Lucira Health, Inc.

Good day and thank you for standing by. Welcome to Lucira Health's third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Greg Chodachak. Please go ahead, sir.

Thank you, Charlotte, and good afternoon, everyone. Earlier today, Lucera Health released financial results for the third quarter ending September 30, 2021. A copy of the press release is available on the company's website. Joining me today on today's call is Eric Engelson, President and Chief Executive Officer, and Dan George, Chief Financial Officer. Before we begin, I'd like to remind you that during the conference call, the company will make forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including without limitation, the risk factor section in the company's annual report on Form 10-K and quarterly reports on Form 10-Q, which identify the specific factors that may cause actual results or events to differ materially, from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development, product potential, the regulatory environment, sales and marketing strategies, capital resources, or operating performance. With that, I'll now turn the call over to Eric.

Thank you, Greg. Good afternoon, everyone, and thank you for joining us. Welcome to the third quarter 2021 earnings conference calls. As the world continues to navigate the waves of new COVID-19 variants, as well as the continued spread among the unvaccinated and among those who are vaccinated yet infected, we continue to see the need and subsequent demand for decentralized testing options. Testing remains a critical contributor to the return to normalcy, and customers welcome accurate, easy to use, and reliable options. that provide quick results. Our Lucera COVID-19 All-in-One Test Kit and our Lucera Check-It COVID-19 Test Kit provide lab-quality molecular testing in a small, easy-to-use form factor for use anytime and anywhere while producing PCR-quality results on the spot. Throughout the past 18 months, we have seen testing volume fluctuate in the range of 800,000 to 1.5 million per day in the U.S. Irrespective of these fluctuations, this is a substantial volume of daily testing. The market for testing remains strong, as does the demand for our tests. Lucera's is an accurate and convenient testing alternative to lab tests, the benefit of which is that immediate on-the-spot results inform early treatment or quarantine decisions thereby aiding in the fight against further infectious outbreaks. We believe that our efforts over the past eight years have resulted in what we believe is a versatile testing platform, that we are well on our way to achieving manufacturing scale, that the initial commercial channels have been defined and success has been demonstrated in selling into these channels. We further believe that the success that we are enjoying as a result, in large part, of the efforts of the expanding team of highly skilled Lucera employees, contractors, consultants, partners, and suppliers who leverage their experience and passion to deliver a great product to our customers. We will continue to revolutionize the at-home testing market for infectious diseases, starting with Lucera's COVID-19 test kit. We welcome the advent of antiviral medications for COVID-19. and look forward to their commercial availability. As with antiviral medications for influenza, these drugs appear to be most effective when taken early in the course of infection. This speaks to the utility of Leucera's accurate on-the-spot molecular test as a companion diagnostic that can be used to detect infection early. We anticipate the same benefit from our multiplexed flu A, flu B, and COVID-19 test kit, which is in development for both influenza and COVID-19 treatment medications. Looking back on the quarter, we are pleased with what we have accomplished and the steps taken to propel Lucira to the next level. Lucira's test provides lab accuracy in an instrument and reader-free, fully disposable form factor that is easy to use and easy to carry. Lucera's test is readily carried in luggage, for example, when traveling. Our test does not require cleaning, calibration, or an app and is powered by two AA batteries included with the test kit. Since commercialization, we have seen our test used in several capacities, including but by no means limited to the following. One, aiding in the travel and leisure and corporate enterprise testing markets. due to its fully self-contained form factor and ease of use. Users may test at home or in their hotel room and then produce a Lucy Pass on our easy-to-use text-based reporting system as proof of a negative test result. The Lucy Pass can be shown at an entrance door to an enterprise, for example, or submitted as a PDF to an airline website when obtaining a boarding pass. This is a convenient and time-efficient testing means for travel. We have had reports of individuals traveling extensively using the Lucy Pass. Two, supporting concierge medicine doctors as they travel to patients. A visiting physician can start the test, depart to make their next stop before the test is completed, and then the patient can easily communicate results back to their physician. This nicely