QuidelOrtho Corporation (QDEL) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us virtually today and welcome to Quidel's Investor Day 2020. I'm Ruben Argueta, Quidel's Director of Investor Relations. We have a great series of presentations planned for you. Each presentation topic will run about 20 minutes a piece, with the entire presentation coming in at about 90 minutes. We will then reserve approximately 60 minutes for moderated Q&A. Please note that we will be making forward-looking statements within the meaning of federal securities laws, including our anticipated revenues for Q4 2020 and other projections. Forward-looking statements, by their nature, involve material risks, assumptions and uncertainties. In particular, our expectations and assumptions around the impact of the COVID-19 pandemic on our business, results of operations and financial condition and that of our suppliers, customers and other business partners are uncertain and subject to change. This and many other events or factors could affect our future financial results and performance such that our actual results and performance may differ materially from those in the forward-looking statements. For a discussion of such factors, please review Quidel's most recent annual report on Form 10-K including the section titled Risk Factors, registration statements and subsequent quarterly reports on Form 10-Q as filed with the SEC and the forward-looking information notice in the presentation. Furthermore, this presentation contains time-sensitive information that is accurate only as of the date of the live broadcast, November 12, 2020. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this presentation, except as required by law. With that, let's get started. I'd like to introduce to you Doug Bryant, our President and CEO. Doug?

Good morning, everybody, and welcome to our virtual Investor Day, a day we've set aside to bring you up to speed on the longer-term outlook for the company. Before getting started, I would like to say to the 1,300 members of the Quidel family that I am proud, as always, of all your accomplishments over the years. But in particular, I am proud of you for having risen to the challenge that this country, and the globe for that matter, is facing with the SARS pandemic. Not only did you leap into action once the sequence of the virus had been described by Chinese scientists by developing and manufacturing one of the first PCR assays, but you were first to bring a high-performing rapid antigen assay Sofia SARS Antigen to market. And we're first to bring a combination assay on that same Sofia platform that enables health care providers to test for influenza and SARS simultaneously from the same single swab sample. More recently, in the last quarter, you more than doubled our manufacturing capacity from 1 million SARS antigen tests per week to over 2 million tests per week. You kitted and shipped tens of millions of tests to thousands of communities throughout the country. And I have no doubt that you will reach our objective of manufacturing and distributing as many as 6 million Sofia SARS Antigen tests per week by the middle of next year. Our goal all along has been to do the right thing, to democratize testing so that health care providers and first responders could do their job safely, so that grandmas and grandpas could safely reunite with their loved ones, so that students could get back to class and so that our economy could be restored as more and more people would safely return to work. And while the journey is long and there is much to do ahead of us, we are well on our way. We are playing our part and you have accomplished a great deal. Your efforts thus far are truly appreciated. Thank you. To our investors and our analysts, I would like to start by stating the obvious. We had a great Q3 on many fronts and are positioned very well for an incredible year due largely to revenue and margin from our COVID products. But if you don't mind me saying without even the slightest hint of arrogance because that's not who we are, of course, we're doing well. For a company our size, we have extraordinary strategic technical and commercial competencies. Our executive team is bright, focused, reads everything and makes decisions quickly. We pick the things we choose to do very well in terms of what is needed to develop lateral flow immunoassays like Sofia and QuickVue SARS antigen. Our R&D team is as good as any on the planet and potentially nimbler and more motivated. The R&D team's processes for developing, cloning, characterizing and manufacturing antibodies are state-of-the-art and our chemists are just as good. Our manufacturing processes are highly automated with direct labor at 4% of our cost and they are just as scalable as any larger company while maintaining the high quality that our brands are known for. Our relationships with our distribution partners are arguably the best in the diagnostics industry. And our direct sales and marketing teams are known for their frequency of contact and impeccable follow-up, which are both critically important to our laboratory customers during these extraordinarily difficult times. Originally, a small but relatively successful and happy infectious disease-focused company, we already have all the elements needed to play a significant role in SARS testing. Happy people are more productive and we are simply executing at speed. For today's discussion, a few members of our executive team and I will cover 3 topics. First, we will take you through what our long-range plan looks like before COVID. I will provide a quick comment or two, then we'll jump into the details. Dr. Tammi Ranalli and Dr. Johannes Kehle will bring you up to speed on the Savanna program. As you will see, Savanna is destined to become the next flagship product for Quidel and is expected to be a key growth driver for the company. Bill Ferenczy will provide an update on TriageTrue, our high-sensitivity troponin assay; and Rhys de Callier will conclude the base case LRP discussion by talking about the non-COVID Sofia product introductions assumed over the next few years. Second, I will provide an update on our entire COVID pipeline and will describe our expectations for those products over the next couple of years. Karen Gibson will then give you an update on the Sniffles program and will talk about use cases for the product and the market segments that seem to be the best fit. Third and finally, we will talk about bigger and more aspirational ideas. Dr. Werner Kroll will discuss project Leapfrog and how this advanced technology could address many diagnostic needs at the point-of-care or even at home. Randy Stewart will talk about our financials over the LRP and our thinking around capital deployment. And then we will take your questions. So let's get started. I will begin by saying that before COVID that our long-range plan suggested a compounded growth rate for revenue at 12% over the next 6 years. In other words, we had expected to double our revenue during that period and to grow to over $1 billion in revenue without COVID. The team will walk you through what that looked like, but I wanted to point out that the projections that you will see could not have considered the collateral and lingering benefit of what has transpired for our company in 2020 as a result of our significant response to COVID. These collateral benefits include, but are not limited to the following: First, we will have greatly expanded our footprint and capacity for manufacturing and distributing millions more Sofia test cartridges and QuickVue lateral flow strips. Importantly, we will have paid for all that without incurring debt. The capacity for serving developed world markets like allergy and toxicology and super high-volume developing world markets like chikungunya and dengue will be in place within 12 to 18 months. Second, the asset base of Sofia and Sniffles instruments needed to address the democratization of testing that will surely occur as the culture of healthcare evolves will be there, ready to run all the future assays that we develop over time. It's entirely possible that in countries in which a point-of-care market segment didn't exist until SARS testing moved into the clinics, like the U.K. and Germany, other tests will follow. And we will already be there. And it's entirely possible that in our own country, where at-home infectious disease testing didn't exist until SARS testing moved into the home, other tests like influenza and strep will follow. And third, throughout the course of this year, we have been serving the high-complexity hospital and reference labs with our high-performing, easy-to-use Lyra SARS and influenza products. In doing so with integrity and forthrightness, we have now established hundreds of enduring relationships and lasting brand recognition and strength. As we launch Solana SARS into a receptive audience of moderate complexity labs and clinics in 2021, we will solidify an existing base of 1,000 Solana customers and expect to double that footprint throughout the year. In 2021, we will be introducing Savanna to a set of customers that knows our company and our commercial and customer service teams very well, which will dramatically compress the market development time that we had incorporated into our original Savanna revenue forecast. Moving forward, a prospective customer that is slow to take a phone call from a representative of Quidel will be rare, thanks to everything that we have done and are continuing to do for our customers. Having said all that, let's talk about Savanna. Johannes?

