Opko Health, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Opco Health Fourth Quarter 2020 Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Yvonne Briggs at LHA Investor Relations. Please go ahead, ma'am.

Thank you, Operator, and good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining today's call to discuss Opco Health's financial results for the fourth quarter of 2020. I'd like to remind you that any statements made during this call by management other than statements of historical fact will be considered forward-looking and as such will be subject to risks and uncertainties that can materially affect the company's expected results. Those forward-looking statements include, without limitation, the various risks described in the company's SEC filings, including the annual report on Form 10-K for the year ended December 31, 2020, and in subsequently filed SEC reports. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 18th, 2021. Except as required by law, OPCO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Before we begin, let me review the format for today's call. Dr. Philip Frost, Chairman and Chief Executive Officer, will open the call. Then Steven Rubin, OPCO's Executive Vice President, will provide a business update and pipeline review, and then Dr. John Cohen will discuss bioreference laboratories. After that, Adam Mogul, OPCO's CFO, will review the company's fourth quarter financial results, and then we'll open the call to questions. Now I'd like to turn the call over to Dr. Frost.

Good afternoon, and thank you for joining the call today. Today we're reporting record revenues earnings, and cash from operations for the fourth quarter and full year 2020. Although every aspect of OpcoHealth was touched by COVID-19 during 2020, I'm particularly proud of our hardworking teams at BioReference Laboratories as they rose to the challenge of scaling up COVID-19 testing services at an unprecedented pace in a fast-moving and highly uncertain environment. We've made significant investments in human resources, adopted innovative new testing models with our retail partners, invested in state-of-the-art technologies, and reconfigured our laboratories to expand our testing capacity and deliver timely results. The ability to ramp up capacity while maintaining accurate results and rapid turnaround times reflects the talent and dedication of BRL's management team and employees. We had record COVID-19 PCR testing volume during the fourth quarter, although our base business, which has substantially recovered during the summer and fall, stalled towards the end of the fourth quarter due to the surge in COVID-19 cases across the country. We believe BRL's base business will largely return to historical levels and beyond as the vaccination rollout continues and fewer new cases are reported. We've seen a significant interest in the capability of bioreference to compete on the national stage by the number and diversity of industries that now seek us to deliver highly complex COVID-19 solutions. And while demand for COVID-19 testing is likely to decline, We believe it will continue into 2022 and beyond. We're encouraged by the new administration's focus on increasing testing availability across the country and their approach to controlling the pandemic by expanding the availability of testing supplies and enhancing laboratory testing capacity. Despite the pandemic, our pharmaceutical business has made great strides. A highlight earlier this year was the joint announcement with our partner Pfizer that the FDA accepted for filing the biologics license application for somatrogen, our long-acting human growth hormone. In addition, an NDA was submitted in Japan for somatrogen, and we're expecting Pfizer to soon make a regulatory submission in Europe. In the U.S., demand for reality continues to be impacted by the pandemic-related restrictions. and remains below pre-COVID levels. Overseas, our partner V4 Fresenius continues to receive marketing approvals in Europe and is planning a commercial launch later this year. During last year's fourth quarter, we began a phase two trial with Rialdi in COVID-19 patients. Our decision to undertake this trial follows numerous independent studies that indicate an inverse correlation between blood vitamin D levels and COVID-19 risk and severity. This trial is ongoing. We look forward to updating you on results when they become available. I want to thank all Opco employees who have worked tirelessly over the past year. I am proud of what we achieved in 2020, and I'm optimistic about what we can accomplish in 2021. I'll now turn the call over to Steve Rubin to further discuss our business. Steve?

