Ladies and gentlemen. Thank you for standing by welcome to the Quidel Corporation Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions]. 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 us today’s call. With me today are our President and Chief Executive Officer, Doug Bryant; and Steward, our Chief Financial Officer. Our fourth quarter and full year 2019 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 February 12, for a period of 24 hours. Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ significantly from these stated expectations. For a discussion of risk factors, please review Quidel’s annual report on Form 10-K, 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, February 12, 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 months and full year ended December 31, 2019. 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 then we’ll open the call to your questions. I will now hand the call over to Doug for his comments.

Thanks, Ruben, and good afternoon, everyone. As I reported at a recent healthcare conference, we were expecting strong fourth quarter revenue so there’s no surprise. At $152.2 million we were just slightly ahead of the $151 to $152 million that we had suggested. The strength was driven by an early start to the Influenza season in which very unusually Flu B was the dominant strain. And now as you know we’re in the middle of another Influenza A epidemic across most of the United States. Sofia and Solana Q4 revenues were favorably affected of course, but we also saw a tick up in QuickVue revenues as customers who may have purchased generic Flu test in the past because of price returned to our QuickVue brand because of ease-of-use factors and the importance of shorter turnaround time when patient volumes are high. For many of our larger multi-site customers our proven ability to scale during an epidemic, leveraging our supply chain to manufacture millions more Flu test when needed has also been a compelling reason to switch back to QuickVue. Molecular product revenue which was also helped by the early start to the Influenza season was up 21% to $7.1 million. Cardiometabolic revenue contributed to the strong quarter as well up 5% on both an actual and a constant currency basis as the unfavorable foreign exchange impact that we saw in the first three quarters was largely mitigated in the fourth. For the year, overall revenues were roughly $535 million in line with their expectations for 2019 despite soft Influenza revenue in Q1 and the delay in regulatory clearance for the new Triage toxicology panel. Equally important, we had a number of operational accomplishments in the year. The global integration of the Triage businesses was completed in November delivering $20 million…

Thank you, Doug. Good afternoon, everyone. As we reported earlier today total revenues for the fourth quarter of 2019 were $152.2 million as compared to $132.6 million in the fourth quarter of 2018. This 15% increase came from revenue growth across all four major categories. We realized 29% increase in rapid immunoassay revenue, 5% growth in cardiac immunoassay revenue, 21% growth in molecular diagnostic solutions revenue and 7% growth from specialized diagnostic solutions. In the quarter there was not a significant foreign currency impact. For the Cardiac Immunoassay business, revenue was $65.8 million as mentioned the growth of 5% in the fourth quarter of 201. Off the $65.8 million, $33.6 million was derived from the Triage business and $32.2 million from the Beckman BNP business. We placed an incremental 292 Triage MeterPro instruments in the quarter as we continue to close smaller volume accounts on the triage side of the business to offset lost customers to the higher volume multiplex [ph] systems. Cardiac Immunoassay realized revenue growth in all major geographies. North America increased 5%, China increased 6% and Europe, Middle East, Africa grew 3%. North America and China realized growth on the Beckman BNP side somewhat offset by declines in the triage business. Europe, Middle East, Africa realized strong growth in triage somewhat offset by declines in the Beckman BNP business. For the year, on an as reported basis cardiac immunoassay revenue was $266.5 million equal to last year. On a constant currency basis, cardiac immunoassay revenue grew by 2% over the prior year. Off the $266.5 million total triage business revenue was $139.9 million a decrease of 6% and the Beckman BNP revenue was $126.6 million an increase of 7%. From a geographic perspective for the full year cardiac revenue in North America was $137.3 million. China was…

[Operator Instructions] our first question is going to come from the line of Jack Meehan with Barclays Bank.

Wanted to start with a two part around Flu. So as you reflect on the recent respiratory season, Doug I was curious if you had a sense for how market share might have shifted, just what are you seeing? And then for Randy as you look in the crystal ball, just what are you thinking about pacing into the first quarter?

It’s unclear at this point exactly how much share we gained, we’ll do some work on – quarter closes that we may have a better answer for you, when we do the analyst day at the first week in April, Jack. But as I mentioned there was a bit of share shift back at QuickVue and clearly, we’ve been placing Sofia analyzers as well and I won’t point to the competitive manufacturers, but specifically we can name the folks where that share came from. So I think when the analytics are completed, we’ll be able to show more precisely what we think the share gains actually ended up being. But we know or we strong suspect which we put at that, we strongly suspect that we’ve gained share with. What I would say is, we’re shifting everything we make at this point and we’ve not been backward. And I can’t say the same is true for others.