Thank you very much, Doug. I'm Johannes Kehle, Vice President of Research and Development, Savanna. We will first discuss some key development or key technical factors of the platform and how these differentiate our system from the competition. In other words, let's review the technical details that will make Savanna a very successful diagnostic platform. The basis of the system is built on proven robust technologies. These are molecular techniques, in particular, the so-called magnetic bead-based nucleic acid isolation and the real-time polymerase chain reaction or, in short, real-time PCR, which enable us to analyze up to 12 pathogens or 12 targets plus controls in a single assay run. However, due to a clever combination of many unique factors, we managed to achieve superior and differentiating performance for the turnaround time, the simplicity, ease of use, modularity and versatility of the platform. Here are some examples. A very fast turnaround time is achieved by the instrument's unique light fiber optics which allows us to have excellent test sensitivity in real-time PCR reactions that are as short as 12 minutes. And this for 45 cycles of the reaction for less than 20 minutes of total turnaround time. Another example. The disposable coverage is designed in a way that both direct patient swaps and also liquid patient samples can be inserted. Further, the assay chemistry enables room temperature storage for the disposable cartridge, adding simplicity and ease of use to the system. Another interesting feature is the instrument modularity. One main bay or a mass instrument can drive up to 3 auxiliary base or pupil units in order to expand capacity and simultaneously keep the required lab space and CapEx cost as minimal as possible. Important to mention is also the assay versatility. In Savanna, we can test for analytes qualitatively, meaning screen for a positive versus negative result, but also quantitatively, for example, test for certain viral load or, in other words, for the number of viral particles in a patient sample. We can also test for a particular pathogen, for example, certain bacteria and simultaneously in the same run, determine their antibiotic resistance statuses. This gives us absolute flexibility for the assays that we can develop for Savanna. Of course, we want to make full use of this feature and launch the platform with a critical mass of relevant assays. And again, the technology allows us to scale up manufacturing to very high volumes in a very short period of time. That much about the theory. Let us now examine some key technical factors directly from the components of the platform. And we will start with the Savanna disposable cartridge, which you can see on this image. On the right side here are the sample ports for the patient's swab and the patient liquid sample insertion. These sample ports have this particular cartridge. On the left side of the cartridge, you can discern the real-time PCR chambers. As previously stated, we can analyze up to 12 analytes plus controls in 1 assay run in these reaction chambers in as short as 20 minutes. As also explained before, the reagents of the cartridge enable room temperature storage of the disposable. And there is an excellent assay integration capability and assay versatility of the platform due to these reagents. In order to run the disposable cartridge, the Savanna instrument, which you can see here, is required. The key human machine interface part is the intuitive touch screen on the upper part of the instrument. Very important features of the instrument are its small footprint, the integrated barcode reader and the built-in connectivity. The instrument has both a WiFi and a cellular modem. Very easy to discern is where to insert the cartridge in and an illuminated alley gearing intuitively informs the user about the test progress and other relevant information during the test run. The image on the right side presents the instrument modularity. The main bay with the touch screen drives up to 3 auxiliary base, which can be added vertically and/or horizontally in order to expand test capacity. The Savanna test procedure is as simple as can be, a true sample-in-to-result-out operation. Either a swab patient sample or a liquid patient sample is added into the respective cartridge sample port. In a second step, the cartridge is inserted into the instrument after scanning the patient sample and cartridge barcodes. The cartridge barcode then automatically tells the instrument which test protocol to open and also run. After 20 minutes, as in the shown example of the respiratory virus panel assay, this test result is finished, the cartridge is ejected and the instrument automatically provides the test results. In the shown example, you can see that the patient sample was positive for at least 1 analyte. The big plus on the screen shows the test result, of course. And further information can then be retrieved by simply pushing the view results button. After all the details on our Savanna platform, there is one final information to review and hopefully what you have seen about the platform raised the same question in your mind, namely, how far we are with the development of the platform and when to expect the commercial launch. The high-level time line shown here aims to answer exactly these questions. The next important milestone is to have clinical trial instruments available by the end of this year. We have very high confidence that this will be the case in order to then start with the clinical trial of the first assay for FDA approval at the end of January 2021. The clinical trials for more assays will be commenced shortly thereafter. The final instrument prototype version is expected by the end of March, beginning of April prior to availability of production instrument units. We prepare for a commercial product launch early in the second half of 2021. Subsequently, the next panel assays will be FDA-approved and their commercial launch will follow immediately upon approval. After reviewing the technical and development-specific details of our Savanna platform, let's have now look at some relevant marketing and commercial-specific information. Tammi, I give the presentation over to you.

Thank you, Johannes. Now if someone who has been with the Savanna program since the inception of the project, I am absolutely thrilled that we are launching this instrument in the first half of 2021. Part of what is allowing us to accelerate our time line is the undeniable impact that COVID has had and will continue to have on diagnostic testing. So one of the changes that we've seen in the market has been the tremendous growth in respiratory testing. This was an impact that was initially felt in the molecular arena and now has been extended into immunoassay as more tests have been launched into the marketplace. This is projected to result in a compound annual growth rate in testing that is in the double digits over the next 5 years. And this impact is not limited to just the United States, but it's felt throughout the entire world. So the changes in behavior that COVID has generated are believed to be long-lasting. Simple symptoms in previous times that would likely be brushed off as mere cold or even allergies are now a significant impetus to go and get tested. And as testing is driven closer to the patient, this behavior will be reinforced by the ability to get both accurate and timely results. So as we introduce Savanna into the marketplace, one of the key questions we needed to answer is was there a need for additional molecular platforms in this marketplace? And as I look around at the competitive landscape, we find that the current platforms out there all have limitations and trade-offs with their features or functionality. And so I've got a few of them that I'm going to discuss here today. We have platforms that are moderate in cost with excellent performance, however, don't have the ability to multiplex with broader panels. And then we have those that have the fastest turnaround times, which obviously make them more desirable for point-of-care testing, but those are generally the most limited in terms of panel size. And on the other hand, you've got options where there's platforms that have very large panels but are far more costly with much slower turnaround times and also don't allow for any flexibility in analyte choice. So we've chosen to focus on the features and attributes of Savanna that take into account all of the true needs that a point-of-care system requires in order to be competitive. So turnaround times of 20 minutes with high-performing and flexible panels that an end user can customize as they see fit for their own testing needs as well as a broad menu of options to choose from. So the plan has always been with Savanna to develop a critical mass of targets and include between 4 to 12 analytes per cartridge. And the rationale behind this is that we've focused on therapeutically actionable clinical results, so cases wherein getting that test result allows a physician to alter treatment for that patient while the patient is still available. This solution really needs to be CLIA-waived with the simplicity of a true sample-in, result-out and turnaround times that's relevant for a point-of-care setting. This is incredibly important as we shift the paradigm from a fee-for-service medicine to more of a value-based diagnostics and also take into account allowing for pathways around challenging reimbursement issues, which provides the end user with flexibility in selecting which analytes they would like to run for each and every patient. So our current launch strategy for Savanna in 2021 is going to be very focused. We're going to be spending the time while we are developing and enhancing our manufacturing capabilities to pursue an Emergency Use Authorization on a very targeted respiratory panel in early 2021. And this will allow us to get into the market more quickly than planned, and then we're going to expand the panel to be inclusive of the full respiratory offering and that is our RVP 10. We will partner with leading institutions initially to quickly demonstrate utility of the platform and assay as well as provide a much-needed solution for faster molecular respiratory testing during this pandemic. This will give us the time to generate publications that will be needed during the expansion of our launch over the course of the year. We are in a fantastic position to capitalize on the very large number of relationships that we at Quidel have created over the last 9 months with the launch of both our molecular and immunoassay COVID products, so then as we add in additional menu and scale up our production, we will be able to both solidify and greatly expand our customer base. And so in looking beyond 2021 and beyond the impacts of COVID-19, we've dedicated our initial development efforts towards the following infectious disease offerings with very focused panels that are going to include STD testing, which is herpes, vaginitis as well as an STI panel that includes drug resistance. This STI panel I love because it will be the first offering that allows for both the diagnosis of the STI as well as susceptibility to a variety of different therapies and this can all be done while the patient is in the office. In addition, we'll have several GI panels in development, including a combo bacterial-viral offering as well as a targeted parasite panel. In addition to RVP 10, we will also have a very comprehensive pharyngitis panel and we are also looking into an MRSA and hospital-acquired infection panel as an additional offering because of the continued overuse of antibiotics is increasing resistance problems in hospital settings as well. So to conclude, I'd really like to thank you today for the opportunity and very much look forward to the next Investor Day where we'll be describing our success in the marketplace with the Savanna platform.