Thanks, Bill. Good afternoon, everyone, and thank you for joining us. 2020 was an eventful year for Opco with the onset of the COVID-19 pandemic. Our reference laboratories demonstrated its ability to be a leading provider of testing services on a national level, not only for COVID-19 PCR testing, but for clinical specialty and genetic testing as well. This leading position resulted in record revenue growth and profitability, which Adam will discuss in more detail. As Phil mentioned, earlier this year we jointly announced with Pfizer that the FDA accepted for review the BLA for somatrogen, a once-weekly treatment for children with growth hormone deficiency. The Target Prescription Drug User Fee Act, or PDUFA, action date for decision by the FDA is October of this year. Pfizer also submitted an NDA to the Ministry of Health, Labor, and Welfare in Japan for so much further. As for Europe, Pfizer remains on schedule with respect to a regulatory submission for marketing approval, and we expect to announce that submission shortly. As this is a global program, Pfizer has also submitted and will continue to submit for marketing approvals in many different countries across the world. Under our agreement with Pfizer, Opco is eligible to receive up to $275 million upon achievement of certain regulatory and pricing milestones. In addition, upon launch, we are entitled to regional tiered gross profit sharing for both Somatrogon and Pfizer's Genotropin. Now I'd like to turn to our commercial pharmaceutical business, starting with reality. Reality numbers for the quarter break down as follows. Total prescriptions for Reality in Q4 2020, as reported by IQVIA, were approximately 15,000, representing a decrease of approximately 16% compared with Q4 2019, and a 10% decrease compared with Q3 2020. The Reality sales force continues to contend with the impact of COVID-19 on access to physicians, as well as a decline in patient visits to doctors' offices. New patient starts, however, increased by 1% in Q4 versus Q3. And since the product was launched, nearly 22,700 patients have had Reality prescribed by approximately 3,400 physicians. Approximately 140 physicians, or about 4% of the total number of prescribers, were new to Reality prescribers in Q4. We anticipate that sales on Reality will rebound as COVID-19 vaccinations become more available and new infections decline. We are pleased to announce that V4 Percentius, our partner for reality in Europe, has secured marketing approval for reality in Spain, Portugal, Italy, and Switzerland, adding to the seven European countries that have previously approved the product, namely the United Kingdom, Germany, Sweden, Norway, Ireland, Denmark, and the Netherlands. Commercial launch is anticipated in 2021, and pricing negotiations are well advanced. Our phase two trial with Rialdi as a treatment for patients with mild to moderate COVID-19 is progressing as we continue enrolling subjects at multiple sites across the U.S. The trial is a randomized, double-blind, placebo-controlled study and is expected to enroll approximately 160 patients, including many with stage three or four chronic kidney disease who are at a higher risk for developing more severe illness. These outpatients are being randomized in a one-to-one ratio to four weeks of daily treatment with either Rialdi or placebo, and then monitored for another two weeks. The dosing regimen is designed to quickly raise and maintain serum 25 hydroxy vitamin D levels within the range of 50 to 100 nanograms per mil in order to induce calcitriol production in