QuidelOrtho Corp (QDEL) 2004 Q2 法說會逐字稿

Welcome to the Quidel 2004 second quarter financial results conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a Q&A session. To ask a question, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference, please press star-0 for operator assistance. As a reminder, this conference is being recorded today, July 28, 2004. I would now like to turn the call over to Miss Ina McGuinness. Please go ahead ma'am.

Thank you. This is Ina McGuinness with Lippert/Heilshorn and Associates. Thank you for participating in today's call. Earlier today Quidel released the financial results for the second quarter and six month ended June 30th, 2004. If you have not received this news release or if you would like to be added to the company's distribution list, please call Lippert/Heilshorn in L.A. at 310-691-7100, and speak with Eleanor Tang. Today's call will begin with prepared remarks by management, and then we will take your questions. I caution that this call will include forward-looking statements within the meaning of the Federal Securities Laws. It is possible that actual results could differ from these stated expectations. For discussion of these and other factors, please review Quidel's annual report on Form 10-K, and subsequent quarterly report from Form 10-Q, as filed with the SEC.

This conference call contains time-sensitive information that is accurate only as of the date of the live broadcast of July 28, 2004. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Today's conference call is hosted by Wayne Kay, President and CEO; and by Paul Landers, the SVP and CFO. I'll now call the call over to Wayne.

Thank you Ina, and my thanks to everyone for joining us this afternoon to discuss our second quarter financial results. In terms with the structure of today's call, I'll provide an overview of the second quarter market dynamics that led to this quarter's disappointing sales performance, primarily from two of our products. Next, I'll provide an update of our patent litigation with Inverness Medical Innovations and Applied Biotech. Thirdly, I'll provide an update of our development work with the Layered Thin Film technology platform. And then, Paul will provide details on our quarter's financial results.

As we pre-announced quarterly results on July 9th, most of you know Quidel's financial performance during the second quarter was disappointing due a combination of factors involving our distributors. This resulted in a revenue shortfall of approximately $6m. The sales decline divide into the following categories: $2m in Strep A sales, $2m in our new flu A+B product sales, $1m in international sales, and $1m from overall weak market conditions.

Let me discuss each of these factors in turn. As we review each of the major product line performances, I will refer to Quidel's share of market based on 12 trailing months of data, through March 31, 2004.

The shortfall in Strep A sales was caused primarily by the reluctance of three of our six largest distributors. In speaking with these distributors, they sited uncertainty related to the ongoing patent infringement lawsuit between Quidel and Inverness Medical. There was some concern among these distributors, likely created by Inverness, that should the litigation go against Quidel, our distributors would be facing inventory exposure. Of course, as I'll discuss in a moment, it's premature to be speculating about the outcome of that ongoing litigation as we remain fairly early in that judicial process. Furthermore, we have publicly reiterated our position on the litigation with a factual explanation and accurate information clarifying that no legal decisions have been made related to our case.

As a result, we believe that going forward; the distributors will be placing orders consistent with the real end-user demand. Our market share of the Strep A test in the US was 42% share of market, nearly 3 times larger than the nearest competitor. The shortfall in sales of our new QuickVue Influenza A+B test during the quarter was due primarily to a domestic distributor delaying initial orders while in the process of their completing their closing and integration of a large acquisition. That particular distributor was looking for an early start in selling this new product with particular potential in the acute care hospital settings.

We are pleased that sales to distributors of our QuickVue Influenza A+B test began during the third quarter. This new influenza A+B test which aids in the differential diagnosis of acute Influenza Type A+B, was granted a CLIA waiver from the US Food and Drug Administration in the first quarter of 2004, allowing our access with this test to a broader base of health-care professionals. We believe that this product provides for an excellent opportunity to penetrate the acute-care settings which is a $30m market today in the US alone, and we will continue to penetrate other new end-users representing a potential of approximately $70m in incremental market opportunity.

Regarding our currently marketed Influenza A/B combination test, the seasonal nature of flu, makes this primarily a first and fourth calendar quarter product. For the 12 months ending March 31, 2004, our US market share was 50%. We believe that Q3 will be relatively strong as we encourage our distributions partners, and they encourage their end-user customers to prepare for the flu season which traditionally begins to peak in mid-winter months. Our entire communications strategy focuses on early market awareness through heavy advertising and public relations, both professionally and to the mass media.

