QuidelOrtho Corp (QDEL) 2010 Q4 法說會逐字稿

Welcome to the Quidel Corporation fourth quarter and full year 2010 earnings conference call. (Operator Instructions)I would now like to turn the call over to Mr. John Radak. Please go ahead.

Thank you. This is John Radak, Chief Financial Officer at Quidel. Thank you for participating in today's call. Joining me today is our President and Chief Executive Officer Doug Bryant. Today Quidel released financial results for its three months ended December 31, 2010, as well as for the full year. If you have not received this news release or if you would like to be added to the Company's distribution list, please call Ruben Argueta at Quidel at (858)646-8023. Please note that this conference call will include forward looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ materially from these stated expectations. For a discussion of risk factors please review Quidel's annual report on Form 10-K, registration statements and subsequent quarterly reports on Form 10-Q as filed with the SEC. Furthermore this conference call contains time sensitive information that is accurate only as of the date of the live broadcast February 24, 2011. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call except as required by law.

For today's call I will report on financial results for the quarter and year to date and speak to our financing activities. Doug will talk about our accomplishments in 2010, our near term growth drivers and things to watch for in 2011. We will then open the call to your questions. Total global revenues for the fourth quarter were $31.7 million compared to $66.6 million in the fourth quarter of 2009. The prior year period was abnormally high due to the 2009 flu pandemic. DHI contributed $10.5 million of revenue in the quarter partially offsetting the revenue decline. In the following comments on revenues, I will compare business on a pro forma basis as if DHI had been acquired at the start of 2009.

Global sales of infectious disease products totaled $21.4 million in the fourth quarter of 2010 compared to sales of $69.2 million in the fourth quarter of the prior year. As previously stated, 2009 was a pandemic year and there was no influenza in 2010 until week 51. What little flu activity we saw in December was absorbed for the most part by existing distributor inventories which at year end were the lowest in recent history. Consistent with the approach that we implemented in 2009, we did not incent distributor partners to take on board inventory in advance of flu demand. Consequently, global flu sales in the fourth quarter of 2010 remain modest.

Gross margin in the fourth quarter of 2010 decreased to 56% as compared to 71% in the fourth quarter of the prior year, primarily due to a less favorable product mix. Operating expenses were $18.5 million in 2010 compared to $15.8 million in the prior year. The expenses in 2010 include $5.1 million of DHI's operating expenses in the current period which includes $1.6 million of intangible asset amortization associated with the DHI acquisition. Research and development costs were $5.8 million which were slightly lower than the third quarter because of a reduction in spend with the outside contractors on the next generation lateral flow and Bobcat programs in the fourth quarter. We expect to see higher research and development costs in Q1 and Q2 of 2011 as a number of new products enter clinical trials which Doug will comment on. Stock based compensation expense was $1.3 million in the fourth quarter versus $2 million for the same period in 2009.

Summarizing the financial results for the full year 2010, total revenues declined to $113.3 million from $164.3 million in 2009. Revenues for the year were affected primarily by two factors, first the absence of a respiratory season in 2010 versus a pandemic situation in 2009 and second, the acquisition of DHI in February of 2010. Gross margin for the year declined to 54% in 2010 compared to gross margin of 66% in 2009. Our margins were affected by a less favorable product mix due to higher margin influenza products making up a lower percentage of total revenues versus the prior year. Operating expenses for the full year 2010 were $76 million compared to $56.5 million in 2009. The increase in operating expenses is driven primarily by operating expenses associated with the DHI business and our initiatives to reinvigorate our new product development pipeline including our efforts to develop a molecular diagnostic franchise.

Stock based compensation expense was $5.2 million for 2010 versus $4.5 million for the full year 2009. The tax rate benefit in the fourth quarter 2010 was favorably affected by the extension of the federal research credit. The full year effective tax rate for 2010 was 35.3% compared to 36.9% for 2009. We anticipate our tax rate for 2011 to be approximately 37%. As most of you are already aware, we initiated a 4.6 million share equity offering in the beginning of 2011 that culminated in $57 million in cash to the Company. I will now turn the call over to Doug.

