Lucira Health Inc (LHDX) 2022 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Lucira Health Third Quarter 2022 Earnings Conference Call. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Greg Chodaczek from the Gilmartin Group.

Thank you, Jonathan, and good afternoon, everyone.

Earlier today, Lucira Health released financial results for the third quarter ended September 30, 2022. A copy of the press release is available on the company's website. Joining me on today's call is Erik Engelson, President and Chief Executive Officer; and Dan George, Chief Financial Officer.

Before we begin, I'd like to remind you that during this conference call, the company will make forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the Risk Factors section in the company's most recently filed annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, which identify the [risk] factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development and manufacturing, product potential, the regulatory environment, sales and marketing strategies, capital resources, or operating performance.

With that, I'll turn the call over to Erik.

Thank you, Greg. Good afternoon, everyone, and thank you for joining us. Welcome to the Third Quarter 2022 Earnings Conference Call.

Lucira had a solid third quarter in which sales were $34.4 million, driven by demand for our PCR quality molecular COVID-19 test. This represents a 130% increase over sales in the same period last year and a sequential revenue increase of 32% over the second quarter of this year.

On November 11, we executed a marketing agreement with Pfizer to increase awareness of the risks of COVID-19 and the availability of treatment. The Pfizer partnership will provide financial and promotional support so that through Lucira [Connect] test users who are positive for COVID-19 can immediately find high-quality information about the disease and its treatment options and access a health care provider consultation. In addition, Lucira has partnered with telehealth marketplace, Sesame Care, to offer all Lucira test users an immediate and affordable option to speak to a doctor about their test result without leaving home.

If a consumer tests positive for COVID-19 on a Lucira test, a telehealth visit is completely free and can typically occur within 15 minutes of scanning one's test result through luceraconnect.com. To our knowledge, there is no other offering out there that combines such convenience, speed and affordability. Just as Lucira's tests are onetime use with no additional investment in equipment required, our referral service can be utilized whenever needed without subscription. We believe that this combined offering is good for public health and good for business. Lucira Connect was built to seamlessly and immediately connect patients to the resources they seek at the moment they need it, the initial diagnosis.

These developments provide the opportunity to partner with pharmaceutical manufacturers, brick-and-mortar locations and virtual health care providers to ensure patients can immediately access high-quality information from reputable sources. Lucira test users have the ability to rapidly confirm a diagnosis, speak to a doctor to determine the best next course of action to get to better and request the prescription. All without leaving home or spending valuable time and resources on multiple trips and appointments.

Turning to some of our operating results. In the quarter, cash decreased to $39.8 million, primarily related to funding our operations and working capital in advance of the anticipated launch of the combination COVID-19 and influenza test kit in the fourth quarter of 2022. The combination of COVID-19 and influenza test kit is a molecular test that demonstrated 99% accuracy for COVID and influenza A and B and is comparable to highly sensitive lab-based PCR assays. As of today, we anticipate having sufficient inventory of COVID-19 and combination COVID-19 influenza test kits to fulfill anticipated demand in the current respiratory season in our primary markets of the U.S. and Canada.

During the quarter, we received Canadian regulatory approval in the form of an interim order during Q3. We have not yet received authorization from FDA despite having submitted our EUA in May of this year and maintaining strong advocacy throughout the review process by our DC-based regulatory journeys. The user operation of the combination COVID-19 influenza test kit is identical to that of our COVID-19 test. And while our EUA submission contained all of the clinical data, that was previously agreed in a pre-submission with FDA, the agency informed us in early November that they would grant only point-of-care approval at this time.

The FDA has agreed to allow us to amend this point-of-care EUA to transform it to OTC use once additional prospective clinical data has been obtained through ongoing clinical trials. The Lucira product is designed primarily for OTC use and the delay in obtaining the OTC EUA will significantly impact sales and consequently, cash in Q4 of 2022. Our Board of Directors has initiated a review of strategic alternatives, including a potential sale, merger or other strategic transactions and of our financing strategy.

