Ladies and gentlemen. Thank you for standing by and welcome to the Quidel Corporation First Quarter 2020 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 is our President and Chief Executive Officer, Doug Bryant; and Randy Steward, our Chief Financial Officer. Our first 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 May 6 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, May 6, 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 ended March 31, 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 then we’ll open the call to your questions. I will now hand the call over to Doug for his comments.

Thank you, Ruben, and good afternoon, everyone. First quarter 2020 feels like a really long time ago. We had a good quarter in terms of product development, manufacturing and financial performance .I will be unusually brief though as I know there were or there will be several questions with respect to what we are doing with our SARS 2 coronavirus assays. Total revenue for Q1 was roughly $175 million driven by $80 million in influenza testing revenue which demonstrated the strength of our Sofia franchise and shows what leveraging 43,000 analyzers looks like. Favorability in respiratory disease testing was offset by a decline at the end of the quarter and patient demand for our cardio metabolic products. In terms of product development, first, the Savanna team made significant progress which gives me a great deal of confidence as we exit this year that we will have a highly competitive sample to answer molecular platforms one that will likely begin to take significant market share in 2021. I predict that Savanna will become within a two to three year window our next flagship product perhaps equal to our Sofia franchise in importance. Second, the triage high sensitivity Troponin team prepared and submitted our pre submission package to the FDA in advance of the dialogue we will have with them shortly in preparation for the U.S. clinical trial later this year. And finally while several other assay programs remained on track, we began the development of three COVID-19 product offerings. The Lyra reverse transcriptase PCR for high volume, high complexity labs, the Sofia SARS antigen assay and the Sofia serology assay. On March 17, we received emergency use authorization from the FDA for Lyra SARS-COV2 and began immediately solidifying our supply chain and ramping up manufacturing. Before the end of the quarter we were able to manufacture a modest volume of PCR kits all of which were sold. Sofia assays are now in the final stages of development. We suggest to the summer launch for both assays and are running slightly ahead of that timetable. In terms of manufacturing in the quarter, our operations group demonstrated the strength of our supply chain and production teams generating record levels of output when others in the industry were struggling to keep up with demand. The proven scalability of our Sofia cartridge manufacturing lines during this recent influenza epidemic pertains well for our ability to meaningfully contribute to improving U.S. public health during the COVID-19 epidemic. Randy?

Thanks Doug. Good afternoon everyone. As we reported earlier today, total revenues for the first quarter of 2020 were $174.7 million as compared to $148 million in the first quarter of 2019. This 18% increase in revenue was driven mostly by growth in flu and other respiratory products. In the first quarter of 2020, rapid immunoassay grew 54% over the prior year while molecular diagnostic solutions grew 45% and specialized diagnostic solutions grew 19%. Foreign currency impact was minimal at $500,000 in the quarter. For the cardio metabolic immunoassay business revenue was $53.9 million and 18% decrease in the first quarter of 2020 or a 17% decrease in constant currency. Of the $53.9 million in cardio metabolic revenue, $28.5 million was derived from the Triage business and $25.5 million from the Beckman BNP business. In the first quarter, we saw an atypical decline in all the major geographies as patients with chest pain either would not or could not visit traditional testing center as a result of the coronavirus pandemic. We believe this quarter trend will continue for the next couple quarters. Rapid immunoassay product revenues increased 54% to $95.9 million and this compares to $62.5 million in the previous year. Within this category Sofia products grew 52% from the first quarter 2019 to $65.2 million, while QuickVue product revenues increased 61% to $29.5 million, both driven mostly by influenza. Total influenza revenue which includes rapid immunoassay DHI and molecular diagnostics, grew 69% in the quarter to $79.6 million. The influenza rapid immunoassay revenue was $73.8 million with approximately 76% of the revenue derived from the Sofia platform. Rapid immunoassay revenue for Strep grew 22% in a quarter and RSV revenue grew 17%. Revenue in the specialized diagnostic solutions category increased 19% in the first quarter to $16.5 million driven…

Certainly. [Operator Instructions] Your first question will be from the line of Alex Novak with Craig-Hallum Capital. Please go ahead.

Great. Good afternoon everyone. Doug, can you help us from a market opportunity here on the COVID Sofia test, have you run any scenarios thinking about what COVID testing could be as a percentage of what you're doing from flu over the next several years because I think a lot of people out here are trying to figure out, how frequently are you going to be testing for COVID in the post-COVID world? Is it just going to be a test that runs just this year or is this something that's going to be recurring for a longer time period?

