LumiraDx Limited

Good day and thank you for standing by. Welcome to the LumiraDx first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today. Melissa Garcia, please go ahead.

Hello, everyone. And welcome to today's call to discuss LumiraDx's first quarter 2023 financial results issued earlier today. Joining us are LumiraDx's chairman and CEO, Ron Zwanziger, and chief financial officer, Dorian LeBlanc. The press release announcing our financial results is posted on the investor relations section of the company's website at lumiradx.com. Before we begin, I would like to caution listeners that any statements we make today Other than historical facts, our forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please be aware that all such forward-looking statements involve risks and uncertainties, such as those detailed in our annual report on Form 20F for the year ended December 31st, 2022, which was filed with the SEC on May 1st, 2023, and in other filings that we make with the SEC. Any forward-looking statements that we make must be considered in light of these factors. Actual results may vary materially. Also, during today's call, we may refer to certain non-IFRS financial measures. Non-IFRS financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with IFRS. There is a schedule showing the reconciliation of these non-IFRS financial measures in our press release issued earlier today, which can be found on our website at LumeriDx.com. I will now turn the call over to Ron Zwanziger for opening remarks. We will then provide financial and business updates before answering questions. Ron?

Thanks, Melissa. Good morning, everyone, and thank you for joining our first quarter results call. We continue to advance our three priorities, which include commercializing our product portfolio of 12 CE mark tests in Europe and other international markets, progressing our U.S. revenue pipeline and 510K plan, accelerating the development of our high-sensitivity troponin and molecular assays on the platform, and reshaping our organization while lowering our cost base to support strong innovation and commercial success. Milestones reached in Q1 in Europe and other international markets include launching the world's first quantitative finger stick NT Pro BMP test in Q1. This test delivers results in 12 minutes, allowing for immediate linkage to care for patients suffering from heart failure, which afflicts nearly 65 million people worldwide. In February, we showcased this test alongside Medtronic and a number of local healthcare trusts in the UK as part of your Heart Matters bus initiative, delivering free healthcare checks in the community. Since February, we've already shipped our NT-PRO BMP test, the highest margin product in our cardiometabolic portfolio, to more than 100 commercial customers. As previously announced, we achieved NGSP certification in Europe for our HbA1c test, and recently, recertification with the International Federation of Clinical Chemistry, demonstrating the high performance of our assay. Boots Pharmacy announced a new private pilot service for diabetes screening utilizing the Lumary DX platform, and cuts in demand continues to grow across Europe for this assay. We received Japanese PMDA approval for both our HbA1c and CRP tests. These tests are going through commercial readiness implementation, and we currently plan to commence commercial sales in June for Japan. Japan represents an attractive market with high reimbursement and pricing for point-of-care assays. The first quarter marked our highest quarterly sales to date for INR, CRPG, Dyma, HBA1C, and NT-PRO BMP as more European international customers take advantage of our multi-analyte menu. Additionally, we're optimizing the testing locations of our instruments to prepare for a growing shift to non-COVID testing. We're working closely with our customers to achieve this. In the UK, we successfully deployed nearly 800 instruments from the NIH from their COVID procurement into testing locations for non-COVID use cases. We expect to continue to deploy, deploying instruments with the NHS for multi and light testing. And we're exploring a similar redeployment initiative for a portion of our 5,000 plus instrument base in Africa. Overall, we're encouraging our customers to maximize the number of test run per instrument. We've seen our customers continue to diversify the number of different assays they are testing on their instrument, and the volume of non-coating with tests they're doing per instrument. In addition to the instruments redeployed with customers like the NHS, we deployed an additional 350 instruments in the quarter. Along with those, we anticipate deploying over 1,000 instruments in this second quarter. In the US, we concluded our 5-day clinical studies for our 5-minute COVID Ultra product and plan to submit the 5-day notification to the FDA in Q2. Our first 510K for the Lumire DX platform importantly helps pave the way for future 510K submissions for