostics?
spk05: Thank you for joining the call. And it's nice to hear from you again. We're very enthused about several different initiatives other than the COVID and infectious disease opportunity. But let me touch a little bit more on the infectious disease because I mentioned The sexually transmitted infections or STI, which is a big area that we've been working on and with some of our clinical partners. And there are about a million STIs every day in the world. And so this is another huge market that we think we can play an important role in. And also in India, we have had a dozen of our tests approved by the CDSCO, which is their version of the FDA. And so we've done a lot of work preparing India. COVID has given us an opportunity to do a tremendous expansion, and we've spent some money there to open up the number of labs, which now are at about 250 within the country. And this is an area where, you know, we expect it to be one of the largest healthcare markets in the world. COVID gave us an opportunity to garner market share at a significant rate. And now that we have the opportunity to go forward with a whole bunch of new tests, about a dozen in all, that significantly expand the market opportunity there. With respect to liquid biopsy, as you know, we have been doing research, significant research in that space for some time now. This is an area that is one of the most exciting areas in human health care, and we have done significant work, learned a lot of things, and prepared a six different EGFR panel test that we expect will be able to move towards commercialization in the future. This is rocket science in molecular biology, so it's not something that will be – you know, looked at in anything but a very serious context in terms of how ready we are to enter into that market and provide a product. I think, like in infectious diseases, our ability to service the liquid biopsy market will center mostly in the areas of high burden developing countries. It will also have appeal in the United States. but we will be concentrating not on the diagnostic side of it, but on the monitoring side and in looking at people that don't know they have cancer, don't know they have symptoms. So it's something that goes ahead of the diagnostic where we can detect way ahead of time the presence of these mutations in a person's blood. That's a significant area for us. We've done a great deal of research on it, and we look forward to commercializing a product in the future. We've also done very important work in other areas, including what we're doing with Bayer Crop Services and LGC. We're happy that recently Bayer Crop Services has begun offering products utilizing our co-primers in certain places of the world, and that's the culmination of a great deal of research and development and having them look at our product and our technology and being able to embrace it. So we're excited about that. Of course, we continue to make strides in our mosquito abatement program. We continue to sign counties in certain places of the United States, and we think this is going to be an ongoing and growing product. I just add that the mosquito is the most deadly creature on the planet and it's one of the areas that we have developed a specific product with some real good results and continue to sell new counties on this program I think finally with respect to what we're developing I mentioned what we're doing in dentistry for example done a lot of significant research there and some of the things that we're doing are in preparation for not only what we're doing with our centralized lab segment, but that we expect to port over to the point-of-care and at-home device. We think that some of these products like that we're doing for dentistry and veterinary and even in agriculture will have application in both of those two different business segments, that is centralized lab business segment and the point-of-care and at-home product.
spk03: Got it. Thank you very much.
spk01: Our next question comes from Jim Sidoti with Sidoti and Company. Please go ahead.
spk04: Good afternoon. Thanks for taking the question. Can you give us a little more detail on what milestones you have left for your test system?
spk05: The new system is, I would say, characterize it as that we're on the precipice of beginning our clinical trials. As I mentioned in my prepared remarks, our focus has been to make sure that we have a product that meets the highest performance levels that we can possibly obtain before we put it into the market. And so we're in the process of tweaking certain elements of its performance so that when we release it, we have something that is really superior. And we haven't been trying to hit a particular deadline as much as we've been trying to optimize the breadth of the product. As I mentioned in my prepared remarks, originally we had contemplated this being a saliva direct product, but in In our work with the FDA, we decided we would expand it to include not only the saliva direct, but also the nasal swabs. And swabs, of course, that can be used in other parts of the body, depending on what it is you're trying to test. So, you know, it took some, made a little bit of a delay, but made it so when we do have an authorization, We anticipate it to be for a much broader market and a lot less sort of fits and starts as we have to continue to develop further iterations of the device. We're not trying to game the next Omicron surge. We have a very solid product line to deal with that in the centralized lab environment. We of course want to put this point-of-care and at-home device out there as soon as we possibly can, and it is the single biggest focus in the company. You know, when we went from our parent company employment base of about 50 people at the end of the year through these two acquisitions, we now have a neighborhood of 125 people. So we have a lot of folks that are working on this particular project. A lot of great engineers and PhDs that are really super focused on this. So we don't anticipate it being an extraordinary long period of time until we're able to commence our clinical trial and then make a submission. But when we do that, we expect it to be a product that is really worthy of notice in its performance and in the breadth of the market that it's going to be able to serve.
