Co-Diagnostics Inc New

Good day and welcome to the Code Diagnostics first quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your phone. To withdraw the question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Andrew Benson, Head of Investor Relations. Please go ahead.

Thank you. I'm Andrew Benson, and joining me this afternoon are members of the Co-Diagnostics Management Team, including Dwight Egan, Chief Executive Officer, and Brian Brown, Chief Financial Officer. We will begin the call with management's prepared remarks and then open up the call to questions from our analysts. Before we begin, we would like to inform the listeners that certain statements made by Co-Diagnostics during the course of this call are may constitute forward-looking statements. Any statement about company expectations, beliefs, plans, objectives, assumptions of future events or performance are forward-looking statements. For example, statements concerning 2021 financial and operational guidance, the development, regulatory clearance, commercialization and features of new products, plans and objectives of management and market trends are all forward-looking statements. The company believes these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future result expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in code agnostics filings with the SEC. Co-diagnostics assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. In addition, the company will discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release out shortly before this call, which contains reconciliation to the non-GAAP financial measures presented to their most comparable GAAP results. At this time, I would like to turn the call over to Co-Diagnostics Chief Executive Officer Dwight Egan. Dwight?

Thank you, Andrew, and thank you all for joining us. On this call, we will provide an overview of our results for the quarter, updates on key financial performance metrics, and a discussion of progress and future strategy. Then we will take questions from our analysts. We are very enthused about the performance of Co-Diagnostics during the first quarter, the positive impact we've been able to have in various regions, and the value we've been able to provide to our shareholders. We would like to thank our employees for their dedication and actions that delivered outstanding results for the quarter. We are also excited about the continued progress the company has made so far in Q2. Sales of our tests continue to be strong in both domestic and international markets. And overall, sales momentum is continuing to be consistent with prior quarters since the pandemic began. As expected, demand for our logic smart COVID-19 test continued to drive sales, and we anticipate demand for our portfolio of products to continue as we remain well positioned to be a leading global molecular diagnostic company. As we forecast during our first quarter call, we expected the revenue mix to trend more toward the international markets as 2021 progressed. The Q1 domestic international revenue mix was essentially equivalent to prior quarters. And as we predicted in our last call, we are seeing some trending towards international sales in Q2. But as stated earlier, overall sales momentum has remained stable. The company's ability to maintain consistent sales, even as vaccination in the U.S. moves along, is the result of several factors, including our more durable business model, comprising a large number of distributors and customers in over 50 foreign markets and a broad-based network of CLIA lab customers in the U.S. The general sentiment in the U.S. is relief as vaccination rates rise. But meanwhile, the world as a whole is experiencing its highest level of infections since the pandemic began, seeing surges in cases and deaths in some countries. This means that new mutations, variants, and strains are evolving that may compromise the worldwide situation. Keep in mind that vaccination in the United States has just crossed through the one-third of the country being fully vaccinated. But on a worldwide basis, that equals less than one and a half percent of the Earth's population. Worldwide, only about 4% of the population is vaccinated. India is at 2 to 3%, and many countries have no material access to vaccines. That is why we have always agreed with Dr. Michael Osterholm, a member of the President's COVID-19 Task Force, who said, we're not going to be vaccinating our way out of this to 8 plus billion people in the world right now. According to the New York Times yesterday, in the U.S., more than 600 people die from COVID each day on average. India's death toll has been horrific. Cases have been rising in Cambodia, Malaysia, Thailand, and Brazil, and much of South America are struggling too. All of these serve as reminders that the world remains vulnerable to new waves. Suffice it to say that the worldwide incidence of COVID-19 infection is currently more prevalent than at any other time during the pandemic. In the United States, a great deal of political and media attention has been directed to the status of vaccinations in the country. But notwithstanding the great efforts to curtail COVID-19 through mass vaccination, the level of infection in the U.S. is still on par with what we were experiencing at the beginning of last summer, which as listeners may recall, was deemed to be a very serious situation in every region of the country. Moreover, as previously mentioned, worldwide we are experiencing more COVID infections than we have ever had before. In other words, the political and media focus on vaccination progress in the United States is masking