Thank you, John. Last year was an important year for us faced with a shortfall of revenues tied to the absence of a meaningful respiratory season, we still managed to achieve a great deal with respect to our three strategic imperatives. Developing new products so that we can leverage our existing infrastructure, gaining better control of the distribution of our products, and creating a molecular diagnostics franchise. During 2010 we completed the development of six new products, QuickVue RSV10, QuickVue Mononucleosis, RapidVue HCG, the immune complement markers MicroVue Ba and Sclerostin, and a flu sub typing assay. To be fair we did have one disappointment in that we had expected to launch our second generation FIT product for colorectal cancer screening mid year. And as I said before, this project is currently on hold. To be specific, the clinical data did not support a 510(k) clearance the scientific team that were assigned to the new FIT product was moved to our next generation Strep A product, which we did not want to delay. As scientists on current projects free up, we will examine restarting our next generation FIT product.

On the other hand during the year we exceeded our expectations in the progress we made in the development of our next generation rapid point of care platform. The development of the Bobcat, our internal name for an automated DFA slide reading instrument, and the molecular diagnostic program. In addition through the implementation of our inventory management program and the confidence our distribution partners have in our ability to deliver product, inventory levels at distribution partner sites for flu, strep, and HCG were the lowest in recent history as we exited 2010. Overall, despite the rough financial comparison with 2009, I'm pleased with what our team accomplished in 2010.

Of course I look forward to seeing what we can get done in 2011, a year in which the Quidel team's ability to execute elements of its strategic plan will be particularly important. Our execution in 2011 has two major components, maximizing revenues for flu, Thyretain, and the recently launched products and completing the development phase for our next generation lateral flow device, Bobcat and two molecular diagnostic programs.

For Q1 our biggest focus is on our respiratory products and sales of QuickVue Influenza A plus B in particular. So, let's talk a little bit about what we've seen so far, data compiled by the CDC from 1976 to 2009 suggest that nearly 50% of all flu cases in the United States occur in February, with December, January, and March making up a significant portion of the difference. Assuming this pattern holds true we would expect very little flu in Q2 and Q3 with some sales in December depending on the start of the season. For 2010 the flu and cold season did not start until weeks 51 and 52. Correspondingly our sales of QuickVue Influenza A plus B as well as our other respiratory disease products were light in both Q3 and Q4. In the final two weeks, however, because of low inventories of our products in the channel, our distribution partners began placing significant orders for product and that has continued as the percentage of ILI increased sequentially for several weeks. The percent of ILI this quarter so far is actually higher than in previous seasons and our market share remains stable and consistent with previous years.

According to our sales team, we've actually gained some hospital accounts. So far in 2011, we've observed increases in testing in all categories, rapid point of care, DFA and even molecular. In fact for flu -- excuse me, QuickVue, A plus B out sales from distribution to their customers are actually up season to date through January versus what we saw in 2008. Overall we continue to expect that about two-thirds of our flu revenue will occur in Q1 and that about 20% will occur in Q4. Another product we're focusing on early this year is Thyretain, our test for Graves' Disease. In 2010 we experienced about 17% growth for the product and hope to accelerate that over the next couple of years.

Here is where we are in terms of our commercial efforts, we completed the training of a dedicated sales force in October and have been making demand creation calls on primary care physicians, endocrinologists and ob/gyns. We've established a key opinion leaders speaker bureau and have completed a number of CME accredited educational programs for physicians. We've developed a sophisticated economic model that helps medical directors and managers of the health plans understand how testing for thyroid stimulating antibodies early in the process of diagnosing Graves' Disease can dramatically reduce overall treatment expense. And there are now, four peer reviewed reference articles that have been published describing the clinical utility of Thyretain. While we continue to explore other tools we can use to grow demand, we think that many of the elements for successful demand creation are in place.

In 2010 we completed the development and achieved FDA clearance for a number of products that should help us broaden our portfolio. In 2011 we will rely upon our distribution partners to launch these products successfully as they have in the past. The other area of focus for us in 2011 is to complete the development of three platform projects and to prepare for the commercialization of those products. Here is where we are with each of these key platforms. First, is our next generation lateral flow technology, as a reminder, our goal is to bring to market a system that combines an approved assay chemistry with an objective read on a small bench top analyzer with the objective of delivering improved product performance. We completed our final phase of instrument and initial assay development, completed a beta site trial that demonstrated very good product performance and began US clinical trials for FDA 510(k) clearance and CLIA waiver this month. We're on track to deliver a system and potentially two assays to the market before year end.