the other tests in our menu, including our cardiometabolic portfolio. Due to low prevalence, we were unable to acquire sufficient clinical samples during the current season to complete our 510K clinical study this year. We continue to work with the independent test assessment program, ITAP, established by the NIH. rapid acceleration of diagnostics program to achieve accelerated FDA EUA review for our COVID and flu combination product for the 23-24 season. This program is in its final stages and currently undergoing external testing. We do see expansion opportunities for the LumiraDx platform in the near term in the U.S. for endemic COVID, seasonal respiratory testing, and for the cardiometrics cardiometabolic menu, which we have commercialized outside the U.S. We continue to see increased orders in the U.S. for the platform even prior to the menu expansion. As a result of our cost reduction program, we're accelerating the development of high-value assays for both molecular testing initially with Strep A and TB and for our high-sensitivity troponin assay. We expect clinical trials to commence in these assays in the second half of the year, for US 510K and IVDR in Europe and expect to launch in the UK and other markets later this year, our high sensitivity troponin test. The advancement of technology and new care models introduced during COVID-19 pandemic have accelerated improvements in the quality, efficiency and convenience of healthcare delivery. Our point of care platform which brings together multiple assays on a single easy to use instrument with a laboratory equivalent performance and a low cost of ownership facilitates this new generation of care and is resonating across our customer base. Customers are now developing increased use cases for deploying our unique point of care technology as seen in the following examples. In the UK, some of the previously mentioned redeployment instruments are being positioned in the NHS virtual ward program. Virtual wards, which are a growing trend in health systems worldwide, allow patients to get care they need in a place they call home, including care homes, safely and conveniently, rather than being in hospital. NHS England definition of a virtual ward is a safe and efficient alternative to bedded care that is enabled by technology. The Lumire DX platform, which delivers a broad menu of lab-comparable primary care tests within minutes, is exactly the type of technology enabling this key development towards a more patient-centric healthcare system. Another example, France is in the process of authorizing legislation to enable an expansion of point-of-care testing and reimbursement into clinical settings that have previously been required to use only lab testing, such as medical houses where general practitioners practice facilities comparable to urgent care clinics and nursing homes. This legislation is expected to open a new large new point of care market opportunity in the second largest country in the European Union. The recent amendment to the U.S. Public Readiness and Emergency Preparedness, or PREP Act, which was enacted during COVID-19, extended PREP Act coverage to essentially allow pharmacists and qualified pharmacy technicians to administer vaccine and COVID-19 testing at pharmacy locations. This model emphasizes the need for point-of-care testing and allows a pharmacist to conveniently test results and treat patients in one visit and is especially impactful in geographic areas and for patient populations lacking convenient access to traditional health settings. The Lumeria X platform that utilizes a single instrument with low cost and high accuracy is particularly well suited to serve the trend to consumer-oriented care at retail locations. And the final example we'll provide is on April 18th of this year, the WHO issued the WHO Standard Universal Access to Rapid Tuberculosis Diagnostics, a plan to achieve universal TB testing for the over 10 million infected with TB annually. As part of the report, the WHO calls for a next generation TB test that will be, quote, Low-cost, battery-operated, rapid nucleic acid amplification test that provides results within 30 minutes at an expected price well below the U.S. $10 threshold and suitable for sample times that are simply to collect, e.g., tongue swabs. This is an exact description of the TB test Lumiere DX is developing and speaks to the enormous global demand for our potential first-in-class product. As you can see, the Lumeria DX platform was designed specifically as a diagnostic solution for the myriad traditional and emerging care models. As our platform continues to mature, our menu expands in key geographies, and our customers continue to implement new workflows enabled by our performance, ease of use, and low cost. We remain confident in our platform's capability to transform community-based healthcare with LabCorp results in minutes. Now, Dorian will further discuss our financial performance in the first quarter. Dorian?