the true prevalence of COVID-19 cases around the world and to some extent in the United States as well. So, to be clear, let me reiterate, sales remain strong and our domestic and international distribution model is proving to be a durable and diverse business model. These conditions are providing the cash flow for co-diagnostics to increase the number of markets we serve and to more fully develop the capabilities of our powerful and unique intellectual property, which we are about to leverage in significant and far-reaching ways over the next several quarters and in the years to come. Turning to normalization of society, we believe that many organizations will develop testing protocols to promote the safety of their employees and customers as normalization is attempted in countries where vaccination is more prevalent. Restaurants, for example, will want to inform patrons that the staff is tested on a regular basis so the transmission resulting from close contact with a server and diner is minimized. In a recent survey, two-thirds of participants said they would rather quit than return to the workplace, with more than half citing COVID as the primary reason. Businesses want to provide a COVID-safe work environment for employees and also desire to avoid potential legal liability for negligence claims that may obtain If prudent, regular testing protocols are ignored and employees, customers, or their families get sick and possibly die from COVID exposure while at work. Obviously, airlines, cruise ships, theme parks, and entertainment venues are also concerned about ensuring COVID-safe conditions for their employees and customers. Over the last 16 months since we first engineered a COVID-19 test, doing our part to supply test kits around the world has been our primary concern. we have contributed in important ways to the ongoing development of several new innovations for mass scale testing, as well as point of care and at-home applications that are in wide use around the world. For example, in conjunction with some of our capable partners, such as Clinical Reference Laboratory, one of the largest privately held clinical testing laboratories in the U.S., new PCR science and technology pioneered by the company and CRL, is enabling and expanding the applications and accessibility of PCR tests, including non-invasive and highly accurate saliva PCR tests for at-home collection. In November, CRL announced that it is selling its CRL rapid response saliva-based COVID-19 RT-PCR test directly to consumers. And in February of this year, CRL and Walgreens announced that the FDA-authorized CRL rapid response COVID-19 saliva test based on CoDiagnostics CoPrimer technology, is now available through Walgreens FindCare, a digital health platform available on the Walgreens app and Walgreens.com, offering consumers the convenience of self-collecting the test right in their own homes without supervision. The CRL announcement states that the test uses CoPrimer probes and primers developed by CoDiagnostics with high degrees of sensitivity and specificity, and a simple saliva collection device that can be administered in virtually any setting with results in typically 24 hours that are delivered via a secure online computer or mobile device platform. While we observe the daily infection and death counts around the world, we are also, of course, able to monitor the daily influx of demand for our tests, which now includes several different variations of our COVID assays and several different modes of sample collection and instrumentation. The strong level of orders has not abated, and we believe the expected shift of geographic emphasis trending towards our international clients reflects the lack of vaccination combined with mutations and more pernicious variants or other causes which has resulted in infection and death that is off the rails in some countries such as India and Brazil. Just how long the virus continues to run somewhat unchecked in certain areas of the globe, we cannot say. But if our order flow for tests is any indication of the world's predicament, we potentially have a long way to go before the world is COVID safe. In addition, much attention is being placed on normalization in the developed world, including the United States. To be sure, this is still in its infancy, and a significant amount of ongoing and regular testing is likely to be needed in order to create COVID safe work environments, safe schools, safe restaurants, and safe travel and sports venues. Since cold and flu symptoms mirror COVID-19 in the beginning stages, people potentially infected with COVID will need differentiation tests. Our ABC test, for example, has traversed from comprising 1% of fourth quarter testing orders to 5% in Q1 and 14% so far in Q2. We will continue to supply the United States with critical PCR tests as normalization is attempted. And we will also continue to supply a significant number of tests to international customers who are comparatively a long way from COVID safety and far behind the US with respect to vaccinations. India is only at 2% to 3% vaccination levels, and Africa is only at approximately 1%. That's how we see the current environment. I will now turn to a discussion of the ICON testing platform, which we regard as the most important of all our inventions and technologies, and represents the culmination of a Herculean effort on the part of the company as well as other world-renowned experts who are involved in its development. The ICON platform includes several breakthrough technological advancements. The unique chemistry includes co-diagnostics flagship patented co-primer molecules