All right. Thanks, Tammi, and thanks to everyone listening in today. As Doug mentioned, I will be providing an update on the TriageTrue high-sensitivity troponin assay and the opportunity it represents for Quidel. First, a quick overview of the cardiac market business. Overall, the business is solid and we are competitive in our target markets. The Triage Meter-based natriuretic peptide and D-dimer assays remain the best fit for low-volume hospital laboratories as well as true POC settings. Our BNP Test is CLIA-waived, which expands testing for heart failure to a wide range of outpatient clinics. And our BNP assay for Beckman analyzers lets us address higher volume, automated testing and larger facilities. Finally, although COVID had a negative effect on cardiovascular testing, we are seeing an increased demand for our D-dimer tests related to the concerns that COVID can drive clotting-related disorders. Outside of the U.S., we also have several unique multiplex panels that give us a strong competitive edge in China and key European countries. The biggest challenge we face is the ongoing adoption of high-sensitivity troponin around the world. Troponin tests on big iron instruments have evolved continuously over the last 20 years and point-of-care assays have not kept pace. Outside of the U.S., instrument-based high-sense assays have been available for 10 years and this has greatly reduced the use of point-of-care assays in hospitals in many countries. The ongoing adoption of high-sense troponin in the U.S. will inevitably impact the Triage cardiac panel business here as well. At the same time, TriageTrue represents the biggest single opportunity for the cardiovascular business. I will explain this by walking through how high-sensitivity troponin improves diagnosis, why point-of-care adds more value and how this will help grow the Triage business. First, some background on troponin. Troponin is a protein found in myocytes that is released when heart muscle is injured. Levels range from very low in healthy young people to very high in myocardial infarction patients. In chronic disease, levels are elevated but stable. In acute events such as MI, levels rise quickly and then fall off. Early troponin assays, first introduced about 20 years ago, were very specific but not sensitive. When detected, interpretation was easy, the patient was having an MI. However, when not detected, interpretation was challenging. Acute coronary syndrome which includes MI could not be safely ruled out. Patients were often held for 12 hours and longer to allow time for the troponin to rise to a detectable level and many patients were unnecessarily admitted to the hospital rather than risk sending them home. High-sensitivity troponin assays are very sensitive and accurate. By definition, they have to detect troponin in 50% of normal healthy people and they are very precise even at low concentrations. Interpretation is easy, if troponin is not detected or stays below the 99 percentile, the patient is not having an MI. But ruling is more difficult since troponin is detected in many non-myocardial infarction patients. So patients are sorted out via algorithms that combine the troponin level and the change in that level over time. Here is a simplified version of such a diagnostic algorithm showing how troponin fits in. When patients with suspected MI are presented in the emergency room, an electrocardiogram is run within a few minutes. About 5% of these patients will have an ECG feature known as an ST-segment elevation, which is highly diagnostic of a serious MI. These STEMI patients are rushed to the cath lab for angiography and, as needed, a stent. The goal is to initiate angiography within 60 minutes of presentation to the ER. Although troponin tests are run in these patients, they are not utilized for the initial diagnosis which is based on the ECG. The remaining 95% of patients will have a nondiagnostic ECG. Approximately 15% have what is known as a non-ST-segment elevation MI while the remaining 80% are not having an MI. Troponin testing plays a critical role in sorting out these patients. Over the course of a few hours, several troponins will be run with diagnosis based on both the troponin concentration and the change in concentration over time. Based on this algorithm, patients are either ruled in, ruled out or held for observation and additional testing. Patients ruled in are sent to the cath lab. With high-sense troponin, high-sensitivity assays can detect troponin elevation early after symptom onset and can accurately track small changes in concentration. This enables accelerated approaches with compressed blood draw times at 3, 2 or just 1 hour apart. The majority of patients can be rapidly ruled in or out in just 3 or 4 hours, with only 25% to 45% -- 40% of the patients held longer for observation. And they are very safe, patients ruled out have very low-risk of MI. So why a point-of-care test? If we zoom in on an accelerated algorithm, in this case, a 0, 1-hour version, we can see how point-of-care testing makes a difference. When the testing is performed in the central lab, it takes time for the sample to be transported to the lab, received, centrifuged and then run on an analyzer. This can add an hour or more to the time that it takes to get a result back to the doctor. And the results for the initial test may not even be back before the draw time for the second test. With point of care, the test is run on whole blood at the patient bedside with results back to the doctor in 20 minutes or less. This can reduce the time of disposition by 45 to 90 minutes depending on the facility and cut the time to patient disposition up to 50%. Okay, as just shown, point-of-care can further reduce the total time to patient disposition. This can have a significant impact on busy ERs because it allows clinicians to focus on the right patients and provide better care and it increases ED throughput and efficiency and it enhances patient satisfaction. However, a true point-of-care high-sense troponin test platform can also have value in other settings besides the ER. It can be a simpler and more cost-effective approach for low-volume testing in the laboratories of small hospitals with fewer chest pain patients. In concept, this is similar to use of pod-based coffee machines rather than a classic drip system for people who have 1 to 2 cups of coffee a day. Point-of-care can also enable democratization of high-sense troponin testing to urgent care centers and other nonhospital sites by enabling safe, rapid disposition of low-risk chest pain patients and avoiding the need to divert them to a hospital. But can this be done? Can a point-of-care assay meet the challenging analytical and clinical requirements established by central lab analyzers? The simple answer is yes. TriageTrue development was initiated by Alere more than 5 years ago. A challenging requirement was a need to utilize the same Triage MeterPro in order to leverage the placement base and ensure synergy with the other assays on the platform. The key to success was the complete redesign of the Triage cartridge. Several innovative features were developed that greatly improve assay sensitivity and precision while maintaining the use of whole blood samples, ease of use and short time to results. Shortly after the acquisition of the Triage business, Quidel committed to complete the development and launch of TriageTrue. Given the challenging regulatory and market requirements, we felt it was important to establish a strong, capable advisory board to help guide the process. We have met periodically with this well-known group of cardiologists, ER physicians and clinical chemists since early 2018. They recommended a control market launch with key milestones as follows: First, obtain CE Mark and launch in Europe as the fastest path to market and to gain real-world experience. Second, conduct a major scientific study to validate assay clinical performance prior to initiating an expansive and complex FDA trial. Third, we'll leverage this study to drive market adoption outside the U.S. while completing the FDA trial and clearance. Here is an overview of that launch time line and where we stand today. We obtained a CE Mark in late 2018 and launched in early 2019 into countries where we sell directly or closely support a strong distributor. More importantly, we were able to work with Dr. Christian Mueller and his team in Basel, Switzerland to quickly conduct a major prospective multicenter trial, which was published in the Journal of the American College of Cardiology in March of 2019. And here are the highlights of that study: The researchers used samples from the well-known APACE study to evaluate clinical performance on 1,261 suspected myocardial infarction patients. The TriageTrue performance was evaluated against a gold standard diagnosis, as determined independently by 2 cardiologists using all available patient data, including angiography and imaging. The investigators also compared TriageTrue to the Roche and Abbott high-sense troponin assays. The results were outstanding and included a validation of a safe and effective 0/1-hour algorithm using the TriageTrue test with very high sensitivity, no adverse events at 30 days in rule-out patients, high rule-in accuracy and high efficacy, 74% of patients ruled in or out at 1 hour and only 26% were held for observation. The conclusion was very strong, including the comment that the clinical performance is at least comparable to that provided by the best-validated central laboratory-based assays, meaning Roche and Abbott. This figure from the publication captures perfectly the safety and efficacy of a TriageTrue used in a highly accelerated 0/1-hour algorithm. TriageTrue proved to be highly effective with rule-in and rule-out of 56% of patients after the initial 0-hour draw and a total of 74% using the 0/1-hour algorithm. And it also proved to be very safe with no missed MIs on the day of presentation and 0 adverse events over the following 30 days for those patients ruled out. Based on the APACE study results, the European Society of Cardiology, in August, updated their clinical guidelines to include the validated TriageTrue 0/1- and 0/2-hour algorithms. Between this and the APACE study itself, we now have strong third-party proof-of-performance to support our commercial efforts in Europe and the confidence to proceed with the FDA trial. That is reflected with where things stand right now. Moving forward, we will ramp up the commercial efforts in Europe, an effort we had hoped to initiate back in March before COVID closed things down. To that end, the Quidel European team has developed and has begun the execution of a comprehensive plan to drive awareness and adoption there. We are also expanding commercialization to target countries and other regions. We also plan to initiate our FDA trial in December. Based on the rigor of high-sense troponin trials and the scrutiny given them by the FDA, this translates into an estimated U.S. launch of the product in the fourth quarter of 2022. Finally, to maximize product adoption outside the U.S. and to prepare for a successful U.S. launch, we will be conducting studies that demonstrate the impact and value of the TriageTrue test. What kind of opportunity does TriageTrue represent? Based on a number of factors, the focus will be on Europe and the U.S., so we have sized the potential accordingly. Across these 2 markets, there are an estimated 15 million to 20 million chest pain presentations. Based on APACE and other non-Triage studies, we have calculated that the average patient will get tested for troponin twice during the initial presentation and we are looking at a price range of $12 to $15, varying by region. With all that considered, we estimate a market potential somewhere between $360 million and $600 million. So how much of that can we get? To figure that out, we started by identifying the target market segments that are a good fit for point of care, as outlined earlier: ER point-of-care, low volume hospitals and decentralized to urgent care centers, these are shown in green. We then determined the positioning, opportunity and model assumptions for each. A level of detail shown here but that I will not be addressing fully today other than one important exception. This is U.S. hospital-centric but it's a good example since it's the biggest opportunity and the underlying logic applies to other segments and regions. The model is built on positioning and penetration of TriageTrue based on number of beds per hospital. We expect good penetration in small hospitals. The sales process is simpler since testing is done in the lab and the value proposition is cost effectiveness at low testing volumes. Updates should occur relatively quickly due to the simpler sales process. While the volume per site is low, there are many sites. On the other hand, we are modeling limited penetration in large hospitals. The sales cycle is longer and more complex since testing is done in the emergency department and we need to demonstrate the value of faster patient disposition. While only some hospitals will adopt point-of-care testing, the volume per site is very high. And we will conduct the needed outcome studies to support the sales effort. We've applied this approach to the market segments in both Europe and the U.S. and developed the revenue projections shown here. Note that we based it primarily in the U.S. and Europe for a variety of reasons. They have well-developed high-sense troponin markets, TriageTrue fits well into multiple market segments and there is adequate reimbursement. Although hospital is the biggest contributor, we included other segments that will grow over time and we did include some pull-through of other Triage tests that we gained with new placements driven by TriageTrue. Although it starts slowly after U.S. clearance in the fourth quarter of 2022, the revenue begins to ramp in 2023, reaching $125 million in 2025 and then $175 million 2 years later. At this point, the China opportunity is still to be determined given that the high-sense market there is still in the early stages. It's a hospital-centric market with fewer decentralized testing settings, there are registration challenges and timing that are still uncertain and the current Triage business there is already at the point-of-care and in higher volume settings. At the outside, TriageTrue would likely cannibalize existing business. Finally, we have included very limited revenue from the rest of the world at this point. So I'll end by saying that we are excited about the opportunity to revitalize and grow the Triage cardiac business and look forward to making it happen. This brings me to the end of my session, and I will now hand things off to rise to Rhys de Callier.

