Hologic, Inc. (HOLX) Earnings Call Transcript & Summary

Greetings. This is Dan Brennan. UBS' Life Science Tools Diagnostics Pharma Services analyst. It's day 1 of our virtual health care conference. In the 2:10 slot, and I'm pleased to be joined with me, Mike Watts, who is VP of Investor Relations and Corporate Communications at Hologic. So for those of you who are online, feel free to send the question to me that way, I think there is a way to submit questions. And certainly, during the presentation, I'll allot some time towards the middle, or back end, and we'll hopefully get to some of those questions. And I think to kick it off, I think Mike is going to make some opening remarks, and then we'll dig into some Q&A. So Mike, thanks for joining us.

Yes. Thank you, Dan. Thanks for having us. Really appreciate the opportunity to join you for your virtual conference. So thanks again. Yes. So Hologic, if you're not familiar with us, we're an innovative medical technology company. We have historically been focused mainly in women's health. We operate in 3 major divisions. One is our Diagnostics business. Second is our Breast Health business and third is Surgical, which is a bit smaller than the other two. But obviously, in recent weeks and months, been heavily focused through our Diagnostics business on the COVID pandemic. And obviously, there's a lot of uncertainty in the world right now, as we all know. But I think a few things we know for sure, and that is as we kind of went into the COVID pandemic through the middle of March, our businesses were performing very well, those 3 divisions that I mentioned to you. Through the end of February, we said in our most recent call, for example, we had 5.2% growth through the end of February, which we were pleased with. Another thing we know is that we need more testing for COVID. And we know that widespread diagnostic testing for the virus is going to be essential to getting America and the whole world back to work and to reopening economies and we need more of it. So we think, we are pretty well positioned in this environment, really given any scenario going forward. Obviously, if COVID continues to constrain other health care utilization, then we should have, at worst, a very significant positive offset from our own COVID test. Most people on the call probably know that we've introduced 2 COVID assays, the first one that runs on our Panther Fusion platform. And the second one that runs on our -- an Aptima assay that runs on our base Panther platform. You might have seen we just got emergency use authorization last week for that second test. So in that scenario where the rest of health care utilization does not bounce back, we should have a pretty positive offset from our own testing. And frankly, if the level of testing helps us -- helps economies bounce back. And if health care utilization comes back as well, so will our base business, that business that was running, up 5% through February. We do think that testing will continue for a long time and it'll be a very significant molecular market for COVID testing. So pretty well positioned in either of those scenarios. And in either case, we're going to place a lot more Panthers and a lot Panther Fusions. And I'm sure we'll get into this, but I think that's going to make our Diagnostics business that much stronger and really the whole company that much stronger, as we emerge out of this pandemic. So I'll just stop there and happy to take whatever questions you have.

Great.

Just getting on speaker.

Thank you for that. Maybe can you just -- third quarter fiscal revenue trajectory kind of overall and maybe by business, give us a little color. I mean we'll shoot some tactical questions on COVID and then we'll kind of peel it back and we'll obviously, won't just focus on COVID. But nonetheless, could you kind of unpack how we should think about kind of Q3? And I know you just mentioned at the end commentary as of the fiscal -- as of your call, I'm wondering in addition to unpacking fiscal third quarter, is there any comment at all about kind of real-time how things are trending. So maybe those would be the kind of first question I would have to kick it off.

Yes, sure. Well, so obviously, we pulled our guidance like a lot of companies, given all the uncertainties in the market. So -- but having said that, I don't think that much has changed, in terms of our outlook. It's really only been a couple of weeks since our call. What we tried to do in our call was kind of give you what was close to actual results for April. And hopefully, that will be the worst month or close to it. And what we said is that the businesses would be affected in -- were affected in different ways in April. Surgical, clearly, the hardest hit, down about 85%. Diagnostics, ex-COVID, down about 45%. And Breast & Skeletal, which we manage as one unit internally, down more than 30% in April. And when you kind of net all that out, we said our base business would likely be down somewhere in the neighborhood, 45%, 50%. In April, and that was probably the right way to think about -- roughly the right way to think about the full quarter as well. As I alluded to, upfront, we did say that our own COVID test would be a significant offset to that on the positive side. We started shipping our second COVID assay, the week before last. And we did say that, that could generate $150 million or more in revenue this quarter, that would be added on to the declines, I just mentioned. So don't think anything has really changed in the outlook thus far. A couple of weeks later, I think we're still kind of on that same trajectory.