Yes on the first quarter, as Doug has mentioned it’s been pretty strong to-date and rather than giving you some guidance on it. I think probably the most astute thing to do is, we’re having our Analyst Day on April 8th and we can certainly then give you a lot more insight as to how the Flu revenue was in Q1.

Perhaps a better idea on revenue guidance for the year.

Sounds good. Maybe on Triage then to just reflect on the year down 6% for the year on the Triage specifically. Can you just asses what you think might have been going on between market and competition and then, an update on the commercial efforts behind toxicology?

First, we’ll just start with what’s happening with Triage generally, it does depend on geography of course. But here in the US and in China, what we see is the volume of the Triage accounts get larger and larger to the point where it’s no longer practical to do it on a Triage MeterPro analyzer and those accounts been opt to go to a larger immunoassay analyzer in the main lab often that’s Beckman that we pick up the volume there, but equally often it’s not. So when you lose an account like that, that needs to be offset by the continued sales of people now having volume and up to start the Triage MeterPro, so it’s a bit of churn as we’ve learned over the last couple of years. And I think we’re getting ahead of it and I do think that the introduction of toxicology product is helping reintroduce that. We’re certainly seeing the introduction of the TriageTrue High Sensitivity product in Europe as one effective tool. And then to the toxicology piece, what I can say is that we spend a lot of time making sure that we’re addressing all the accounts that we should, the data that we see and salesforce.com shows that the funnel is building. I think the reps in the field have a very good understanding of where to go and where the rep [ph] meets the accounts and more specifically when I’ve travelled over the last couple of weeks with sales people. There’s a quite a bit of focus on toxicology and I would say, except in one specific account I visited. There’s a lot of interest in Triage toxicology and by the way, the account where there wasn’t an interest it’s because their volume was too high, so I think an acceptable response by the customer. we love to do it, but we couldn’t do it on your platform. That’s where we’re at, at this stage, but Jack I think the funnel looks good and we’re still forecasting to deliver what we thought at this stage of the year.

Sounds good. Last question. Have you baked the cake yet before the Savanna instrumental or when is that going to take place and what needs to be finalized before you got there?

Well as I mentioned in my comments. We are ahead of schedule on the assay development, six of the seven actually there’s eight now that off the panels that we are working on are done. The seventh is in progress and so is the eighth. So that looks really good. We did finalize cartridge design. We have one manufacturing line going as fast as it can. At this point, we have plans to build two other manufacturing lines for the cartridges and the aim there is to have enough cartridges built in order to do the clinical trials. We’re in the process of instrument development which will build faster than the other components, but still there’s a lot of work to be done and effectively we’ll be integrating all the pieces of that and we’ll have a clinical trial box by the end of the year and we’ll be in a clinical trial by the end of the year. So we’re still on schedule for that and let’s just see what happens after that. Now of course lot of happen between now and year end and inevitably something will pop up that we need to solve, which we don’t know about. But I’m pretty confident at this stage that, most of the issues that we have in front of us are known.

Sounds good, congrats on the progress.

Thanks, Jack.

And our next question is going to come from the line of Brian Weinstein with William Blair.

As we think about 2020 just putting some pieces together here. If you did $535 million this year, I think Doug you said $10 million from host of new products. Cardio probably grows what mid-single digits that’s going to add another 15 or so, so plus whatever you’re going to get from Flu and then the other parts of the base. I mean is there a reason why there shouldn’t be well over $560 million next year in terms of revenue?

I would suggest that there’s certainly upside to the 550 and as we get through the end of this quarter and see where we are at, will head into the Analyst Day as Randy just mentioned on April 8th and we’ll tell you about what we’re working on of course, but will give you a much better idea on what we think we’re going to land for the year and that wouldn’t surprise me, if it’s north of 550, yes.

Okay and then, I think after the Investor Conference earlier this year. I think you said the way to think about Q1 Flu is similar to Q4 which would be just right around that kind of $50 million. Did we hear that right? I heard what you said to Jack’s question. But I think you did comment on it previously, so I just want to go back and A; did I hear that comment correctly and B; would that still be just directionally the right way to think about it?

Yes, I would say that’s comfortable.

Okay. And then a question for you on gross margin. I’m sorry, go ahead.

I’ll leave you to interpret what that means. I’m sorry to be vague, but it looks really good. We’re shipping everything we make right now. Okay and as you know, the limit when it stops, it stops. To continue through the end of the quarter, it could be I don’t want to use the word extraordinary. I’ll just say it would be a good quarter.

