OraSure Technologies Inc (OSUR) 2007 Q1 法說會逐字稿

Welcome to the Orasure first quarter 2007 financial results conference call and simultaneous webcast. As a reminder, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions)

For opening remarks and introductions, I will now turn this call over to Eileen Tavares at OraSure Technologies. Please go ahead.

Good afternoon, everyone, and thank you for joining us today. I would like to begin by telling you that OraSure Technologies issued a press release at approximately 4 p.m. Eastern time today regarding our first quarter 2007 results and certain other matters. The press release is available to you on our website at www.OraSure.com or by calling 610-882-1820. If you go to our website, the press release can accessed by opening the Investor Relations page and clicking on the link for the news releases.

This call is also available real-time on our website and will be archived there for seven days. Alternatively, you can listen to an archive of this call until midnight May 15, 2007, by calling 800-642-1687 for domestic or 706-645-9291 for international. The access code is 5389843.

With us today are Doug Michels, President and Chief Executive Officer, and Ron Spair, Chief Operating Officer and Chief Financial Officer. Doug and Ron will begin with opening statements, which will be followed a question-and-answer session.

Before I turn the call over to Doug, I must also remind you that this call can contain certain forward-looking statements including statements with respect to revenues, expenses, profitability, earnings per share, and other financial performance, product development performance, shipment and markets, and regulatory filings and approvals. Actual results could be significantly different. Factors that could affect results are discussed more fully in the SEC filings of OraSure Technologies, including its registration statements, its annual report on Form 10-K for the year ended December 31, 2006, its quarterly reports on Form 10-Q, and other SEC filings.

Although forward-looking statements help to provide complete information about future prospects, listeners should keep in mind that forward-looking statements may not be reliable. The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call.

With that, I would like to turn the call over to Doug Michels.

Thank you, Eileen, and good afternoon, everyone, and welcome to our first quarter 2007 earnings conference call.

Similar to the format that we used for our last investor conference call, our call today will be divided into two sections. In the first section, Ron Spair, our Chief Operating Officer and Chief Financial Officer, will review our outstanding financial results for the first quarter of 2007. We will then open the floor for any questions that you may have on the earnings press release issued earlier today and our first quarter performance.

The second half and majority of time on the call will focus on our future and the significant strategic initiatives we are pursuing. We will also provide additional business updates and discuss our financial guidance for both the second quarter and the full year of 2007. We will conclude by again opening the floor for questions on the information provided during the second half of the call.

Overall, we're off to a great start for 2007. Our first quarter financial results were excellent, and we continue to make significant progress against our strategic initiatives, as I will describe further during today's call. With that, let's get started with the financial overview from Ron.

Thanks, Doug, and good afternoon, everyone. We are extremely pleased with the very strong financial results reported for the first quarter of 2007. We substantially exceeded expectations on both the top and bottom lines, and our business performed very well.

Total revenues for Q1 were a record $20.1 million, a 32% increase over revenues reported for the same period in 2006. This is the highest level of quarterly revenues recorded to date. Increased sales of the company's OraQuick Advance tests intercept all fluid drug tests and cryosurgical systems products as well as an increase in funded R&D activities during Q1 related to our rapid hepatitis C test drove these fantastic results.

In the infectious disease market, we booked sales of $8.9 million, 45% higher than that first quarter of 2006 and up 12% over the fourth quarter of 2006. A revenue increase of 50% in our direct sales to the public health market, and a 45% increase in sales to Abbott for hospital distribution were the primary reasons for the outstanding performance in the infectious disease testing business.

In substance abuse testing, sales were $3.9 million, up 14% over the first quarter of 2006. Our workplace testing and criminal justice businesses were each up 21% over 2006, as we continued to expand oral fluid drug testing and increased market share.

Our direct sales, although compared to a modest base, were up 47% in the quarter. First quarter cryosurgical system sales were $5.7 million, a 27% increase over 2006. Our primary growth drivers for higher sales of our international over-the-counter cryosurgical product in both Europe and Mexico, our business in Mexico is off to a great start, and we will share more specifics later in the call.

During the first quarter we also reported $679,000 of funded R&D work pursuant to our agreement with Schering-Plough for the development of a rapid HCV test on the OraQuick platform.

Rounding out the revenue picture, insurance risk assessment sales of $890,000 in the quarter were down $200,000, or about 18% when compared to the comparable quarter in 2006.