macrophages, thereby enabling them to secrete LL37, a potent antimicrobial protein that can destroy SARS-CoV-2. The primary efficacy endpoints include raising and maintaining serum total 25-hydroxyvitamin D within the range of 50 to 100 nanograms per mil and time to resolution of COVID-19 symptoms. Should the data from the trial be positive, we intend to seek emergency use authorization from the FDA for reality for this indication. There have been numerous independent studies reporting an inverse correlation between vitamin D status and COVID-19 risk and severity, which, as Phil mentioned, underscores the rationale for the trial. Two recent reports from Spain indicate that orally administered immediate release calcifediol is effective in mitigating COVID-19 severity in hospitalized patients. The first report by Castillo in 2020 showed that calcifediol therapy reduced ICU admissions from 50% to 2%. The second report, Minogas, in 2021, showed that ICU admission was required by 5.4% of patients treated with calcifediol and 21.1% of patients treated with placebo. And deaths occurred in 6.5% of patients receiving calcifediol versus 15% of those on placebo. The calcifediol dosing regimen in both of these studies was the same. And according to our calculations, it likely raised serum total 25-hydroxyvitamin D levels to at least the range of 50 to 100 nanograms per mil. To update you on other reality studies, we have completed our phase four clinical trial comparing reality with three common treatment regimens for secondary hyperparathyroidism in adult patients with stage three or four CKD and vitamin D insufficiency. top-line data are fully consistent with the previously announced interim results, namely that a daily dose of 60 micrograms of Vraldi is the only treatment that raised serum total 25-hydroxyvitamin D to the range of 50 to 100 nanograms per mil, a level required to effectively suppress elevated plasma parathyroid hormone levels in patients with stage 3 or 4 CKD. Earlier this week, We completed our Phase 2 clinical trial, meaning last subject, last visit. That's exploring the safety and efficacy of a high-strength formulation of reality as a new treatment for secondary hyperparathyroidism in adult patients with vitamin D insufficiency and stage 5 CKD on hemodialysis. Final data analysis now underway. We are also currently designing a Phase 2B follow-on study with our partners at V4 and Japan Tobacco. We have several programs in our product pipeline that are advancing in preclinical and early clinical development. The focus here is on our long-acting platform technologies in rare diseases. Two of our most advanced compounds are our long-acting recombinant Factor VII compound for the treatment and prevention of bleeding episodes in patients with hemophilia A or B, with inhibitors to Factor VIII or Factor IX, and our long-acting GLP-2 analog for short bowel syndrome. Our Factor VII compound has successfully completed a Phase I study with subcutaneous administration in healthy subjects and a Phase I-IIa study with intravenous administration in hemophilia patients. Our GRIP2 molecule for the treatment of short bowel syndrome is expected to enter clinical trials in late 2021. Patients with short bowel syndrome typically have undergone massive internal surgery, resulting in significantly reduced or complete loss of intestinal function. We believe our long-acting technologies will offer clinical benefits over current products on the market. Now let me turn the call over to John Cohen to discuss our bioreferenced labs business. John?