It's interesting question and I don't have an answer for you. I really can't speculate on what will happen moving forward. I would guess that we will be doing fairly high-volume testing for sometime into next year, beyond that will this be a seasonal virus that we see quite often, will we test for it routinely, will the vaccine have any impact on that, if it's a vaccine like flu then you could guess that we'll be doing testing just like we do for flu today. If it's a vaccine that this is very, very useful then perhaps we wouldn't need to test as frequently. So it's an interesting question. I understand why you're asking it but I don't really have a good answer for you.

Understood. And when you're speaking with distributors today about preparing for the next flu season, what are you hearing from them? Are they stocking up expecting a ton of flu testing in this next flu season to rule out COVID or are they somewhat expecting a light flu season because we're all being told to socially distance and wash our hands, etc.

We're not really hearing much from distribution in that regard. What we're preparing for is some level of volume that we saw recently and in that regard we're manufacturing pretty significant volumes that we'll keep an inventory in advance of that recognizing that we will likely take those same manufacturing lines and begin manufacturing both the COVID antigen product as well as the serology assays.

Okay. Got it and just last question if I can. I think this pandemic really highlights the need for point-of-care testing for COVID but also just a range of diseases, illnesses. As you're talking with customers today are you seeing more demand in recent weeks to place Sofia in a spot you typically wouldn't see one? I'm thinking the traditional retail clinics, the pharmacies even the grocery chain centers, just wanted to know if this is really going to expand the scope in the used case of point-of-care diagnostics going forward?

I think you're right. We have seen evidence of that prior to this and this is going to accelerate it.

Okay. Understood. Thank you.

Yes. Thanks, Alex.

You have a question from the line of Brian Weinstein with William Blair. Please go ahead. Your line is open.

Hi guys, good afternoon. This is Andrew Brackmann on today. Thanks for taking the questions. Doug, maybe just start off with your commentary on the Sofia antigen and serology assays for COVID-19. Could you maybe provide a little bit more color on some of the key hurdles that are still out there for bringing these to market? Anything you can say on the timeline there? A little bit more firmer than summertime when each of these will be made available and then how should we be thinking about pricing for these tests both the standalone SAR Cov-2 and potentially combined flu AB + SARS COV-2 assay. Thanks.

I'm pretty sure that was more than one question.

Just trying to keep you on your feet.

I’ll start with timing, we are running ahead of what we have suggested before and I can't be more specific than that other than we are manufacturing product. We do have an intent to as a first step to ship about 40,000 tests into the market eminently in order to do studies that will be useful in demonstrating the performance of this product. And so that's the first step. What we intend to do moving forward is then to take on board customers in the traditional professional segment and particularly those that would help us in addressing testing for hospital healthcare providers and first responders and so we have a number of work streams beyond that. We’ll next target pharmacies and schools and all those things before we'll get to companies that want to do testing either themselves or through third parties like occupational health companies. And then there's another category dentists, ophthalmologists, optometrists and finally the travel industry. So in terms of timing, I think more about timing in terms of ramping up manufacturing. We will, as I said, we will ship initial tranche that we use for tests with key customers and then we'll be building to a number that is a subset of our total capacity. In that regard, we currently have a capacity to do about 84 million tests per year for all of the Sofia assays, on top of that we can do another 30 million QuickVeu assays. We were also adding a seventh manufacturing line that will give us additional Sofia cartridge capacity of another 30 million tests and right now the manufacturing plan is to ramp to a number that is more like 50 million to 60 million tests that we would allocate for both the antigen product and the serology product. In other words, we would get to a point within several weeks moving forward from here to the ability to ship something north of a million tests a week. So in terms of timing I'm more concerned about us ramping up so that we can address immediately what's required to do those healthcare providers and first responders and then there's a whole series of things that we want to get to moving forward. But the most important element of all that the biggest challenge is securing and locking down our supply chains and ramping up manufacturing. So that's where we're at. I can't be more explicit than that I think, Andrew.

That's perfect. Thanks for all that color. Anything that you could say on pricing for these [assays]?

We've determined the price. We'll launch the COVID antigen assay first at a price per test that takes into consideration our increased cost of labor and raw materials for both assays and instruments. We are of course looking at what our opportunity cost has been because we've moved people on other projects over these projects. We'll look at the performance of the product relative to other clinical assay products that are currently in market and other factors and then our price will become well known as soon as we start selling it.

Completely understand. But appreciate that color. And then just sort of last one for me, there seems to be a pretty large opportunity to deploy by arena here to track COVID once you test. Any details you can provide on how we should be thinking about the business model for that capability moving forward?