Good morning, everyone. I'd like to spend the next few minutes describing some of our near-term growth drivers of our Sofia franchise. As a reminder, Sofia is Quidel's market-leading point-of-care platform that provides results in minutes and is heavily utilized in CLIA-waived doctors' offices and hospitals. As you all are aware, Sofia has been making a positive impact in our society's fight against COVID-19 and we expect new products to experience a collateral benefit due to these new COVID-related placements. Now I'd like to proceed by providing you all with some visibility into our Sofia pipeline. First, we will be leveraging our rapidly growing Sofia placements through the development of a highly competitive GI portfolio of 6 assays. We believe this market is both large and includes unmet needs that can be met by Sofia. For example, in the U.S. alone, the market and end-user dollars is approximately $400 million. A large percentage of this market comes from C. diff and H. pylori testing. The cornerstone of this portfolio will be our C. difficile assay, which provides differentiation between Tox A/B and GDH. Over the past decade, we saw a shift to molecular methods for the detection of C. difficile infection, however, many health systems are now looking to reincorporate antigen testing back into their algorithms as PCR had been found to detect nontoxigenic patients. And at the moment, there is one visually read antigen-based assay that represents the bulk of antigen testing. Our intent is to launch an IDSA guideline-compliant antigen test to be used within the multiple testing algorithms. As we near submission for this assay, we are confident it will perform very favorably against the leading visually read assay. Next, the stool antigen H. pylori market is another one where it is dominated by one player in the right for entry. Our goal here is to provide a cost-effective assay with a test of cure claim. This test will detect active infections as well as confirm the absence of infection following treatment. The other GI products in this portfolio will also benefit from Sofia's platform features, including objectivity, connectivity and performance over culture and visually read assays. Now I'd like to turn to another exciting project, Strep 98. Today, the Strep A market is somewhat of a commodity. Much of the 40 million tests performed in the United States are generic products made overseas and sold for a few dollars per test. Most of these tests are run in pediatric offices on children and young adults aged 5 to 18. Current guidelines suggest any negative test must be reflexed to culture for confirmation. This is a key disadvantage of these tests as culture confirmation is a process that can take as long as 2 to 3 days. There is shared frustration in this process among kids, parents and physicians. We believe patients, providers and payers will benefit from a rapid, low-cost, no-culture backup assay that can be run in CLIA-waived settings. In addition to cost, we've learned through many conversations with physicians that Strep A infections are a key driver of antibiotic misuse. As we near submission for this assay, we are confident in our ability to address this problem. As we think about our go-to-market approach, there are still some unknowns, particularly around reimbursement and pricing for this assay. As such, we're modeling a few scenarios covering a wide range of potential revenue. However, we are confident in our ability to convert about 1/3 of the competitive antigen market to Sofia. And now I'd like to give you all a brief update on our Sofia Lyme test. As you may be aware, Lyme disease can be a very challenging disease to diagnose, leading to pain and frustration for patients. The CDC, Quest Diagnostics and the nonprofit FAIR Health all released reports in recent years demonstrating the growth and spread of Lyme disease. While physicians can't treat based on the bull's eye rash, the CDC estimates 20% to 30% of those infected with the bacteria that cause Lyme disease may not develop this rash while some studies have estimated the number may be closer to 50%. Our Sofia Lyme assay provides Tier 1 detection of both IGM and IGG antibodies to the infection. It is CLIA-waived and uses a finger stick whole-blood sample and provides results in minutes as compared to days for the typical lab send-out process. The pandemic has dramatically reduced the number of patients visiting their primary care provider in person. Despite this drop in visits, we've continued investing in broad awareness campaigns and marketing programs internally. To date, we have more than 600 contracted customers and as patients begin returning to in-person visits to the primary care doctor, we expect to grow this number. In closing, we plan to further leverage this platform as we ramp to 75,000 Sofia placements. As I mentioned previously, in the short term, we'll be launching Strep 98 and a portfolio of 6 new assays targeting gastrointestinal diseases. Longer term, there are several areas of interest in which our R&D teams are investigating. Thanks for your attention today and I hope you all stay well.

Next, let's talk about our COVID product pipeline. I will keep this succinct and tight and we'll plan on answering your questions during our Q&A. What you already know is that we developed and are currently shipping 4 COVID products: Lyra-extracted SARS PCR, which was EUA-cleared in March; Sofia SARS Antigen, which was EUA-cleared in May; Lyra Direct SARS PCR, which was EUA-cleared later in May; and Sofia 2 flu and SARS, which was EUA-cleared in October. Moving forward, we have 8 assays in development. Here are the anticipated EUA submission dates. One, QuickVue SARS antigen for the point of care, already submitted and under active FDA review; two, Solana SARS, our 25-minute isothermal assay, submission any day; three, Lyra PCR flu and extracted SARS, submission this month; four, QuickVue SARS at home, submission in December; five, Sofia 2 SARS, IgG antibodies, 2 nucleocapsid and 2 spike protein epitopes, submission in December; six, Lyra Direct PCR flu and SARS, submission in January; seven, Savanna Respiratory Viral Panel 4, which includes flu A, flu B, RSV and SARS, submission in the first quarter; and finally, eight, Sofia 2 RVP 4, which uses our new strip and spotting technology, submission in March. Clearly, there's still more to do in playing a significant role in addressing the country's need for tests with various use cases. And now for something really exciting, Karen Gibson will kick us off on our big idea segment with an update on Sniffles. Karen?

Hello. I'm Karen Gibson and I'm the Senior Vice President for Digital Health here at Quidel. The digital health business unit was formed to use innovative digital technology to enhance our products and expand diagnostic testing into new areas. Today, I want to share some information about a very exciting product currently in development, one we affectionately call project Sniffles internally. The current COVID pandemic has changed the world of diagnostic testing forever in an extremely short period of time. We have all seen or experienced personally the need for affordable and scalable testing for SARS. The pandemic has brought testing to the forefront of the health care system. Diagnostic testing is now woven throughout the fabric of everyday conversations. You can now schedule a test online and you even have the ability to choose what type of tests you want from an e-commerce shopping card. Would you like a PCR test, a rapid antigen test or an antibody test? Another outcome of the pandemic is the rapid adoption of new patient care models. A recent McKinsey survey shows that in 2019, less than 11% of consumers were using telehealth services where now over 76% would have no issue using a telehealth system. Physicians have adapted their practices and we are seeing the regulatory agencies adapt as well. In the last year, over 80 new telehealth services have been introduced. While this trend may go downward as more physicians return to their office practices, most industry analysts are convinced that the adoption of telehealth is here to stay and will continue to grow as more services can be offered as part of the virtual visit. One of those key services lacking is the ability to do diagnostic testing with telehealth. Diagnostic testing is a huge value-added service for the provider and it also improves the patient experience as well. The timing of the pandemic intercepts with another key trend which is the application of advanced technology within the health care industry. It is more common today to see the usage of AI, machine learning, biometrics, IoT or informatics used within health care, which is very exciting to me personally. At Quidel, we envision a future of diagnostic testing that uses innovative technology to not only improve patient care but to open up new business models. Diagnostics is clearly being digitized. Project Sniffles is the embodiment of all 3 of these key trends. It's an affordable and scalable testing platform using advanced technology, and due to its mobile IT infrastructure, it can be used to expand testing into new and novel patient care settings. I'd like to introduce you to project Sniffles currently under development, but we will be announcing it for release in the near future. Sniffles is the combination of a small diagnostic reader, about the size of a Grande coffee cup, as you can see here, that's able to read a standard Sofia fluorescent immunoassay cassette. After the sample is taken and prepared, you simply insert the cartridge into the reader. Images of the cassette are captured on the reader and transmitted via Bluetooth technology to a mobile device. The result is then interpreted using our proprietary AI software model on an app, which has been downloaded to the mobile device. As I said earlier, there are many benefits of the Sniffles platform. First, affordability. To manufacture this device is less than 20% of the Sofia instrument to manufacture. Due to the simplicity of the design, it's highly scalable. We're currently under contract to manufacture over 100,000 of these devices by early 2021, and we have the capability to expand our manufacturing into the millions, if desired, Imagine a world of diagnostic testing without instrument constraints. But the real value of Sniffles is in its software technology. With the artificial intelligence capability, we can train our models interpreting the assays to be smarter and more accurate over time. With the inherent cellular connectivity, we can use that mobility for our customers who are going beyond the lab and physician office, and we are seeing that currently today. Cellular connectivity also allows us to integrate with other software platforms easily, giving us the ability to address the entire testing experience. But the biggest advantage is that we can target software features quickly to adapt to market opportunities. I'd next like to share some of the current thinking around where Sniffles can be applied. As you can see here on the slide, we have our professional point-of-care market, the telemedicine market, which will allow a health care professional to oversee the sampling process and guide the patient through the interpretation of the results and potentially even the home market where the patient can test themselves for a result. When we think of the professional point-of-care market, we see it in a much broader context than the traditional physician office or hospital. We have customers today picking up and transporting our analyzers to parking lots, sports stadiums, concert locations. And we've even seen a storage closet set up to accommodate testing, which by the way, we don't recommend. Sniffles can handle those environments but it also addresses more permanent mobile medicine needs of concierge medicine and home health care services. Introducing the Sniffles platform will allow our customers to choose the analyzer platform that meets their needs the best, be it a Sofia, Sofia 2 or a Sniffles. Telemedicine is a very enticing market for Sniffles as it completes the virtual visit, giving the physician more insight even though they're not physically in the same room as the patient. Think of the benefits of having a virtual visit combined with a SARS test. The patient is not sitting in the waiting room or ER, potentially infecting others prior to a consultation and the physician can give immediate guidance. The convenience of this care model may also incentivize patients to reach out more quickly for help before their condition worsens. Naturally, the next step from telemedicine is having the diagnostic in a form where the patient can test themselves without oversight. While we are not recommending forgoing health care professionals, the improved technology of Sniffles allows an affordable and accurate test, just like the ones performed in the physician office with immediate convenience. This empowers a patient to take charge of their own health and seek out professional assistance faster. Home testing under instruction from a physician can also allow for better monitoring of chronic conditions, enabling a very strong patient care plan. There are many opportunities to apply Sniffles technology so let's take a look at our current thoughts around a launch roadmap. Sniffles is simple by design. Our focus has been on building a platform that can be adapted to new markets quickly by adding new software features. We have an ever-evolving road map that will allow the platform to expand. At launch, we plan to leverage the benefits of Sniffles being developed on a native mobile technology platform. As I stated earlier, the diagnostic testing is moving outside of the boundaries of traditional point-of-care environments. This little 1.5-pound device can be easily transported where it's needed the most. One of the key areas Sniffles can quickly integrate is into the telehealth marketplace, combining physician oversight with an accurate diagnostic test, directly enhances the provider's capability to service the patient and again improves the patient experience. It is truly a game changer for telehealth and diagnostics. Next, we plan to focus heavily on the professional segment as we will develop software features more suitable for the diversity and the rigor of the traditional settings. In this setting, an analyzer as affordable as Sniffles allows testing to scale dramatically. We can also develop new and more complex AI assay interpretation models for new disease conditions. And finally, we do see the capability to take Sniffles directly to the home at some point. Imagine a time when you can test yourself in the convenience of your own home with the confidence of a result that physicians have depended upon for years. In conclusion, this little analyzer is actually a pretty big deal. It can shape a whole new future for diagnostic testing. Thank you for your time today. And now I'd like to introduce Dr. Werner Kroll, who will give you even more big ideas coming from Quidel.

