Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later instructions will be given for the questions-and-answer session. [Operator Instructions] I’d now like to turn the call over to Mr. Ruben Argueta, Quidel’s Senior 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 our Chief Financial Officer, Randy Steward. Our fiscal first quarter 2022 earnings release is now available on ir.quidel.com, our Investor Relations website. We will also post prepared remarks on the Presentations tab of our IR website following the conclusion of this call on May 04, 2022 for a period of 24 hours. Please note that some of the information we provide during today’s conference call will include forward-looking statements, including, but not limited to the types of statements identified as forward-looking in our Quarterly Report on Form 10-Q that we will file later today, which will be available on our IR website. Actual results may differ materially from those projected in any forward-looking statement. For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements as well as risks related to our business and the proposed business combination with Ortho Clinical Diagnostics, please see our Annual Report on Form 10-K and subsequent periodic reports and registration statements filed with the SEC. Furthermore, this conference call contains time-sensitive information that is accurate only as of today. Except as required by law, we undertake no obligation to update these forward-looking statements or time-sensitive information which speak only as of today. Today, Quidel released financial results for the three months ended March 31, 2022. If you have not received our earnings 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 take your questions. I’ll now hand the call over to Doug for his comments.

Thanks, Ruben and welcome everyone. We really appreciate your time and interest in Quidel. We had an extraordinary start of the year. The first quarter was historic. We achieved record revenue on the top line, record profitability that flowed through the bottom line and record cash on the balance sheet. Our first quarter truly demonstrates the earnings power of the business as we build on the significant investments we've made and execute against our growth roadmap. Our diverse suite of assays, increasing brand strength and growing installed base at Sofia analyzers continue to propel our market expansion and broaden our post-pandemic opportunities. Our new product pipeline, including our revolutionary Savanna platform that we expect to launch in the US later this year, further adds to forward momentum and runway, and yes, once again, the entire Quidel team performed very well. From product development in our R&D organization to the responsiveness of our manufacturing and operations teams through our commercial channel, we fired on all cylinders. Our first quarter results put us in a strong financial position, creating additional flexibility to strengthen our balance sheet, while we continue to drive R&D investment to further develop and broaden our portfolio. Let's take a look at some specifics; revenue for the first quarter of 2022 reached just over $1 billion. That's a pretty extraordinary 167% increase over the prior year period. It was driven primarily by strong performance in our rapid immunoassay product portfolio. Total rapid immunoassay revenue increased by $655 million in the first quarter of '22 to $893 million. We saw significant sales in our QuickVue At-Home OTC COVID 19 tests and while COVID 19 testing made up the bulk of this heightened demand, it's noteworthy that non-COVID sales grew 56% or almost double that if you exclude the Beckman BNP…

Thank you, Doug and good afternoon, everyone. I'd also like to thank all of our employees who demonstrated Quidel's strength, the spirit, perseverance and dedication to delivers such outstanding results. Due to their tireless efforts, we again achieved another record quarter for revenue, eclipsing our previous high water mark of $809 million set in Q4 of 2020. During my tenure here, I've seen Quidel grow substantially and Quidel's incredible culture has been the driving force behind such explosive growth and our sustained excellence. I'm very proud to be a part of what we have achieved here at Quidel. As Doug mentioned, total revenues for the first quarter of 2022 were $1.2 billion compared to $375.3 million in the first quarter of 2021, achieving growth of 167%. This growth is primarily due to increased rapid immunoassay product revenue, which was driven by the continued fulfilment of the US government order for over a 100 million QuickVue COVID 19 tests. Total SARS revenue in the quarter from all products was $836.1 million and this compares to $269.1 million in the first quarter of 2021, a growth of 211%. In total, we sold over $126 million COVID tests in the first quarter. 113 million tests were QuickVue, 12 million tests were Sofia and over two million were all other tests. Foreign currency exchange had an unfavorable impact of $1 million in the quarter. Influenza revenue was $89.1 million, and this is versus $16.4 million in the first quarter of last here. Included in the influenza number for the quarter was $54.2 million and Sofia ABC revenue $25.4 million and Sofia flu revenue and $5.9 million in QuickVue flu revenue. Rapid immunoassay revenues were or $892.8 million in the first quarter showing growth of 276% from first quarter of 2021. Within this category, Sofia…

[Operator instructions] The first question comes from Alex Nowak with Craig-Hallum. Please proceed.

Good afternoon, everyone and Randy enjoyed working with you. A metric we were watching on the go-forward for COVID testing is the low watermark per month. In spring of 2021, it was 20 million to 25 million of COVID test sales per month. Last quarter said to be higher, but we didn't exactly know that figure. Do we have a new low watermark for the back half of the year to think about?

