Omnicell Inc (OMCL) 2014 Q1 法說會逐字稿

Good afternoon. My name is Holly, and I'll be your conference operator today. At this time we'd like to welcome everyone to the Omnicell first quarter earnings announcement.

(Operator Instructions)

I'd now like to turn today's conference over to Rob Seim. Please go ahead, sir.

Good afternoon, and welcome to the Omnicell 2014 first quarter results conference call. Joining me today is Randall Lipps, Omnicell Chairman, President and CEO.

You can find our results in the Omnicell first quarter earnings press release posted in the Investor Relations section of our website at www.omnicell.com.

This call will include forward-looking statements subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. For a more detailed description of the risks that impact these forward-looking statements, please refer to the information in our press release today, in the Omnicell Annual Report on Form 10-K filed with the SEC on March 17, 2014, and in other more recent reports filed with the SEC. Please be aware that you should not place undue reliance on any forward-looking statements made today.

The date of this conference call is May 1, 2014, and all forward-looking statements made on this call are made based on the beliefs of Omnicell as of this date only. Future events or simply the passage of time may cause these beliefs to change.

And, finally, this conference call is the property of Omnicell, Inc., and any taping or other duplication, rebroadcast without the express written consent of Omnicell is prohibited.

Today Randy will first cover an update on our business, and then I'll go over our results for Q1 and our guidance for 2014. And following our prepared remarks we'll take questions.

Good afternoon.

Our momentum from 2013 has continued through the first quarter of 2014, and we are right on track to the growth guidance we gave 90 days ago. Our revenue is ahead of expectations and grew 17% from Q1 of 2013. Earnings are also ahead of our guidance for the quarter. Investments in our three-legged strategy of differentiated products, expansion into new markets, acquisitions and partnerships have paid off and continue to drive our success.

One of the major market trends we see is our customers moving toward more integrated enterprise-wide system management. Whether it is a community hospital taking a more holistic approach to patient care or a multi-hospital organization driving consistency across the entire enterprise, these healthcare providers are seeking a consistent, safer patient experience and increased efficiency. Our solutions have the capabilities these institutions are asking for.

The Unity platform that the majority of our systems now run on creates a single point of management for all drug and supply information from receiving dock to bedside, saving administration, installation and maintenance time, while improving patient safety. We believe Omnicell is the only company that provides this fully integrated solution.

Some of the products we announced back in December that began shipping this month are great examples of our continued investment in this platform. Among them is an exciting new software solution for the central pharmacy.

Central pharmacy automation usually includes larger scale equipment that is often out of reach for smaller hospitals or hospitals with space constraints. Our new central pharmacy automation software gives these customers a solution, expanding our market and improving workflows between the wholesaler, the pharmacy and our systems.

Our latest Pandora analytics release now consolidates information across dispensing systems in the nursing area, the perioperative area and the central pharmacy.

Finally, we are also shipping larger scaled OmniCenter server software that handles up to 1,000 automated dispensing systems, making implementations of large, multi-hospital enterprises and distributed nonacute facilities from a single server more efficient than ever.

Enterprise capabilities like these are important to our larger customers and contribute to our successful track record of competitive conversions, such as Sisters of Charity Leavenworth Health System, which recently decided to standardize on Omnicell medication systems. Sisters of Charity is an eight-hospital group in Colorado, Kansas and Montana who conducted a thorough analysis of all products available on the market. The group currently had a mixture of Omnicell and a competitor's products and will now be exclusively Omnicell in all of its hospitals. The order includes market-leading products that aid nursing in their workflow.

Another new win is the Capital Health system in New Jersey, who is installing our OmniRx systems to take advantage of our nurse efficiency features such as Anywhere RN, SinglePointe and OmniDispenser.

Internationally, the Guy's St. Thomas' Trust of London, who installed supply systems house-wide and did a partial implementation of medication systems in 2008, is now expanding the use of medication systems house-wide, as well.

These wins underscore the strength of our G4 platform with both new and existing customers. Over 1,000 customers have ordered G4 since it was launched in 2011, and among existing customers on our older G3 technology, 41% have now upgraded to G4.