Gross margin for Q1 of 2007 was 62%, down slightly from 2006 first quarter gross margin of 63%, resulting primarily from increased product support costs, partially offset by higher funded research and development.

Research and development expenses for the first quarter were up approximately $1.3 million over 2006, primarily as a result of increased staffing-related charges of approximately $700,000 and an increase of approximately $600,000 in product development costs.

Sales and marketing expenses increased approximately $700,000 due to increased staffing related charges and increased advertising reimbursement expense for our OTC cryosurgical product. As we discussed previously, we are adding to our field sales force and have agreed to reimburse a portion of the advertising expenditure incurred by SSL, our European OTC cryosurgical distributor.

General and administrative expenses increased approximately $1.3 million because of increased staffing-related charges, higher consulting fees related to our successful enterprise resource planning system implementation and higher legal fees.

Our net income for Q1 was $1,487,000, or $0.03 per share on a fully diluted basis compared to $900,000, or $0.02 per share for the same period of 2006. This increase was due to a gain for the January sale of our investment in our UK Intercept distributor.

Operationally our increased gross margin generated during the first quarter was reinvested in the business.

Our cash balance remained strong with $86.5 million at quarter-end. In the quarter, we expended $4 million for intellectual property licenses and used $1 million for operating cash flows.

Accounts receivable increased as day sales outstanding rose to 66 days as a result of inter-quarter revenue distribution and a decrease in the timeliness of customer remittances.

With that, we would now like to open the floor for questions regarding our first quarter financial results.

(Operator Instructions) Ed Shenkan, Needham & Company.

I just wanted to ask about the $4 million patent payment in the quarter. Maybe just walk us through who that's to and future expectations.

Right, most of that is related to the agreement that we entered into with Ortho Kiron for access to the HCV intellectual property, which we're using for the development of the rapid HCV test on the OraQuick platform.

And what would you expect as far as future payments with Kiron, or what can you tell us?

Sure, there's a number of additional milestone payments that we will need to make over the course of the development of our HCV test in both the domestic and international marketplaces. To date, I believe we've paid over $4 million, and there is an obligation that approximates 10 for that in total.

On the insurance risk business, can you talk a little bit about what you saw this quarter with the fall-off and what you expect, going forward?

The quarter was down $200,000 versus the first quarter of 2006. We had been working diligently with our laboratory partners in the insurance risk assessment business to assess where they are with respect to inventories and the pull-through that we should anticipate and expect from some of the additional closes that we have made in that business. We're certainly hopeful that from here we can stabilize and turn the business around, but I think it's a little early to predict what that's going to be like until we get a little bit more traction as we move out through the year.

What was the cause for the fall-off?

As you know, our arrangement is that we ship product to our laboratory partners who, in turn, distribute product out to their insurance company customers who then use it in the field to test individuals who are applying for life insurance applications.

What we are aware of in the market is that the number of total overall applications are down, and in addition, the face value of those policies are trending up somewhat, and as you may be aware, our target market in that insurance risk assessment business would be in the $250,000 face value policies.

And so the trending up of the face value along with the reduction in total of the number of applications adversely affects us.

Aaron Lindberg, William Smith & Company.

Just one quick question -- what were the higher legal fees for in the quarter?

They were primarily related to the ongoing dispute with Prestige Brands, Aaron.

And so are you making progress on that arbitration? Have you had a hearing at this point?

We have not had a hearing at this point. The hearing is scheduled for the latter part of August right now. That's due primarily to schedule conflicts with the arbitrators, and we expect that, though, to us incurring additional legal expenses over the next quarter here, as we are in the midst of discovery.

Okay, and was much of that spent on Schering-Plough or is that basically no spending and just holding pattern at this point?

I think the latter characterization is correct. It's more of a holding pattern at this point.

No additional comments or questions on the first quarter results?

Yes, sir, at this time you have a follow-up question from the line of Ed Shenkan with Needham & Company.

Hey, Doug, I wanted to ask a follow-up on the infectious disease business, which was particularly strong in the quarter.

We need FDA approval for this product. We have completed the clinical work for use of our over-the-counter cryosurgical product in combination with salicylic acid, and our submission is pending before the FDA. We recently received some feedback from the FDA on our submission, and we are gathering data for our response.

On final area I would like to address is operations. During the quarter, we completed an extensive consultant-driven effort in capacity and facility planning designed to address the current and future production requirements of our recently completed long-range plan.