Thanks, Ron. Quarterly revenues for Q1 exceeded our recent guidance on stronger than anticipated COVID sales. Of our 22.2 million in first quarter revenues, 7.3 million, or 33% of total revenues, or from non-COVID-specific solutions, including $2.9 million from our Lumira DX technologies and $4.4 million from our distribution business. We expect seasonality in our respiratory business, including COVID, influenza, and RSV testing, to provide headwinds for revenue growth during the next two quarters. We anticipate total revenues in Q2 2023 to be similar to our Q1 results, with growth in our non-respiratory point-of-care tests to compensate for the seasonal decline in respiratory testing. Total adjusted gross margins for the quarter were 0.5 million. Adjusted gross margins exclude net depreciation, amortization, stock-based compensation, and restructuring charges. The full impact of our most recent cost reduction program will decrease our fixed cost manufacturing expenses from June onward, and we anticipate similar modest adjusted gross margins in Q2 as fixed costs and instrument placements dilute the strong gross margin profile of our test strips. As discussed in our prior earnings call, we are in the process of implementing our most recent cost reduction program to generate an additional $36 million of annualized cost savings. We expect that the full impact of these restructuring activities will be realized during Q3 2023. We did accelerate the impact of our operating on our operating expenses from our 2022 restructuring activities within the quarter. Our first quarter adjusted R&D expenses were 14.8 million compared to 16.8 million in Q4 2022, and first quarter adjusted SG&A expenses were 19 million compared to 22.3 million in Q4 2022. Adjusted operating expenses exclude depreciation, amortization, stock-based compensation, and restructuring charges. Our adjusted operating loss for the quarter decreased to $33.3 million and we anticipate our cost reduction programs will further reduce our loss in Q2. In March 31, 2023, our cash balance was $68.1 million. In addition to our specific focus on our cost reduction programs and our declining operating losses, we do expect to deal with our balance sheet later this quarter to strengthen the company for the future. As a prelude to this, we filed a shelf registration statement on May 4th, which became effective yesterday in the amount of $100 million to provide additional alternatives for raising capital. We will now pause for the operator to gather any questions. Operator?

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.

Our first question comes from Vijay Kumar with Evercore ISI.

Your line is open.

Hi, this is Alexandra on for Vijay. Dorian, just one for you. I was hoping you could walk through the cadence of OpEx spend for the rest of the year. I know you just said that you're expecting reduction in the OpEx loss, but just like 3Q and 4Q, what are you expecting?

So we haven't had any real impact in Q1 from the most recent cost reductions, and we only had about half of the quarter from the cost reductions we announced at the end of 2022. So I think you can anticipate that the cost reductions are impacting all three lines of expenses, cost of goods, R&D, and SG&A. So we have the full 3 million to come out, and you can think of that almost as being split a million, a million, a million across those three lines. And we have additional couple million of expense that's gonna come out from the cost reduction, the full impact of the end of 2022 cost reductions.

Okay. And then one for Ron. Could you just give some more color on the install-based utilization, how you're expecting base business revenues to look for the rest of the year, and, like, especially what you're seeing in the UK and Europe?

Well, in a company such as ours, when you're sort of doing a transformational changes, it's always a bit hard to predict, but by way of example, about a year ago, a little over a year ago, in the German-speaking countries of, well, Germany in particular, but Austria and Switzerland, the vast majority, I think 98% of the accounts were testing COVID only. And that's already risen to 23% or 25%, I think 23% are using three or more tests, and that continues to rise. So we're seeing this everywhere. Now, in the UK, we talked about the redeployment of tests, and we redeployed 800 units, and actually we think the NHS might redeploy more. And this is quite an operation, moving instruments around to new locations, and we expect, and we've only just had the first orders from the locations. Previously, all the ordering for COVID was done centrally. Now, these 800 units have gone into, I think, over 300 locations, and I think it's about 300 separate locations, and they've only just started ordering, and each one of these locations, we'll be using a different combination of strips. Now, these are combinations, these locations tend to be with quite sick patients, so the sort of testing, the kind of tests that they'll be used will be CRP, which will be fairly ubiquitous, some INR, and we anticipate quite a lot of antiprobe BMP. So we see that picking up, we see it picking up everywhere. And the feedback we're getting from everywhere in Europe is increased negotiations and increased interest in the multi-analyzed aspect of our platform. And indeed, which we didn't have before because we were so focused a year ago on COVID, but we're now actually getting new orders where the initial order is already for multiple tests. So the whole concept that we set up the company is beginning to take hold. And we mentioned the fact we've got more products recently cleared, two additional products cleared in Japan, so now Japan is getting a bit of a basket of tests as well. So we're anticipating significant growth. Some of the growth, of course, will come from flu A, flu B, which has done very well, but, of course, is decreasing. Well, it decreased. We'll have relatively little in Q2.

Great. Thanks for taking my questions.

One moment for our next question.

Our next question comes from Mark Massar with BTIG. Your line is open.

Hey guys, thank you for the questions. My first question is around the instrument placement number in the quarter. I know it's a relatively small number relative to your install base. Were those, were those, excuse me, substantially all in Europe or were there some U.S. placements?