Our presence with medication adherence products also continues to expand, with 600,000 patients now receiving medications in our Multi-Med adherence packaging in Europe. Those figures exclude our announced pending acquisition of SurgiChem, which is still being reviewed by regulatory authorities in the UK. We expect an answer from them in Q3 of this year.

Before I turn the call over to Rob I'd like to comment on some other changes at Omnicell.

Don Wegmiller is retiring from our Board effective later this month after 10 faithful years of service. His operational and industrial expertise has been invaluable to Omnicell's growth and contributed to our position of innovation and leadership. I want to thank him for his many contributions.

I'd like to also welcome Bruce Smith to the Board. Bruce is the Chief Information Officer of Advocate Health in Chicago. Bruce has a distinctive mix of executive leadership and technical savvy in the healthcare setting that makes him an excellent addition to the Omnicell Board, and I do look forward to his contributions.

We believe our hard work over the years and the execution of our three-legged strategy has laid the foundation for our current successes and sets us up for continued growth in the future. In today's changing and tumultuous healthcare environment, we remain focused on our mission, to change the practice of healthcare with solutions that improve patient and provider outcomes.

Our solutions provide clinicians greater assurance that medications and supplies are administered correctly, are not misused, and are handled in a cost-effective manner. Every day our products serve caregivers and millions of patients around the globe, saving money and improving patient care.

Rob?

Thanks, Randy.

So, Q1 was a great start to 2014 for us, consistent with the last nine years in a row. 30% of our automated dispensing system orders were from new and competitive conversion customers, with approximately three-fourths coming from competitive conversions and one-fourth from greenfield customers who have never purchased automation before.

Our revenues were $101.8 million, which, as Randy highlighted, is up 17% from the same quarter last year. GAAP earnings per share were $0.17, up 70% from Q1 2013.

Now, in addition to GAAP financial results, we report our results on a non-GAAP basis, which excludes stock compensation expense and amortization of intangible assets associated with acquisitions. We use non-GAAP financial statements in addition to GAAP financial statements because we believe it is useful for investors to understand acquisition-related costs and noncash stock compensation expenses that are a part of our reported results. A full reconciliation of our GAAP to non-GAAP results is included in our first quarter earnings press release and is posted on our website.

On a non-GAAP basis, earnings per share were $0.26 in Q1, up 24% from 2013 and $0.02 over analyst expectations. Non-GAAP earnings per share was down sequentially from $0.29 in Q4 2013, as expected, but up from $0.21 in Q1 of 2013. The sequential decline from Q4 2013 occurred because of an anticipated decline in revenue and because Omnicell had some seasonally high expenses in Q1 as every year that affect both cost and operating expenses.

Adjusted earnings before interest, taxes, depreciation and amortization, which also excludes stock compensation amortization and the amortization of acquisition-related costs, was $17 million for the first quarter of 2014, up 39% from $12.2 million a year ago.

Since acquiring MTS almost two years ago, we've reported our business on two segments that corresponded to a customer orientation. The acute care segment was the descriptor we used for everything we sold to hospitals, and non-acute care referred to everything we sold outside the hospital setting.

Now, while everything we do is customer-focused, of course, we are finding that these two customer segments are beginning to blend together due to the evolving marketplace and the increasingly broad application of our solutions. More and more, hospitals are combining with longer term, non-acute facilities to provide services across the continuum of care and to manage population health.

So, similar to our customers, Omnicell's approach to the market is blending also. To better reflect how we're now managing the business, we are going to change our segmentation to a product orientation. Our new segments will be the automation and analytics solutions segment, which will include our OmniRx, Anesthesia Workstation, Central Pharmacy, Omni Supply and Pandora Analytics products, and the medication adherence solutions segment that will include our MTS blister card packaging products and related consumables. Our investor relations material posted to our website today contains a table that provides our historical quarterly results broken into these new segments.

The automation and analytics segment contributed $81.5 million in revenue and $11.8 million of non-GAAP operating income in Q1 2014. This compares to $68.7 million of revenue and $7.7 million of non-GAAP operating income in the quarter one year ago.

The medication adherence segment contributed $20.3 million of revenue to the quarter and $2 million of non-GAAP operating income. This compares to $18.4 million of revenue and $1.2 million of operating income in Q1 a year ago.

