QuidelOrtho Corporation

Welcome to the Quardell Corporation First Quarter 2021 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 Store 0 for operator assistance. I'd now like to turn the call over to Mr. Ruben Arguera-Quardell, 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 first quarter 2021 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 May 6th for a period of 24 hours. Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. Forward-looking statements by their nature involve material risks, assumptions, and uncertainties. In particular, our expectations and assumptions around the COVID-19 pandemic impact and response on our business results of operations, and financial condition, and that of our suppliers, customers, and other business partners are highly uncertain, continuously evolving, and unpredictable. 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 a 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 10-Q 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, May 6, 2021. 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 months ended March 31, 2021. 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.

Thank you, Reuben, and good afternoon, everyone. Thank you all for being with us. I know it's quite late for many of you, but your time and your interest in our company are appreciated. As you saw in our press release, our first quarter 2021 results showcase a very strong performance, execution, and capital discipline of our Quidel team. We delivered a 115% increase in revenue, a 163% increase in gross profit, and an approximately 340% increase in net income and earnings per share compared to the same period one year ago. We achieved this growth while simultaneously launching new products expected to have high impact, like our quick view at home OTC rapid antigen test and Solana SARS-CoV-2, completing the construction of a new distribution center, continuing to establish our new manufacturing facility in Carlsbad, managing a challenging supply chain, negotiating regulatory clearances, and advancing innovative new product platforms that will give us the foundation to capitalize on mass market opportunities that will serve quidel well into 2021 and beyond these results would not be possible without the extraordinary vision talent commitment and grit of the entire quidel team we see it every day in our labs manufacturing facilities and packaging operations as well as across our strategic and specialty teams from regulatory and quality to hr marketing in emerging markets. Everyone is stepping up big to take on the unique challenges brought on by the global pandemic. While doing our part in the fight against COVID has remained the top priority for us, we have also undergone a significant transformation as a company over the last several years centered on the belief that what we do empowers others to take charge of their personal health and well-being. In doing so, our customers can pay it forward by taking prudent steps to protect their families, coworkers, and communities. That is the diagnostics-based force multiplier that is helping to contain the pandemic. The breakthrough products we have introduced are meeting society's needs thanks to our R&D and innovation teams. As a result, we have several other strategic growth drivers worth noting. As most of you know, we are poised to introduce Savannah, a multiplex molecular analyzer that enables professional customers to analyze up to 12 pathogens or targets plus controls in a single assay run in under 25 minutes and built on our proven robust real-time PCR techniques. Given an ingenious combination of many unique factors, we managed to achieve superior and differentiating performance for turnaround time, simplicity, ease of use, modularity, and versatility of the platform. This revolutionary Savannah technology promises to disrupt and decentralize multiplex molecular testing, extending big iron centralized lab capabilities to moderately complex labs, regional hospitals, and potentially physicians' offices, urgent care clinics, and other point-of-care settings. Feedback from customers has been tremendous. We have submitted our first Savannah product four analyte respiratory panels to the FDA recently, and we expect to submit our first 510K package to the Savannah platform in the back of it this year. Regarding cardiometabolic product development, we began U.S. clinical trials in April for a triage high-sensitivity troponin and expect to submit a de novo 510K package for PLGF, also known as placental growth factor, this quarter. Very soon, we look forward to introducing our long-awaited SOFIA2 coronavirus antibody test, or as it will be more properly known, the SOFIA2 SARS-CoV-2 antibody IgG FIA. Our proprietary technology employs immunofluorescence for the rapid qualitative and differential detection of human IgG antibodies to SARS-CoV-2 nucleocapsid proteins spike protein 1 and spike protein 2 from finger stick whole blood, venous whole blood, and serum and plasma specimens from patients suspected of COVID-19 exposure. Our SOFIA-2 analyzer instrument also reports semi-quantitative signal-to-cutoff values for antibodies to each protein, which is an indicator of antibody titers or levels in the body. That's the technical side of the story, but the use case is far more understandable and compelling. Patients who experienced COVID-like symptoms before PCR and antigen tests were widely available want to know two things. Did they have COVID, and do they have antibodies against future infections? Our COVID blood test detects antibodies to three distinct parts of the virus, along with the individual's degree of active immune reaction to COVID-19. The test can also be used to confirm a vaccinated patient's passive immune reaction by detecting antibodies to spike one, which is the single target protein for current COVID-19 vaccines. We plan to submit to the FDA an EUA packet