This involved assessing the use of automated manufacturing, semi-automated production, and offshore manufacturing. I am please to report that the company has in place the plans to ensure sufficient capacity to meet the forecasted demand for OraQuick Advanced in both the professional and over-the-counter markets, the projected requirements for our HCV rapid test on the OraQuick platform, and the production needs associated with the continued growth in our Intercept product line.

During the quarter we made substantial progress towards our goal of validating our automated manufacturing equipment in advance of filing with the FDA and in construction of an additional semi-automated manufacturing space for OraQuick devices that will need to be validated and approved by the FDA. We are laying the foundation to support a much larger business in the years to come.

As you can see, the first quarter was a busy one for us with significant progress being made on all of our major development initiatives. We continue to be very excited about these programs and the business opportunities they represent for our future. We will continue to provide updates as additional progress is made and milestones are achieved.

Now I'd like to review some additional steps that we are taking under each of our product lines to continue to grow our business.

During the first quarter, our infectious disease business continued its strong growth, and we expect continued growth for a number of reasons. Our direct sales to the public health market grew 50% in the first quarter and should continue to fuel substantial growth throughout the rest of the year.

We continue to make good progress assisting our customers in planning for and implementing citywide testing initiatives. Washington, D.C. remains committed to establishing a citywide routine HIV screening program as evidence by an additional purchase order from the city and an extension of our existing agreement.

In addition, the program in Philadelphia, where testing is being conducted in underserved communities is going well, and we expect this program to continue to expand. We are also in discussions with several other large cities that intend to launch broad-scale testing initiatives in the near future.

We continued our efforts to sell OraQuick outside of the traditional public health setting. For example, during the National Week of Prayer, we worked with a number of faith-based organizations to offer testing programs, one of which was the Enon Baptist Tabernacle Church in Philadelphia, which tested nearly 1,000 people in just one day.

In February we announced that we were donating OraQuick tests to more than 20 community-based organization and testing sites around the country who were offering free HIV testing in observance of National Black HIV AIDS Awareness Day. The primary goal of this day was to encourage African-Americans to get tested and know their HIV status; get educated about the transmission modes of HIV and AIDS; get involved in their local community; and get treated if they are currently living with HIV or are newly diagnosed.

Along these lines, the CDC in early March announced its mobilization effort in response to fighting HIV among African-Americans. This announcement included several strategies focused on expanding investments and access to HIV testing for African-Americans.

We expect that sales of OraQuick Advanced to Abbott Laboratories for further distribution to hospitals will also continue to grow. During the first quarter we added 73 new hospitals and nine new emergency room departments as OraQuick customers. Not surprisingly, we recorded a record level of sales to Abbott during the first quarter.

This is a clear indication that rapid HIV screening in hospitals is expanding. We have been participants in a series of CDC-sponsored workshops that are taking place throughout the country with some of the nations largest hospitals and emergency rooms to support the adoption of the new CDC recommendations for routine HIV screening.

And as discussed during our last call, Abbott Laboratories recently announced that it was selling its diagnostics division, which includes its rights to our OraQuick test to General Electric. That transaction has not yet closed, so we have not yet been able to discuss the impact of that transaction with management at General Electric. Our understanding is that the transaction is expected to close in the next couple of months at which time we plan to engage GE management to discuss how our relationship will move forward.

In the physician office market, we have added a new significant distributor with the signing of an agreement with Henry Schein. We are also in discussions to add several other physician office distributors later in the year.

On the international front, we have some long-awaited great news to share with you regarding a CE mark for the OraQuick Advanced test. In March and April, our notified body completed two facility inspections as a final step towards granting our CE mark. These inspections were important milestones. After the second inspection, which ended last Wednesday, May 2nd, we were told by our auditors that we are being recommended for CE mark approval.

We have been preparing final labeling and packaging for the European Union in anticipation of officially receiving our CE mark and after receipt we will move to actively pursue the required country approval.

As previously disclosed, there are several sites in Europe currently conducting investigational or pilot studies with our OraQuick Advanced test. One prominent hospital in the UK has given us some very positive feedback on the performance of our tests and has indicated that it is very pleased with the use of OraQuick in oral fluid testing. We believe that studies like this will help facilitate the European launch of OraQuick after the CE mark is issued.

As we recently announced, we've been working closely with the government of Madagascar in support of their plans for a major HIV screening initiative in that country. To date, we have sold approximately $300,000 of OraQuick tests to the Madagascar government. Last month I traveled to meet with the prime minister and minister of health to formally kick off their Mother-and-Child Wellness Week, which is intended to provide free health care for women and children and promote expanded HIV screening programs with oral fluid testing using the OraQuick device.