During Q1 we completed a share repurchase totaling $4 million. We bought back approximately 146,000 shares at an average price of $27.92.

Cash grew $3 million, to $108 million, at the end of Q1 2014. Excluding the buyback, cash was up $7 million. We have Board authorization to repurchase up to another 25 million of our stock.

Accounts receivable days sales outstanding were 68, and that's up 17 days from last quarter. The timing of shipments combined with a very favorable collections at the end of 2013 and strong revenue gave us an exceptionally low days sales outstanding in Q4 2013. Going forward we expect our DSO to be between 55 and 65 days.

Inventories were $31 million, roughly flat to last quarter, and our headcount was 1,148, up 14 since the end of 2013.

Looking forward, we believe we are right on track to our growth guidance we gave in February. We expect revenue to be between $415 million and $425 million, an increase of 9% to 12% from 2013. We expect non-GAAP earnings to be $1.17 to $1.23 per share, up 8% to 14% year to year.

Our effective tax rate on GAAP earnings was 36% in Q1, but earnings per share estimates reflect our assumption of an annual tax rate of 38% on GAAP earnings by year end.

We expect steady revenue and earnings growth through the year and to finish with an average annual operating income of approximately 15%.

We expect 2014 product bookings to be between $340 million and $350 million.

All this guidance is the same as we provided in February and excludes the pending acquisition of SurgiChem.

Now I'd like to open the call to take questions.

(Operator Instructions)

Jamie Stockton, Wells Fargo.

Yes, good evening. Thanks for taking my questions. I guess maybe the -- congratulations on having a good quarter -- the first question is the G4 upgrades. It seems like the pace didn't necessarily accelerate during the quarter even though you had the Windows XP end-of-life in April. Do you have any thoughts on how that pace might, or based on the conversations you guys are having with customers, how that pace might change the rest of the year? Should we expect we're going to roll along at about a 4% clip of the legacy base upgrading each quarter, or do you think that that could accelerate some in the near term?

Well, I think -- we're at 40% now, and I think certainly by the end of the year we'll be well over 50%, probably maybe closer to the 60% range. And it's just I think most hospitals have the G4 upgrade in their sights either this year or next year. So I think it's just there were those who were sort of frightened into doing it right away and then those who probably said yes, we've got to do it, but we're going to do it in a -- fit it in with a budget cycle or an implementation time that made sense.

So it's a great product. A lot of people are looking at it. We'll do more bookings this year than we did last year, and I think the momentum continues.

Okay, that's great. And I know you guys aren't going to break out the non-acute piece from a revenue standpoint, but can you just qualitatively give us any color on whether or not you continued to see that business pick up within the automation and analytics segment or was the strength during the quarter more a result of the acute business being strong?

Well, we saw a lot of good growth quarter to -- year over year in the quarter on the automation and analytics, which I would characterize it as most of the products that had the Omnicell brand originally. We do see -- continue to see good pipeline and good growth in placing the automated dispensing systems into non-acute care facilities. That is a business that's growing for us mainly because of the channel orientation and relationships that MTS had that they're helping us in the selling process.

The medication adherence segment, which is predominantly the products that have the MTS brand on them, those products did well in the quarter also. Year over year their revenue was up about 10%. So we're seeing good growth in all of our product segments and all of our product lines.

Okay. I guess what I'm really asking is it seemed like the -- for the automation and analytics, the non-acute really inflected, if I recall correctly, in the second quarter last year, and I'm wondering if it's kind of tracking at that same, if I remember correctly, $4 million or $5 million revenue level or if it has seen a further acceleration because you guys are seeing a broader base of customers that are ordering the cabinets for a non-acute facility.

Yes, so you're correct. That revenue ranges in the $3 million to $6 million in a quarter, and we're continuing to see it go along in that pace, and we have a very good pipeline for continued growth and expansion in that part of our business.

Okay, that's great. My last question, international, what's the -- any color on how the quarter went from an international standpoint? Did you see -- I know that you had a big quarter in the Middle East in the fourth quarter. Was the Middle East still strong in the first quarter? Are you seeing anything in Asia start to percolate?