Thanks, Steve, and good afternoon, everybody. I'm going to start my remarks with a review of our core business, which includes routine clinical testing and our specialty testing services comprising oncology, urology, women's health, and genetic testing. Overall, sample volume in our core business in Q4 of 2020 was down 7% compared to Q4 of 2019. We saw a decrease in Q4 versus Q3 of this year of about 4%. In Q4 of last year, our women's health business was stable compared to Q3. Our oncology business grew 4% Q4 versus Q3. and our 4K score grew 1% Q4 versus Q3. We believe that the core business will remain 5% to 10% lower for that period compared to 2019, as many patients are still reluctant to visit their physicians. In addition, telemedicine continues to have a significant impact on physician office visits. We expect trends to improve at a moderate pace during the second half of this year. We are pleased with the performance of GeneDx as its volumes have remained stable to pre-COVID levels, Q4 of this year compared to Q4 of 2019. The Q4 volumes for GeneDx was up 11.6% versus Q3 in 2020. Last month, we announced that GeneDx launched several new genetic tests, including repeat expansion analysis for spinal cerebellar ataxia Friedreich's ataxia and other common forms of hereditary ataxias. With these additions, GeneDx has created a comprehensive and affordable offering that covers the vast majority of genes involved with pediatric-onset and adult-onset ataxias. Also in January, we were excited to formally announce the expansion of our digital home testing service under the Scarlett brand. Scarlet is an in-home, fully integrated digital platform that provides access to on-demand diagnostic services. After visiting with a healthcare provider, a patient receives a link where they can elect to utilize Scarlet and schedule an in-person visit by choosing a date, time, and location for a qualified healthcare professional to collect their test specimen. That location could be at the patient's home or office. Patients then receive real-time updates and relevant information, such as learning how to prepare for the visit or tracking the healthcare professional's arrival. Once collected, the specimens are sent to bioreference for testing, and the results are securely available online to the patient and to their ordering healthcare provider. We believe Scarlet delivers an innovative and highly convenient alternative to the traditional patient service center for specimen collections. and is the first of many future initiatives to advance BioReference's digital health strategy focused on providing flexibility and convenience for patients. Now let me turn my attention to COVID testing. In the last year, we dramatically scaled the company to accommodate the need for more testing. In the last 10 months, we have gone from performing 40,000 requisitions a day to 115,000 requisitions a day. We increased our employee headcount from 4,000 to 8,100. We increased our clinical staff from 120 to 300, and we now serve 19 million patients per year, which is up from 11 million patients a year in 2019. As for COVID testing, to date, we have performed more than 12.5 million COVID-19 PCR tests in the nation. In the fourth quarter, we performed about 4.5 million COVID-19 molecular tests, which is up 24% from the 3.5 million tests performed in the third quarter. We are averaging between 50 and 60,000 tests a day with a current capacity to do more than 100,000 PCR tests per day with an average turnaround time of less than 48 hours in most cases. BioReference remains committed to providing innovative solutions to the COVID-19 testing needs of the physicians, health systems, long-term facilities, governments, schools, employers, sports teams, entertainment venues, transportation, hospitality, and the general public through our relationships with Rite Aid and CVS with now over 1,500 locations around the country. We believe that rapid testing with point of care devices will play an increasingly important role in detecting the disease in situations where a timely result is important. We have validated multiple different point of care platforms and have partnered with several manufacturers to provide customized solutions for many different industries. We have developed proprietary software for several point of care devices to deliver and report results in a timely fashion. To date, we have performed 100,000 rapid tests for different clients, and our point of care test volume grew 260% from Q3 to Q4. Last month, we announced COVID-19 testing agreements for players and officials, as well as the team and league staff for the 2020 and 2021 seasons for the National Basketball Association and for the National Hockey League. We continue to dominate the sports vertical with our contracts with the NFL, the 32 teams in 30 cities, the NBA with 30 teams in 28 cities, and the NHL with 24 U.S. teams in 22 cities, with a rapidly growing services organization and a logistics operation to support these venues across the country. I want to call out our partnership with the NFL. We performed 1.3 million COVID-19 tests for 5,000 staff, coaches, and players every day for seven months and ran 15,000 logistic routes so that 268 games could be played that culminated in the Super Bowl on February 7th. Testing was just one part of the NFL's multiple mitigation strategies and the compulsive commitment to safety that resulted in an infection rate of less than 1%. I am also proud to announce today that we have an agreement now to provide COVID-19 testing for all major 30 major league baseball teams around the country. At this point, BioReference performs COVID-19 testing for all five of the major U.S. professional sports leagues, namely football, baseball, basketball, soccer, and hockey. In addition, BioReference successfully supported the Winter X Games in Aspen, and is supporting the U.S. Soccer's women's and men's national teams and the NBA G League in Orlando. We are performing fan testing for several of these teams and partnered recently with the Buffalo Bills organization to allow 7,000 fans to attend each of their two playoff games. This program was the first of its kind in the U.S. and required all fans to obtain COVID-19 PCR results from bioreference within 72 hours of the game. BioReference's quick response to the pandemic has highlighted our position as a leading national laboratory and has led to numerous high-profile private and government contracts for COVID-19 testing. We are one of the largest providers of testing for public school students in the country with our preferred relationship to test students in New York City. We have now tested almost 300,000 students with a program that tests almost 1,200 schools weekly. Our custom solutions utilizing both lab-based PCR and point-of-care tests has positioned us as the leading provider of large-scale COVID screening programs in the country. And now I'd like to turn it over to our CFO, Adam.