I think there was substantially all in Europe and there was, and there was, and they were obviously non-COVID.

Yeah, okay. And then, Ron, in your prepared remarks, I heard you say that due to the lack of prevalence of a certain indication, you may not have been able to continue. Was that for the flu, COVID? And can you just comment as to which? Is that for the U.S. clinical trial?

Yes, that was a clinical trial for COVID flu A, flu B, the combination test. And there was just... almost no flu be around. And so, but as we described in the prepared remarks, we're working through the ITAP program where they're doing external testing, where the requirements are different. And we do have, and we think we will have the right, well, we do have the right kind of data. So we expect or expecting to receive that, which will allow us to address the 23-24 season, and then at the beginning of that season, we'll complete the regular trial for a regular 510K for the COVID flu A-B combination.

Okay. All right. That's helpful. And then it's nice to see the good initial uptake of the ProBNP assay In Europe, could you provide an update on the high sensitivity troponin program in in the US?

Yes, certainly so first of all the internal results we have Show that We can achieve high sensitivity which should enable a rule-out claim. So that's where we're at. Now, we're starting the, we expect to start the clinicals for that later this year to cover, you asked for the U.S., but it'll be just the same for Europe, for IVDR. So we're expecting to start those trials for both IVDR and the 510K later this year. Unlike most 510Ks, these are more involved. They involve rather more sites, and they involve a large number of patients in the study. So we expect to do that, and that could take six months, and we hope not more than that simply by having more sites to do the data collection. And then we expect to submit next year. Now, in the meantime, in the US and for Europe, but in the meantime, under the UK self-certification program, we expect to get that through later this year and actually expect to start shipping in the UK for this high sensitivity troponin in the UK later this year. And the fact that we're able to do that opens a select group, a select number of customers, countries, apologies, countries around the world as well. So we can start getting the, we can start generating revenues from the troponin while the IBDR and 510 process completes next year.

Okay, that's great. I believe your Fast Lab Solutions business was primarily COVID. Are you guys looking to try to roll out more content that's non-COVID in that segment?

Well, just to correct your question, we did have on Fast Lab Flu A and Flu B, which we were selling a significant amount of in the numbers you've seen. in the U.S., under EUA, in Japan, and in Europe. So we already have Flu A, Flu B on the platform, and it did very well. And yes, we do expect additional, over time, additional markers on the platform.

Okay, and just the last one for me. I heard you talk about accelerating strep A molecular. What is the status of that on the clinical trial front in the U.S. market?

So we expect to start – it's actually very similar to what I just said about troponin, although the trial itself should be shorter. So we expect to start the strep A molecular trials – this year, later this year, and be on the market, well, subject to the regulatory issue next year. Again, our early results are very good, and we're very excited about the Strep A. And we also have had initial feasibility results, clinical trials, on our TB program, and we expect to submit it to a program organized by FIND, which is an organization in Switzerland that does this, and we expect to be in the market with it. As we said in our prepared remarks, the WHO has got this program, which they described in a major presentation. paper they published in April, this past April, a month ago. And so we expect to be with the TB test on the market as well. Generally, our molecular line, not just the strep A and the TB, but tests coming immediately behind it include chlamydia gonorrhea. that whole part of the company is on quite a roll. And despite the generally severe cutbacks we put in, we actually protected this part in the cutbacks because these tests are so important for our platform.

Okay, that's it for me. Thank you, guys. One moment for our next question.

Our next question comes from Andrew Cooper with Raymond James. Your line is open.

Hey, everybody. Thanks for the time. Some stuff's been covered already, so maybe just first, you know, you talked about Japan and the opportunity there. Can you give us a sense kind of what the footprint is there currently from both an instrument and a sort of distribution capability perspective? And then when we think about that thousand installs you called out for next quarter, how much of that is maybe going to Japan, to other geographies, or help us think about where some of that momentum may be coming from.

Okay, well, first of all, in a moment, I'll ask Dorian because I don't remember, I should remember the number in Japan. It's growing and they're very excited about the two tests that have just cleared. But you specifically asked about the thousand. We did say in our prepared remarks, which you picked up on, that we would deploy over 1,000. I think the way things are shaping up, I do expect the number will be considerably above 1,000. But as we said, it will deploy well over 1,000 and maybe considerably over 1,000. Dorian, do you remember the deployment in Japan?