The second platform project is the Bobcat an automated instrument that eliminates the need to manually read FastPoint, a multiplexed DFA slide used to identify cells that have been infected by up to eight different viruses. We're in Phase III, the final phase of our assay development process before clinical trials. We've built and tested our engineering confidence units and have built our clinical trial units. We've identified our clinical trial sites and expect to be in clinical trials as early as the end of Q1. Depending on when we can start clinical trials and how quickly we can find positive samples for each of the viruses in the multiplex panel we could be ready to go to market before year end. While the timeline for Bobcat is quite tight at this stage, the molecular platform projects are actually running slightly ahead of schedule at this point.

Recall that as a result of the acquisition of DHI, we inherited a number of PCR based molecular assays that were being used internally by the DHI R&D team. Since the beginning of 2010, we've been working on further developing the assays, simplifying them and productizing them so that they can be sold to molecular diagnostic labs that already have a commercially available thermocycler. We've completed the development process for two of those assays and began clinical trials on both this month. We remain on track to launch these assays in the fall outside the US and by the end of the year here in the US, depending on the timing of FDA clearance.

And finally, as a result of our collaboration with BioHelix which began in October 2009, we're now in the final phase of development of two assays that are run on a hand-held, disposable molecular device that delivers molecular assay results without the need for thermalcycling equipment. We expect to begin clinical trials the first half of this year. While we realize there is inherit uncertainty with development work and clinical trial outcomes and activities always remain subject to change, we believe that we are getting closer to our goal of evolving into a broader based business. We're very pleased with the milestones that we've reached in the absence of a flu season in 2010 and we're very pleased with the integration of DHI, which has given us additional commercial strength in the acute care segment as well as additional skills and technologies. Importantly, hospitals now account for the largest proportion of our total revenues. I am confident that 2011 will represent a major step in the evolution of our Company and I look forward to reporting on our progress periodically. That concludes our formal comments for today. Operator, we're now ready to open the call for questions.

(Operator instructions) Our first question comes from the line Ashim Anand with Natixis, please proceed.

Thanks for taking my question. I was wondering, John, if you could provide the breakdown for the productive segment and the other revenue category?

Sure. The Women's Health segment revenues in the fourth quarter were $7.5 million, Gastrointestinal was $1.7 million and other was $1.1 million.

Wonderful. In terms of International revenues, you know, if you can comment on how they are going. It looks like they are sort of lower than the second quarter of 2010, If I am correct. If you can kind of point out to the dynamics over there?

I'm sorry. Repeat your question, they were lower than which quarter?

Second quarter of this year, of 2010, right?

They were about 11%. They made up about 11% of revenues in Q4 this year.

Okay. And any comments on how the RSV product has been tracking?

You talking about the new RSV 10 or just RSV in total?

Yes. No. New RSV 10.

Hi, Ashim, this is Doug. We manufactured the loss that we needed at the end of Q4. We began distributing to the channel Q1 2011. One major distributor in the hospital -- excuse me, the Physician Office segment has this as part of one of its major programs and we've also launched in the Hospital segment through our distributors there as well.

Okay. And finally if, you know, you guys would like to give us any updates on the M&A front you know with the new equity raise you've been confident that you can grow that part if you would what you might be looking for, any comments on that?

Sure. Yes, with respect to the M&A front, we have -- we continue to have an ongoing business development effort. And we regularly look at evaluating opportunities. But at this time we don't have anything -- anything further to disclose on that front. With respect to the use of proceeds of the offering as we indicated in the prospectus, we'll use those for working capital needs. The acquisition of new technologies similar to what we did with the Northwestern deal, the acquisition of diagnostic related companies like DHI and possibly repayment of debt.

And our next question comes from Jeff Frelick, Canaccord. Please proceed.

Great, thanks guys. Doug, maybe with respect to just kind of some visibility from the field reports. At the end of 3Q you had mentioned that there might be some broader number of physicians ordering Rapid Flu tests and some carry over from the pandemic. Are you guys noticing any follow through to that, you know, either late 4Q, early 1Q, more positions kind of stuck with it ordering rapid tests from the pandemic phase?

Well, let me tell you what we're seeing, what our sales guys are actually seeing out there with respect to flu. First of all, clearly they're seeing widespread flu. For the most part consistent with what you would see and expect as a result of the CDC data that has been published. They did contact a number of physicians as you can imagine over the last couple of months. In fact, over the last 6,400 calls on physicians offices, we confirmed the following in terms of our position in the market. First, 70.5% of those 6,400 customers that we call on during that period were rapid point of care testers of flu. So about 70% of the type of customers we call on who are typically Primary Care physicians, Internal Medicine docs, Ob/Gyns and Pediatricians, 50.5% of those rapid point of care testers for flu were QuickVue or Quidel's customers. 46.8% of those customers were (inaudible) customers.