Thank you, John. The fourth quarter financial results reflect the tremendous effort that Steve and John highlighted. As I will cover in more detail shortly, Despite all of the challenges, our commercial teams have delivered solid performances across all portions of our business, resulting in operating profit led by bio-reference, but also positive operating profit contributions by our Rialdi commercial team, along with most of our international operating companies. Total revenue for the quarter was $495 million, an increase of more than 120% over 2019's $224 million. Our diagnostic segment reported revenue from services of $458 million compared to $178 million for the 2019 period. The increase in net revenue was driven by the execution of our COVID-19 testing strategy, as well as continued sequential improvements in our volumes for our base business, as John mentioned. Combining our routine testing business and our COVID testing business, Volumes overall increased over 170 percent compared to historical levels. Overall routine clinical testing, however, remained below historical levels, while genetic testing improved each month, resulting in an overall quarterly genetic testing volumes being flat compared to the 2019 period. The diagnostic segment reported operating income of $69.9 million compared to an operating loss of $45.4 million. an improvement of $115.3 million over the 2019 period. The fourth quarter of 2019 included a non-cash impairment charge of $38 million related to our CLAROS point-of-care development program. Overall, selling general and administrative research and development expense decreased as a percentage of revenue from 33 percent down to 18 percent, reflecting overall operating leverage improvement. total costs and expenses increased by $164.6 million compared to 2019, including increased cost of revenues of $176 million due to the overall increase in testing. Moving to our pharmaceutical segment, we reported revenues of $36.7 million for the fourth quarter of 2020 compared to $46.4 million for the 2019 period. Revenue from product sales for the fourth quarter of 2020 decreased slightly to $30.8 million, including $10.1 million of revenue from Rialdi, compared to $32 million in the fourth quarter of 2019, which included $12.6 million of revenue from Rialdi. The growth rate of Rialdi has been negatively impacted by the stay-at-home orders and physician office restrictions, which restrict product sales representatives from making calls in overall reduced patient office visits. However, we saw a sequential improvement in the gross to net price realization. When looking at revenue from the transfer of intellectual property, we reported $5.9 million of revenue for the 2020 period, compared to $14.4 million a year ago, reflecting the completion of our SOMATROGEN Phase III clinical trial. As a reminder, we had been amortizing our upfront payment from Pfizer over the development period and now have fully amortized that upfront payment. Loss from operations from our pharmaceutical segment was $9 million for the fourth quarter of 2020 compared to $56.8 million for the 2019 period. The 2019 period included an impairment charge of $53.7 million related to two of our acquired development programs. Overall research and development expense for the fourth quarter of 2020 was $17.5 million compared to $23 million in 2019, reflecting reduced spending on our SOMA TROGEN development program. On a consolidated basis, the fourth quarter of 2020 had an operating profit of $49.3 million, a significant improvement of $162 million over 2019's operating loss of $112.5 million. Our net income for the fourth quarter of 2020 was $32.3 million, or 5 cents per diluted share, compared to a net loss of $112.4 million, or 18 cents per share for the 2019 period. Finally, for the fourth quarter of 2020, we generated $34 million of cash from operations, resulting in a cash balance at December 31st of $72.2 million. We have approximately $158 million available under our lines of credit. The combination of our cash on hand and lines of credit provide us with a strong balance sheet and adequate capital resources heading into 2021. As we look forward into the first quarter of 2021, we see a significant opportunity to continue to generate operating profits and cash flows. Given the uncertainty of the testing demands for 2019, We are limiting our forward-looking guidance to the first quarter and look forward to providing greater insights into the remainder of 2021 as we see how demand for testing evolves. For the first quarter of 2021, we have built the following assumptions into our forecast. We anticipate performing between 4.2 million and 4.8 million COVID-19 PCR point-of-care and antibody tests during the first quarter. As John mentioned, we have capacity well in excess of these levels should demand for testing increase. Our revenue could expand beyond our guidance. We assume our base business for both routine, clinical, and genetic testing will remain at current levels, which overall are in the mid to high single digits behind 2019's levels. We anticipate Royalty sales to remain behind 2019 in the first quarter of 2020's levels until our sales force is able to fully return to the promotional activities, at which time we expect Royalty to return to growth. With that, overall, we expect revenue for the first quarter of 2021 to be between $450 and $500 million, including revenue from services of $420 million to $475 million, revenue from products of $27 to $32 million, and other revenue of $3 to $6 million. We expect costs and expenses to be between $430 to $460 million, resulting in an operating profit of $20 to $40 million at various points between the revenue and expense assumptions. Operating profit includes approximately $22 million of non-cash depreciation and amortization expense, as well as an expectation of research and development expense of $20 to $22 million. With that, I will open up the call for questions. Operator?