Yes, so our international business last year was about $34 million across the two segments. In this -- in the first quarter we did another $7 million, so we're tracking right on the same pace. We continue to see good acceptance of the medication adherence products mostly across Europe. We continue to see good pipeline in the Middle East.

China is still in the beginning. We don't have a hospital that's house-wide yet, but we do, as I reported last quarter, have over 20 installations that have been completed or are in progress. So we'll continue to monitor that and we'll continue to invest in the region, because we think it's a great opportunity.

You might have noticed in one of our announcements that we have now opened an office in China, a sales and training-oriented office. So we do believe that there is great opportunity there and continue to invest in the region.

Thank you.

Charles Rhyee, Cowen and Company.

Yes, hey, thanks for taking the questions, guys. Rob, I just had a couple of quick questions here. Well, actually, the first question, medication adherence, you talk about 600,000 patients getting the Multi-Med packaging in Europe. Can you talk a little about the growth in terms of patients that represents either sequentially or year over year?

So we've had double-digit growth for the medication adherence usage in Europe for some time now. It's coming from a small base but starting to build up to a pretty sizable set of patients that are getting their medications on these packages. Once a patient starts utilizing them, they're so intuitive and easy to use that usually people stay on them.

Now, I mean, that certainly makes sense, but when you say double digit, are we talking just over 10 or are we talking into the 20s? Can you give us (multiple speakers)?

Well, of course, it varies a little bit quarter to quarter, depending upon what pharmacies come on, but it's been between 10% and 20%.

Okay. And can you sort of update where you're seeing opportunities for US launch? (Multiple speakers) the way you think?

Well, the US is behind Europe in the adoption of these products, but we do have a number of customers utilizing the medication adherence packages in the United States, both hand packing them in small volume and utilizing our automation equipment. So we, as I reported, we do have other products that are in the development stream to enhance the process of packaging these that we've already launched, and we do have various pharmacies using them today.

Okay. Great. Just on the -- and I don't know if I might've missed it, but when you talked about the expenses, R&D ticked down sequentially, down year over year. Should we expect that -- is that -- is there something specific to that or is that sort of the level of investment that we should expect this year at least?

Well, R&D spending is pretty consistent from quarter to quarter, but, depending upon where we are in the product announcement -- testing and announcement cycle, there's different amounts that may be capitalized and then amortized through cost of goods sold at a later point in time.

We did just, as you might've seen, announce that we released 18.5, and Randy went over some of the pretty interesting products that are in 18.5. And through the quarter we were in the last parts of the testing cycle. So we capitalized $2.9 million of R&D expense in the quarter.

Okay. That's helpful. And then just last question on tax rate, you -- did I hear you right? You're saying that we should still assume a GAAP tax rate of 38% for the remainder of the year?

Yes, we expect to have 38% for the full year. So there might be some quarters that are a little bit more than 38%, but we expect it to average out. The thing that makes the tax rate fluctuate is just the timing of stock, employee stock activity, and that's almost impossible to forecast.

Right. Okay. Great. Thanks a lot, guys.

Sean Wieland, Piper Jaffray.

Hi, thanks. Nice job on the quarter. So question on operating margin, so Q1 is always the low water mark by a long shot on operating margin, but you're off on the right foot this year. What's the likelihood we get to that 15% target by year end, and do you have any thoughts on operating margin longer term?

So the forecast that we gave does assume that we get to the 15% by year end and we average out through the year. There'll be quarter-to-quarter fluctuations. There always are.

Long term we are still planning to manage to the 15% operating margin, and when we have any opportunity we take any additional funds we have and invest them in the growth of the business. We believe that we've got quite a few growth areas. Randy talked about the three-legged strategy, and those are exactly the things that we're investing in, and they're all great opportunities.

So am I hearing you that you'll revisit that long-term 15% margin, or am I putting words in your mouth?

No, we intend to manage to the 15% at this point.

All right. Got you. Thanks a lot.

Matt Hewitt, Craig-Hallum Capital.

Good afternoon, and congratulations on the momentum.

Thank you.