Overall we see about -- about a 55/45 split in terms of actual sales in terms of market share. And I would conclude that we think there's probably about a 55% to 70% adoption rate for flu now, which is probably higher than we had expected before certainly in 2007 or 2008. And remember that we were speculating that as a result of the pandemic, that the adoption rate would go up and that some of what we have seen in 2009 would actually stick and that appears to be the case.

Great. That was helpful. And then what's the -- what's the visibility on respiratory pull through with some flu on the early part of the quarter. Increasing (inaudible) RSV.

So interestingly the RSV season which typically begins December and goes through January has been somewhat robust. So we're actually showing pretty good results so far with that. I would also add that DHI sales, which are very closely tied to when they see the patient, much more closely than the way we currently expect with QuickVue product that shift through distribution, that has actually been going up. In addition and finally I would say that Strep A volumes have been -- have been significant.

And our next question comes from Ross Taylor, CL King. Please proceed.

Hi. I had one topic I wanted to cover, just trying to understand the comment you have in the press release about, you know, Flu sales, you know, so far in 2011 and I think you made some comments also that I missed in your prepared remarks. But, when you say it's a similar level to what you saw in 2008. Does that really just refer to the March 2008 quarter or does that include some of the, you know, sales you had in the fall with 2007 ahead of the season as well?

The comment, Ross, was more general in nature and suggested that a normal season in terms of total volume would be about that size. What we can say and what John has said publicly before is that the flu -- in a typical flu season we would do about $50 million to $60 million in QuickVue A plus B and A/B sales. And that two-thirds of that would be in Q1. And what we can tell you so far is that we're very much on track to achieve that in Q1.

Okay. That's very helpful. Thank you.

I can also add a little bit because of what you see in terms of data, the CDC data actually still show about 4.5%, percentage ILI which is fairly significant relative to a baseline of 2.5%. When we look at the Google Flu map we still show significant flu in US, Europe and Asia. And I would say the two combined directionally indicate that we still are in a Flu season for the most part in the northern hemisphere. And then I would add that last week the CDC reported that the percentage of cases that were positive for flu was about 35% and that actually is the eighth week in a row since week 51 that it's been above 20%.

So what we're showing right now is that the season looks to be about like a 2008 season and each season differs slightly in terms of when it starts and stops and probably more detail than you needed, but recalled that in 2008, that season it was -- it all happened in about a six week period of time. So, it all happened in a flurry, where as this appears to have started in week 51 and we're already in terms of duration going probably longer than 2008, but right now frankly we're actually lower in terms of ILI percentage at the moment.

And our next question comes from Steven Crowley with Craig Hallum, please proceed.

Hey, guys. I'll join with you in waving goodbye to 2010 and looking forward to 2011. That was really useful color on the set up for flu and you talking about the whole season and how it seems to being pushed more into first quarter. The clear math there, it's not hard to get yourself into the mid-30s for flu test sales in first quarter. And modest, in Q4 from what I can discern just working with the numbers here, it's certainly less than $5 million worth of Flu sales in Q4, is that a correct implication from the numbers and the discussion?

For 2010 Steve?

Yes, Q4 '10.

Yes, that's about right.

Okay. So there's obviously a pretty sizable step in flu dictated by the CDC data and the market reality and the market share stuff you're talking about?

Plus I would add the way that we distribute product. We made a clear and conscience decision to change the way we manage our inventories and our distribution partners have a great deal of confidence that we can ship product in. They have managed their inventories down accordingly. So we didn't see any flu in Q4 until weeks 51 and 52, so we didn't ship a lot of product.

Great. Great. That bodes well for this quarter. In terms of the Thyretain business, can you give us a little bit of clarification for what's happened there. You threw out a growth rate number, does that imply for the whole year that Thyretain was $5.5 million or a little below that or closer to $6 million? I don't know what we're comparing against.

Yes, that's about right Steve.

So low fives or high fives?

You're asking whether -- well, it's probably close -- I would describe it closer to five.