Alex, it's very, very challenging to really identify a low watermark, just because of government participation and the prevalence of the virus here or as we go forward. So the current time, I would say what we had stated previously, probably as good as anything we can see at this point. I will say though, we're not forecasting a significant amount of COVID revenue in the back half of the year.

Okay. Understood. And then maybe expand a bit more on the day-30 and maybe the day-90 plans after closing the Ortho deal. Maybe highlight some of the first action items you're going to be undertaking

Well, I think initially, we're getting to close. We've done a lot of strategic planning, but it's really hard to really get into the execution mode until after close, and within 30 days after close, we have to file our first Q as a combined entity. So we're very focused on really the first 90 days or actually through the end of the year to really focus on just driving both businesses, making sure that we're performing at the expected level -- expected performance requirements and then we really get into kind of more of the combined entity execution here entering into 2023. But certainly we will be planning during that and during that whole time period looking at cost synergies and revenue synergies as well.

And just one more here, maybe expand a bit more on the menu expansion for Sofia and QuickVue At-Home just when can we start to see the new products hit the market?

I'm sorry, Alex, I didn't -- you were asking about additional OTC products in the OTC market?

OTC and standard Sofia for professional, just the menu expansion timelines there, from what to expect.

Yeah, I'll jump in on that one. Alex. I would just say that the R&D guys would tell you they've got a number of products in development on Sofia and so we see that as a major growth engine moving forward. The instrument placements out there at greater than 75,000 certainly represents a huge opportunity for further development in that space. And, overall I think on the OTC side, it's more about putting together the clinical trials necessary to get these products over the OTC performance hurdles and so more specific moving forward, clearly as we have phase zero, phase one, etcetera, identified for Sofia, we will be in a position when we do our next Analyst Day to talk about things in more detail, but obviously at this stage that would be premature. But rest assured, we moved from 20 R&D projects per year to over 50 that we were working on in any given year and most of those for the most part are Sofia.

All right. Thanks for the update. Thanks.

Sure. Thank you, Alex.

Thank you. The next question comes from Brian Weinstein with William Blair. Please proceed.

Hey guys, this is Dustin on the line for Brian. Just to start with Ortho, I'm wondering since it's been about 5.5 months since you announced the deal, has there been any change into how you see the value of the asset and where the combined company could play in the space?

Yeah, I’d say the key changes as we get to know the team over there, we're increasingly impressed by the -- both the executive team and the management team and I actually see more value than we probably had anticipated. Of course, until you get to know people and at the end of the day, it's putting people together. Until you understand the people that you're working with more and more, it's been really hard to pre-deal understand the value. I would just say personally, I look at more of the people side of things as everybody in our company knows and I would say super impressed by the talent in that organization. I think Chris Smith and the executives there have brought on a board a lot of really good people and I think that that's going to be helpful moving forward. Other than that, we don't see anything. There's no distraction from the critical path or anything that we're working on. For the most part, I would say is all super positive.

That's good to hear. In terms of flu, we're wondering if you guys have any more visibility there, wondering about inventory levels and anything you're seeing in the channel kind of as we prepare for next season.

Yeah. No inventory levels are pretty consistent with what we've seen over the last couple of years relating to all of our core products. As you know, coming out of flu, inventory distribution is managed pretty tightly. So no build up on that at all. We did see a little bit of increase on our COVID revenue inventories but that's obvious since we were in pretty high demand going into the quarter, but overall, I think on average, we're somewhere between three and four weeks of inventory at distribution. So we're in good shape with that -- with that statistic.

Okay, great. And just one last one for us. We're wondering on what was the ex-COVID, ex-flu, rapid revenue in the quarter and what kind of pull through are you guys seeing there? Thank you.

Do you know ex. Well, the pull through, I guess I'll follow up with you related to the exact number, but the pull through actually in the quarter I know the core revenue is very strong. We saw significant increase with strep with RSV, as well as with our pregnancy tests. So really across the board we saw growth versus Q1 of 2021, and I'll get back with what the actual number was on that.

Thank you. The next question comes from Casey Woodring with JPMorgan. Please proceed.

Hi guys. Thanks for taking that question. On the incremental government COVID contracts passed the 35 million tests in 2Q, how conversation on stockpiling evolved since the beginning of the year. Is that something that you think is still realistic for the second half of this year or even in 2023?

We're in consistent and weekly conversations on that topic, whether it's stockpiling or manufacturing, etcetera. And I would without being too specific, I would say that we can expect to see some level of orders and as I think, I said and Randy has said, as we learn exactly what the numbers are going to be, we'll certainly -- we'll certainly let everybody know. Yes, we are in conversations. Yes, we've had discussions about some specifics, but just as late as a couple hours ago, we were having a discussion on response that we were making on a certain requests, but you're going to want, Casey you’re going to want more detail than that, but we'll provide that when we have more firm commitment and we'll be transparent about it.