Yeah, it's between 500 and 600 instruments. And those have primarily just been flu and COVID in the hospital-based business with our partner, Suzaken and Shionogi.

Okay, great. Thank you. Oh, just to clarify. Hold on, just to clarify. Most people on the call wouldn't have understood the comment. Suzaken is kind of equivalent to McKesson in the U.S., so it's a very large distributor. Sorry, go ahead.

Great. Thank you. Maybe one kind of, Dorian, maybe angled a little bit more towards you, but just can you give us a little bit more detail on the growth margins in terms of, you know, are strip margins still tracking exactly as you'd like? And then when we think about the transition from 2Q into 3Q and 4Q, you know, where should we expect margins to sort of land later this year as things get a little bit more normal? Obviously, you have COVID sort of coming down. You have maybe some seasonality and respiratory on the back end as well. Just help us think about the cadence of gross margins and where you would expect those to land kind of at an exit rate maybe.

Yeah, the two things that I mentioned in the prepared remarks that are diluting the margin is we do have a fixed cost base that we still have maintained a portion of through the COVID scale-up that part of the cost reductions that we're working through now is right-sizing that manufacturing footprint and that manufacturing cost base, both in the size of the staff from a wages perspective and just in the amount of activity. So that continues to drag on the margins, but that's certainly a fixed cost and we have tremendous capacity. So as you think about the cost for us to make the next test strip, a lot of that cost is already born in the numbers that you see in Q1. And to your question around where the margins are tracking on the individual test strips, we still have test strip margins exceeding 80% and direct labor and direct materials costs on those test strips. Those who have followed the company and understand and have seen are disposable, can note that the amount of material there is so limited that it really drives spectacular margins on an incremental basis. So as we track through the back half of the year, we anticipate revenue growth both from the core community-based assays and from an uplift in the seasonality from respiratory, especially in the United States, which should deliver a lot of test strip volume that's going to flow straight through the gross margin line. The offset of that, of course, is instruments. Until we move more to a reagent rental model where we capitalize the instruments, we continue to expense 100% of the cost of the instruments when they're placed in the quarter. So that's the other drag that isn't apples to apples. They go to some of our peers, but as we move from the more respiratory business into contracting on long-term arrangements around the broader portfolio, we'll start to capitalize those instruments, and that'll improve the reported margins as well.

Okay, great. I'll stop there for now. Thanks. Just to add a little bit to that question, you recall that the whole process Programmer which we set the company around had three elements to it a single platform Lab performance at the point of care setting and being the low-cost provider Which which we are and it shows up in our gross margin But of course to make to get to profitability we need to keep driving driving more instruments into the field but on the on the on the cost side as using using molecular because we're about to start launching a molecular just to put it in in in context about a are competitive advantage in addition to a single platform and having lab forms at the point of care setting. Some of the molecular tests out there at the moment, the cartridges that they have have been as high as some competitors are as high based on their data as high as $15 a share per test for cartridge. Some are at $10 a test. Some of these are public companies. um as the data is available and then uh some of the higher volume ones uh for the market leaders around the cartridges uh as far as we can tell their cost of production is around uh five dollars per cartridge um our um strep and molecular tests that we just referred to that are coming out are our cost of production is is is under a dollar So our competitive advantage is immense, and it drives the margins, of course.

Maybe actually if I can speak one more in on that front. You know, just help us think about kind of this burgeoning molecular progress. You know, down the road, should we think about COVID or combo potentially transitioning towards molecular or at least having kind of both in the menu and what would the timeframe look like and what are the puts and takes to kind of decide whether to invest behind that versus antigen given all the moving parts and all the options out there from a COVID perspective?