fits the mobile workflow of the modern healthcare practitioner. And three, families are able to test all family members concurrently, and medical clinics and dentist offices test patients on the spot. The elimination of an instrument or reader means that there is no testing bottleneck or lab capacity issue. As many people can be tested simultaneously as there are Lucera tests available, and there is no investment in testing infrastructure required. We believe we continue to establish ourselves as a leader in the untethered mobile molecular testing environment and will continue to build and capitalize upon the many opportunities that are provided by the Lucera technology. During today's call, I will review our third quarter highlights, provide a business update, and discuss our plans and outlook for the future. I will then turn the call over to Dan who will give a more detailed review of the financial results. Before turning to a more detailed review of the third quarter, I would like to provide a financial summary. We are encouraged by our strong third quarter. Our organic revenue growth continued to accelerate as the quarter progressed. In the third quarter of 2021, we recorded revenue of $15 million, representing a 21% sequential growth from the previous quarter of 2021. Gross margin when excluding impairment and certain obsolescence charges is continuing to improve sequentially as our volumes increase. Although we anticipate we could be at a positive gross margin run rate by the end of 2021, we are instead prioritizing increased investment in manufacturing capabilities in response to demand. In fact, total demand exceeded total shipments in the third quarter of 2021. and accelerating the product ramp in the Dominican Republic remains a primary focus. We remain on track to bring the Dominican Republic facility to capacity production in the first half of 2022. To this end, senior Lucero manufacturing personnel are now stationed in the Dominican Republic and will continue to be so on an ongoing basis in partnership with the team from our contract manufacturer, Jabil. We believe this joint presence has yielded positive results. Based on our demand trends and operational achievements, we are forecasting fourth quarter 2021 revenues of at least $30 million and 2022 revenues in excess of $150 million. Our business strategy is to grow revenues increase margins, and expand the product pipeline. To drive the strategy, we remain focused on several key initiatives that we discussed last quarter. As a reminder, these initiatives focused on opportunities generated by our over-the-counter indication, growing international revenue, and aiding in the worldwide reopening and control of COVID-19 and its variants. Many of these initiatives were vital to driving revenue during the third quarter, and we hit several significant milestones. We are excited to share the strides that we have made toward these goals. First, looking at our over-the-counter indication, the Lucera Check-It Test Kit was granted FDA authorization via EUA in the first half of 2021. As a result, a test allowing users to detect a positive result in as few as 11 minutes or to confirm a negative result within 30 minutes is available to individuals without requiring a physician prescription or oversight from a healthcare professional. FDA authorization was an instrumental milestone and is the foundation that we continue to build upon. A vital mission of ours is to make our product accessible. We strive to provide customers with ready access to testing with an accurate, easy-to-use, at-home alternative to centralized testing via various distribution channels. While demand in all distribution channels has remained strong, we paused online sales of our product late in the second quarter to better support large contracts. We are pleased to share that we have reopened online sales of our Lucira Check-It Test Kit on our website and on Amazon. Our decision to allocate inventory to our online retail channels was based solely on our desire to get tests into the hands of retail consumers and had nothing to do with overall demand, which remains very strong. Now, turning to international business. Last quarter, we mentioned the growing globalization of our sales and its contribution to revenue. We continue to support international customers and, as in the U.S., see vigorous demand. Our Quality and Regulatory Affairs team has been instrumental in facilitating the importation and approval processes of various countries along with our international partners. As an example, in October, we received Pandemic Special Access Route, or PSAR, approval for our Lucera Check-It COVID-19 test kit by Singapore's Health Sciences Authority. This is an essential step in our continued international commercial expansion. As part of the approval, we have partnered with Labgistics Asia to import and distribute Lucera's products in Singapore. While the continued presence of COVID-19 and the rise of its variants are unfortunate, we continue to see demand for testing, particularly as the world continues to reopen and COVID-19 becomes endemic. To support the sales ramp, we have taken several steps and made essential