Okay, I appreciate that. Thanks. And then quick one on gross margin. On gross margin, you talked about I think it was overhead absorption was one of the issues that, it might have held the back, at least that’s what I think you said in the press release. It would seem that, with all the volumes you guys are putting through, you guys should have seen potentially better gross margins then what you guys posted. Can you just go back through kind of the pluses and minuses with gross margin and how we should think about, the strong Flu quarter? How Flu does contribute to gross margin?

Flu is a strong contributor to gross margin and the high volumes that we are pushing through the factory right now, would suggest that we’re going to do fine there. I think the issue that we have before was actually more on the cardio volume that we had it, assumed that we were going to do. So and I know, I know you know how to do standard costing, Brian. So effectively the drag if you will is that we had overestimated what we thought we were going to manufacture and shipped out of the factory.

The other piece of it, Brian, is there’s a little different mix, little lower margins in the rest of the world products versus what we see in North America, so that had a little bit impact, but as Doug said Summers Ridge manufacturing was where the overhead absorption was under absorbed. Plus if you remember there’s also a tax impact, so that had a negative impact full year was approximately I think it was $4.8 million negative tax impact as well.

Off which about $4.6 million at first three quarters, Brian. Yes.

Got it and then last one from me, I promise this. As far as China goes and Corona, do you import anything that goes into your manufacturing process or anything else from China that could be affected, if those factories are down, so is there any raw materials or anything else that you guys bring here, that we should be thinking about?

No, we don’t.

Okay, thanks for the clarification. Thanks.

Our next question will come from the line of Tycho Peterson, JP Morgan. Q –Tycho Peterson: Little bit on [indiscernible] I guess we can wait till April. But just to probe on a couple of things. For Cardiac your comps are notably easier, so is mid-single-digit the right way to think about and why does the easier comps? And what’s the latest on the toxicology channel delay?

You saw we were right at five now, if I go on to be conservative, I’ll call it four to five. It depends obviously on the existing base business, but you’ve also got toxicology in there and there’s a couple of other things. PLGF could be helpful. Yes and what we do in Troponin in Europe is another factor. So there’s a few variables there, but I would say we’re comfortably in the four to five range. Q –Tycho Peterson: But on the toxicology, you talked about having to retrain the commercial teams, so what’s just the latest on where you’re in toxicology rollout?

Let me clarify because I’ve had to do this couple times now. The main driver to the mess was the FDA delay in approving the product. We had assumed that we would have approval early in the second quarter and we had rolled it out to the sales team and the sales meeting that was around that time. So I don’t think there was so much retraining the sales force as it was a resource allocation issue because in Q3 our sales people spend a lot of time working with customers make sure that we retain our Flu business and we also like to place more Sofia as you might imagine. So I would say it was more of a resource allocation not a training issue. But having said that, all that is behind us, our guys are out there actively addressing every single opportunity that’s out there and I believe I just heard a little while ago that we expect very shortly to have contacted virtually every customer that’s possibility here and in the next quarter. So I think we’re in good shape, the funnel looks good. We track calls, we track progress, we track opportunities. We try to assess things under what we call 30-60-90-day forecast and as I look at it, I think and I judge, what people are telling me. I think we’re in pretty good shape to hit the numbers that we suggested. Q –Tycho Peterson: And then can you talk a little bit more on the molecular acceleration you just saw 21% versus 6% last quarter? Can you just maybe talk to drivers and sustainability there?

Remember we make a Solana Influenza assay, we make PCR assay under the brand Lyra those certainly were healthy in the quarter, those products. And honestly Strep is also a big contributor our share and molecular ship [ph] is quite good and so we’ve done pretty well there as well. Yes, the products that we have out there as certainly not that good respiratory season and we did get some traction HZV/VZV as Randy also mentioned. So I think the Solana business looks pretty solid right now. The other thing that was a factor for us, that I thought may have impaired our growth particularly in the larger accounts is the front end of the whole process was a little bit too laborious for some people and so we’ve recently completed the development of what I would call, a front end engineering solution that should be helpful and we’re rolling that out now. So I don’t think we’re done growing with Solana. We got about 1,100 or so instruments out there and I suspect that we’ll continue to grow that throughout this year assisted by some improvements to the ease with which our customers can actually run the assay so, but to your point fourth quarter 21% looks big, but there’s a lot of respiratory in there. Q –Tycho Peterson: And then on Lyme, can you talk – well you’ve talked at the time of the launch about getting in new POC customers, can you talk to the degree which that’s opened up new doors and then also your confidence in locking down the clinical study design before the season hit in the fall.

Are you talking for Troponin? Q –Tycho Peterson: I’m talking about Lyme.