Okay. And then on Sofia OTC how should we think about that test in an endemic COVID environment? Was that ABC number you called out for this quarter largely Omicron-driven and should we assume kind of similar volumes between the ABC test and the flu standalone test moving forward?

Well, I think it's fair to say, we did see an uptick and flu in a quarter and that drove a lot of that ABC, but you're right. It's certainly interesting that the Omicron variant and many folks manifested itself and symptoms that were very much flu like, and a lot of people, including myself, would've described it as sort of a mild flu and so I can see how that would drive physician behavior to make sure that we understand whether it's flu or COVID.

Got you and then just last one for me. You talked about Savanna launching in the US in the back half of the year. Can you remind us with the margin profile of both the instrument and consumables there on Savanna? How do they compare to Sofia and also how do they compare to the combined company's margin profile? Thank you.

Yes, on Savannah, the nice thing is the instrument cost is very reasonable. So we're estimating that a lot of it's going to be on a reagent rental agreement. So we'll do it over a three to five-year contract is what we're currently estimating in the US. The margin profile when we're at volume with our cartridge manufacturing, certainly our target is to be incremental to our kind of overall 65%. So we're looking at margins probably in the low 70% margins here as we get traction going into 2023.

Got it. Thanks.

You're welcome.

Thank you. The next question comes from Jack Meehan from Nephron Research. Please proceed.

Good afternoon. And first, Randy just wanted to say it's been both fun and great working with you over the years. I also have a feeling this won't be the end hopefully see around in San Diego or I'll swear in the future. Off the question talk Sounds good. Wanted to start just on Sophia, you know, the installed base is, you know, just kind of reflecting over the last couple years, it's expanded a lot 79,000 instruments now in the field. Can you just give us a mark to market on what the mix looks like today between physician office, hospital urgent care versus non-traditional sites that might have of scaled up for COVID?

Yeah, it's interesting. Exactly. I've seen a little shift and we're now seeing, you know, placements we're now seeing about a little over 15% of the placements are in urgent care. We're seeing hospitals that about 25% then POL is around 50%, but in the hospital setting, you're now seeing an increase in per hospital usage around six instruments versus what we had said was four before. So I think the growth you're seeing is you know, really in current customers, adding hospitals and additional placements as us expanded into urgent care, as we've talked about previously.

And I know like obviously the visibility and the kind of future COVID demand, isn't great for anybody, but was just curious, you know, maybe what you're hearing from your Sophia customers around kind of what the on ongoing utilization of these instruments is going to look like, whether it be for COVID or some of the other assays under development.

Yeah, that's a, that's a good question, Jack. I just, we're going to have to see what we see moving forward, you know, we're projecting and we're hypothesizing that we're going to be in a, you know, we call it post COVID, but effectively this is just another virus that, that presents itself from year to year. It seems so. So that's the answer on, on that side, I think, and then moving forward, obviously we're, we're you know, we're forecasting and we putting together business development plans around these new and, and I think there's a strong chance that we've identified the things that are important to our customers. Moving forward, I'm speaking, obviously, Jack specifically about the things we have in development.

Got it, and then on Savanna, so submitting under EUA and 510(k) submission coming in July. Can you just talk about like what the approval pathway looks like? Do you think you'll get UA approval? You know, what does, you know, what is the five, 10 K on top of that? And just, you know, what's the timeline look like for kind of full approval of Savanna?

Well, in, in the pre-COVID situation, I would've been able to speculate with some degree of certainty around the timeline with the FDA. I think it's safe to say that particularly on 510(k), that you know, prevalence is driving the clinical trial, but then the approval process you know, depending on the value of the particular product It's not quite as short as it used to be. So, you know, in the old days we would've said 90 days for most things and, and it's entirely possible that that goes out another month or so.

Okay. And then final question on the cardio metabolic business. So the triage sales were up 1% year-over-year. It's probably a little lighter than, you know, I think the way you've described revenue in a given quarter in the past just, were there any headwinds that you saw just any additional color on of triage specifically would be great?

Yeah, Jack, the shortfall was really all U.S. based and in looking into it a little bit more, I think it's more just kind of a sell in versus a sell through because we looked at the sell through data in U.S. and it was up I think, in high single digits. So I think it was more in inventory situation that was really a, a demand for the product. So it would've put the, it would've put the growth more in the mid single digits considering that issue. So it's more of a just timing issue than it was a sell issue

And maybe pretty you or for Doug, any thoughts on high sensitivity troponin, just how the feedback is from the field on that and just any revenue contribution you can call out at this point?