Also contributing to the second quarter's sales shortfall, albeit to a lesser extent, was a $3.2m decline in international sales, compared with the prior year's second quarter. This was the result of a very mild flu season in Japan. We expect our Japanese flu partner Sumitomo to launch the new A+B influenza product during the second half of 2004, and we expect this product to achieve a strong market share position in a competitive environment. As a percentage of Quidel's total revenues, international sales were 30% during the year's second quarter, compared with 40% during the last year's second quarter.

Looking at sales of our professional pregnancy test, US sales were down a modest 3% compared with the second quarter of 2003. We continue to own the market-leading share position of professional pregnancy testing market with a 50% market share at the end of Q1 in the US, which is more than twice the size of our nearest competitor.

Importantly, Quidel's reputation for developing and marketing leading high-quality products remains a cornerstone of our operations, and as a result we have well-established excellent brand equity in the end-user market place, which will continue to support our long-term growth objectives.

Turning to a status report on our ongoing intellectual property litigation with Inverness Medical, the case which is being tried in the US District Court Southern District of California is in the process of a claims construction order and opinion hearing. This is also known as a "Markman" hearing. The Markman hearing was conducted for four days in mid-May of this year, and is continuing in the third quarter. At this point, it is premature to speculate about the outcome of the Markman hearing or the outcome of the litigation. Indeed, during the May portion of the hearing, only 5 of 30 patent claims to be construed were presented and discussed. Our policy on this matter has been to refrain from commenting on the lawsuit, except as would be set out in our filings with the SEC. In this manner, we feel that we ensure that descriptions in the case are complete, are not taken out of context, and are available to all interested parties at the same time.

As we reported earlier, the lawsuit caused concern among some of our distributors. As we have told our distributor partners, we continue to have great confidence in the strength of our patent position. We are further committed to all that is necessary to ensure our continued leadership position with each of these distribution partners, as well as their end-user customers- health care providers who use our tests every day.

Turning to our commercialization work with our new next generation Layered Thin Film technology platform, our focus continues to be to introduce a suite of point-of-care rapid test on LTF. As you know, the benefits of advancing the proprietary LTF technology are multiple, and include improving product performance, ease of use for the customer, and improved economics. We remain on track to complete the LTF immunoassay platform feasibility development by year end. Because of our core competency, an immunoassay development, we will be focused on analyte applications covering the spectrum of our core product families. In addition, we are continuing our research work in parallel on a Strep A application on the LTF enzyme platform. We remain committed to our proprietary patent-protected LTF technology which will allow Quidel to gain an even stronger position in the professional point-of-care testing market.

Now, let me turn the call over to Paul, who will review the financials in greater detail. Paul?

Thanks, Wayne. For the second quarter, total revenues were $14.3m, compared with total revenues of $18.9m in the second quarter of 2003. The net loss for the second quarter of 2004 was $2.3m, or 7 cents per share, compared with a net loss of $.4m, or 1 cent per share for the second quarter of 2003.

Our core products of pregnancy and Strep A, coupled with our Influenza product, together accounting for $8.3m, or 61% of net product sales. These same products represented $12.3m, or 67% of net product sales in the comparable quarter of 2003. Due to the sales decline in our flu product, and lower than expected Strep A product sales during the quarter, gross margin decreased to 46% of net sales. This compares with gross margin of 49% for the same period last year.

Operating expenses for the 2004 second quarter rose to $10.9m, compared with $10.1m last year, which included an $800,000 restructuring charge. The increase reflects approximately $1.7m in litigation costs in connection with the company's patent infringement lawsuit, and higher R&D expense reflecting continuing activities associated with our LTF technology and related projects. These increases were partially offset by savings resulting from the company's restructuring activities in 2003, including closure of the company's sales offices in Germany and Italy.

Our balance sheet continues to be very strong. Cash and Cash equivalents at June 30th, 2004 totaled $35.3m, up from $25.6m at December 31, 2003. Accounts Receivable days outstanding improved to 60 days from last year's 61 days. Inventory turns were impacted by lower sales volumes during the period, but should show improvement over the rest of the year.

For the first of 2004, our net loss was $2.0m, or 6 cents per share; verses net income of $1.3m, or 4 cents per share on a diluted basis in 2003. On a year-to-date basis, total revenues were $34.0m, verses first half 2003 total revenues of $43.3m. Gross margin was 49% YTD, compared with 52% last year- again owing to lower sales volume.

As noted in our July 9th news release, because of the difficulty in predicting the severity or timing of the cold and flu season, and a number of factors that impacted financial results for the past two quarters, we have made the decision to suspend financial guidance for the balance of the year. And we do not expect to provide revised guidance in the near term. And now, Wayne and I will be happy to take your questions. Operator-?