personnel investments to sustain this growth. Our sales strategy has been developed to service the various sales channels to capitalize on the growing demand and to increase access to our product. This strategy includes business-to-business, including corporate enterprise sales, partnerships with telehealth, and testing service providers, events, and travel and leisure. International, including enterprise and government. Business to consumer, which is serviced by our online presence. Healthcare, including hospital networks, clinics, dentists, pre-procedural testing, and more. The four sales strategies are resourced with experienced sales executives and team members. Our commercial team, led by Chief Revenue Officer Kevin Collins, has demonstrated effective selling into these channels. This team onboarded beginning in the second quarter and expanded further during the third quarter. As Lucera continues to grow, so does our executive team, and we have made several top-tier additions during the third quarter. In August, Ghazi Khashmola joined the company as Chief Quality Officer and Executive Vice President, Regulatory Affairs. With over 30 years of experience, Ghazi and his expanding team are playing an important role as we expand globally, bring new products to market, and manufacture increasing volumes of our current product. Additionally, in September, Tony Allen joined the company as Chief Operations Officer. With over 25 years of experience in operations and management, Tony and his expanding team have been instrumental as we increase production, streamline operations, and increase product availability in a growing number of countries. During their brief tenure with Lucera, both Tony and Ghazi have made profoundly positive impacts on the business. Moving to manufacturing, in the second quarter, we opened a new production facility in the Dominican Republic run by our manufacturing partner, Jabil. We are delighted to report that we have worked through many of the initial startup challenges associated with a new production center and that we currently have two lines running. We anticipate having all four production lines operating at full capacity in the first half of 2022. As these lines ramped during the third quarter, we began to see improved efficiencies in the Dominican Republic, while at the same time we experienced continued labor shortages in our Michigan plant. Ultimately, this led us to the decision to consolidate all current manufacturing into the Dominican Republic and to implement a fifth line that will be operational and then at capacity in the first and second halves of 2022, respectively. We expect the Dominican Republic production facility to be able to support our near-term business needs. I would like to acknowledge the team in the Dominican Republic for their strong performance, as well as to compliment those who worked hard and made key manufacturing innovations in Michigan. One of the benefits of Lucera's platform technology is its ability to be adapted to diagnose other infectious diseases. It was designed with this flexibility in mind. In addition to the COVID-19 tests, a pipeline of new tests is either in full-scale development or in feasibility. And seeing the positive commercial success of the COVID-19 test has led us to redouble efforts to bring additional tests to markets. With this in mind, I would like to provide an update on a few products in our pipeline. The first is what we refer to as our ABC test, a multiplexed flu A, flu B, and COVID test. With a single swab sample, a user can have results from these three tests all in one device at the same time. This development program is fully resourced and is on track for a 2022 FDA submission. Pending the submission process and regulatory approval, we anticipate that this product could be available to support the 2022 flu season. Second, we have commenced feasibility testing on a menu of additional respiratory and STI indications. As we have more updates on our pipeline and our progress, we will provide them as we prioritize follow-on tests for full-scale development. Lastly, I want to briefly mention that as a result of its utility, we are more fully resourcing the internal team behind the Lucy Digital Reporting Platform. The Lucy platform provides users an easy way to receive a digitally verified test result and to access this result for up to seven days on a smartphone. This text-based platform is a value-added service that we view as an important complement to our testing platform. Broadening the capabilities of Lucy is the mission of this growing internal team and we look forward to sharing more with you in subsequent quarters. Before I end, I want to acknowledge, recognize, and thank all of our employees and contractors. The leadership and continually improving execution that this growing team is providing is the reason for the success that we enjoyed in the third quarter. The entire management team and I are honored to work with such a skilled and experienced team. We are excited about our future and look forward to the upcoming quarters. I will now turn the call over to Dan George, our CFO, for a detailed discussion of our financials.