Well, I think we had good success in launching and Europe in particular markets and we can continue with the clinical trials and here in the U.S. I think the feedback from KOL's in particular, who have looked at the product has been quite good, so we're, we're not quite there yet in terms of the clinical trials, but we expect to be there shortly.

The next question comes from Andrew Cooper with Raymond James, please proceed.

Hey guys. Thanks for the questions and Randy; Yeah, everybody else's sentiment. It's been it's been fun to watch everything over the last many years and wish you the best if we, if we don't see you quite as often anymore. Maybe just first on Savanna we just listened to Ortho call out some chip issues far from the only ones. I think Doug you've commented in the past. That's been a little bit of a challenge for the instrument side. So are you able to build some inventory for as we, we head into this U.S. launch? And then once you close the deal, is there any thinking of, hey, you might get a little bit more leverage with some of those chip suppliers anything to look out on that front?

That's a very interesting question, Andrew, and, and I would say that we've had challenges that we've sorted through for the most part. We're -- we're not in a position where we're building a ton of the inventory, but at the same time we're making progress. We're, we're building enough instruments to put more instruments in the R& D organization. We're building more instruments that can, can supply the European launch and certainly we're anticipating having some level of inventory as we launch. So it's a great question though, because worldwide supply chain issues are pretty big across the board. But I do think that we have an opportunity in combining the Company to explore things that we can jointly do together. Certainly Ortho purchases, a lot of products that go into, into their instrumentation and that could be helpful, but that's something to, to work on and explore. And, I'm hopeful that that's the case because at the end of the day, I see the only constraint with the launch, honestly, being our ability to get enough instruments into the market as quickly as possible, as well as our ability to manufacture cartridge is at very, are very high volume. So we've learned a lot about hyper scaling got an organization that's got a lot of strength now that we didn't have before in terms of supply chain. Phil McClellan and the team and operations have done a phenomenal job so far. So a lot of work to be done, but I'm pretty confident in the team and, and I've got some talented folks that are working on it.

Okay, great. And, and maybe just one more, I think you commented, I think the number was 87 projects from the, the cross-functional teams. Can you give U.S. a sense for how many, how much of the $90 million of cost synergies maybe come from those projects what's fully identified and fully baked versus; hey, we've, identified something, but don't quite have the plan really put together just sort of, where are we in, in, in trying to capture that $90 million right away?

Well, we're aimed in what we're going to achieve in 2023, and we expect to have a roadmap that we can help describe for you on terms of all that. I would say that for the most part, the things that we had identified were possible reductions are certainly there and there are others that, that give U.S. great confidence that the, that the number that we've called out is not, is not over projected; so year one 2023 as we're aimed at right now. And I would just say based on what I know right now I'm pretty, pretty confident.

[Operator Instructions] There are no additional questions. I'm sorry. We do have a follow up from Andrew Cooper. Please proceed.

I was to be generous and let other people ask, but I'll fire one more at you guys, just in terms of Sofia Q, it came up a couple times in the fall, but trying to get a sense for what the hurdles are to, to get that product; to market a little bit more aggressively and what you're looking for before we can expect more concrete, common and a broader launch?

Yeah, I like the question, Andrew. I, I -- the product performed exceedingly well with the cover product that we had, but we made a determination launching into the market with one product was not a great idea. And so we're working on what other menu items would, would go on that. And we have manufacturers there, there's a situation where we've already, we've got inventory. So we're looking at what other products that we'd want to we'd want to put on that. And, and specifically, I think it's a, probably a pretty good product for the professional market but obviously could be a candidate for an OTC product as well.

Okay, great. Thanks again.

Thank you. That is all the time we have today. Please proceed with your presentation or any closings remarks.

Well, I'll conclude just simply by saying it was a great quarter. The team really stepped up and rose to the challenge and appreciate it very much. I don't want to sign-off before saying that I know you all appreciate very much the way that you've dealt and communicated with Randy over the years. And he's still going to be around. We're going to -- we're going to try to keep him in the game. He's got that place in, in Santa Fe that he can't wait to get to, but we're still, we're, we're still trying to dangle the carrot out to keep him involved. And he's got a wealth of experience and in addition he's collegial, he's determined, he's optimistic and we're still going to keep him around for a while, but he's going to be very helpful as we move through the integration, there's not too many people in our space that have his sets of experiences. He's a little bit feisty from time to time, but that's a good thing. So I'll just say on behalf of you all and, and, and our company that we appreciate, Randy everything that you've done. And with that, I would say, thanks everybody for, for your interest in quite I, and I hope you enjoy the rest of the day.

Ladies and gentlemen, we thank you for your participation and ask that you disconnect your line.