Okay. Now, you instituted a number of marketing initiatives and at last check it seemed like you were seeing some follow through in terms of prescription orders in uptake of the Thyretain test. I'm not sure that the numbers -- those numbers necessarily would validate that, but are you seeing an up-tick in scrips for Thyretain and what are the prospects for 2011 with Thyretain?

As I said before, we grew Thyretain in 2010 over 2009 about 17% and we continue to expect that we're going to accelerate that. Our sales guys the 30 guys we have on the ground calling on Primary Care physicians et cetera, report significant agreement by doctors to begin testing for TSI when presented with patients who has Graves Disease. How quickly that translates into actual laboratory testing depends on a number of factors, one of which is how many women actually present to physicians with those symptoms. And so we will evaluate that over the next quarter or so and see how well the data that we get from our sales team actually ties to big reference lab orders of our product and I would say also that this is a demand creation exercise that we are hopeful can create a market that should exist.

We will continue to spend on the program at least through 2012, but at the end of the day, Steve as you know, we have three major programs that are our growth drivers, the Molecular programs, the Bobcat, and the Fluorescent reader, those are the main engines. And we're treating Thyretain as a nice to have and absolute upside should we be able to make it happen. The difficulty with any demand creation product like this is that we're looking for an inflection point and we can't predict when that's going to come. Once we hit it and it accelerates it could be a very robust business. Until that, it's difficult and we continue to slug it away one doctor at a time, one CME, accredited presentation at a time, one reference article at a time, et cetera, so we'll keep plowing away. But we really don't have any numbers specifically in mind honestly internally. Until we hit that inflection point then we'll worry about forecasting a bigger number.

And our next question comes from Scott Gleason with Stephens, please proceed.

Hey, Doug and John thanks for taking my question. Doug, I guess to start off with, can you maybe talk a little bit about the second generation Lateral Flow product? And I don't know if at this time you guys are willing to kind of give out anymore information on kind of what the design will look like, you know, kind of tied to results, the cost of actual capital equipment fees and what the pricing on the test, how it might differ from the current pricing paradigm?

Sure I'll do my best. That was a multi part question. The design of the product is a cassette based product that looks a little bit like our typical cassette based product and that product -- that cassette is inserted into a drawer that is drawn into the instrument where the instrument reads the result of a fluorescent detection chemistry. The results are available on that 10 to 15 minute timeframe just as they are currently with our test today. We expect the cost of capital to be insignificant really, when compared with major, amino acid chemistry instrumentation.

And then, Doug, I guess in terms of the actual pricing of the test, I imagine this would be a premium priced product? Can you maybe give us any kind of color on kind of how maybe you guys are thinking about that? A lot of the ability to price at a premium depends on product performance. We're encouraged with the beta site data and as I said we just started at the beginning of February the clinical trial data. So until we see the sum of all the data it's impossible for me to know how much better this product will be. If you assume that it is better, then there is a potential for a price premium.

And then I guess, Doug, related to your commentary on Bobcat talking about the timing of the actual clinical trials. If there was a delay and you weren't able to get enough samples for the different model types, would that have to be pushed back till next respiratory season or how are you guys kind of thinking about that in terms of -- from a timing standpoint?

There is no real delay in terms of the clinical trial end point because in this viral panel we have eight viruses that are actually present or prevalent, I should say, at different times of the year. For example, we don't really expect to see a lot of Para Influenza at this time, I don't think. . We don't also expect to see a lot of adenoma but we would in the summer. So, if we were to start at the end of March, let's say, the clinical trial or we were to start at the end of April, it doesn't make a whole lot of difference because the Bobcat trial was always going to have to be

Okay.

In order to see those samples. The fact that there is flu year round also means that we could actually do the clinical for flu during the middle of the year as well, but as you can imagine it just becomes extremely hard to find all the positives that you need to find and that makes it a bit more expensive. So I'd rather start earlier rather than later, but I don't expect that it's going to affect when we complete the trial, if that makes sense.

Okay great, and then just one last question for John, when we think about pricing on flu test year-over-year, have there been any significant change either to the positive or the negative or has that pricing remained relatively consistent with what we saw during the pandemic period?

Well recall during the pandemic period, you know, we didn't -- we eliminated all of our promotional programs. We did a few this year, so they'll be a little bit of price, you know, pressure there. But not significant. So, we don't really see a whole lot right now.

Our next question comes from Steven Crowley with Craig Hallum, please proceed.