in a lyophilized or freeze-dried reagent that is activated with the company's direct saliva extraction free protocol. Co-primers virtually eliminate cross-reactivity, which enables multiplexed assays with a high level of accuracy. The device is being developed by trailblazing real-time PCR scientists who are renowned for previous PCR-based inventions currently in widespread use around the world by prominent entities, including Roche, BMRU, and the U.S. government. The ICON device is designed to deliver accurate COVID-19 PCR results in less than 30 minutes from patient-direct saliva samples, which do not require extraction. A simple saliva sample is placed into a disposable receptacle, which is then inserted into the compact platform, and a command from a smartphone app starts the test. The smartphone app displays the progress of the test, concluding with a result in about 30 minutes. Additional cloud-based data applications facilitate multiple paths for data distribution to appropriate parties. There are several global trends that motivated CoDiagnostics to create the new platform. First and foremost is a long-term need for molecular testing that is inexpensive, providing fast results in at-home, point-of-care, and remote locations, and just as important, providing results that are accurate. We believe CoDiagnostics ICON platform will meet the critical imperative for at-home and point-of-care locations that need to be addressed during the pandemic. But the ICON aspirations go far beyond COVID. Indeed, It is designed to cover any RNA or DNA pathogen for which the company develops an extraction-free test. As the unstoppable trend in healthcare moves rapidly towards decentralized healthcare locations, including telemedicine, patients will want faster diagnoses than ever before. But the results have to be reliable, and test costs need to be cheap, among other considerations. Taking all of this into account, including the evaluation of early entries hoping to fill this need, CoDiagnostics embarked on the most significant development project in its history to create what we believe will be one of the most significant diagnostic inventions ever engineered for worldwide healthcare. We believe the ramifications of this development will be widespread and pervasive. The company has been vigorously pursuing the ICON development, And we are very aware of competitive offerings seeking to attract the same vast market that we envision. But it is one thing to be first and another thing to be right. CoDiagnostics believes it will be the first company to get it right as we move forward in introducing this brilliant new diagnostic platform. By getting it right, we mean that the ICOM platform will be a very low cost, fully integrated sample to result molecular diagnostic platform designed to meet all three criteria of cheap, fast, and accurate testing, positioning the company to revolutionize molecular testing in a way that could drive co-diagnostic results for many years to come. Traditionally, molecular testing has been a complicated process that involves numerous steps. These steps include extraction, amplification, detection, interpretation, and reporting results. Because of the complexity of the process, sophisticated, often centralized labs with trained personnel using expensive equipment were required to process the test. In contrast, the ICON platform, through a combination of unique and powerful technologies and innovations, will be able to complete all necessary steps in a sample to result mode with almost no human interaction besides spitting into a small container, placing the container into the compact device, and activating the test through a smartphone app. The user can then walk away while the system provides rapid results through the smartphone app. The progress that has been made on the device in a relatively short amount of time is truly staggering, and we anticipate being able to provide updates on the validation and timeline for an application with the FDA for emergency use for the device and the initial test by the next earnings call, as well as our more long-term expectations for additional regulatory clearance and updates on the planned menu for the platform. The key to getting it right is not just for the short term. It is, rather, a long-term strategy that can replace antigen testing because it has all of the primary benefits of an antigen test, low cost, rapid testing, at home, and point of care locations, while also delivering gold standard PCR accuracy as opposed to less accurate antigen testing. Over the next several years, the company expects to conduct sales campaigns to a vast number of potential clients, which include doctors and dentist offices, schools and college campuses, theme parks, airlines, cruise ships, sports venues, restaurants, and others. We believe the overall value proposition of this product has the potential to leapfrog over diagnostic systems currently in place, as well as open up the at-home and point-of-care markets in ways not previously addressed by other less nimble technologies. From the creation of the CoPrimer technology to the engineering of this device, To the human factor studies and focus groups, to the regulatory team, this product development represents a high level of innovation, expertise, and skill sets, which together portend a successful future for the product and the company as a whole. Let me now turn things over to Brian Brown, our CFO, for a review of the key financial metrics and numbers, after which I will conclude with a discussion of future plans outside of what has already been discussed here. Brian? Thanks, Dwight.