spk04: So is it fair to say the delay is something you measure in months and not in years?
spk05: That's certainly correct, yes.
spk04: And then on the fourth quarter performance, you know, the revenue was down, but gross margins jumped up from around 84% in 2020. It looks like it was around 88% in 2021. What happened there?
spk07: Yeah, Jim, that's a couple of things. One of the biggest things is the mix. Last year in 2020, we would have sold a significantly higher number of devices that have a much lower margin than the tests. And so it was just the biggest thing is the mix between one of the biggest things is the mix between what we were selling tests versus devices. Most of what we sold this year in Q4 would have been tests. very little in devices, so it's higher margin product. The other piece of it is just enhancing the production process and becoming more efficient. Those are, I think, the two key things to think about.
spk04: All right, and seeing as we only have about a week left in the quarter, is it fair to say that you're fairly confident in the first quarter revenue guidance?
spk07: I guess the question for you, Jim, is we probably wouldn't put it out there if we weren't confident in it. So I think, yes, we've got about a week left in the quarter. We're confident in the numbers we put out there for guidance.
spk04: All right. Thank you.
spk07: You're welcome.
spk01: Our next question comes from Theodore O'Neill with Litchfield Hills Research. Please go ahead.
spk02: Thanks very much, and congratulations on results for the year. First question is about a follow-up on margins. Your 2022 margins improved year over year, partly because of mix, more test reagents than equipment. So can you talk about the margin impact as you start to sell the COTIX platform and the reagents for it?
spk07: Yeah, just in terms of margins for the new products, we don't expect that the total margins over time are going to be much different than the margins we have currently. They're clearly initially, if you commercialize a product, clearly one piece of that product is probably going to be a little lower margin than the other. And until we get a number of months behind us, I think our margins will suffer a bit, but they'll come back to where they currently are, maybe a hair lower than that. I think there's certainly going to be a little bit of a drag When it comes to everyone else selling a device, the margins aren't typically as high as just as we've experienced with the devices we sell for centralized labs. The margins aren't as high as they are for the tests. So there's going to be a mixed issue also as we commercialize that, and that will have an impact on margin initially.
spk02: Okay, that makes sense. And if the U.S. government does not reauthorize any additional money for COVID testing, Would this have an impact on your business?
spk05: I think we'd have to say that free money from the government certainly would enhance sales. So I think it would have an impact on us or anybody else that's in the COVID space, which is the reason why we have, you know, had the foresight a year and a half ago to say what impact happens after COVID traverses from a pandemic to an endemic phase. You know, molecular diagnostics was a big business before COVID. It will continue to be a big business after COVID. The question becomes what kind of platform will win in a post-COVID environment that is a post-pandemic environment. And we believe, and I think other people believe, such as Dr. Scott Gottlieb, that this paradigm shift in the FDA allowing the at-home testing is going to make it so these other endemic diseases will also have an opportunity, as Dr. Gottlieb says, that it opens up a whole new range of home testing for a big range of products of different pathogens. So I think it's just... important to realize that we had the foresight, you know, more than a year and a half ago to recognize that and to begin the development of a product so that when we came through that whole period, our product offering would have applicability to lots of other diseases. And keep in mind that, you know, COVID is so pernicious in terms of its lethality that these other things like the flu and RSV, even strep, for example, they will need to be tested along with COVID. COVID will have to be a part of the mix of what people are tested for. And in that regard, the multiplexing capability of our device will be critical in making it so people can test for a number of different diseases for a very small price at home or at the point of care. And that's all part of the strategy going forward. So I think if you were to look before COVID and say, what would have been the best device to have on the market during COVID? Had we been able to do this two years ago, that would, of course, been awesome. But going forward, it is clearly the best solution and going to be very powerful in our belief.
spk02: Okay, thanks, Dwight.
spk01: This concludes our question and answer session. I would like to turn the conference back over to Dwight Egan for any closing remarks.
spk05: Thank you, Operator, and thanks to all of you for participating on the call. We look forward to an exciting 2022 as we launch the anticipated commercialization of our new Kodiak's at-home point-of-care platform. It's a PCR gold standard platform, and we're also very excited about the continued progress in our other significant initiatives, and we look forward to visiting with all of you on our next call. Good day.
spk01: conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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