Ladies and gentlemen, if you wish to register for a question for today's question-and-answer session, you will need to press star followed by the number one on your telephone. You will hear a prompt to acknowledge your request. If your question has been answered and you wish to withdraw your polling request, you may do so by pressing star followed by the number two. If you are using a speaker phone, please pick up your handset before entering your request. Again, we request that you press star one to ask a question, please press star one once more to ensure you enter into the queue. One moment please, for the first question-

Our first question is from Adam Chazan of Pacific Growth Equities.

This is Eric [Cursheed] for Adam Chazan. First I have a three-part question with respect to Strep A. Have we learned anything about the pressure Inverness has put on distributors? Two, what has management done to rectify this misinformation in the market place. And three, how certain are we that these sales are going to return? Thank you.

Eric, this is Wayne. Thanks for your question. One of the things that we immediately began doing meetings with the senior management, of not just the three distributors affected in the second quarter, but all of our distributors that are key contributors to the [lateral flow] product families. Some of those meetings have been held, additional such meetings were held this week, and other meetings are scheduled for the next two weeks- the first two weeks of August with those distribution top-executives and their internal counsel so that we can discuss with them the issues of our patent litigation, the progress to date, and where we are currently and our confidence of the strength of our position moving forward. That we believe has gone a great distance to addressing their immediate concerns, and as I said, as far as addressing or correcting the issue moving forward that you spoke of, we now see the order flow activity as we begin the month of July. This being very directly tied to the end-user demand pull through from those distributor inventories that they have. So we feel we are very well-matched to product being shipped into distributors that supports that demand for the QuickVue brand pulling out.

We believe that the biggest interruption at disappointment that we've experienced is behind us, and we'll continue with the strong market share at the end-user that I spoke of as being maintained to see strength going in to the third and fourth quarter, where we historically have a very strong respiratory response given seasonality to the Strep and the flu products.

Great.

Your next question comes from David Francis with Jefferies and Company.

[inaudible] First Wayne thanks for your commentary and I am very sorry about you on the board's decision to see you move out of that role. I'm not sure that everything that happened recently was necessarily a result of management's activities, but rather the business model of the company. To that end, I would love to get a little bit more color on the move to LTF which you've considered a meaningful driver of value for shareholders going forward. I was hoping that you could give us a little bit more color on A. what may have been or continue to be some of the technical issues that the company needs to get over in moving the technology from bench to commercial availability and anything in terms of a better sense relative to different product areas that might be moved from a time-frame perspective into LFT commercial availability so that we can get a better sense as to how that is going to move forward and drive share holder value? Thanks.

Thanks Dave, for your comments and let me switch to the LTF questions that you have. First off, I will respond generally as best as I can to those questions. Part of the issues related to precise timing is somewhat linked to guidance and our suspension of guidance, but let me give you the feel for what those blocks of time are in a time-line, and relative confidences moving forward.

As I commented, and as we reported in previous earning call discussions, the work that we have with the chemical platform and the enzyme platform as you know has been demonstrated with the first two products that we have in our infectious vaginitis product line pH and Amines, and the enzyme with [gardnerella] vaginalis. We had difficulty in the enzyme specific selection and background interferences that we saw in the early developments of the Strep A enzyme application. We continue to work at that, but as I reported previously, we have focused more attention on completing the discovery work, which is more R than D for certain at this point, relative to demonstrate the feasibility that the technology will also be successfully applied to an immunoassay platform. That is work that, until that's complete, it's literally not possible for us to talk about what the individual analyte-specific product developments will be moving forward. We are growing in our confidence and belief that we will complete by the end of this calendar year, that immunoassay feasibility work. And as I said, given the company's more than 20 years of history of immunoassay development, we believe that applying that immunoassay platform once successfully proven feasible, will result in multiple specific analyte development programs as early as the first of the year, once that feasibility is completed. If we presume we're successful, in that feasibility work, than [the] order of magnitude would certainly be nothing less than a twelve-month period to be realistic. But 12-18 month windows are reasonable estimates at this point of a time frame in which we would expect specific analyte development programs to then yield a marketable product at the end of that time frame.

Our resources are such that we would envision, as we start up those analyte-specific development programs, that we would have multiple analyte development programs working in parallel, and see as I said, a family or suite of rapid immunoassays coming from that immunoassay application.

Thank you for your comments.

Thank you, Dave.

Once again, ladies and gentlemen, as a reminder to register for a question please press star followed by the number one on your telephone keypad.