Thank you. As a reminder, ladies and gentlemen, to ask a question, you will need to press star 1 on your telephone. And to withdraw your question, just press the pound key. Our first question will come from Maury Raycroft from Jefferies. You may begin.

Hi, everyone. Congrats on all the progress in the updates today, and thanks for taking my questions. First question is just checking to see if you can provide perspective into pricing and reimbursement pressure with COVID-19 testing saturation and increased competition. I guess, how should we think about reimbursement for the PCR testing going forward? John?

I don't know, Adam, you want to, or you want me to go into the point of care?

Yeah, so we continue to see kind of mid-level, mid-60s overall reimbursement for PCR. I think our view is that it's going to continue to be stable during the first quarter, despite some of the changes that have been enacted under Medicare. I think our overall pricing and reimbursement should remain at those levels.

Got it. Okay. And then also wondering how you think about conversion of COVID-19 testing costs and personnel back to what the new base business will be as COVID-19 testing demand retreats over time. How are you guys thinking about that?

Yeah, I think the, you know, I don't want to confuse or the The PCR testing long-term with what's happening on the rapid point of care side. So there is still a fairly large amount of interest and contractual relationships being established between multiple different industries relative to their desire to continue to test, whether it's lab-based PCR or point of care or rapid testing. So eventually, which, you know, I don't know when that will be yet, quite honestly. So I don't, there's no plan yet to downsize any of the workforce relative to what's going on for COVID because of the huge demand that we're seeing on the on the point-of-care rapid side for multiple industries.

Got it. Okay, that's helpful. And then last question is on reality. So you talked a little bit about the Stage 5 CKD study and that you're going through the data. Can you just talk a little bit more about what you plan on reporting as far as the number of patients and some of the data measures that you plan on reporting as well? Hi Mari, this is Charlie Bishop.

Yes, the study that we just completed is an early phase two study, it's phase 2A. It involves a total of 44 subjects, so we'll be reporting on a three to one randomization active to placebo. And the design of the study was basically to look at three things. One is reality tolerated well by dialysis patients, and we used the maximum dose that we thought would be required in order to successfully treat secondary hyperparathyroidism. The data show that there's absolutely no change in the safety parameters at all, even at the highest dose that we chose. Secondly, the goal of the study was to see if reality could in fact be activated in patients that don't have functional kidneys. And the medical literature teaches extensively that activation of reality is required in the kidney. And we have found, contrary to the medical literature, the reality is activated readily without functional kidneys. And lastly, the study was designed, of course, to see if we could lower PTH. And what we found with the study is that in many patients, we could lower PTH very nicely. In other patients, we can't. And this is part of the drug development process. It's up to us now to figure out why it is that some patients do respond and why others do not. And this will go into our patient selection criteria for the follow-on study, the Phase 2B study. I hope that answered your question. Yep.

Yeah, that's very helpful. And maybe last follow-up is just if the COVID-19 reality results could be reported at the same time, or can you provide any more granularity on time when we might see data from both of these studies?

Well, I wish my crystal ball were really great because I can't tell you how the pandemic is going to go, but as long as infection rates stay high, we expect that enrollment will be good. You should keep in mind that we've designed the ongoing COVID-19 study not to take all comers. It is a study in outpatients, but most patients have very few symptoms or asymptomatic And they are not suitable for study to see if an agent like reality can shorten the time to resolution of symptoms. We have to select out patients that have significant symptoms even though they're not hospitalized so that we can see the effect of the drug. So this requires a subset of the total population that's infected with SARS-CoV-2. Got it.

That's very helpful. Okay. Thank you for taking my question.

And our next question will come from the line of Devin Gaiman from Guggenheim Partners. You may begin.