Okay. And then when we think about a question that you got on the call and obviously, one that will come up, I'm sure frequently for any diagnostic testing company. But how would you characterize different testing areas that you're involved with, whether or not you think this is more of a push to the right in terms of whatever delay that occurs or whether or not there's an ability to kind of catch up? I know this came up on the call, but it would be interesting just to kind of explore this topic, since it is an important one, I think, about kind of what the trajectory of business looks like over the next 6, 12, 18 months?

Yes. So in our Diagnostics business, ex-COVID, a lot of that business is based on regular checkups, women getting to the doctor for well-women visits for infectious disease test, for Pap test, for those kinds of things. Now there are other parts of the business, for example, our viral load business, so quantitative testing for HIV, hepatitis C, hepatitis B. Those are not quite as directly affected. But certainly for the test, which comprised the bulk of revenue, things like Pap and the other SCD test, that's going to be significantly affected by COVID to the negative. I think it probably would be too optimistic to assume that there was going to be a significant catch-up there for those tests. I think the way that I look at it is, if a woman had an appointment scheduled in March, that was postponed, maybe it got rescheduled for June, for example. So she goes in, in June, and that's great. But I mean, I don't think her next appointment after that is going to be in March, the next year, right? I think it's going to kind of reset on that annual June pace. So I think probably, to use your terms, probably that demand gets pushed to the right. Certainly, don't think it goes away. I think one of the things that's going to be really important, both from a public health perspective that these cancer screenings, in particular, resume whether that's for cervical cancer in our Diagnostics business or breast health for breast cancer screening. I think it's really important for public health that those things resume. And it's going to be really important for those hospitals and OB-GYN offices to get that business up and running again. So definitely, do not think that, that demand goes away. And I think when we're on the other end of this, we'll continue to be a market leader in those segments, but I do think it gets pushed out a bit.

Okay. That makes sense. And then I know on the call. And then obviously, this is a point that you guys have stressed, and I think it's an important part of Steve's strategy is your kind of market-leading Mammo business is kind of removing some of the instrument orientation of that business and by adding other features, different consumable streams and also service. Maybe just level set us about what is the breakdown of that Mammo business today between instrument service and consumables. And as we hopefully, bottom out and the economy begin to open back up, how do we think about the different trajectories of those different components?

Yes, sure. There's a lot in that question, Dan, obviously. But I think it's a really important one talk about. So first of all, you're absolutely right. A big part of Pete Valenti, he's our division President for Breast Health. Big part of his strategy over the last 5 or so years has been to build on that strength that we have in core Mammography and expand across the whole continuum of breast health care. So the fundamental question that our reps are asking customers now is not, can I sell you a piece of capital, but rather have how can I help you with your breast health needs and what that has done, combined with some of the tuck-in acquisitions that we've done of Focal and Faxitron and SuperSonic Imagine has really enabled us to diversify our revenue streams and generate more recurring revenue across that entire continuum of care, starting with the screening mammogram, where we were clearly very strong. Working through the analysis of the biopsy, potentially the breast conserving surgery and all the way through, in some cases, to radiation therapy. So been able to compete against that whole continuum. And as a result of that, to your point, revenue has become much more diversified. So last year, for example, U.S. capital was only about 21% of total breast health revenue. Now there's capital and other pieces of the business as well, OUS as well as in our Interventional business. So in total, capital was about probably close to half of the Breast business. But that includes some software upgrades, for example, new AI tools new 2D reconstruction software, new breast density software. It includes new hardware upgrades like a smart curve, which is a new curved paddle that helps with -- helps improve the patient experience, reduces the pain, associated with the mammogram. So those are things that by and large, we can continue to sell onto our existing installed base. For those customers who maybe aren't ready or not right away to purchase a full piece of capital. So that is something that we'll continue to emphasize, even as capital remains constrained. And then clearly, the biggest chunk of that business is our service business. And service, if you look at it as a product, would be our single biggest product in breast health, and that was about 30% of revenue last year. So bigger than our capital business. And that will not be certainly immune from pressure related to COVID, but certainly should be somewhat insulated. And that's one of the reasons why we said breast health would be down more than 30%. Certainly, the capital piece of that would be down more significantly, at least in the near term, but we are a little bit insulated with some of these upgrades and also the service revenue stream. So certainly, this is a business that has changed dramatically, over the years and much for the better with many more recurring sources of revenue.