Lyme, exclusively. So Lyme right now for us is a market growth concept. The whole idea of getting physicians some of them don’t even test at all for anything to begin testing customers. Particularly in the upper Midwest in the North East. So we have a number of marketing programs, PR, word-of-mouth, symposia, all sorts of things that we’re working on to create both awareness by physicians and awareness by people who could be tested. So it’s still early phase, but I would say that we’re expecting a reasonably significant uptick a $2 million or so inline this year than we were before and we’re also expecting some collateral benefit on Flu RSV and Strep as a result. And what was the last question, I think it was regard to clinical? Q –Tycho Peterson: The clinical study, you’re doing clinical study for Lyme, right? Before the season in the fall.

Yes, so we’re doing a Tier 2 and we’re in discussions right now with the FDA and what that study looks like because we couldn’t mimic what’s done currently which is the Western block and certainly we could launch a product that had all the proteins that are done by Western block, Sofia test trip and so we couldn’t mimic the Tier 2 product. What we’ve decided to do instead of something Novel. We’ll talk more about it at the Analyst Day and why we think that’s a better result. But we actually think that rather than continuing with this testing process which is willfully inadequate. We think we’ve come up with something clever that’s actually going to better and we’re presenting that to the FDA here shortly so. If you don’t mind, I’ll just hit the pause button that question and say that we’ll provide lot more detail on that, on April 8. Q –Tycho Peterson: Last one on M&A, just curious odds of getting a deal one for faster year or so how would characterize one?

Well as Randy pointed out, we’re certainly in good shape to do one and we’ve been looking at a number of targets and some of them are interesting and I’m hopeful that we can announce something in a reasonably soon, but I can’t speak with the time, of course. Q –Tycho Peterson: Thank you.

Our next question is going to come from the line of Bill Quirk, Piper Sandler. Q –Bill Quirk: First question for me Doug, just thinking about the Sofia pipeline here for 2020 obviously fairly full. Can you just remind us about how we should think about the pacing of the filings or the approvals for those over the course of 2020?

Sure, the first one likely to be submitted would be the C.diff assay for Toxin A/B and GDH. And then as I mentioned before, we got a number of other assays that we have in development as well. So in this third quarter I expect that we would be closer to submission with Campylobacter, shiga-toxin, H. pylori, lactoferrin, [indiscernible] parasite panel. So those are ones that we’re working on. We expect them all to be submitted this year. But all of them are pretty much in back half with CDIP [ph] potentially being early through quarter. Q –Bill Quirk: Okay, got it. Sorry go ahead.

I’m looking at Randy asking, did I miss one, sometimes. I’m getting to the age where I start to forget stuff. We may be closer to being able to start the trial for the four member respiratory panel which just to remind you Flu AB, RSV and human metapnueno. I think what we may do is file a 510(k) or start a 510(k) clinical trial and then move later to the [indiscernible] so that we can start the trial and get data. So we can actually depend [indiscernible] this Flu season at last we might be able to get started here reasonably soon on that. And then as we go into the next winter start the [indiscernible] trial, so that’s the other one on Sofia that I was I was forgetting that Randy just reminded me. Q –Bill Quirk: Okay, no I got it. Appreciated. It sounds like Randy is due for a higher bonus this year to help up.

Thank you, Bill. Q –Bill Quirk: You’re welcome, Randy.

Appreciated. Q –Bill Quirk: The Lyra cost synergies, you hit your targets. Actually we’ll be thinking about anything additional on a go forward basis. Thank you.

Well you should definitely think, there is more and we still think there’s work to do in the Summers Ridge facility to improve yields and I don’t know that we have a really solid idea, but.

A couple million maybe more Bill.

That’s a swag at this point. There’s a lot more to be done – we believe and we’ve got consultants working with us right now to see if we can get more done. But sort of in that range of possibility I would guess. Q –Bill Quirk: Okay, very good. Thanks guys appreciated.

[Operator Instructions] and our next question is going to come from the line of Alex Novak, Craig-Hallum Capital. Q –Alex Novak: Doug, can you just provide some more details around the concept of Sniffles [ph] if that cannibalizes any of the existing business and which markets does the smaller cheaper Sofia box [indiscernible]?