A couple of questions for me. First, from the competitive landscape perspective, obviously one of your peers was having issues last summer. They were able to get their software out the door finally later in the year. When you reported Q4 it sounds like the market had kind of evened out a little bit.

Where do we sit today from a competitive standpoint? I mean, it's essentially a two-horse race. The third horse has been sold. I would assume that both parties, both you and the other one, are picking up share, but maybe just an overview of the competitive landscape would be helpful.

Yes, sure, Matt. The competitive landscape for us continues to position the Company extremely well. Our products, as we said, are really leaning toward the large enterprises that want to have multi-hospital implementations and drive best practice across the whole group, and having a single platform to not only manage that across multi-hospitals but to manage all the areas of drug movement in a hospital is quite essential to making that happen, and having a server that can facilitate that.

And then the nurse workflow products, where that really helped to smooth transition, particularly in the integration of, for instance, our Cerner eMAR-ADC connection points have been huge home runs. We could see that at the University of Alabama, which we announced earlier in the year, which was a huge IDN win that had been with a competitive product for 20 years.

And then it hasn't slowed down. You know, we had Capital Health. And usually what happens when hospitals combine their -- with another site, they go through a more formal process to look at the situation with their technologies, and that, again, bodes really well for us in the marketplace.

I think our technology's positioned well. We have a lot of the features and functions and architecture that customers want today and it works today. It's out and about and fully implementable. And I think our reputation in the marketplace is second to none, and it really pushes people over the edge to make the switch.

And I think as you described it well, I think we have a formidable competitor and one that gives us opportunity to take some more market share out there, and I think we're going to continue to do that.

Great. Thanks. Another one for me, as far as the analytics is concerned, obviously it's going to become, it sounds like, a bigger contributor to your growth. You launched that Pandora Analytics at ASHP last December. What do you -- when you talk to, when you lead with that product or when customers reach out to you and are looking for a product, what exactly about the analytics has them most excited? What -- when you're pitching it, what is the one or two key points that you're trying to hammer home?

Well, again, it's on the enterprise side. It's both depth and breadth of the product. They don't just want to know what the tracking of meds are in a few areas. They want to know total hospital and then across the enterprise, and then they want to have some way of managing drug shortages, which are a big issue.

And so, and now a lot of the hospitals have a corporate pharmacy group which is trying to drive best practice, manage through the shortage issues and then also drive compliance, particularly around diversion, which has gotten, I would say, increased scrutiny over the last couple of years as diversion of drugs creates institutional liabilities when trying to treat patients when you have issues with drug diversions, either in the integrity of the drugs that you have or on personnel who may be -- have abusive situations. So that's become a newer highlight, and I think it's certainly being pushed by the government regulatory folks.

Great. Maybe one more for me and I'll hop back in the queue. As far as the Q1 performance is concerned, it was a nice beat in the top line. How much of that upside or how much was from Sidra? Was the Guy's St. Thomas incorporated in Q1 or is that still coming?

So Sidra was fully recognized as revenue last year, so there's no Sidra in this quarter. And Guy's St. Thomas was an order but it has not been installed yet, so it has not hit the revenue. Q1 was all the orders that we, of course, had scheduled, but we do have more of an order flow now for the upgrades, and the upgrades tend to be installed much faster than the rest of our orders, so it's giving a little bit more variability to our revenue.

All right. Thank you very much.

Gene Mannheimer, B. Riley.

Thanks for taking the question, and nice quarter. If I could just follow up, then, on what you just said, Rob, I mean, the revenue performance very impressive, beat our model by about $5 million in product alone. If you had to characterize where the upside came from, was it G4, was it government, was it medication adherence, competitive wins? How could we sort of summarize the beat here? Thanks.

Yes, so relative to the guidance that we gave, medication adherence did better than we had anticipated, and the rest of it is all in the scheduling of orders and how fast people want to install upgrades that they order inside the quarter. And most of our orders in the automation and analytics segment would not be installed in the quarter that they're ordered, because usually it just takes a hospital longer to plan out the installations. But the G4 upgrades are actually installed quite easily. They were designed to install easily. And so they can go pretty fast.

Okay. Okay. So if there's some variability in the install schedules that sort of led to outperformance this quarter, should I be inferring that that may -- you may back off from that next quarter, or is it tough to say that?