Thanks, Mike. Okay. And then maybe we can come back to breast health kind of if we have time, since it is given the size of the business and the importance for Hologic, but I'm -- just to kind of round out going through the different businesses. And obviously, this came up on the call. But similarly to the Diagnostics business, when you think about Surgical, how would you characterize that in terms of this push out versus catch up idea between your Surgical businesses? How do we think about that aspect?

Yes. So couple of things on Surgical. I mean clearly, given the numbers, I shared earlier, we would expect Surgical to be the most heavily impacted to the negative from COVID. Obviously, we are dealing here with procedures for women's health of to deal with abnormal uterine bleeding or procedures to remove fibroids and polyps. And those would certainly be pushed out to the right, as states have shut down electric procedures, or as hospitals have kind of focused on their COVID response at the expense of other things. Beginning to anecdotally see more activity in the field here as either states loosen up or hospitals figure out a way to reopen and begin serving those patients again. I would describe those steps as kind of tentative at this point, and they differ, depending upon what geography you're operating in and what an individual set of policies could be. But I do think, in general, Surgical has the ability to perhaps bounce back a little more quickly than, say, the capital part of breast health. These are important procedures that women need to get done. And certainly for the OB/GYN, who's deriving a significant portion of his or her revenue from these kind of things. I do think there's a possibility for them to come back relatively quickly. We did say in our call that, certainly by the first half of our fiscal '21. So that would be the -- either the December quarter or the March quarter, given our fiscal year, things could be back to kind of where they were before this COVID pandemic started. I think Surgical can certainly fit into that framework.

Thanks, Mike. Okay. So on the COVID testing itself, obviously, that was a significant kind of benefit in the coming quarter and, certainly, could be a lasting benefit, dependent upon how testing manifests over the next 3, 6, 12, 18, 24 months, I guess, as this pandemic plays out. But in the more near term, in pushing your guide, $150 million or plus kind of third quarter revenue estimate. Could you help us think about volume versus price, U.S. versus OUS kind of within that estimate?

Yes, sure. So I think we said that pricing, we would expect would be kind of in the $20 to $25 range, when you kind of look at it across the portfolio and across both products, and I think that still holds. Initially here, the majority of the supply is going to go to the U.S. We don't yet have our CE mark. We would expect that to be later in May that would enable us to access most of the European markets. But as we get in the -- we're beginning to ship OUS a little bit now. And I think, as we get into -- certainly into June, a higher percentage will go outside the United States. But for the full quarter, certainly, the vast majority of that would be in the United States. And so far, things are going well. As I mentioned, you probably saw that we received our EUA last week. So that was terrific. We've actually began shipping product out the week prior, that initial supply of what we call RUO reagents to our initial batch of customers. So doing what we said we were going to do, and executing on the plans that we laid out in our call.