Approximately 15,000 individuals were screened for HIV in Madagascar in 2005, and this increased to nearly 140,000 individuals in 2006, primarily due to the adoption of oral fluid testing with OraQuick in the latter part of last year.

Because of the success of the testing program with OraQuick, the government is expanding its testing program and has indicated that it expects to test more than 400,000 individuals in 2007. A major component of that testing program is a door-to-door campaign that will utilize teams of individuals traveling throughout the most populated areas of the country.

Currently, approximately 70% of all HIV screening in Madagascar is done with the OraQuick test, and we expect OraQuick to play a major role in future testing in that country.

During the first quarter, we successfully registered OraQuick in both South Korea and Singapore, and we recently learned that our registration in Indonesia has been approved. We expect to obtain several additional registrations later this year.

In addition, our OraQuick test has been validated for us with oral fluid in several African countries.

Turning to substance abuse testing, this business grew 14% in the first quarter, and we expect continued growth for a number of reasons. During the first quarter of 2007, 23 new Intercept accounts were closed and the number of specimens processed in the workplace testing market hit an all-time high of over 300,000 specimens for the quarter. This is indicative of the continue penetration of our Intercept test in the drug-testing market. We will continue to focus on closing new accounts and implementing recently signed accounts as rapidly as possible.

During the first quarter, we also added two new criminal justice laboratories that are both up and running and processing Intercept specimens. We are driving the adoption of oral fluid drug testing, and we hope to have several additional labs yet this year.

Also in the first quarter, we added five new third-party administrators, or TPAs, who are now actively offering Intercept oral fluid drug testing as part of their overall employee screening program that they deliver to their workplace customers.

In the cryosurgical systems market, several developments are in process to further strengthen our business. Overall, our relationship with SSL has developed nicely. During the first quarter we saw a 28% increase in sales to SSL compared to 2006, and we expect sales to continue to increase throughout the year.

We recently announced an amendment to our agreement with SSL for the distribution of our over-the-counter cryosurgical products in Europe, Australia, and New Zealand. The purpose of this amendment was to restructure the agreement somewhat to create a greater incentive for SSL to expand sales and accelerate the commercialization of this product in new countries.

Genoma, our distributor in Mexico, who sells our over-the-counter cryosurgery product under "Points" brand name, had an outstanding product launch in March. Fueled by a robust national media campaign, Genoma purchased approximately $500,000 during the quarter.

With that as an overview, I will now turn it back over to Ron to update our financial guidance.

Thanks, Doug. Starting first with the second quarter guidance, we are expecting revenues to approximate $20 million and earnings per share to approximate breakeven to a penny per share in the second quarter. We do expect expenses to increase as we progress our clinical development activities.

With respect to guidance for the full year 2007, I am pleased to report that we are increasing our revenue forecast to $81 million, which would represent a 19% increase over 2006. As explained during our last call, our previous full-year guidance did not include any additional government bulk orders for OraQuick Advanced or orders from Prestige brand for our over-the-counter cryosurgical product beyond those received at the time we initially announced our guidance.

Based on the company's performance in the first quarter, and the receipt of an additional order of approximately $1 million from Prestige for delivery in the second quarter, we are taking up our revenue guidance. We currently expect our full-year earnings per share to remain within the $0.03 to $0.05 per share range.

We will continue to monitor developments in our business so that we can provide an update on guidance as necessary after each quarter.

In closing, we continue to believe that 2007 will be an exciting year and will position us for future growth. Now I'll turn it back over to Doug.

Well, thank you, Ron, and, as we said, we'd like to again open the floor to questions regarding the business update we just provided now and our view of the future. So open it up again.

(Operator Instructions) Caroline Corner, Montgomery & Company.

What's the stratification point, Doug, when you were talking about the CE Mark. You said you expect numbers soon, and then after a CE mark was obtained, you have to get the approval -- some kind of required approval in the countries of the markets where you enter. Could you give a little color on how long that would take and what's required there?

There is still a fair amount of work involved after we are finally issued our CE mark. So hopefully we'll get that in the next few weeks, as we were told, which is very exciting news for us. Once we have the CE mark, then we have to finalize our labeling. That labeling is going to have to be submitted to the regulatory authorities, they're going to have to approve that. Once we receive our CE mark, they will prescribe the lot release testing criteria and the lot release panel that need to be tested with each different lot of material that we produce. So those protocols all have to be implemented.