Hi, this is Devin on for Dana Flanders. Thanks for taking the questions and congrats on the quarter. Thanks again for, I guess, some of the guidance that you gave for 1Q. I just had a question on kind of the margin progression throughout 2021. I know there are a lot of moving parts with, I guess, what presumably could be a margin tailwind from improving base business volumes, offset maybe by a headwind from potentially lower COVID testing volumes as the vaccine rollout continues. Could you maybe perhaps contextualize these different levers for us, and do you expect one to more offset than the other? And then I guess tangential to that, I know Medicare and reimbursement cuts under PAMA this year aren't happening. Do you expect this to be beneficial to margins, or do you still expect a healthy level of commercial payer pressure in 2021? Thank you.

Thanks, Devin. So, I'll try to address them. And, John, please weigh in as well. So, I think the margin evolution, what you saw in the third and fourth quarter, you know, are pretty consistent. I think as COVID testing volumes continue to move, as John highlighted, into the point of care, I think those will stay and remain healthy. The PCR margins for us will also stay pretty healthy. I think as the base business, you know, is at, you know, about 90% to 95% of historical levels, the cost structure is there. So really the variable cost that come through on our COVID testing is really what's going to drive margin changes. Very closely tied to both revenue line items. As it relates to Medicare changes and PAMA, I don't think and we don't expect any meaningful changes to the overall reimbursement in 2021. Obviously, the delay of PAMA into 2022 is pretty much is fully baked into the numbers that I gave for the first quarter.

Yeah, I think that's right. I mean, I don't, I don't see much more discussion of PAMA right now until, you know, 2022 at the earliest. And there's a, you probably know if you follow this, there's a, an appeal on the way that PAMA was priced. That was won by the, by ACLA. So there's a, there's a lot of muddiness around the, where PAMA is going to head in the future of PAMA right now.

Okay, great. Thank you very much.

And our next question will come from Edward from Pepper Sandler. You may begin.

Great, thank you, and good evening, everyone. I want to echo our thanks for all of your hard and important work in terms of all of the testing that's being done. I had one quick question. I just want to make sure I heard this right, Adam. Did you say that the $38.7 million clarifying, where was that recognized? That was last year. Oh, last year, sorry. Yeah, okay. And then looking at some of Trogon, can you tell us a little bit about what prep work is being done, both on the regulatory side, you anticipate that there would be a panel, and then also over at Pfizer with respect to commercial readiness. Thank you very much.

So we don't expect a panel, Ted, but the work is, you know, we're responding, advisors respond on a real-time basis to various inquiries. There are inspections going on, some of them including down here in Miami. So that's a pretty ordinary course at this point as we go through the process. Okay.

And then what about on the commercial side?

Okay.

So Pfizer's got the primary responsibility for the commercial activities, so I think you'd have to direct the questions to them.

Fair enough. Thank you, guys.

And our next question will come from the line of Yale Jen from Laidlaw and Company. You may begin.

And good afternoon. And also I put in my congrats on the great quarters. The first question I have is that in terms of your guidance, 4.2 to 4.8 million PCR tests in the first quarter, do you guys have any thoughts in terms of the trends for the serological tests for 2021, especially small people getting vaccines?

John, do you want to manage that? This is the, uh, you're talking about the serology test for, for antibodies. Is that the question? Yes.

Yes.

Yeah.

So, um, um, it's still a, uh, and I know we have a very large capacity to do, uh, several hundreds of thousands of antibody testing. If, uh, if need be, uh, we've, uh, we have, uh, at least two different platforms are running the antibody testing on which are both quantitative at this point moving away from the qualitative assay which was the first one out so the the question of who's going to get antibody testing post vaccine to either to document either the effectiveness of the of the vaccine which will depend on which vaccine you get quite honestly or or documenting whether you have the disease. There's been an enormous amount of discussion about that right now, but I don't think anybody can predict how much serology testing right now will occur. Some of it will be related to, I believe, travel more than probably the other industries, meaning can you validate whether you've either had the vaccine, had the disease, or have enough antibodies to to travel probably internationally. And I think that maybe it's probably biggest role coming up. But that's a guess.