Well, we've stayed with the revenue guidance that we gave. There's nothing in Q1 that right now makes us think that the year won't come out to the same guidance that we gave 90 years ago, or 90 days ago.

Okay. Thank you.

Leo Carpio, HM Global.

Good afternoon, gentlemen. Two quick questions. First on ICD-10, now that the deadline delay's been implemented, have you seen any feedback from your customers coming back and inquiring if they can add their -- do some upgrades or other things that they had previously postponed? And then on MTS, we've been hearing hospitals talking about soft census. Did that flow through in MTS' performance in any way, or just you didn't see it?

Well, let me address the first question and I'll give the second one to Rob. I don't think ICD-10 -- you know, our systems are really driven from the clinician side, don't have a lot of impact on the operations from the IT side. And so whether the ICD-10 was in or out probably didn't have as much impact on us. I think clinicians are really driving our install cycles, and they really need to standardize and drive best practice and get the cost out. So those tend to be the big drivers in our selection.

Yes, and regarding the soft census, I think you're talking about the soft hospital census, possibly, the patients not necessarily disappearing but getting care in longer term care facilities or secondary facilities. So we do see that happening with hospitals.

I don't know that it's necessarily driving anything particular in the MTS medication adherence business for the quarter, but we do think over time as patients move more into lower cost facilities for care that there'll be not only more demand for the medication adherence products but also more demand for our dispensing products, because those are sometimes more acute patients and they're still on more of a unit dose medication regimen. And to manage that, of course, you need some sort of dispensing system.

Okay. And just back again on the ICD-10 question, the question (inaudible) phrase it, whether you've been hearing from hospitals is that now that the deadline's been delayed they're reviewing their IT staffing, tackling other projects that had previously deferred, for example, the sunset of XP, going to Windows 7, and since they're tackling it more resources to learn those projects or other things that had been on their wish list. I thought you probably could see maybe a feedback more of people saying they want more G4 upgrades faster or more reallocating those resources to projects that happen to be in your sweet spot of the products and services that you'd be able to (inaudible).

Well, that may happen. I think hospitals move slow enough that we're not necessarily going to see it make a material change in our pipeline, if it's going to make a material change, for a little bit. We wouldn't necessarily have seen it already in Q1.

As Randy said, our systems are really a clinical-based system. IT definitely does support them. They have the server in place, the networking, of course. But the implementation of our systems from a workload standpoint is predominantly in the pharmacy and a little bit in nursing through the training. The pharmacy has to do all the setup work and testing interfaces, actually physically, the drugs, things like that. So for our systems the implementation of ICD-10 wasn't really a major impediment, and so we don't really expect to see a major change now that ICD-10 has been postponed.

All right. Thank you.

(Operator Instructions)

Raymond Myers, Alere Financial.

Yes, thanks for taking the questions. My first question is kind of a high level. How are you seeing the rollout of the Affordable Care Act affecting hospital purchasing patterns? Is it having an effect at all, and anything surprising at all?

Well, I think everything, and it's universal about the Affordable Care Act, is that two things, acute care has got to get less expensive, and more patients with higher acuities are going to move to more non-acute facilities.

And on the cost-effective side, what you see is these lean teams being put together, and we, when we walk into a new institution or a major upgrade, we have a lean team that works with their lean team that really gets the stakeholders engaged in cutting out cost and processes. I think in the past that was a little more -- we had to do a lot more arm-twisting to get people to engage in that level of process change. Now you see the hospitals a lot more ready to listen to you and take on our best practice as what they can really do to reduce the cost.

And on the other side of that is sicker patients are definitely showing up in more venues other than hospitals. That means they need automation and medication management that really requires higher levels of scrutiny, and particularly the distribution of narcotics, which also takes a lot of extra work to do, and you need automation in order to meet those regulatory compliance in these other venues.

And so both those things bode really well for our company and why we feel really good about the future.

Yes, thanks, Randy. That sounds positive. Help me to understand the timing of when that starts to affect your business. Has that already affected the business, or do you think that that is a continuing trend that will garner support in an increasing fashion over time?