And then we're going to need to take that out into each one of the different countries and fulfill any local or country-specific registration requirements that they may have, and it varies by country throughout the EU. In many cases it's simply a notification but in other countries, like France and Germany, there's additional testing that will need to be performed.

So it will be variable, over time. We also, as we've described earlier, we've been in discussions with several distributors throughout the EU in different countries. We have entered into an agreement with a distributor in the UK. We are very far along in advanced discussions with distributors in several other countries, and so those agreements need to be put in place, and then arrangements made to transfer product there.

So this is going to be a process that we'll be working through over the next couple of quarters, for sure, and we'll provide you appropriate updates as we continue to make progress.

The next piece of news you're going to hear from us is when we actually receive the official notification that we have our CE mark. But the inspections went super, we came out of it with zero non-conformances, and, as a result, we're going to be recommended to receive the CE mark, and we expect it shortly.

Great, glad to hear that. And also, just a question about the guidance -- you've bumped up the top-line guidance by $1 million. The bottom line is still at $0.03 to $0.05. You just said $0.03, and you've guided to breakeven to a penny for the next quarter. Should we be thinking that the third quarter is going to be at a loss on the bottom line at this point, due to the cryosurgery sales, or is there something else that will cause that third quarter to break even as well.

I think, Caroline, it's primarily related to the clinical development activity that's pretty much back-end loaded in 2007, and that would be for both the OraQuick OTC trial work as well as the OraQuick HCB work. And, of course, there's still a fair degree of variability as to when that trial will start. The accrual rates on patients into the various trials, the approvals necessary to start and then also the closeout -- so there are a number of variables in play but, clearly, the expenses are more back-end loaded on the R&D side related to those trials, and that's why the higher-rep earnings in the beginning of the year.

Ed Shenkan, Needham & Company.

Ron, I wanted to ask about the tax rate. Should we still expect 45%?

Well, actually, Ed, we've done a closer analysis of our effective tax rate for book purposes, and it's going to look -- it's going to approximate the 50% range, and that's due to the permanent differences that are related to some of the non-deductible items for our actual tax return rate.

Now, you know that we're not paying federal income taxes and so although we're displaying a higher rate for GAAP purposes on the face of the income statement, the actual cash related to payments for federal taxes will be de minimis, if any, for 2007.

But for planning purposes, I'd use 50%, and we will continue to evaluate that, because it's influenced not only by the permanent differences but the ultimate level of profitability that's expected for 2007 for the entire fiscal year.

So as far as cash flows, it's de minimis on this tax front for '07. What's the expectation for '08, or what kind of NOLs do you have? What metrics can you give us?

I think that's an excellent point to raise. As the deferred tax assets, which represent net operating losses on our balance sheet at March 31st actually approximate $22.5 million. So we have offsets to federal tax liabilities to $22.5 million for use in 2007 and beyond. So it will be some time -- hopefully sooner than later -- but sometime before actually paying federal income taxes.

Aaron Lindberg, William Smith & Company.

A quick follow-up on Ed's question on NOL. Do you guys have additional NOL that you can recognize that's just not reflected in that deferred tax asset right now?

Not that we're prepared to take at the moment, Aaron. There may be some additional deferred tax assets related to R&D credits, but that would have to be an exhaustive analysis that would need to be completed before we recognize anything, and so at this time it's fully reserved.

Okay, so the 22.5 is the lion's share of it, and we can just run with that for now.

Yes, I think that's a good way to approach it, yes.

Okay, now, are you making progress with extending the shelf life on Advance?

We are. We spoke, I believe, on our last call that we were going to be putting our -- making some minor changes to our manufacturing processes, and then putting that product up on stability. We manufactured three additional lots of product over the last 60 days using this new process. Those three lots of product are up on stability right now, and so assuming success with that project, hopefully, we'll be in a position to extend our product dating later this year.

And then, that's the first product that you've put up on stability in the last two months?

Yes.

And so the way that we should think about that in terms of your ability to extend it is basically the clock starts then and as you continue to test that, over time, as time elapses, that kind of gives us a sense of how far out we can go?

That's exactly right. We have six months dating on our existing product, so as we exceed that level, we'll be sharing that stability information with the FDA and, at the appropriate time, we'll extend our dating, and we will continue to extend that, provided the product stability shows that we can do that.

Okay, so as an example, as of 11/08, assuming things went well, you could extend it nine or 10 months, something like that?