So question number one Alex was will Sniffles [ph] cannibalize some business and I would suggest, sure. It would. At the same time by the time we launched many of our boxes would have fall off their three-year depreciation schedule so it’s not really necessarily and in fact swapping out now with Sniffles [ph] at a significantly reduced cost will be fine. I think the biggest opportunity would be in the great ability to democratize this thing and to put these analyzers just about anywhere where you want, even in physicians today who have a Sofia in the central part of their office practice. Imagine you could have a little Sniffles [ph] instrument in each of exam rooms which would dramatically reduce the overall turnaround time. Right now the assays are short, but you still have to take a swat and move it toward the Sofia and so if you can eliminate all that time and the transport time is setup and all that, by simply just doing the test while the patient is sitting on the funny paper that would be dramatic better and then also the same would be true in urging care centers. You can imagine putting these in each one of the exam rooms there versus going to a centralized lab. So or on the floors in hospitals etc. So when you get the cost down that low, I think there’s just almost no end to where we could do it and then certainly we’re counting on markets like China and others where volumes are significantly higher and I think this is a perfect product for expanding beyond the traditional places where we have gone in the past. Q –Alex Novak: Thanks Doug, really appreciate that. That’s really helpful and then I don’t have perfect math here, but I scale away Flu in your immunoassay business. I see the non-Flu assay [indiscernible] mid single digits over 2019 so, the growth in that business used to be pretty consistent. But I’m just curious what’s driving the decline there recently?

Go ahead and answer, Randy.

Alex, the biggest assay that we’re seeing a decline in our hCG product. We continue to see it being commoditize prior labels, probably has the largest share now in that market in US and so that’s where you’re seeing a decline, that offset some of the growth in our Strep RSV and Flu business.

Yes it truly is a generic market, where it’s in the professional segment or its in over the counter and the grocery stores, you’d see generic products versus the branded versions and so, that’s just a – it’s a commodity as you point out. So unfortunately, we’ve been in that market for a long time and we’ve seen it, where we had pretty high volumes and it’s just sort of slowly got away. Q –Alex Novak: I mean, how much revenue is locked [ph] there. I mean should we expect declines for or enough material declines would receive on the revenue line next year, 2020?

Yes, I think you’d continue to see a mid-to-high single-digit decline. We probably only doing $7 million to $8 million cost a year now, where it uses to be double out about five years ago. Q –Alex Novak: Okay, that’s all we’re just kind of mulling this out. I know you had to adjust the protocol here for the Strep 98 so I’m just curious what is current timeline there. If [indiscernible] didn’t mention as one of the three products in the prepared remarks and just remind us, what is the share, what is your share in that market and then what sort of price agreement should you be able to demand for a confirmatory product there?

Sure, first we’re manufacturing the immunoassay side now, $16 million, $17 million. Randy says $16 million. You know I’m the CEO, I say 17. He’s the CFO, he says 16. So $16 million, $17 million that’s just what we manufactured today. The price point unfortunately is such that our gross margins are well under 50% so you certainly wouldn’t want to jump into the business at this point on that side. Step 98 on the other hand, if we’re successful enables some in a very short – a physician in a very short period of time to not have to reflect a negative result. And frankly most of the results are negative 80%, 85% of the Strep test are in a position [indiscernible] probably negative. So there’s a lot of value there. We do have two ideas in mind and we’re going to have to work through that here as we move closer to lunch. One is with Sniffles [ph], is that a compelling enough package together that I should just launch into the market with the existing reimbursement rate and then just price it modestly higher than it is today. I don’t know whether that’s a $2 higher or what it is, but certainly well below the reimbursement rate and there’s a tradeoff there. One is because I get lot more volume but I’m going to forego some of the margin that I would have gained it, if I priced it like a true confirmatory test. The other option of course is to go in and expect low volume, but don’t allow reimbursement. In other words, don’t cross walk it this product over to the current immunoassay code and if we did that, we could potentially have pricing that was significantly higher closer to where our own molecular tests are priced. So in other words in the teens and if that were the case, obviously the gross margin would be high, but the volumes would be low because we would be outcomes studies in order to justify with payers, why we needed a reimbursement that was significantly higher than what we have today. So those are the two options that we’re exploring, we’re doing the investigation on that. We’ll probably again provide more analysis when we talk about our overall portfolio and strategy during the analyst day here in April. Where we are at in terms of product development, the product of course performs great. We’re working through the clinical trial at this stage. We’ll continue to run samples I think we still have a little bit of runway before the end of this respiratory we’ll see what we have. We have to have for the FDA, a set number of positive samples. And of course we need to demonstrate the sensitivity and the specificity that would be required to call this confirmatory assay, so that’s where we are at. Q –Alex Novak: Okay, understood. Thank you.

You’re welcome, Alex.

Thank you and at this time. We do not have any further questions and I would like to turn the call over to Mr. Doug Bryant for closing comments.

Sure, well thanks everyone for your support and of course your interest in Quidel. We did have a great year and we’re in terrific shape to achieve our growth objectives over the next few years. Placeholder would send out Analyst Day, April 8 encourage you to participate, if you can and thanks again everybody for being on the call.

Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Goodbye.