Well, we've reached out to the CDC through our context there and may make adjustments to allow for additional data that they say needs to be collected. I think that will increase the value of that information we provide which will then provide significant value to our overall product offering which will help with placements and secure our Sofia franchise. I think it will be an added value that others are going to struggle to mimic. I know there's a lot of expectation around whether we should be charging folks for data and as they're a means of monetizing what we've done and I would just say that at this time we want to do the best for public health that we can and right now we don't have an intent to charge for data that's collected. We will provide that to the CDC, to state county and city public health department says they require and we'll do that at no charge. The benefit to us from a monetary perspective what would obviously be that we would hope to be a preferred supplier of these types of products and that's I think that's how we'll recoup the investment we've made there. I do recognize that a lot of people are saying boy those data are valuable. Is there a way that you can monetize that and maybe there is moving forward but right now I just don't feel like that's the right thing for us to do.

I got you. Thank guys.

Thanks Andrew.

Your next question will be from the line of Tycho Peterson with JP Morgan. Please go ahead.

Hey, good afternoon. Doug can you talk a little bit about Lyra? You did a million you still have you sold all [indiscernible] manufacturing and you're now doing kind of 500,000 tests per week. How do you think about the trajectory of that going forward?

Yes. What an exercise that was for us, we'll admit it. The Bill of Materials on these assays was long and there's a lot of components and we struggled them at the outset to secure our supply chain. So we only made a handful of assays in March. We made, I think 130,000 tests. The first million got sold in March and then the remainder of those kits were sold early April and then we ramped to about a million and a half tests that we did in April and we're going to be moving forward at effectively a thousand kits a day which is 480,000 tests per week. Some folks are going to say well can you manufacture Saturday Sunday, my answer there would be we are but we're manufacturing our other stuff on Saturdays and Sundays. So I suppose we could make more if we had to but 480,000 tests is we're at now it's pretty solid. Early on we had trouble getting probes and primers. Our principal supplier of enzymes said they forgot our order. We had to lock down all sorts of chemicals and components of this process. The guys in Ohio that are manufacturing this product did a tremendous job for us. We're now solid at a thousand kits a day 480,000 tests a week, as we exit June the last week our forecast which is put together by customer bases as this is roughly 2/3rds of our manufacturing capacity. So we think by the end of June we'll have a run rate of what we're shipping on a weekly basis that would be roughly 2/3rds of that 480,000 test that we would have manufactured that week. So that's what we think we're going to be. I like the fact that we'll have a little bit of inventory that was a concern of ours. We didn't want to start up customers that we couldn't supply routinely and sustainably. So that's kind of where we're at. It's been a great experience for us. A lot of people I think are surprised that we could do all this in short order but we've got a great team in terms of scientific count but also in terms of our supply chain and our operations guys. So nice little additional business that we've added onto our overall infrastructure.

And then as we think about Sofia, I appreciate you don't want to talk explicitly about person but if we think about flu pricing is there any reason it should be materially different for the antigen test, you get about $10 to your distributors on this weekly?

It will be higher. And the volumes will be dramatically higher.

And maybe lastly, I mean I know you have a question before about how you think about the market evolving but you've got had to put manufactures manufacturer, Roche and Hologic scaling up, you've got the syndromic players and how do you think about how much of this market ends up getting centralized versus decentralized and can you talk a little bit about how you see Sofia test stacking up versus some of the syndromic panels that COVID will be added to?

This market will become extraordinarily democratized and if you just follow the flu example, more than 90% of flu tests are done by rapid tests because they can't be done by molecular methods. And I do respect what the molecular players are doing and trying to increase their capacity, and I'm glad they're doing it but at the end of the day the constraint on the molecular side is more in the lab than it is on the manufacturers. So I think it will be beneficial to public health that these large panther systems not just the panther fusion can run the assays and I am appreciative of what that company is doing but at the end of the day if we're going to be doing a million tests a day we can't get there by molecular methods. And so it's going to be useful not only that I enter the market with the volume that we're talking about but we need BD, we need Abbot, we need Roche we need all of the players to be developing rapid antigen tests and rapid serology tests as well. Otherwise, we're not going to get everybody tested and I'm meaningfully in a meaningful number that will be useful to get people back to work. So this is a huge task but it's not just on the IVD manufacturers. It's also on the people who have to run it. People have to do the swabbing, accessioning the samples in the samples to where they need to be and there's extreme value and being able to test on the spot and not have to wait. I know for my own company that I'm thankful that we're going to be able to test everybody under 15 minutes and we'll be able to tell them whether they can enter the building and stay working.

Lastly just anything you can say on specificity or sensitivity for the serology tests? Obviously they've been press reports about mixed quality of the tests that were brought to market earlier. I assume your quality is going to be much higher but any numbers you can give us on performance?