At the same time, we are reducing costs, and this unfortunately impacts our workforce company-wide. Several weeks ago, we took action to reduce our workforce and notified 56 employees of a 60-day termination period. And today, we notified an additional 97 employees of a similar timeline. The decision to reduce workforce size was a difficult one. Not only are we disappointed to see these hard-working employees leave the company, but personnel reductions will also delay execution of product pipeline programs. The combined reductions in force represents an approximate 68% decrease of our workforce and are expected to result in $26.4 million in annual cost reductions.

Before I turn it over to Dan, I'd like to recognize and thank the employees and contractors of Lucira that have worked tirelessly on behalf of the company's mission.

I will now turn the call over to Dan George, our CFO, for a detailed discussion of financials.

Thank you, Erik.

Please refer to our press release issued earlier today for a summary of our financial results for the third quarter of 2022, a discussion and reconciliation of our non-GAAP financial measures.

Net sales for the third quarter of 2022 were $34.4 million, a 130% increase over the third quarter of 2021. Our net revenue was primarily driven by sales directly to consumers, businesses and distributors, health care providers and international customers. GAAP gross loss and negative gross margin for the third quarter of 2022 was $99.6 million and 289%, respectively; compared to a gross loss and negative gross margin for the third quarter of 2021 of approximately $1.5 million and 10%, respectively.

Our increase in GAAP gross loss and gross margin was driven primarily by a onetime noncash excess inventory-related charge of $107.2 million due to a significant reduction in our sales forecast resulting from an unanticipated delay in FDA's approval of our COVID-19 and influenza test kit and a decline in COVID-19 testing demand. Non-GAAP gross profit and gross margin that excludes the excess inventory-related charge and other noncash charges, such as depreciation and stock-based compensation was $9.5 million and 28%, respectively. Non-GAAP gross profit and gross margin for the same period in 2021 were $2.4 million and 16%, respectively.

R&D expenses were $9.1 million in the third quarter of 2022 compared to $14.3 million in the same period in 2021. R&D expenses incurred during the third quarter of 2022 were primarily related to new product development, clinical activities and validation of manufacturing activities. The third quarter of 2021 R&D expenses were primarily related to the redevelopment of our manufacturing and quality release process in preparation for launching our Dominican Republic manufacturing facility at our contract manufacturer.

Selling, general and administration expenses were $17.6 million in the third quarter of 2022 compared to approximately $11.8 million in the same quarter of 2021. The increase was primarily related to increasing personnel-related costs [in] third-party services, facilitate commercial activities and public company compliance.

GAAP net loss was $126.9 million in the third quarter of 2022 compared to $27.5 million in the same period in 2021. The increase in GAAP net loss was primarily related to our onetime noncash inventory-related charge of $107.2 million. Non-GAAP net loss was approximately $15.4 million in the third quarter of 2022 compared to $18.4 million in the same period in 2021.

We ended the quarter with $39.8 million in cash and cash equivalents compared to cash and cash equivalents of $106 million at the end of 2021. The decrease in cash was primarily related to purchases of inventory and capital equipment, partially offset by the closing of the first tranche of our debt financing agreement of $30 million. In addition, the significant decline in our near-term revenue forecast requires us to seek additional capital sooner than anticipated.

As Erik mentioned, our Board of Directors has initiated a review of strategic alternatives, including a potential sale, merger or other strategic transactions [and of or] -- our financial -- our financing strategy.

I'll now turn the call back over to Erik for closing comments.

Thank you, Dan.

Thank you all for your time this afternoon and for your interest in Lucira Health. Both Lucira's accurate test platform as well as Lucira [Connect] are important offerings that accelerate the [move in] infectious disease testing and result in treatments into the home. We envision an improvement of public health that will result from this important transformation in the way that diagnoses are performed.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.