Well, so that's a complicated question because our COVID antigen test performs equivalent. You just have to look at the instruction for use at the, you know, from the FDA website. to see that our antigen test performs as well as some of the rapid molecular tests out there and our costs are much lower. And so it was one thing during the pandemic when people were getting tests without thinking too much and using the very high reimbursement prices on molecular and selling rapid molecular tests. and taking advantage of the pandemonium around the pandemic, particularly in the early phase, but really all the way through. And so for us to switch to having a molecular COVID test on our platform is tricky because our customers have been taking share, particularly now that all the advantages of the reimbursement are gradually disappearing post-pandemic and life is returning to normal, which means people are starting to think about costs and margins more carefully, we actually, our customers, actually gain share as a result of having a more competitive price COVID test, which gave you performance equivalent to molecular for COVID. So it's a tricky issue for us to then say, okay, we'll put out a COVID molecular on the platform. But we have, we actually have done it. We've demonstrated that we can do it. But the priority for us as a result of enormous demand from customers around chlamydia, gonorrhea, trichomonas and others, So it's much more, it's better for us to deploy the R&D resources into those rather than providing a molecular COVID to our platform, even though, of course, it's possible and we've actually done it. That's probably a rather longer than you expected answer.

No, that was great. I appreciate it. One moment for our next question.

Our next question comes from Matt Sykes with Goldman Sachs.

Your line is open.

Hi, good morning. Thanks for taking my questions. Maybe, Ron, just to follow up on those last comments you made, as you kind of expand in the point-of-care market in Europe and elsewhere, have you found that the priorities from the customers have shifted a bit? I'm sure during COVID, throughput was an issue for them, just given the volume of tests that it represented. But as we get into post-COVID and throughput changes, maybe gets deprioritized relative to cost, and you talked about the competitive advantage your customers may have on that cost side. Are you finding that cost is becoming a much bigger portion of a customer's decision relative to, say, throughput, as long as accuracy is still, you know, comparable?

Well, you know, the customer diversity by country, by industry, by their own where they are in the marketplace varies enormously. So that's a very hard question to answer globally, but there are, but cost in general is becoming much, much more of an issue for customers. And candidly, that's one of our advantages because we do perform. And so one of the reasons we're quite optimistic And we we're optimistic about sort of the increasing deployment and you know our comment that will place More than a thousand some of some of that is directly associated with question you just asked so so I so I do think we give our customers a competitive advantage In countries where you have competing health systems And in countries where you have nationalized systems. It just gives us it just gives them that the the low-cost and alternative which which they prefer and of course it gives them the convenience um and so think of the virtual award program which we described in the nhs we we provide the look we provide the low-cost solution but we along with the convenience so yes i think i think customers uh uh are responding but there are obviously some customers it's a it's a decreasing number who who who who kind of are trying to pry every last penny out of reimbursement but the um But, of course, the payers don't like it. And we're kind of on the right side of this argument.

Got it. Thanks for that. And then, Dorian, you know, in February, you filed and said you modified the debt agreement with a senior lender to waive some financial covenants until the end of June. Obviously, the filing of the shelf could potentially address some of those issues. But is there room for, you know, additional strategic discussions to take place to push that out if needed? or is it really the shell filing that is likely going to address those covenants?

I think we've got a few options, and we've allowed this to play out the length of time that we have to make sure we make the best decisions. We have a very collaborative lender. As you mentioned, that was our fifth amendment that we signed in February. I'm certain that we have room to continue to draft amendments and work through any issues with our lenders. It's been fantastic and supportive and supports the technology, the company, the team. But yes, we obviously have to address the capital position of the company. The shelf gives us another alternative to do that, and we'll continue to work through it here in the quarter.

Got it. And just one more question from me. You mentioned that, you know, with the cost savings actions that you made last year and then again this year, you've protected some areas. You mentioned chlamydia, gonorrhea. I'm just wondering from the opposite side, could you talk about areas where you've deprioritized due to the cost savings initiatives that you've enacted thus far?

Well, Ron mentioned, you know, from the previous question, switching some of the antigen tests to molecular as an area where we had been doing work, but we deprioritized because really that decision from a customer perspective is primarily a reimbursement decision, and that dynamic's changing pretty rapidly. So that was an area that we've de-emphasized. Obviously, we mentioned previously putting our AMIRA program on hold as well. But some of the assays that are longer range, beyond Troponin, we have other markers for the emergency room, but landing Troponin first as the flagship in that franchise is really important, so focusing on that. The value of our molecular with the cost structure that Ron mentioned, the performance, the pathway to development because it's a qualitative result and is kind of easier to get all the way through our programs and to launch. All of those reasons make molecular tremendously attractive to drive not only rapid revenue growth, but rapid margin growth. So that's why we prioritized those assays and some of the other community-based emergency medicine assays, immunoassays, we've just pushed out a little further. Got it.