I don't want to get into precise dates as to when we're going to make the decision to extend but, generally, you're on the right track.

Okay. And then how much were the OraQuick sales to individual cities in the quarter?

Several hundred thousand.

Okay. And then what are you doing to move forward with OTC opportunities outside the U.S.?

We really haven't started specific regulatory approval efforts outside of the United States for over-the-counter testing. Obviously, our first objective in the EU, as an example, was to get the product approved for professional use, which is CE mark-enabled.

What we found in the U.S. is that by having such a strong professional endorsement of the product, it really establishes a strong base from which we can then move to pursue an over-the-counter application.

That's a similar strategy, internationally, they get in the professional market while they run with it for a little while before you back for OTC?

That's our thinking right now, and hopefully we were able to communicate. We've got a lot of very exciting programs on our plate right now, and we're really going full out to deliver the over-the-counter opportunity here in the United States, the HCV product here in the United States and globally, the homogeneous, high-volume substance abuse assays and other initiatives, so we'll get out at it as quickly as we can, but we've got a lot of opportunity to continue to grow this business with our current products in the markets we're currently participating in.

How would you characterize the likelihood of receiving any additional government bulk purchase orders during 2007?

I really don't want to make -- put a bet on that, one way or the other. One thing I'm very confident in, however, is that the government -- we believe that the government is going to increase their spending on HIV prevention and testing. I mentioned the focus on the African-American community, and in March of this year the CDC called together leaders in the African-American community to Atlanta and talked about their heightened national response to the HIV AIDS crisis among African-Americans, and they outlined several key initiatives that they intend to pursue to help stem the tide of HIV within the African-American and other minority communities.

And we believe, based on information that we've learned, that the CDC is going to make additional monies available to state and local health departments for additional prevention measures and additional HIV testing in support of these kinds of programs.

Now, whether they choose to take that money and make bulk purchases, or whether they choose to direct that money to state and local health departments to purchase product for testing, as we demonstrated over the last couple of years, we are somewhat indifferent to. We've got dominant share position with state and local health departments. They're fully trained, and OraQuick is deployed broadly, so we'll participate in a large percentage of that business, should it go that way. And if they make a bulk purchase, that's great, too, so we're in close community with the decision-makers there, and we expect that's going to result, hopefully, in additional revenues later on in the year.

Okay, one last quick question on ACV -- is the data on oral fluids similar to what you'd expect in HIV, or is there just going to be a slight gap in the sensitivity and specificity between the oral fluid and the blood?

It's perhaps a little early to make any definitive statements on that. I think Dr. Lee's presentation at the American Association of Clinical Chemistry will give you the information that we have on paired samples in hundreds of subjects. I can tell you right now, though, that the data that we're generating indicates that we believe that we're going to achieve comparable levels of sensitivity and specificity in all subject types, or specimen types, with OraQuick is currently available with laboratory testing systems.

Are those, like you mentioned earlier, that you're seeking it on all five samples types, and --

That's right.

-- and then you'll trial on all five, and you'd expect to submit in all five?

That's correct, and we expect comparable sensitivity and specificity data to existing laboratory methods. It's a phenomenal piece of science. In 20 minutes we're going to deliver similar results to what it takes two and a half hours in a laboratory. It's going to have a profound impact on public health.

Dave [Sakelli], SIG.

Quickly, the Henry Schein, the doc's office, could you talk just a little bit about that market. Have you been in that market before, and how big do you think that opportunity could be?

Right now, most of the HIV testing that takes place in physicians' offices gets sent out to commercial laboratories, but there is growing interest in bringing testing in-house, primarily in the OB-GYN marketplace, the new CDC guidelines encourage routine HIV screening for individuals 13 to 63 in a health care setting. Reimbursement is in place, and more and more insurers are picking up reimbursement for routine screening.

Schein represents, arguably, one of the largest physician office distributor organizations in the country. They've got over 600 reps calling on physician offices, so we're looking forward to great success with them, and we're also going to be making product available to a couple of other distributors, hopefully, within the next quarter or so.

The allotted time for this call is up. We apologize to those who are still holding to ask a question. I will now turn the call over to Doug Michels for closing remarks.

Okay, well, I just want to thank everyone for participating in this call. We're off to a very good start for the year, and I look forward to updating you again on our progress during the next conference call. Have a great afternoon and evening, everyone. Thank you.

This concludes today's conference call. You may now disconnect.