Your next question comes from [Ross Demont], with [Midwood Capital].

Hi there guys. I know that it is somewhat difficult for you to speculate on the legal process with Inverness, but if you look at the five claims which were covered in the first round of Markman, can you at least sort of suggest where the balance of those points came out, either in your favor or not in your favor?

Ross, this is Wayne. I would love to comment more than we have but we've unfortunately commented to the extent that we feel is appropriate. We've said, given those four days and as a matter of fact, we're in the middle of the Markman continuation as we speak today. The Markman continuation began at 1:00 yesterday, and goes through 4:30 today here in San Diego. We remain very confident of the strength of our position and feel that the Markman will in the end, in the judge's opinion, provide the confidence of our strong IP that comes out of that. Entertaining more would be speculating and guessing what the judge would say.

I guess similarly, did the decision of the Boston judge in a case that actually doesn't involve you, but involves [A-con] to give IMA preliminary injunction. Does that affect this case, or your products in any way?

No, it doesn't affect our products in any way. Clearly its lateral flow, the same patent that's in the case of Inverness being applied against A-con is against us. But let me just speak to clear distinctions: 1. to begin with they are absolutely A-con and Quidel, two entirely different product designs and the design is what is in question to begin with- they are two entirely different jurisdictions, that of the Boston court verses the San Diego court and thus two different judges and their views. They're also lacking any particular comparison, clearly in our case we have the strength of a very fundamental lateral flow technology patent that we are suing Inverness over and the Eisenger patent, which is just being interrogated as we speak in the Markman hearing continuation, which is still too early to say.

So I think when you understand the product, the design, the IP that Quidel has, the courts, the judges; all of these circumstances are quite different. If indeed we had identical to those being presented in the A-con case, there might be a comparable basis. But we don't believe there is. And we absolutely have learned from that litigation and as I say, feel strong about the position in the San Diego court.

OK. Let me ask just one last question and I'll let someone else have some questions. Obviously, the company is losing you. Has the recent weakness or the challenges that channel causing any other relatively senior-level people either sales people or whatever, to sort of move on?

I think specifically to your comment, I don't know that I would attribute any of it to those conditions. We have coincident in timing to the action announced by the board of a change in senior management and my moving on after a successor is named in my place, we have completely independent of that, had two of our senior folks announce their intent to leave the company. One is our regulatory and clinical affairs VP, Miss [Robin Weiner]. Robin has been here for 22 years, she's grown as has the company together, for her skill and her contribution has made an excellent contribution but independent of any of the timing of the events going on in the company. Robin was recently presented with one of those truly career-stretching opportunities applauding her skill and ability to move on to a significant promotional advance for her. We wish her the very best. She's been a great contributor here, and she'll be difficult to replace, but one we are confident we will replace, and we do have a retained executive search underway to fill that position.

We as well, separate from this action of the board, received the resignation of Matt Heindel, our SVP of sales and marketing. Matt indicated his desire and interest to pursue a personal new career opportunity which I am not at liberty to expand upon, that he wished to pursue. And so, indeed, timing is not great but we are confident as well with a separate retained search underway which we promptly moved on that we will have a replacement named in the foreseeable future to resume that role. We fortunately have recently hired a VP of the US sales organization, and [Brian Segran] is doing a terrific job in his early adaptation and leadership that he is providing to the field sales organization and the overall leadership of our US distributor activity. So that is kind of a summary of those points.

OK. Thanks very much, no further questions.

Your next question is a follow up question from the line of Adam Chazan, with Pacific Growth Equities.

Hey guys, this is Eric here again. Now shifting gears to flu, in the pre-announcement the company discussed delays associated with what we assume to be the [Fisher-Apergen] merger. What is expected in terms of mortar flow from Fisher, and are there any other anticipated changes?

Anticipated changes in what regard, I'm sorry?

Just as far as flow, since you're taking on product.

Yeah, you know the flu A+B product, which is a separated A from B is a new market segment opportunity that we've not participated in. We have every expectation in our base business, which is the A/B combination product, principally sold to the physician office to maintain a growth in our share of market beyond the current 50% share that we occupy. We are absolutely confident that the fit competitively to the marketplace of a CLIA-waived A+B, which is significantly superior in its product offering to a non-CLIA-waived test that [Bect & Dickinson] has in this space will give us great opportunity to open new market segments in that hospital acute-care segment. We absolutely believe that Fisher will be a major partner in contributing to that new incremental sales opportunity in our flu product category, and have no reason to believe that the level of success will be any less than what we jointly plan together. How much that will be, as we said, in suspending our guidance because of the difficulty to predict both the timing of and the severity of influenza incidents, it's difficult for us to give you that further color with that suspension of guidance. But we do not think that it will be anything less than what it was in our initial thinking, and we are working at every turn to find ways of enhancing our market-leading position that we have in this strong upper-respiratory space.