Got it. And we're trying to -- I mean, there's no right answer for this. It's kind of a very bottoms-up collection of estimates from employers, from governors, from colleges, from -- you take your pick about how testing is going to play out, as we open up the economy right now. But the capacity that you've outlined kind of where you are. Could you help us think about just where you stand today? Do you think that as we get beyond this quarter, moving to the back half of the -- moving to the summer and then the back half, when the flu certainly is going to pick back up and most are expecting a second pickup in COVID. Is it unreasonable to assume that the capacity that you have will largely be sold out? Is there any reason why it wouldn't be, just how do we think about the capacity that you have and the ability to generate revenue on there?

Yes. So there's 2 -- you're really touching on 2 issues there, Dan, right? I mean one, of course, is what's the overall market demand. And then secondly, our own capacity to be able to supply some of that. And I think, on the first point, I would completely agree with you, almost impossible to predict what demand is going to be. We know it's going to be extremely high, and that's certainly the case today. I think over the weekend, you might have seen, we passed, as a country, 400,000 tests a day for the first time. If you just take that and multiply it by 365 and put a price point on it, you're talking about a -- clearly, a multibillion-dollar market here just in the United States. So it's going to be a very significant market. And frankly, it's hard for me to imagine that levels of testing don't go up from where they are now. Clearly, as I said upfront, major need. I think everyone understands now that testing is really key to unlocking the economies and everyone saying, we need more testing, more testing, more testing. And certainly, as you said, as we get into the fall and perhaps see a resurgence in the virus and see intermingling with flu, that's going to lead to increasing demand as well. So I think, certainly as we think out the next several quarters, at least until we get through next flu season, we believe there will be very significant demand. Hopefully, not too long during that period or after that, we get a vaccine. I think it's important to recognize that, obviously, there will be -- continue to be testing, we think, for significant levels of testing even after we have a vaccine for lots of reasons. But certainly, for the next several quarters, you're going to see heavy demand. Now in terms of our capacity, for production. I think our ops team deserves a lot of credit. I mean for example, our initial assay, the Fusion assay, we increased that capacity at launch by about 12 fold of what we were doing before for that family of test. And clearly, basically, producing at our level of capacity now for the TMA assay as well. We are -- and we alluded to this on our call, we have begun to make some capital investments, pretty significant ones to be able to increase capacity further. We want to be prepared for a scenario potentially in the fall, where demand for our base businesses starts to recover, yet we continue to have very high or even higher demand for COVID testing. Now obviously, that would be a very bullish scenario for the company, I don't know if that's going to happen or not. But we do want to be prepared for that and are making those capital investments now. So I think by the time we get into the late summer or into the fall, in time for the next flu season, we will be able to provide materially more total test to the market than we are today. And that'll be split, obviously, between the base business and COVID assays. We've kind of essentially merged those supply chains or redirected our supply chain for the time being, away from sexual health test more to COVID. So we'll be able to flex that a little bit, based on how quickly the base business recovers in the summer and fall and also how much demand there is for COVID. So definitely making the plans to be able to provide a lot more test by the fall.

Interesting. Okay. And have you indicated at all, in a public call or just some kind of follow-up in terms of implicit in the 4.5 million tests per month that you're kind of guiding to for COVID. What level of kind of diagnostic revenues could you do? Or, I mean, obviously, you're saying you're planning for additional capacity in order. So you can accommodate both. But I'm just wondering, is there a way to think about what level kind of that $4.5 million would imply what level of diagnostics. Diagnostics is obviously going to be down a lot right now. Is it possible to give us some color about the split of that today? Or we're just going to have to wait until we get to the fall and you expand capacity, and then we'll get more color on it?

Well, I think, unfortunately, Dan, you probably just going to have to wait on that. I mean we're in those plans now. So I don't want to get -- we've been really careful throughout this whole process to not overpromise and not get ahead of ourselves. So maybe if it's okay, just kind of hang on, until we get into late summer and fall. And hopefully, by then, we'll have some important new news to produce. But it would be -- we're striving for a very material increase in capacity, adding lines, building new machines, those kind of things to be able to handle what could be a wide range of scenarios into the fall, but probably don't want to try to quantify it now until we get there.