Thank you very much. But just to be clear, part of the cutbacks was a fairly severe cut in R&D. So there were quite a number of programs that have been delayed as a result of this. We just focused on the ones that, of course, are remaining, which are the high-margin troponin and the molecular ones in particular.

Understood. Thank you very much. One moment for our next question. Our next question comes from Jeffrey Colbert of Leidenberg Thalmann. Your line is open.

Hey, good morning. Thanks for taking the questions. Just a few from Aaron. Could you clarify in Japan what's approved now? There's two tests approved now. Was that HBA1C and flu COVID?

We have the COVID antigen test. We have the COVID flu A, flu B multiplex. And we have HBA1C and CRP. Remember, Japan has 100,000 physician offices worldwide. That's a tremendous opportunity for this type of technology where you can consolidate a number of instruments onto a very small physical space that most of these physicians operate out of. You can move away from doing lab send-outs and move the revenue into that physician office to allow them to do the testing there and get reimbursement. So the menu is really attractive. The multiple assays on a single instrument, really attractive for the Japanese market, tremendous opportunity for us. We also have the FAST Labs products cleared in Japan as well and have a partner distributing those from the lab perspective.

Okay, got it. And then I wanted to jump back to some commentary in Africa that you made earlier in the call. So could you talk about the units there and redeployment from what types of locations to what types of locations? Could you elaborate a little bit, please?

Yes, the 5,000 instruments were distributed in Africa at the beginning of the pandemic under the agreement with the Gates Foundation to about 50 countries. And we're in the process of rounding, of pulling back at least two and possibly 3,000 of these instruments and focusing them down on fewer countries, probably less than a dozen. And so this is all underway. So it's quite a logistical problem to round all these instruments up and move them in. And the focus of what we're doing is non-communicable diseases, particularly diabetes, but also CRP testing as a proxy for TB testing, and all this is being done in preparation for the launch of the TB test next year. But in the meantime, there's quite a big focus on A1C. For example, there's a trial program running at the moment in South Africa with 25 25 drug stores doing A1C testing. And that program is likely to expand, and it's one of the foundations of what we're doing by focusing the instruments down in a certain number of countries.

Okay. Thanks for all that helpful. And then lastly, can you talk about the U.S. market and what we should anticipate here, both on the regulatory front and the current market. So you did talk about COVID flu. And I guess the question is, will that make the 23-24 season? And talk a little bit about troponin and what else might be planned for the U.S. as far as trial work and or anticipated approvals.

Yes. So we mentioned that we're expecting to address the next flu season through the ITAP program, assuming that all goes through. We already mentioned that we're doing the first 510K to establish both the strip and the instrument we're doing on COVID because it's the obvious one to go first. But then after that, we will be adding the flu A, flu B, which we mentioned that we'll be doing the trial at the beginning of the season. And then we'll be systematically bringing in additional tests. including NT pro BMP and possibly INR as well and then of course a troponin stress stress and troponin we talked about extensively we're doing those clinical trials in the second part of this year and they're specifically designed for for the US market so we should be applying for both of those hopefully in the early part of next year and expecting to get it on the market subject to obviously the clearance later in the year.

Okay.

I was just going to add, you know, we actually continue to see opportunity to take share in the U.S. on endemic COVID testing, you know, kind of based on the competitive pressure around pricing, our performance, and our cost structure. So there continues to be opportunity there as well in the near term.

Got it. Okay. Thanks for taking our questions.

I'm not showing any further questions at the time. I'll turn the call back over to Ron for any closing remarks.

Thanks. I thought you'd never get to that with all the questions. Well, look, folks, our transition to non-COVID is beginning to develop, especially with the commercial launches of the HBA1C and the NT-PRO BMP on our platforms. Customer response continues to be positive, and we're collaborating with our key customers on use cases where our platform can change clinical pathways and then enable better patient outcomes. Developing new use cases with customers takes time, and we're beginning to see the first green shoots developing partly enabled as our menu of tests has expanded. Again, bringing together multiple assays on a single easy-to-use instrument with a laboratory-equivalent performance and the low cost of ownership is enabling a transformation in community care. Thank you for your time and your support for us. Have a good day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.