I think it's started. I don't know that it's fully impacted. I think a year or two ago you saw us having to push in to do some industrial engineering, so to speak, when we entered the facilities, and trying to convince people to do that. We actually get hospitals now requiring us on a new RP before we come in to do a 5- to 10-day study just to give them an idea about what we would suggest and how it would work.

And so I think it's still moving along. And it's very market specific. Certain areas of the country, hospitals are kind of still working pretty much in the fee-service world, others are starting to experiment with ACOs and bundled payments. So I think they're all trying to figure out how to lower their costs. And a big part of lowering their costs is getting everybody on the same system, whether it's their HIS system or health records system or medication management system. They see benefits to that.

And I think in the past they would sort of tolerate, well, everybody can choose their own medication system at the local hospital. Now they're seeing needs to make one decision and move to a single vendor.

Good. That sounds like positive trends. Now, I want to shift for a second to medication adherence packaging. I understand there's been some product development ongoing for some time now to develop new packaging systems. Can you give us an update on how that's going and when we might expect some new product announcements?

Well, as you know, we don't normally talk a lot about products that are in development for a lot of obvious reasons, but we do have other products in development right now. Just about everybody knows on the call what we're talking about.

In the medication adherence packaging world there's packages that hold multiple doses of one type of medication. Those are called single-dose blister cards. And we have a full line of automation products that range from very inexpensive entry points to million-dollar fully robotic, fully automated systems for very large facilities, very large institutional pharmacy facilities. And that provides us the ability to help any pharmacist get into this business and sustain their business as they grow.

The multi-dose blister cards, which are used more of assisted living facilities and patients that are home that don't have caregivers, for those we have one piece of automation equipment today that is sort of in the middle of that spectrum. You would -- as a customer you would need some volume to justify buying that machine, and if you don't have that volume you tend to pack by hand. And if you're a much larger institutional pharmacy you start to hit the limits of that machine and you need bigger types of automation equipment.

So it is our intent to fill out that product line over time. And, as you said, we have had development in process. You might recall at the end of Q1 last year we changed our direction a bit on the development. We were targeting more the lower end of that product line, and we changed it to target more the higher end of the product line. And those products are still under development. I really can't talk about when exactly they would come to market or what the other steps we would do in development other than directionally we intend to have a full product line for the multi-dose products just like we do for single-dose.

Okay. Thank you. That helps. And I don't know if you're able to give an update on SurgiChem. I know it's something that's in process. Are you able to give us a sense of when you think that might close?

So, SurgiChem is going through regulatory review still at this point, and we understand from the regulatory agencies that it will be Q3 before we have a final answer from them.

Are you aware of any issues that they're working through, or is this a standard review?

Well, it is their standard review. They're examining everything. It's a little bit of a different process in the UK than it is in the United States, but overall they're going through everything that's associated with this market and these products.

Great. So thank you very much for the feedback.

And that will -- we do have a follow-up question from the line of Charles, with Cowen and Company.

Yes, thanks. Hey, just a quick follow-up on medication adherence. Rob, can you give us sort of what the mix in the revenue today is for medication adherence?

Yes, it varies a little bit quarter to quarter, but it's very high consumable mix. It's predominantly the single-dose blister cards, the multi-dose blister cards, which is the fastest growing segment, the smaller piece of the overall consumables. But it tends to be 85% to 90% consumables. And the equipment business has a small service component to it.

(Inaudible) anything about mix of total revenue? What would you ball park that at?

I'm sorry, say again?

What would you ball park as a percent of total revenue?

Oh, medication adherence is about 20% overall of our total revenue.

Okay. All right. That was it. Thanks.

And at this time there are no further questions. I'd like to turn the conference over to Randall Lipps for closing remarks.

Well, thank you very much for joining the call. I'd like to congratulate the Omnicell team for another record quarter of delivering great products. Congratulations on the 18.5 release with another great set of features that still serve the market and help us move the needle in patient outcomes, and another great job in the marketplace of winning more competitive wins to keep our growth continuing to grow. Thank you all for being on the team and listening on the call. We'll see you next time.

And that will conclude today's conference call. We appreciate your participation. You may now disconnect.