Got it. And something you and I have discussed, Mike, and I'm sure investors who are kind of digging in this probably get it, but it's worth at least just discussing briefly, again, right now. In terms of the extraction kits that are in such short supply and like how -- just kind of walk us through with the technology deployed. How -- like what type of extraction is conducted? Where -- what kind of suppliers you need to rely upon? And is that particular area, a cause of concern for your ability to scale?

Yes. So thanks for bringing that up. For those who maybe aren't as familiar with the company or the technology. So what we are selling is a fully integrated kit, that includes all of the ingredients, if you will, needed to generate a test result. So I always use the analogy, it's a little bit like selling cake mix, right? You get all the ingredients that are in the box that we sell to the customer. And that includes all the steps in the process. So you alluded to shortages of extraction reagents. Customer does not need to buy separate extraction reagents to use our kits. So we do that through a proprietary technology that's called target capture, which uses magnetic beads to bind the target and isolate them. Those are reagents chemicals, that we sell as part of our kits. So you do not need to go buy or find extraction reagents. You don't have to try to manage your own supply chain. You just need to buy our products. And what's interesting is that we -- obviously, we buy raw materials from a number of suppliers, but we make -- we do almost all of our own production in-house. And so we have been able to line up those supply chains to support the roughly 1 million tests a week on average that we've kind of committed to be able to deliver. So we feel good that we'll be able to do that. Even things like swabs, right? For example, which you've also heard in the past, many concerns and shortages around those, which I think is getting resolved now. But we have actually validated our own, what we call our Multitest Swab to be used for COVID testing. So it's the same swab that would be used, potentially, for HPV testing or chlamydia, gonorrhea testing, can be used to test for COVID. And what's interesting about that, and this really speaks to the power of the automation that we have is if a customer is using our own swab and our Multitest Kit, what happens is the swab is obviously used on the patient at the doctor's office. That swab goes into the test tube, you break off the shaft of the swab, you seal the test tube with a cap, and by the way, it's that penetrable cap that we're trying to ramp up production of. And then that test tube goes directly to the lab without it ever being opened. So then what the lab can do is put that directly onboard their Panther instrument. The cap is penetrable by the automated pipe [ petters ] onboard the system. They don't have to open it again, and that obviously, contributes to the automation that we're seeing that has made us a leader in things like chlamydia testing or HPV testing, makes it easier for the customer. So that's the beauty of our system. I mean it's fully integrated end-to-end. Now obviously, if someone wants to use a different swab and put it in a transport medium, that's fine, too. They'll just have the pipe headed into our tube, once it gets to the lab, which is the same as what a customer would have to do for anybody else. But if they choose to go to with our solution, it can be the same thing end-to-end. And then you overlay that on a base of 1,000 Panther instruments in all 50 states, with high-volume testing close to the patient, feel like we can make a very significant dent in this pandemic and really be pretty uniquely positioned to help fight it.

And just to kind of close out that point because we've done calls with folks who were not in the weeds. They're taking a big picture view, experts and they'll say, well, given the amount of testing that needs to get done, just the ramp in the global supply chain, it's just not going to be able to accommodate it. So you basically say, "Listen, you're buying your own raw materials from different suppliers that you've lined up. Is there any chance we get to the fall?" And let's say, there is a second tiers, in testing ramps, and it's like you're kind of scrambling for some of the same chemicals and maybe go into some of the kind of prepackaged kits. So while you're not relying upon these third-party vendors, it's maybe some of the core components of that, that are in short supply. So I don't know, is there any way to maybe just close at this point in terms of the supply of the key building block for extracts and you feel comfortable that, you've got ample capacity to continue to grow that?

