QuidelOrtho Corporation

Ladies and gentlemen, thank you for standing by. Welcome to Quidel Corporation Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later instructions will be given for the question and answer session. If anyone has difficulty hearing the conference, please press star zero for operator assistance. I'd now like to turn the call over to Mr. Ruben Argueta, Quidel's Director of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining today's call. With me today is our president and chief executive officer, Doug Bryant, and Randy Stewart, our chief financial officer. Our third quarter 2020 earnings release is now available on ir.quidel.com, our investor relations website. We will also post our prepared remarks on the presentations tab of our IR website following the conclusion of this call on October 29th for a period of 24 hours. Please note that this conference call will include forward-looking statements within the meaning of federal securities laws, including our anticipated revenues for Q4 2020. Forward-looking statements by their nature involve material risks, assumptions, and uncertainties. In particular, our expectations and assumptions around the impact of the COVID-19 pandemic on our business, results of operations and financial condition, and that of our suppliers, customers, and other business partners are uncertain and subject to change. Many possible events or factors could affect our future financial results and performance, such that our actual results and performance may differ materially from those in the forward-looking statements. For discussion of such factors, please review Quidel's most recent annual report on Form 10-K, including the section titled Risk Factors. registration statements and subsequent quarterly reports on form 10Q as filed with the SEC. Furthermore, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, October 29, 2020. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for the three and nine months and at September 30, 2020. If you have not received our news release or if you would like to be added to the company's distribution list, please contact me at 858-646-8023. Following Doug's comments, Randy will briefly discuss our financial results and we'll open the call to take your questions. I'll now hand the call over to Doug for his comments.

Thanks, Ruben, and good afternoon, everybody. Welcome to my 47th consecutive quarterly earnings call. I hope that you and your families are well and safe during these challenging and uncertain times. At the moment, America faces the prospect of a third wave of COVID-19 infections, as indicated by a rise in the number of daily cases. Now, up to 23 infections per 100,000 residents. The spread of the novel coronavirus has migrated from metropolitan centers to suburban areas and even to the countryside. The weather is getting colder and the flu season is still looming. As we face the potential for a third wave and another rise in infections, our company understands the need for increased testing and continues to rise to the challenge in the fight against COVID-19. by expanding access to affordable, highly accurate diagnostic testing throughout our communities. I couldn't be more proud of our people, those deemed essential as well as those working from home. With the way that they've embodied the Quidel spirit through dedication, determination, perseverance, singular focus, quick problem-solving ability, and a team-first mentality, all the qualities that are a bedrock of our company's culture and allow us to tackle a challenge like COVID-19 had on. We had a record quarter in terms of revenue consistent with our pre-announcement and a record in terms of profit for the quarter. To be efficient, I'll let Randy provide more detail on revenue and margin in a minute. Here are the revenue drivers for Q3 at a high level and what we can expect in Q4. First, the rapid point of care operations and supply chain teams in San Diego exceeded expectations. Line two was converted to SARS antigen production, and the nasal foam swab issue that slowed the kitting process has been resolved, which together enabled us to reach the level of 2.1 million kitted Sophia SARS antigen tests per week. We believe we can sustain that level of production throughout the fourth quarter. While shipments in Q3 of SOFIA influenza should have been and were lower than the prior year quarter, we have manufactured and shipped several million dollars of our SOFIA influenza tests already this quarter, as well as several million dollars of our SOFIA-ABC combination tests. We expect at this point to move to 80% ABC combination tests and 20% SARS antigen tests in December. We placed approximately 5,000 SOFIA-2 instruments in Q3 and expect to exit the year with about 75,000 analyzers on the ground. With recent increases in instrument production, we expect to satisfy most of the pent-up demand from the traditional laboratory segment by the middle of Q1 2021. and can then begin providing instruments more routinely to newer market segments and opportunities, which are endless. I will mention quickly SARS antigen when I talk about pipeline, but we're expecting a meaningful revenue contribution from this new product in Q4 as well. Second, the molecular operations and supply chain teams in Athens, Ohio, were rock solid in Q3 and poised to both meet increasing demand for Allura SARS in the fourth quarter and to ramp up production of Solana SARS following EUA clearance from the FDA for that new product. Third quarter revenue of Lyra SARS, driven by orders from just over 120 North American customers and a handful of international sites, was better than we had suggested. And fourth quarter Lyra SARS revenue looks to be about a third higher sequentially. We're expecting a meaningful revenue contribution from salon of sars in the fourth quarter as well in terms of our ongoing covet pipeline we will go into some detail at our investor day which is scheduled for november 12th in the meantime here are a few high-level notes first in q4 we expect to launch our sophia serology assay another first of its kind into a limited number of sites to do studies with the intent to demonstrate the clinical utility of the point-of-care finger stick combination assay that tests for IgG antibodies to the nucleocapsid protein and to two distinct epitopes, S1 and S2, of the spike protein in just minutes. We also expect to launch QuickView SARS, which, promisingly, has shown similar performance in terms of agreement with PCR and SOFIA SARS antigen. We are executing on a plan that should get us to a manufacturing capacity of 50 million quick-view SARS tests at some point per month in 2021. In terms of molecular products, we are expecting to launch Solana SARS in Lyra ABC in Q4. Initially, we intend to manufacture about 1 million Solana SARS tests per month for about 700 or so of our existing Solana customers. Each Solana instrument can perform 12 Solana SARS assays at once in 25 minutes. The data generated by the Solana SARS isothermal molecular assay show remarkable agreement with extracted PCR. We expect that demand for a mod complex assay with this speed and performance to be quite high. In terms of our core business and pipeline, I'll save that for the investor day, which should allow more time for your questions today. During our time together on November 12th, a few members of our executive team and I will cover three topics. First, we'll take you through what our long-range plan looked like before COVID, a plan that resulted in 12% compounded revenue growth over a six-year period. I'll provide an overview, then we'll jump into the details. Dr. Tammy Ranali and Dr. Johannes Kehle will bring you up to speed on the Savannah program. As you'll see, Savannah is destined to become the next flagship product for Quidel and is expected to be a key growth driver for the company. Bill Forenzi, who heads up our cardiometabolic business unit, will provide an update on Triage True, our high-sensitivity troponin assay, And Dr. Verna Kroll will talk about our non-COVID SOFIA product line. And I'll summarize by talking about the longer-term collateral benefits of what we're doing with COVID and how that de-risks our longer-term growth plans. Next, we'll provide an update on the entire COVID pipeline, and we'll describe our expectations for those products over the next couple of years. Karen Gibson will give you an update on the SNFLS program. And we'll talk about use cases for the product in the market segments that seem to be the best fit. And finally, we will talk about bigger and more aspirational ideas. Dr. Verna Kroll will discuss Project Leapfrog and how this advanced technology could address many diagnostic testing needs at the point of care or even at home. We'll talk about our vision for at-home testing and the democratization of point-of-care testing for many routine conditions. And Randy Stewart, our CFO, will talk about our financials over the LRP and our thinking around capital deployment. It should be a great half day, and I look forward to bringing you all under the tent, so to speak. In summary, the 1,300 employees at Coidel had a great quarter and were poised for a great year end and an even better 2021. I realize that some of our larger competitors dismiss us. and think we are punching way above our weight. But this company was built for what we're doing today. We have extraordinary strategic, technical, and commercial competencies and the ability to scale to much greater heights. And most important, we are happy. Randy?