Good afternoon, everyone. As Doug and Karen already mentioned, I'd like to update you on our advanced technology platform project, the next-generation immunoassay platform for point-of-care applications, which is run under the codename Leapfrog. The driver for this project is the need for improved immunodiagnostic assays to successfully support the health care trend of switching from contemporary medicine to predictive health, to detect and treat diseases in earlier stages than it is currently done. With this project at Quidel, we want to expand our current strong position in point-of-care infectious disease diagnostics and identify infections at an earlier stage when they are still effectively treatable without long-term implications to the patient. Examples where improved analytical sensitivity can be an enabler for earlier detection, a Lyme disease or TB diagnostics, measuring microbial parameters instead of indirect serological responses, what is currently state-of-the-art. As importantly, however, we also want to expand our current focus beyond acute disease diagnostics of infections and cardiac conditions and enable better and earlier diagnosis in the field of chronic diseases. In the U.S., around half of all adults have at least 1 chronic health condition, and treatment cost of these patients account for about 86% of the national health care spending. Most chronic diseases are not curable but can be managed. On a physiological level, the changes on health or disease status are most directly seen on the protein level. Immunoassays are needed to diagnose and monitor those changes in protein levels along with disease status. Since biochemical changes are small at early disease stages, these applications require more sensitive detection methods as well. Besides the impact on a medical level, this paradigm shift will also have significant implications on health care costs. The shift to comprehensive and certified patient management has the potential to reduce health care costs and improve medical outcomes by enabling earlier individualized interventions that can diminish subsequent health problems, avert adverse events, reduce or prevent hospitalizations and avoid the cost of late-stage or unnecessary treatment. This trend is further amplified if testing is possible in decentralized settings, supporting the new trend of telemedicine and expanded personal responsibility for own health. The Leapfrog platform is a logical next step in the development of our successful immunoassay point-of-care product line that started with QuickVue, fast lateral flow-based assays with visual readout. This was followed by the Sofia platform, providing improved analytical sensitivity through instrument readout of fluorescent signals. With Sofia 2, multiplexing capabilities for lateral flow assays as well as improved connectivity were added. Sniffles is the latest instrument of this line. It utilizes the same assay cartridges as Sofia and provides improved affordability, connectivity and scalability. Karen already presented the key features of that platform and its impact on democratizing immunochemical testing. So far, all these immunoassays are based on lateral flow technology and were incrementally improved over time. Leapfrog, however, represents a disruptive technology jump in that sequence. The improvement Leapfrog provides over the lateral flow technology can be compared to the improvement digital PCR provides over PCR. While digital PCR, however, cannot be applied in point-of-care settings, Leapfrog is designed to work in decentralized CLIA waived locations. The Leapfrog platform enables robust ultra-high sensitivity down to femtogram per ml level in comparison to triple-digit picogram per ml levels achieved by the Sofia platform. Other key features are integrated sample handling, which is supportive of CLIA waived applications and self-learning data analysis algorithms to improve signal readout. Full connectivity will enable data handling and communication in the 2020 decade. This platform is developed with an experienced technology partner complementing Quidel's point-of-care diagnostics expertise. The technology is based on localized plasma resonance as the basis for digital signal readout. Digital signal readout provides an improved signal-to-noise ratio that enables a limit of detection in the femtogram per ml range. The basis of the assay principle is a sandwich immunoassay with a capture antibody on a chip surface, capturing analyte molecules at 1 epitope and a second antibody coupled to a gold bead, which reacts with a second epitope of the analyte and thereby fixes the bead to the chip surface. Instead of measuring the entire integrated plasma resonance on the chip, the signals of individual beads are collected and the number counted on the chip surface. As long as the protein concentration is low enough and the percentage of beads [indiscernible] abled immune complex or base Poisson distribution, each bead will either capture 1 single immune complex or none. For this condition, the analyte concentration is proportional to the number of marked beads. When the concentration is higher, the instruments switches to analog signal measurement. Thus, the dynamic range is expanded to 6 logs. As mentioned earlier, conceptually, this technology improvement can be compared to the switch from PCR to digital PCR. Currently, the platform development is in the feasibility phase. The model assay we have chosen is based on the high sensitivity troponin assay of our Triage platform. The assay principle is the same for both assays, utilizing the same antibody fragments, respectively, the complete antibodies in a sandwich assay. This allows direct comparison of experimental results and quantification of development progress. When using complete antibodies, the limit of detection for troponin in human plasma is about 47 femtogram per ml and the limit of quantitation, 1 picogram per ml. When using fabs instead of complete antibodies, the limit of detection is improved to 22 femtogram per ml and the limit of quantification to 247 femtogram per ml, with a CV of around 10%. The precision in the digital range is between 3% and 7%, depending on the design of the assay. Overall, the assay spans a range of approximately 6 logs. We can measure troponin between around 25 femtogram per ml and 10 nanogram per ml. This allows the coverage of rule-in and rule-out applications without dilution using samples at finger-prick volumes. The ability to use low sample volumes is also driven by the technology's low detection limit. The detection of an analyte is driven by the total number of analyte molecules in the measuring device. Besides the concentration of the analyte in the primary sample, it is also proportional to the sample volume. The better the analytical sensitivity, the lower the required sample volume. This allows the use of finger-prick samples instead of venous draws for blood-based analytics, a key feature enabling sampling in point-of-care testing sites. As Bill explained earlier, for our Triage high-sensitivity troponin assay, this assay will allow rule out of MI in the ER and allow for faster discharge of about 45% to 55% of suspected MIs. At the same time, the assay provides results for rule-in at concentrations in the double- to triple-digit picogram per ml concentrations without sample dilution. A key advantage of this technology is the improved assay robustness, reflected by the underlying digital counting technology and the improved analytical sensitivity, providing better precision around the medical decision points in the 3 picogram per ml or so concentration range. Other applications we are evaluating are in the field of cytokine quantitation or direct TB diagnostics. As we have seen during the COVID pandemic, cytokines are important parameters in the evaluation of disease severity. And the Leapfrog technology provides a sensitivity level at which the relevant concentrations in early disease stages can be quantified for prognostic disease evaluations. The target applications for this platform are CLIA waved point-of-care assays. In order to achieve the respective requirements, we must provide a solution that covers each step along the process flow, from sampling, to sample preparation, to sample analysis, to data analysis and result communication. The assay itself would be performed in a cartridge and does not require any manual manipulation. All reagents are on board. Sample addition and metering are also integrated in the cartridge and do not require any external manipulation. Assay signals will be converted onboard the instrument and are supported by self-learning artificial intelligence-based algorithms. This should improve assay precision and accuracy as well as eliminating sampling or handling errors. Broad communication features, as already shown by Karen, will complete the system. With that said, I'd like to hand over to our next speaker, Randy Steward, who is Quidel's CFO.