Sure, let me talk about antigen first. What we've done which is what all of the rapid antigen folks will have to do is you'll have to look at samples that you know are positive by PCR for the patients, you'll need to run those tests, as you have the samples against your own product and when we do that even in that diluted format which is not how we would do the test in the field, even at that diluted sample we are of a sensitivity that meets the hurdle required and exceeds actually noticeably with the FDA would expect. Once we actually run those samples clinically on patients in the field on dry swabs we expect an improvement of LOD of about eight folds and so we will see an assay with Sofia that effectively is equivalent to an isothermal methodology even though it's molecular but still short of what PCR tests are. In terms of specificity, specificity there will be quite high as we go into the market there. This is also why we're focused early on getting 40,000 tests or so out there, so we can run a lot of actual patient samples and we're going to give people confidence that this product is as good as what you see out there today. On the serology side, I have a lot of concerns about serology because even if I manufacture a product that's 99% specific and 90% sensitive which I think most of us are going to be able to do, positive predictive value is really unknown. I don't know what the prevalence out there is. So if the prevalence is only 1%, I know how to do the math on positive predictive value but if you if you take on a thousand samples with 90%…

Understood. Thanks for the color.

[Operator Instructions] Your next question will come from the line of Andrew Cooper with Raymond James. Please go ahead.

Hey, thanks guys. A lot has already been asked but I just kind of one piece looking maybe a little bit beyond just COVID-19 as we think about flu obviously I think there was a lift as early on in the process you were looking to rule out anything that could have looked like COVID-19 and that sort of changed as things progressed. So are your flu volumes still elevated because of the coronavirus pandemic or have those sort of started to tail off more like your typical seasonality that you might see in that?

Yes, they have tailed up Andrew. I will say that the beginning of second quarter though was reasonably strong. So if you take our typical second quarter and you're trying to model you probably ratchet that up just a bit but what it has now tailed off and we're not seeing anything in May of significance.

Okay. That's helpful. And I guess maybe jumping into COVID kind of discussions in terms of Sofia and you talked about potentially it's an incremental demand that other avenues of care. What's your capacity from an instrument perspective if you get this test launched at the timeline you expect and as far as the first kind of first rapid antigen with any scale coming to market what's your ability to ramp that 43,000 to something higher by whether it's end of year or just sort of how you think about that trajectory?

Yes, instruments active in the U.S. right now would be very accurate right at 36,000. We have on hand something approaching 5,000 and then we've got 1,000 being built right now. Our monthly normal manufacturing would be at about a 1,000 moving forward but we've also added another party that's helping us out and we hope to ramp to about 7,000 analyzers a month of beginning in September. So we firmly believe that the number of analyzer is giving all those work streams that I talked about are going to be necessary and we're going about as fast as we can to make sure we have all those analyzers out there certainly before the fourth quarter.

Okay. Great. That's really helpful and then maybe a little bit longer term as you think about sort of those dynamics and there's players out there talking about home based testing and I think with what you could do with Sofia 3 or Sniffles is kind of has that change the way you think about that product and how it could be used and deployed out into kind of the real world or any time around that would be an interest. Thanks.

We always decide that a combination of telehealth and what we are doing with Sniffles makes sense. This experiences is just confirming that causing us to think where we got to go faster here. The number of patients that are now enrolled in telehealth increased dramatically in the first quarter, and so I think moving forward it's going to be increasingly access like to healthcare. So I love the fact that we've got the product in development. It's on schedule for a year end. We are thinking through how we partner with others to make this happen. I'm staying away from the at-home testing so much because I don't know what the tolerance will be for this particular virus in terms of how the FDA thinks about testing at home but certainly under the care of a physician through telehealth, I think Sniffles is going to be important.

He is not in the queue any longer.

Okay. Perfect. Well, before I say thanks everyone and see you later and all that I will mention that this has really been an interesting starts of the year. We certainly have had to change direction and all that but at the same time we have stayed focused on the things that we've been working on and particularly I have to say that if it weren't for the COVID discussion I would be spending a lot of time right now talking about Savannah. We are now more convinced that we're going to do well with this product. We've made significant progress over the last several months. Our thermal cycling times now are down to 10 seconds per cycle. We think that we can do a reverse transcriptase assay our RVP, our respiratory viral panel which more than likely will include COVID-19. We think we can do in 18 minutes tops. We're working out actually decreasing that and for DNA assay those panels we think we can get that down to 13 minutes. So isothermal speed and footprint with Savannah but with PCR performance. We think that we're going to make significant progress with our molecular franchise once we introduce Savannah in 2021. So if it weren't for this other distraction we would be spending a lot of time talking of that because I really do think that that's our next franchise. That's our next flagship product. So with that I'll say thanks for everyone for your support and your interest in our company. We did have a strong start of the year and we're in really good shape to achieve our objectives over the next few years. Thanks again.

Thank you. Thank you again for joining today's conference. You may now disconnect.