Great, thanks. One follow up question regarding the other $1m shortfall due to general weakness, should we expect this trend to continue?

I don't think so. It is miscellaneous products across multiple markets. Some of this is in the international markets where I spoke of how our revenue had dropped to a 30% of the total mix of revenue from international sales contributions from 40% the prior year. And we think that these are conditions that are temporary in time and we'll recover as we move forward.

Thanks, I'll get back in the queue.

Thank you.

As a reminder, ladies and gentlemen, in order to ask a question please press star followed by the number one on your telephone keypad.

Your next question comes from [Steve Friedman] with [Wolkovia] Securities.

Good afternoon Wayne and Paul. I have two questions. One, Wayne maybe you can elaborate a bit on the lost order on the influenza from the distributor that was involved in an acquisition or whatever. Did I understand you to say that sales on that order were beginning to flow into the third quarter?

I said that sales for that new product launched; the influenza A+B, have already begun and we've recorded third quarter sales. The large hospital partner Steve was the question that I was just commenting on in the previous question from Eric from Pacific Growth Equities, where we do believe that there's a delay in their startup given their closing and integration of their acquisition. But as recent as yesterday, at the American Association of Clinical Chemistry meeting in Los Angeles I met with executive officers of that distribution partner and believe that we will see third quarter sales activity that was expected at the end of Q2 as we move forward with that particular relationship.

Alright, thank you, that answers that. Regarding the discontinuation and for suspension of your financial guidance, does this have anything to do with not releasing any further details of the licensing agreements with your partner that you're expected to be able to go forward with?

I'll comment and then maybe Paul wants to add to that one as well, Steve. This suspension of guidance is principally driven as Paul spoke of in his prepared remarks by the belief that we as a management team and that the board fully supports, that given the difficulty of the timing and the severity of the influenza product sales, that because of the seasonal incidence, that after two big quarter misses that it is not prudent for us at this point to try to project and predict those elements that are difficult to dial in for quarters 3 and 4. But we see a strong seasonal contribution from those products. So, that is the primary driver. I would suggest that you not look much further than that, but indeed we did say that there are other factors. There are a lot of factors that do contribute to it, but none nearly as meaningful as those particular drivers.

Paul, would you care to add anything?

No, I think Wayne that was a good explanation. I will say though that in the financial results reported in the second quarter, we did recognize contract revenue from a partnership that we talked about in the past, and those revenues are reflected in our contract revenue line and the amount of recognition of milestone achievements was approximately $200,000 in the second quarter.

Alright. Will there be a point in time that you can see where you can give us some details of the progress on this partnership and a little bit more guidance as to the contribution and the material impact on the company?

Steve, certainly as within a quarter of activity, during that period that we have material contribution and activity to record in the quarter's results, we will absolutely comment on that. It will be retrospectively rather than prospectively by definition, as long as we are suspending guidance. It will not be until such time as guidance might be reestablished that we would likely be able to say anything looking forward to any great measure. As you and others on the call are aware, we have a respected relationship with this partner that calls for an absolute confidentiality in disclosing the name of the company with whom we are partnering, and performing this joint development activity and with regard to the specific products that are affected by this. There will come a time when Paul will look forward, as I move on to reporting those things too, including the launch of those products by this respected leading partner in the marketplace.

Alright, I thank you for the answer. I guess I'm just sort of still at a little bit of a loss as to if you could give some time frame which you might be thinking of. Are we talking another quarter, six months, any minimum or maximum period that you think you might be able to put some detail to this?

Steve, while I appreciate the comments, we're not at liberty to provide any of that time-line specificity that you asked. I trust that you will understand why we can't in light of the suspension of guidance.

Alright, thank you very much, and Wayne, good luck to you in all of your endeavors, best of luck

Thanks Steve, I hope to be around for another one of these.

Alright.

Your next question is a follow-up question from the line of Adam Chazan with Pacific Growth Equities.

Hey guys, it's me again. Regarding the consumer deal, any hints as to what the impact might be? I mean we totally respect the confidentiality agreement, but we are just trying to figure out what sort of metrics we should be using to measure the progress.