imminently and believe that access to this antibody test will bring peace of mind to countless people with pressing concerns about their immunity or vulnerability to COVID-19 infection. We are already getting calls from urgent care and medical practices with patients asking for the test. Also in the coming months, we look forward to introducing our compact and competitively priced SOFIA Q analyzers, which should accelerate and amplify SOFIA platform penetration across traditional point-of-care outlets and ultimately reach the over-the-counter market. During the first quarter, we also focused on portfolio and channel expansions to enable Quidel to enter new markets, which we expect to be significant drivers of market demand and revenues going forward. Several of these opportunities have been secured and are beginning to take shape in the second quarter. Perhaps the most significant inflection point for our company came on the final day of the quarter, the first quarter that is, when we received EUA from the FDA for non-prescription use of our QFU at-home OTC COVID-19 test for pre-symptomatic and asymptomatic screening through serial testing. This over-the-counter sales authorization and embrace of frequent testing represents a sea change for viral diagnostics regulation that is already generating a wave of demand for at-home testing and testing for reopening at schools, workplaces, and entertainment sites. The next day, which was the first day of our second quarter, we received an EOA for serial screening with our SOFIA SARS product. This clearance for objective observed screening provides employers, sports leagues, and countless other commercial operations with a means to give their employees and patrons greater peace of mind when returning to commercial workplaces and venues with assurance of compliance with FDA and CDC guidelines. Both the QuickView OTC and the SOFIA screening EUAs are truly path-breaking regulatory developments that overcome significant barriers to both market adoption and the benefits that flow from frequent antigen testing. The potential implications of this regulatory shift extend well beyond the immediate addressable markets for OTC at home and reopening testing at schools, workplaces, and entertainment sites. We see tremendous opportunities ahead of us to leverage our rapidly expanding installed base of 70,000 SOFIA analyzers, along with the potential rise of telemedicine to drive sales of our full array of SOFIA assays for flu, strep, Lyme disease, and a host of other conditions. Similarly, we believe broad consumer adoption of our QuickView at-home test could open the door to OTC approvals for at-home use of several of our other diagnostic products and platforms. Quidel is determined to capture significant share in these newly addressable markets through our strategic partnerships with global distribution and retail leaders, including McKesson and Walgreens. We believe that these partnerships could be significant and helpful in driving brand awareness as well as significant retail scale. For example, our partnership with McKesson enables us to continue to supply our existing customers in the professional segment while at the same time reaching significant new markets such as retail, testing for reopening schools, and for health departments, employers, entertainment centers, and many other locations. Our agreement with McKesson will provide us with access to multiple retailers and its Healthmark franchise, allowing Quidel access to a network of over 5,000 independent pharmacies. Finally, McKesson will provide us with the ability to rapidly introduce products across multiple e-commerce sites, such as Amazon, eBay, and Simply Medical. Our partnership with Walgreens will allow us to sell our QuickView at-home OTC COVID-19 test to consumers at any of the more than 7,600 Walgreens locations in the U.S. and Puerto Rico. or at Walgreens.com, further enabling consumers to take charge of their own health. These important and significant partnerships will give us unprecedented exposure to the OTC segment, as well as fulfillment pathways to serve employer groups that are seeking to bring employees back to offices and worksites. We are extremely proud of these new partnerships and the promise they hold for democratizing access to our innovative rapid antigen tests for the well-being of families, workplaces, and communities everywhere. As we look at the second quarter, in the month of April, we realized the same demand for our professional COVID tests as we did in February and March. For May and June, we anticipate some reordering of our professional COVID tests and expect accelerating demand for our QuickView at-home OTC test, aided by our key strategic partnerships. Moving forward, we see increasing revenue opportunities tied to at-home and on-site testing of asymptomatic individuals in support of back-to-school and work initiatives, but it's still very early. In summary, we have a powerful mix of products, partnerships, and macroeconomic trends. COVID-19 testing, which represents a significant component to our near-term growth strategy, is just one aspect of the long runway ahead of us. While it's hard to model with any certainty the effect that COVID will have on our business, we are confident that there are three macro trends, symptomatic testing, asymptomatic screening, and at-home testing that could prove to be material to both market demand and our revenue growth going forward. These innovative products combined with the gateways they provide for our broader portfolio of diagnostic assays pave a long, exciting roadmap for our continued growth and success as we advance diagnostics to improve human health. That's our value proposition. While we understand that we will report revenue and margin each quarter and to a certain extent be valued based on short-term performance, the longer-term value of our company is far greater. Randy?