Greetings from San Diego, and thank you for joining us today. It's been quite the business transformation for Quidel over the last several years. In 2016, we recorded revenues of $192 million with EBITDA of approximately $27 million. In October 2017, we purchased the Cardiometabolic assets from Abbott. In total, we paid $680 million for the business that generated approximately $250 million in annual revenue. Over the next 2 years, we spent significant time integrating the business, creating a global enterprise with commercial sales in more than 100 countries today. We built a strong global commercial team while creating an infrastructure to support that global footprint. During the early days of the integration, we operated under a transition service agreement with Abbott. The integration and elimination of the transition service agreements was completed successfully within the first 2 years. In March of this year, we launched the first of several SARS-CoV-2 assays, our molecular Lyra SARS-CoV-2 assay. We continue to demonstrate our R&D expertise by launching the first antigen test into the market in May and the first combination Flu A and Flu B plus COVID antigen test, which received EUA approval the first week of October. With all the activities in the last 3 years, we have maintained our financial discipline. We significantly reduced our debt profile from 2017 and improved our cash flow generation. We have much more to go, but we also appreciate the success we have realized and the positive impact we are making on testing in the world. For full year 2020, we are estimating revenue in the $1.6 billion to $1.7 billion range, dependent on supply chain constraints, with a very significant EBITDA contribution in excess of 65% of revenues. Since March, we have continued to challenge ourselves to significantly increase production while having a supply chain that can support and exceed our production expectations. For our Sofia assays, going into this year, we had weekly capacity of approximately 1.6 million tests or 84 million tests annually. By adding additional shifts plus converting one of our manual lines to Sofia, today, we have weekly capacity of 2.1 million tests. Very early in the pandemic, we put together a plan that would allow us to greatly increase our capacity by adding 4 additional automated lines to our already existing 2 automated lines we installed in 2016 and 2019. We are currently executing on that plan, and this January, we will increase our capacity to approximately 2.8 million tests a week by adding Line 7. And in Q3, when we have added our fourth line, Line 10, we will have estimated weekly capacity of 4.8 million tests to service our Sofia customers. If history is any indication, we are confident that we will be able to exceed these weekly capacity numbers. During this time period, we have also added a second supplier to manufacture our Sofia instruments, completely sourced and manufactured in the United States. That second supplier is currently online. And by the end of this month, plus the contribution from our original supplier, we will be in a run rate in excess of 10,000 instruments per month. Remember, until this year, we were placing between 6,000 and 8,000 instruments per year. We currently have a back order of instruments. And by the first quarter of next year, we are estimating we will have inventory that allows us to expand our customer base and sell into Tier 2 and Tier 3 customers. QuickVue production capacity today is 50 million tests per year. With the addition of equipment in Q2 of 2021, that capacity will double to 100 million tests per year. In order to get to our ambitious goal of 50 million tests per month, we have several different options. Each or in combination gives us confidence we will be able to achieve this goal in 2021. And certainly, facility expansion is critical to this production ramp. We were able to add the additional production equipment for Sofia into our existing footprint at our McKellar Court facility. All 9 manufacturing personnel have now relocated to our Summers Ridge facility, which was acquired as part of the asset purchase from Abbott. We were also able to solidify a long-term lease on a 106,000-square-foot distribution facility located between our McKellar Court and Summers Ridge facility, so a very efficient location. Here are a couple of slides showing the addition of Line 7 and our warehouse facility prior to adding the racking system. In total, the investment for this expansion is currently estimated at approximately $70 million, of which NIH will reimburse us up to $65 million upon the completion of specific milestones. Here's our McKellar expansion. Here's actually Line 7, of which we actually have our first pouch product that came out today. And then here's the new distribution center that we will basically have up and running by April of 2021. We launched our first COVID molecular assay in March this year under the Lyra brand. If you remember, our Lyra molecular business in 2019 sold approximately $3 million in product revenue. By May of this year, we ramped up production and increased our production capacity to approximately 480,000 tests per week. Through further process improvements and resource allocation, today, our capacity stands at slightly less than 600,000 tests per week. At the current time, we are selling approximately 40% of our capacity. We believe we will realize increased demand as we gain more customers and add a COVID test to our Solana platform anticipated this quarter. We will be increasing our lyophilization capacity by the end of this year. This will increase our weekly output to slightly less than 1 million tests per week, providing ample capacity as we head into 2021. Our strong revenue growth expectations for Quidel's core business, non-COVID-related has not changed. We are expanding our installed base franchise for both Sofia and Solana during this time period. We anticipate exiting 2020 with a Sofia installed base of approximately 75,000 instruments. In 2021, we anticipate continued strong demand for the instrument and could see a doubling of the installed base over the next couple of years as we launch into nontraditional markets. For the Solana instrument, we currently have approximately 1,200 instruments installed. We anticipate this number growing appreciatively in 2021 as we add COVID customers and expand existing customer test requirements. As Rice mentioned, with the addition of gastrointestinal assays, Strep 98 and others, plus strong continued investment in our R&D projects, we anticipate continued expansion of non-COVID assays on our large Sofia installed base. We are estimating an overall growth rate of 13% in our rapid immunoassay business over this 5-year time period, driven by the new products as well as the growth in our respiratory products from the incremental instrument placements. In 2021, we will finally realize the fruits of our labor and our patience with the launch of our Savanna platform. This is very exciting news for us and our customers, and as Tammi stated, a very important market for us to nurture. In year 3 of launch, we have estimated revenues in excess of $300 million, very significant to our total product portfolio. The other important product launch during the next 2 years is our high-sense troponin assay. As Bill stated, the first high-sense point-of-care product could have a major impact on the market once launched. We have estimated the clinical trial could take up to 1 year and approximately the same amount of time to get approval through the FDA. With a U.S. product launch estimated in the back half of 2022, we have estimated a revenue contribution of approximately $80 million in 2024, the second full year of launch. We continued good execution from our R&D and commercial teams. We are estimating an 18% cumulative average growth rate for our total Quidel core business. This slide illustrates our financial discipline and ability to pay down debt quickly, utilizing Quidel's excellent cash flow from operations. In 2024, when it was difficult for us to use the traditional debt markets, we used the convertible debt market to raise $172 million in cash proceeds. This cash was targeted for a potential M&A opportunity and ultimately was used to help fund the Cardiometabolic acquisition. The term debt, revolver and deferred and contingent consideration were all sources of cash used to fund this acquisition. And as of the end of this year, the only remaining debt is the deferred and contingent consideration, which has 3 more annual payments remaining. And we are estimating that we will have in excess of $500 million of cash on the balance sheet at year-end. Over the last several years, we have gone into the market several times to repurchase the convertible bonds, and that certainly proved to be the right decision based on a repurchase weighted average price of $61.43. Now that we have delevered the business and are generating great cash flow, we are poised to take advantage of the next great opportunity. It is our intent to utilize our strong balance sheet and access to the credit markets to further advance our strategic objectives through M&A. We are not looking for quantity, instead focused on the quality of a target and is it the right strategic fit. How does a potential target complement our existing product portfolio? Does it help us expand into adjacent markets, such as telehealth and telemedicine? Does it expand our geographic reach or solidify our global supply chain and allow us to control more of those products? From a financial perspective, we believe that should fit into our long-range objectives of revenue growth, strong margins and cash flow and when utilizing the debt markets, create the ability to delever at least 0.5 turn per year. The ability to integrate a business timely with synergies is also a key component in our evaluation of potential acquisition targets. We have a current pipeline that we are actively reviewing. In summary, we remain very focused on our priorities and excited about the future of our company. We have come a long way over the last several years, have learned a lot and continue to learn and listen as we pursue continued growth and expansion. For 2021, we have identified the following as critical goals: number one, continue to expand our production capacity, whether for QuickVue, Sofia or our molecular products, including Savanna and exceed our capacity targets as outlined; number two, successfully launch incremental COVID-19 assays, serology assay for Sofia, home use testing and additional molecular assays; number three, continue investing in R&D to support our long-term objectives and meeting and enhancing the needs of our customers; number four, commercialize Savanna. There's a great future for this product and our perseverance in commercializing this product will pay significant dividends, as you heard from both Tammi and Johannes; number five, complete high-sense troponin clinical trials. This product enhances our Triage position in the global marketplace and creates a benefit to patients and has a potential to save dollars for our health care system; and last, pursue an M&A transaction. We need to take advantage of our strong balance sheet, access to the credit markets and new stature in the marketplace. Thank you for your words of encouragement and appreciation as we fight this virus together. We remain focused on the task at hand and we'll continue to execute on our plan.

Welcome to the live Q&A. I'm here with Doug Bryant and Randy Steward, who will answer your questions today. [Operator Instructions] Our first question today is how does the recent vaccine news affect your COVID-19 test manufacturing plans for 2021 and 2022. Doug?