I think Eric, that I've [offered] to the extent that I provided the information on the revenue recognition during the quarter, it being $200,000. I suspect that that is not material to the quarter's results, and I think that that trend would probably for the out periods probably continue in future periods. And that is about the extent of my comments that I can provide at this time.

Thanks, Paul. One follow-up just regarding the income statement, could you expand on the interest tax expense on the credit there seems to be quite higher than what we had modeled?

Eric, could you just, again what line item was that?

Interest tax expense.

Oh, interest tax. This is the recognition of the income tax benefit at the 41% effective tax rate that we use for book purposes of capturing income taxes.

Thank you.

Your next question comes from Al Kildani with [SS] Capital.

Good afternoon.

Al, good day.

Wayne, I wonder if you might be able to comment on, with all of the recent activity and developments at Quidel, if you could comment on the standing of the company and your relationships with key distribution partners, those obviously a strength of yours and that you brought a lot of those, and strengthened a lot of those relationships when you came on board. And I would just be interested in your perspective on what are people on the other side of the table thinking.

Al, thanks for the question; little has changed at the company. The things that have driven the company, the company's team of people that have made the company's success and the success in the embrace of our brands are still those key assets that are really the important things that the end-user customer has embraced. The quality of our products, the market-share-leading brands and very strong brand loyalty by the end-user physician/laboratorian, and the loyal continued support by those customers absolutely makes its way every day to and through those distribution [inaudible]. I don't think there are any significant distribution relationships that the company has, that has any different view of the contribution and quality expectation that they get from Quidel to their distribution partnership. We've worked hard at strengthening that, and we have it at many levels- at the distributor level in the field, the branch by our sales representatives, at our regional manager's level with their regional managers with the distribution partner, at the vice president level within his peers, and Brian Segren's addition, and Brian brings a wealth of Johnson & Johnson knowledge and expertise with distribution to the addition of Quidel's team of contacts. I'm remaining very involved and directly in contact with our leading distribution partners, and working with Mark Paiz in his new and expanded role as COO, responsible for worldwide sales and marketing now to indeed transition that relationship and support and commitment from Quidel through Mark's leadership moving forward.

So, indeed change is difficult for many to understand and embrace, but when you deal as a distributor with hundreds, and in the case of the two largest hospital-supply distributors, of a couple of thousand manufacturers and suppliers, these kinds of changes are something that are more commonplace to them, than it is to an individual company whose [faced it] such as Quidel. So, I don't expect that we're going to see any measurable decline because of such a strong brand recognition and preference of the Quidel QuickVue products and the commitment that those products mean to those end-user customers and our distribution partners as we look forward. It may sound naïve, we're working especially hard at it, it's one of the reasons the board asked me to remain President and CEO and a director of the board during this interim period to help transition it. And I can assure you as difficult as it is, after coming to grips with the change, such as we're having, and in my own personal case it didn't take long before I certainly had my own attitude corrected to want to do everything I can at 120% to get shareholder value and price of stock to an appreciable level that it's a value to me and all stakeholders in the Quidel story.

So, we're working hard at it, and indeed we've got a very determined focused motivation after the short fall the first two quarters that's driving us moving forward.

Thank you for that perspective, that's helpful. Finally, I don't really intend to beat a dead horse here, but with regard to the financial outlook, realizing that you're in a position or may not be in any time soon to provide much further commentary, I wonder at a minimum you might be able to comment on what the quarterly progression would look like, and specifically Q3 is usually a relatively weak quarter for you anyway, but I'm wondering if Q4 has-what the potential is for it to repeat it's usual performance in terms of being the strongest quarter of the year?

You said, guidance is off the table? I think you've really characterized what historically we see in our business and we don't see a lot of conditions in the market a lot different than they have been in the recent past, so I think you probably provided an interesting perspective that may well be something repeated.

OK. Thank you very much.

Thanks.

There are no further questions at this time, please proceed with your presentation or any closing remarks.

Thank you operator, I appreciate it. Let me close by saying that we very much appreciate your interest and your continued support in Quidel. We realize it's been a difficult time with change, but we've got a determined path moving forward to [enseed] that indeed we bring the key focused results. Neither the board of directors, nor the management is satisfied with the company's recent financial performance. And we have great promise that we are remaining focused on those right key things and that the high-quality of our products as I said, and our strong market-leading brands and very loyal customers, along with the promise of our LTF technology and high-level of service that we provide to those end-user customers and distributors. So, thank you for participating in today's call, and we'll look forward to speaking with you in another quarter.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.