Yes. I think one of the things that maybe isn't super apparent to a lot of investors is that supply chains are really, really complicated, right? And I think this COVID pandemic has certainly taught us that, as a society. So it is complicated. As soon as you identify your constraints, you remove or fix one of those constraints. And then the next thing you know, something else comes up. And then you just have to kind of move on and remove that constraint. So you never -- this is part of the reason why I don't want to quantify stuff that might be several months out is you never -- no one can sit here and say, "Hey, we're 100% certain that this is going to happen." Having said that, our operations team has been on this for several months now, and we think we have very clear line of sight to being able to deliver what we've committed to, which is this average of 1 million tests a week. And then we also believe we have very clear line of sight into what we need to do to move into the fall to supply significantly more tests, relying on our own unique suppliers, our own unique sets of chemicals. Now is there some level of demand that would overrun that? Of course, there is, right? But that's why we have that next layer of plans for even longer-term to get to even higher numbers. But we feel good that we can provide what we've said for the next several months. And then as we get into the fall, provide a lot more just kind of work in step-by-step to knock down those constraints as we go, but feel good about it as of now.

Got it. And maybe totally switching gears, focusing on the cost structure, and kind of decremental margins and the steps that you're taking to mitigate the pressure. Maybe could you just walk us through again, like as you think about the back half of your fiscal year? What steps are in place and how we might think about like modeling kind of decremental margins?

Yes. So well, first of all, the COVID assay sales should help, right, as many of you know, new Diagnostics assays tend to be accretive to the corporate average, and certainly, this is no exception. Having said that, if you think about the impact on the other parts of the business, Surgical, which is our highest margin business being down 85%, potentially. Our Pap business that you touched on previously, also a very high-margin business. It's going to be very negatively affected by COVID. Total revenue could be down well over $100 million from last quarter to this quarter. I mean we didn't give that guidance, but certainly, that's what consensus implies. And so obviously, that's going to have a negative effect on gross margin. And that will push down operating margin as well from where it was, say, last quarter. Although, as I mentioned, COVID will help offset that. But in total, margins will go down in the near term just given the lower revenue base. Having said that, we tried to act very quickly and decisively on our cost structure as soon as we saw the potential constraints, I mean, from a liquidity and cash flow perspective, and we borrowed $500 million on our revolver to pay off our AR line and just tuck it away for a rainy day. So I think that's been helpful. And from a cost perspective, we took a number of actions to reduce our cost structure in the near term, with the idea to be able to emerge as quickly as possible on the other side of this, right? So we were trying to avoid outright layoffs. But instead, we eliminated temporary employees, based on the needs of the specific businesses. We furloughed employees, for example, in manufacturing. We shortened work weeks and obviously really cut nonessential spending across the board. From a salary perspective, Steve and the Board reduced their salaries by 50%. Our global leadership team reduced its salaries by 25% and most other salaried employees had 10% reduction. So that, I think, has helped us manage through this very effectively. We said in total that operating expenses should be about $40 million less in Q3 than in Q2. But at the same time, obviously, we've got investments to make as well. And we've tried our best to preserve investments in key R&D programs and certainly are investing fully to expand COVID capacity as we've talked about. So that we can continue to grow through this and bring our employees back up as quickly as possible on the other side of this pandemic and start to pick up where we left off, with leadership positions in some of these categories, which we think we're in a good spot to be able to do.

Okay. So we have about 6 minutes left. I wanted to ask another -- I wanted to dig into some questions on Panther. But before I did, I did have a question from an investor, which really spoke to some of the earlier questions, but I think you kind of answered one aspect of this. But the question was, can you talk about whether or not you expect to sell-through all the capacity that you produce for COVID through the end of the flu season. My sense would be you basically, trying to expand a lot in the fall. Do you think there's going to be a lot more demand. Sounds like to me, we'll find out what that capacity increase looks like, but suffice to say, you're expecting demand to soak up a lot of that. But anyway, have you answered that? And then the second part of the question was, what do you think the total demand is for kind of global testing requirements, which I'm not sure, if you can opine on that, but anyway, maybe if you could address both of those?