Hello, everybody. So much for a softball from the start but that's a good place to start, I suppose. Let me begin by saying I'm not obviously an immunologist nor am I a vaccinologist. And I would just encourage anybody looking into this to make sure that the folks that they're talking to actually do have a qualification to comment on the subject. I just read so much out there, some of which seems right, some of which doesn't seem right. What I do have, based on our position in the marketplace and access to people who do know about what's going on, is I do have a good feeling for what the experts are actually saying in that regard. And I would just start by saying that, of course, we want to have a vaccine that is effective. Of course, we want to, along with appropriate masking and social distancing, sterilization of surfaces, et cetera, plus vaccination, of course, we want to do whatever is necessary to get those people who may be immune compromised to the point where they can re-enact, reengage with their loved ones, whether it's grandma's or grandpa's, folks who may be going -- undergoing treatments and haven't seen people for a long time. Of course, we want that for everybody. But what I'm told rather recently is that we should be looking at this with an extraordinary amount of caution. We've never made a vaccine in such a short time. I think if you were to ask people who were in the know, they would say that they're concerned that the plasma B cells that are producing the antibodies, those plasma B cells may likely be short-lived. And so we can't actually be sure how long these B cells are going to crank out the antibodies. And there is some concern being expressed that I'm hearing out there that in 6 to 12 months, there may be no protection. The other interesting point is that each of these vaccines so far is targeting the same spike protein antigen. So if they are safe and they are used, and I hope that, that's the case, then they will all put essentially the same pressure on the virus to mutate and essentially invite the arrival of a surviving new strain. And I'm told by experts that should this occur, that we're looking at a different pandemic, but it is nevertheless another pandemic. So I think there is optimism with the vaccine but there's also appropriate caution and we should keep that into account. When you look at, from our perspective, of course, we make PCR tests but we also make an antibody-based test looking for the nucleocapsid protein, I think something that I do know pretty well from listening to our folks internally is that the genome coding for the virus, this protein, the nuclear protein, when it mutates, the virus often dies and it cannot replicate. So it's just a point worth making that these rapid antigen tests will be appropriate even after the virus mutates. So just to summarize, not to put too fine a point on it but the coronavirus is constantly mutating. Werner is here with us as well, and he can talk about a couple of the new mutations that are out there. But there's really been little or no selective pressure for a mutated version to pop up and become prominent. When the arrival of these new vaccines over the next few months, when they come out, there will be selective pressure for the arrival of the newly mutated coronavirus. And continued R&D monitoring, assay development and testing will be essential to detect, to track and differentiate new viral strains that might appear. Everything that we've learned from influenza and RSV and other respiratory virus informs and demands our commitment to continued innovation against COVID-19 and the SARS-CoV-2 virus. Our work is not done. In a second, I'll ask Werner to step in real quick and talk about as a result of what we see happening with a vaccination, what we think we might be doing from an R&D perspective. But clearly, our work's not done. We think that, therefore, testing is likely to continue and so do the experts for some period of time. Our plans to ramp up production are unchanged. And happy to have further questions on what we think about volumes and all that and -- moving into 2021, 2022. But our plan is, at this stage, based on the suggestion that a vaccine is forthcoming, as we always suspected it would be, our plans at this stage are unchanged. So Werner, could you step in for just a second and talk a little bit about what we've previously thought in terms of serology, what we're thinking about differently now as a result of vaccines, et cetera, what we think we might be doing moving forward?

Hello, everybody. Yes, I think we are still learning a lot about the virus. And over the last, let's say, 9 months or so, we made pretty good progress. We are monitoring behavior of the virus. And learning out of that, I think we are anticipating that there will be changes as soon as the vaccine is coming. So the virus is going to behave differently. We see first changes already, not necessarily connected to the vaccine but new patients are happening at low frequency. As Doug mentioned, we have this on the N protein as well on the S protein, so the S one is the one the vaccines are going to target. And what we have seen recently are the latest ones and companies like Lilly, like Vir, like Regeneron are also looking very carefully into these mutations, monitor them, so their treatments are being effective. Where we come into play is also see what mutations we have on these spike proteins, if these antibodies are effectively interacting with them or can interact with them and then monitor also, once you have received the antibodies, that they are still in high enough concentrations. And that's the same for vaccines. When you get a vaccine, are you still having enough antibodies for protection? Are you losing this? We know this from cases like HBV in the past, where we are also checking titers on a regular basis. We expect that also to happen for the SARS vaccine. So that's where we are working right now on an assay, looking for the function of activity against neutralization. So we will have an assay over the next few months that we are getting ready with to measure these neutralization activities as well as a serology assay. Did you generate antibodies at all with a vaccine? We have to see the vaccine, not necessarily will be active in anyone not due to the vaccine itself but due to the logistics around it. The RNA vaccines will have to be stored at minus 80 degree. We will definitely see problems with that, which will relate to no response in patients most likely. So we will be able to monitor that as well. So I think lots of changes coming and we are preparing for that.

So that's terrific, so we described 8 programs that you've got under development now in the COVID space, one of which is the serology assay that detects antibodies to the nuclear protein but also to S1 and S2. That's a little bit different. But what I think I'm hearing you say is you've got a ninth that you just informed me of this morning, which is great. But you've got a ninth program where you're looking at, do these targets that we're going to look at, are they indicative of neutralizing antibodies? In other words, are you, as a person, you've become vaccinated. Are you going to actually clear the virus?

Clear the virus or does the virus still have a chance to interact with your own body cells? And just having an antibody against the virus doesn't necessarily mean the antibody can still interact with your system.

Right. So this is why you're telling me that despite the fact that we're going to try to get everybody vaccinated in our company, I don't know if we'll be successful. Well, let's just say we're successful because we're in an industry where, frankly, we need your people healthy and at work, right? So I could make an argument that we, maybe not ahead of grandma or grandpa, but ahead of just the standard person, companies like ours should be vaccinated first because we're manufacturing product, right? So let's say that we're successful, all of us get vaccinating -- vaccinated, excuse me. But you're still telling me, I got to test everybody weekly for antigen, aren't you?

First of all, I think the first test will be, does everyone respond?

Yes. But you're not going to let me get rid of my weekly COVID testing, are you?

No.

No. I think that's the answer. So I think that's the answer in a nutshell.

Absolutely.

Thank you, Werner.

Thanks, Doug. Jack Meehan had a related question for Doug. How does the timeline for a vaccine impact your thinking around the durability of the testing demand in context of all the supply that we're building? So more related to the demand.

The demand still at this point is endless. We're going to ramp -- on the QuickVue SARS, we're going to try to ramp to 50 million a month. That, more than likely will not happen earlier in the year, obviously. So we're going to have to move quickly to get that done. That will be a run rate of about 600 million tests per year. We think we can get to somewhere north of 240 million tests on the Sofia SARS antigen product. But from our perspective, I don't think the vaccine reduces the demands at all at this stage for the reasons that I've stated. I don't know that vaccinating my people will actually confer protection. I don't know that they can come to work and not worry about it. So I think as more and more is known and is not politicized, that people are going to recognize that these experts that are saying the testing is not going away, the masks aren't going away, the social distancing is not going away. We'd kind of like to go to a restaurant an occasion. But a lot of this is not going away, including testing for some time.

Awesome. Another question from Brian Weinstein. He says, what does the OUS opportunity look like now post COVID-19? You spoke a little bit about increased utilization where testing did not take place today, but how is that factored into your revenue assumption?

We have very little forecasted for ex U.S. We do have some opportunities that are selective where it would make sense. But we feel like we have an obligation to do whatever is necessary here in the U.S. first. And for the foreseeable future, I don't know that I can get to what's being asked of us to deliver what's necessary in the U.S. So we haven't forecasted a lot ex U.S.

Okay, great. Let's move on here to [ Joy Mashal } asks. Can you discuss the distribution of your current Sofia installed base customers or your expected installed base at the end of the year? What percentage are urgent care hospitals, nursing homes, et cetera? We're looking for a breakdown there.

I don't have a breakdown off the top of my head. We will exit the year, as I said before, at about 75,000 analyzers. We haven't addressed what I'll call, new markets, in any significant way. So we haven't done, other than the Pac-12 and the Big Ten announcements that are tied to studies, we -- and we obviously will try to help the NCAA out with the basketball program. But those are small numbers relative to our total. The bulk of what we're shipping right now is into hospital labs and to the urgent care centers. I think we had a review on urgent care centers that, that particular area is expanding that and freestanding AVs is expanding greatly. But we really haven't done anything outside of what I would call our traditional space at this stage with some limited exceptions, as I pointed out. So my short answer is most of the business is right where all the flu testing was in the first place. That has not changed dramatically. And frankly, we haven't been able to address even the smaller accounts that were flu and strep customers, we haven't had the ability to ship them SARS products. So that's the status so far. I can't really give you a breakout on percentages. I would just say the percentages are not different than they had been before. They haven't been yet, despite the fact that a number of folks are asking us to start shipping product. In the employee space, in the entertainment space, we're getting a lot of calls right now.

We have said that Tier 2, Tier 3 or more a Q1 issue.

Okay. Larry Feinberg asks, when is QuickVue approval expected? And what additional requirements are needed to file EUA for home use, specifically to the SARS test?

We're under active review, Larry, at the FDA with QuickVue SARS. And as soon as we get finished with that, we'll do the initial -- or the additional, excuse me, studies necessary to complete the template for at-home use. We'll do so initially with the product without the requirement other than visually reading it. And then we will also submit with an app that can be used -- an app that's on an iPhone, for example, that can be used to do either transmission of the data to state and county public health departments who want the data or assist the individual with reading the results. So again, we'll finish the professional segment EUA shortly. It's under active review. Immediately after that, we will compile and submit the data necessary for the at-home template, visually read-only, to be immediately followed by an amendment that would include the app.