Okay, great. One more question. It's on the COVID-19 reality studies. You mentioned there's only selective patient that is relevant. Could you give us some sense of what portion of the COVID patient, hospitalized patient, would be more suitable for treated by reality.

Hi, Yale. What we're using for primary efficacy endpoint in the ongoing study is a patient reported outcome tool that's been validated for viral infections. And we require patients to have a score on that tool that's above a certain level in order to get into the study. And what that does is it enables the time course of the disease to be fairly long in quite a few patients and long enough even in those patients who resolve quickly that we can hopefully differentiate active versus placebo treatment. So I'm very pleased with the way that we're able to enroll patients into the study. We see a spread in time to resolution of symptoms ranging from two days to more than 42. That's exactly what we wanted to see. So patients fill out this tool every day and we can monitor how their symptoms improve over time. Now it's our expectation, based on what we're seeing from screening and also from what we see in the literature, that somewhere around the range of 20%, maybe a little higher percentage of the patients, would have severe enough symptoms that they would want to treat to try to accelerate resolution of those symptoms. It's possible in time that we can develop this drug to treat hospitalized patients, but we don't yet have plans to do that. I hope I answered your question.

Yes, that is very helpful. And again, congrats on the great quarter.

Thank you. As a reminder, that's star one for questions. Our next question will come from Ye Chen from HCW. You may begin.

Hi, thank you for taking my question. My question is, recently the World Health Organization has released the guidance to laboratories stating that they should reduce the cycle count in PCR tests, which could lead to a lower number of new COVID-19 cases detected. So what's your opinion on that, and what's your current practice?

Yeah. You know, we run at least four platforms now, different manufacturers. One of them in particular, well, there's really two, you know, we, if requested, we'll report out the CT values, cycle time values. I don't, we're not, we're not in the position to determine the you know, what that should or shouldn't be relative to the platform manufacturers getting their approval or EUAs relative to how they report out their results. So if we have a platform that reports out CT values and the patient physician client requests that to be reported, we will report it to that client. But we don't make that decision relative to changes in how CT values get reported on the platforms. That would be a vendor decision.

Okay. Thank you.

Thank you. And our next question is from Mike Petusky from Barrington Research. You may begin.

Thank you. Good evening, guys. Thank you. So, Adam, I may have not quite caught it, but your guidance on reality for Q1 is just – was it simply below Q1-20? That was essentially the guidance?

That's right. That's right, Mike. So it's included in the total number, but I didn't break it up separately. Okay.

All right, great. And then just, I guess, a longer-term question, and I know that this is sort of an ever-changing – as we learn more. But as you think about COVID-19 PCR tests, serology tests over time, I mean, three years from now, is this still a, I suspect it would be much reduced, but is it still a meaningful part of BRL revenue or do vaccinations sort of then take such hold and regularity for people that it's it's, it's not anywhere near materiality, uh, three, four or five years from now. Thanks.

Yeah. So that's the, uh, you know, that's a multi million dollar question, right? We, nobody has any idea how this will evolve or, or morph over the next, you know, uh, one to two years. We, you know, I think everybody hopes that this all goes away. Um, Now, having said that, right now, all the variants are being treated by the, or at least mostly, depending on some changing data, by the current existing vaccinations. The question will be, of course, is does some other variant emerge that needs some other type of treatment and or testing? We have not seen that yet. So I honestly don't think anybody has the answer to that. It's just... You know, it's the same with the vaccine. Is it vaccination so that you get it one time, or is it going to be like the flu where everybody needs the COVID vaccine every fall? So I don't think anybody right now I haven't seen can predict three years out is what you're asking. The question is, it's too far from now, right now.

Fair enough. Thanks, guys. Appreciate it.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Dr. Frost for any closing remarks.

Thank you all for your participation and good questions. Say well. And we look forward to being with you again to report the first quarter results. Good night.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.