Yes. Both are really good, really critical questions that are really hard to answer, right? And I think we're in this unique situation now as an industry, where there is such a need for testing that it's just very, very high for the time being. Now how long does that continue? Boy, that's the million -- well, that's the billion dollar question, really. As we work through this. I mean as I alluded to, and maybe this gets to the second part of the question, even 400,000 tests a day, for a full year is a market of close to $3 billion. I got to believe that number is going up. That testing number is going up materially. But even at $3 billion, that is, what, 8x or more larger than the single largest molecular market for anything else, right, which is probably for any single analyte is probably chlamydia, right? And so that's massively higher than anything else that's out there today. And that doesn't even include OUS. And I will tell you that although OUS is harder perhaps for investors to get visibility on, I mean, there is significant demand OUS. We've already signed some very material contracts with national governments to provide testing, mainly after we get our CE Mark, hopefully, later this month. So it is -- I think under any scenario, it is a multibillion-dollar market. And even if it's less than that, what I do know is that demand for Panthers is through the roof right now, and we will place many more Panthers than we have, historically, last 5, 6 years, we've been doing 200, 250 new placements a year. Wouldn't surprise me, if that doubled, over the course of the next 12 months. So -- and that's really the whole beauty of our strategy is to place those panthers and then load them up with those other 16 assays that we have approved. So that's why I think, we're going to come out of this very strong on the other side of this, just with the significant amount of new automated instruments that we put in the field. But I wish, I could be more specific on the demand questions, good questions. But I think we're all kind of waiting to see.

And do you think, Mike, in a final couple of minutes, do you feel like our customers who are placing Panthers orders, do you have a sense of whether or not there's such an acute need for COVID testing now and maybe over the next 12 -- 6, 12, 18 months, 24 months, whatever it is that they're saying, we just need one of these right now to test? Or do you think because we've done many calls with experts and some of them brought up, we don't want to buy one, if we're not going to be using it. Do you think, they're thinking through and saying, we're committed now to do a lot more testing beyond COVID by putting down the capital or the agreement to buy a Panther. So that we as analysts or any investor could then look out over the next 12 months and say, as your base business recovers, "Hey, we can apply that pull-through to these new Panthers just as much?"

Yes. So a couple of things on that. First, capital does not need to be a constraint for a Panther to the customer. So if they want to buy a Panther, that's fine. But actually, most of our Panthers are placed, meaning we kind of keep them on our balance sheet. The customer doesn't pay anything upfront, and then we just recoup the cost of the instrument through that assay use, over time. And both the economics of either way really don't matter to us. We're fine either way. So that should not be a constraint for the customer. I would tell you, right now, Dan, the demand is massively high for Panthers. And to the extent that we're refurbing Panthers in our own labs to try to get them out to customers as quickly as we can. And we have a lot of customers to use your words, just saying, "Hey, I just need -- I need them out or I need more now. Maybe I don't need one, maybe I already have a half a dozen, but I need more right now." I would say that we are more than happy to allow that to occur now because what we have known from the last several years of running the Diagnostics business, is that when a customer gets a Panther, they love it, they start using it for other things because they realize they can make more money from doing that testing. That's either by adding menu or building up an outreach business to get more volumes coming in. And in the vast majority of the conversations that we're having with those customers, we are having that longer term kind of discussion as well. So that if COVID demand were to wane over some period of time, they'd be able to move quickly to some other things. So it's definitely on our mind, definitely on the customer's mind. I think in the end, putting more of a best-in-class, fully automated box in the field is a good thing. And what we've seen over the last several years is the assay demand is always there once you put the razor, if you will, into the field.

Great. Well, I think, we're just about out of time, or we actually are out of time. So we didn't get to some other ones, but I think it was a fruitful discussion. So Mike, thank you for being with us, as always, look forward to staying in touch, and thank you all for hopefully listening in.

Yes. You're very welcome. Thank you, Dan, and thanks to everybody for taking the time to listen. Appreciate it.

Okay. Bye-Bye.

Bye-bye.