Okay. And a follow-up on that. How can we expect QuickVue to be priced relative to Sofia for both the professional and for the at-home markets?

Haven't priced the at-home at this point. I would say that we are concerned of -- with having a price that's too different from the Sofia price. Although I do think that without some of the costs associated with Sofia that we should be able to come in somewhere -- something lower than $20 at an end user level for the QuickVue SARS in the professional segment. Moving forward, we have done preliminary pricing studies at home but they were more related to flu and strep. So I would just say that we're not going to have to give up a lot on price necessarily. Either way, it's going to be profitable.

Great. And then Alex Nowak asks, Quidel has never been a consumer-facing company. How do you plan to modify the company for at-home tests either from internal changes or M&A? And how would at-home tests be sold?

We have 2 paths right now with consumer-facing companies that are widely known. So 2 very large, very large consumer-facing companies that we are in discussions with right now. Your point, Alex, is a good one. We don't know the consumer space well at all. This is why we're going to partner with somebody who does. We are looking at M&A from the perspective of things that could take that product and make it more friendly at home. And as Randy would point out, we have cash and access to capital, and we have a number of things that we're looking at the moment that are under active discussion. So I think that's the answer to the question. Let me know, Alex, if you need more.

Great. And then here, we have been through -- Alex also asks, why would someone buy a Sniffles versus a Sofia? Can you please explain the centers that would adopt Sniffles? What is needed for FDA approval? And how and when would this product move into the at-home space?

The advantage of Sofia 2 is in sites that can batch, and sites that don't necessarily need that so much, I think that the Sniffles, our internal product name for the smaller device, could be more beneficial and lower cost or more democratized settings, like retail clinics, for example, and potentially for at-home use. You can see how testing for, not only SARS, but other things over time could be useful at home and having that device could be particularly useful. Effectively, the difference between Sofia 2 and Sniffles is that we've taken the optics of Sofia and made them smaller. And all of the intelligence of the analyzer, we've moved off of the analyzer onto an app on a cell phone. So effectively, the Sniffles product takes images of the Sofia cartridge, and then transmit those images by Bluetooth to the app, and the app through a trained algorithm is interpreting that image and determining positive or negative. So the main difference is size, cost and scalability. We think that we can be early in the first quarter at about 100,000 Sniffles units. We think that we can build reasonably quickly to something more than $1 million a year. And I think that's extremely advantageous. Other than that, there's not a whole lot of distinction between the 2 products. Cost and scalability are the 2 factors.

Okay. Andrew Cooper has a follow-up to the at-home question. When you say at-home, could you talk about the difference between needing an Rx versus a direct OTC purchase by the consumer? How do you envision that? And how do you prioritize where the capacity will go?

Well, we want to be there regardless of which way regulatory agencies decide this is going to be effected. So there's a world in which I buy over-the-counter, a QuickVue SARS test, I take it home, I run it myself, then I have no responsibility to report it. I just have an answer. That's 1 world. I don't know if it will go that way or not. The other extreme is, of course, I don't get to have a test unless somebody authorizes me to have one, then it has to be done under some level of supervision or certainly some conversation with a health care professional. In the event that, that is where the market goes, we want to be there as well. I do think there's an advantage of engagement with physicians in order to get all this done, but I'm also hearing from experts in epidemiology, and that's not what they're thinking. They're thinking, make it available so that people can just go without any repercussion, they can go and get tested, and then if they're positive, do the right thing. So we're going to be ready, whichever way it goes.

Great. Can we talk a little bit about Savanna now? I think folks are asking a lot about Savanna now. Okay. Mark Massaro asks, is this -- is Savanna, do you expect it will sit on a floor or a lab bench? And can you give up the approximate dimensions?

The dimensions are the same as you may have seen at the AACC a while back. They're somewhere around 7x8x8 inches each module. So it's actually quite small. So I wouldn't put it on the floor. You might step on it.

And a follow-up to that, how does it compare to the GeneXpert system and the BioFire FilmArray?

Well, it doesn't really compare very well with the Cepheid. First of all, we're doing 4 PCRs instead of 1. The cycle times are dramatically shorter. Our menu because of the 4 PCRs will be dramatically different than the Cepheid analyzer. For example, Cepheid is going to do CT/NG, well they do that today successfully, they've done a nice job. But the market really isn't just CT/NG. It's CT/NG, microplasma and genitalia and Trichomonas vaginalis. Those 4 are what is required for an STI panel. And so they're missing 2. On the other hand, if you compare -- if you try to compare with BioFire, again, it's not very comparable either, because cost, speed, smaller footprint, time to result, all those things. And the ability for integrated delivery networks to pick and choose what they do and to push certain tests out in the clinics, I think will be significantly advantageous with the BioFire. The BioFire is a great product as well. If you're looking to run a lot of analytes all at once, and you're scientifically curious, I think it's a very good product. It is slower, it is more expensive, and instead of lowering the cost, they just keep adding analytes. And I think that's an interesting strategy. But it has a bit of a limit there. So in a nutshell, I would say that Savanna doesn't really compare very well with either one. So it's sort of in the middle of the 2.

Great. Great. Steven Mah with Piper is asking, on Savanna, you mentioned that you were developing both an identification test and also an antibiotic resistance test simultaneously. Could you give us a little more detail on what you are looking for in terms of antibiotic resistance versus the functional assays that require culturing with antibiotics?

Yes, I could. But rather than make a mess of it, since I've got Werner standing right next to me, I'll just have him step over and answer the question for us.

I think we're going to do 2 things: genotypic resistance testing as well as functional resistance testing. So we were just talking about Savanna, and there we have also the space to do certain mutations for NG in the instrument. But there, we will always have the situation that we have to run after the mutations. Only if we know the mutations and the impact we will be able to see if there is resistance. The functional test has a big advantage that you actually do a test with the antibiotic and see the direct impact of the bacterium onto the antibiotic. So you don't need to know upfront if a specific mutation will cause resistance or not. And that's a big difference. The differentiating factors here is that we intend to do this in a very short time and sample in result [ out ] activities. So we're going to employ a new way to identify bacteria using the carrier phages and then also have a differentiating readout after exposure to the antibiotic. So I think it comes nicely together.

So in effect what you're saying -- and to be clear, is you actually have 2 different programs? You're doing resistance markers on Savanna, which makes a lot of sense. But you're also through a phage technology that you've been looking at for a few years now...

Yes.

You're looking at susceptibility testing as well. So it's an important category, whether we're looking at phenotypic or as in your phage technology, or genotypic, which obviously, there's a need to do that as well in these PCR products.

Yes. I think this is very practical for the major mutations. But for new mutations, definitely the phenotypic assay is going to be the point of frame.

And in terms of Savanna, because you've got 4 PCRs, I guess that allows you some space to add on things like resistance markers?

Correct.

Whereas other people couldn't do that. Okay. Good. Thank you.

One more on Savanna from Jack Meehan. Could you clarify the readout for Savanna? Does it tell the physician if a patient is positive for the panel broadly? Or does it get more granular to the analyte for which the test -- for which they test positive for. I wasn't sure from the example.

So if I understand the question correctly, maybe you'll help me, Ruben. Are we asking, do I get an individual answer for each of the things on the panel in a Savanna cartridge?

Yes, that's the question. Is it -- answer.

That's a simple answer, it's yes. You get an answer for each.

Great. Jack also asks on Savanna, you're targeting $300 million worth of sales for Savanna. What is your thought around the potential for cannibalization of Sofia sales?

It's a different market altogether. We've said this many times before when people said, "Oh my gosh, molecular products are coming out, you're going to lose market share." But I said early on, and I say it again over and over again is this is not a zero-sum game. What you're going to see, and I -- over time, and I think Tammi's data actually illustrated this through a third-party was it's anticipated that at least for respiratory markers, and others, having multiple technologies doesn't actually take away from any 1 of the technologies. They're just different use cases. So I don't see Savanna at home. I don't see Savanna necessarily in a doctor's office unless it's a certain type of practice, and they're doing a lot of, I don't know, STI panels, let's say. For the most part, we've developed Savanna to be an integrated delivery network product that can be distributed throughout all of the locations broadly and to be all tied into the same data management system. So Sofia is a completely different product, where you're looking at a lot of outpatients and really widespread locations. I don't necessarily see, for example, Savanna in Rite Aid. Maybe. But it's not really the right product.

Okay. Moving back to Sofia, we have a lot of questions on Sofia now. Brian Weinstein asked, what is the current utilization per Sofia box today? And where do new assays take it? And what is the difference between expected utilization on recently placed instruments from COVID-19 versus the legacy placements?

I'm going to punt that 1 to Randy, and do you have any idea on what your average placement is for COVID? We can obviously talk about how we model things before COVID, and where we're at in that regard. But...

No. It's a great question. And unfortunately, we're kind of right in the middle of the whole COVID volume and trying to understand that. But it will differentiate once we go to Tier 2 and Tier 3 customers. But on average, pre-COVID, we're at approximately $4,000 revenue per box. And what we're seeing currently continued contracting and stuff, so we don't see that changing. So it's really difficult to say what the next 6 to 9 months looks like as far as revenue per box COVID-wise.