Great guys. Just a couple quick follow ups, in terms of the whole Thyroid testing franchise in Autoimmune, in terms of your aspirations to have a bigger platform play there, is -- are those aspirations dependent on you seeing that hockey stick or inflection point in Thyretain over the relative short term or do you have longer term things in motion to build out a platform there?

We began in this company in Autoimmune business years ago and have been involved in that category for some time. So we continue to look at autoimmune. Of course we would love to see Thyretain be the flagship product and to be successful. But we're also -- we would remain interested in the autoimmune category just because we have a lot of expertise up in our Santa Clara facility. I should add, Steve, that we now have entered Phase II with our blocker, the flip side of the Thyroid stimulating is the blocking antibodies, that project is now in Phase II as I just said which means that it's fully funded and underway. So we expect to continue to invest in the area I just remarked that it's not the only thing that we have that is upside of the company, the main drivers, of course, are the three major projects that we have ongoing now.

Great. That's helpful. And then for either you or John, on the expense side you guys have telegraphed some higher R&D expenses in the first half of 2011 and then probably a drop back in the second half and in total how should we think about the upward propensity in R&D expense in 2011 versus all of 2010?

We said previously that we would be flat from year to year from 2010 to 2011. Since that description, we had $5.8 million in spend in Q4. It's down because of a couple of factors, one is the amount of expense that we had on Bobcat actually declined. We expect that to tick back up in Q1, however, because we're starting a number of clinical trials. Yes, so. In total relative to 2010 we would expect R&D spend to be, in total for the year up $1 million to $2 million and then with a significant portion of that being in Q1 and Q2 with -- as you said, trailing down in Q3, Q4.

And our next question comes from Brian Weinstein with William Blair and Company, please proceed.

Hey, guys, it's actually Pete in for Brian. Most of my questions have been addressed but I was wondering if you guys had any thoughts about kind of the break down between the Physician market and the Hospital market on the raped side. And kind of how much is at risk of going towards the Molecular testing?

It -- it remains about the same in terms of testing between physicians and between hospitals as it has in years past at least that's what we're seeing so far. I can tell you that in the Hospital segment the Molecular testing arena, it really is a completely different segment, at least at this stage. Molecular diagnostics is still not main stream today in terms of the diagnosis of flu. But as it progresses clearly we expect to be there and in fact that is part of our development program to develop Molecular assays for Respiratory diseases including flu.

Okay. And then still --

But today -- but today in many cases Molecular diagnostic testing as in hospitals is used for reflex testing and in some cases for surveillance testing. And I can -- I can give you some data also, Pete, that might be helpful. Our out sales of QuickVue Influenza A plus B thus far are actually higher this year than they were in 2008, even though the ILI percentage right now at the moment is actually lower. So if there were a meaningful shift to molecular, we would be seeing it in our out sales now, and we're not seeing it.

Okay. Interesting. And then I was wondering if you could give me any commentary on the DHI acquisition and how the accretion dilution kind of played out in the end for 2010?

I would say first that the DHI integration overall has gone extremely well. We had cost synergies identified, you may remember the chart of $0.11 and we actually achieved in the year $0.15. In addition to integrating the back office function, we transitioned the Fluorescent reader Molecular antibody manufacturing for flu A and B, those reagents were over to Athens over to DHI. We implemented a project to drive long-term manufacturing efficiencies and we also reorganized the DHI molecular group to actually support and develop the open box assays, so overall we're -- we're thrilled with the integration and how well it's gone and as I said, Pete, on the actual cost synergies, we actually delivered a little bit better than we had hoped.

And our next question comes from Daniel Owczarski with Avondale Partners please proceed.

Thanks. Hi Doug, hi John.

Hey, Dan.

Just go back to the clinical trial discussion, you've got a number of them starting this year. How confident are you of the protocols and time lines behind these trials given all the changes and given the stricter FDA that we are seeing, especially when you're coming up with pretty unique newer technologies?

We've held pre ID discussions with the FDA on each of the trials and got very specific guidance on what they expect to see in order to demonstrate clinical equivalence and to achieve 510(k) clearance. So, based on that and what we saw on the Beta site so far for both the reader as well as our open box assays, at least for those two programs I can say quite confidently we're in very good shape.

Okay. And then with the new products that you've launched in 2010, you know, that expanding the QuickVue line and some of the rapids. I mean, what are the challenges to get those tests ordered by your customers, I'm assuming it's straightforward getting the distributors to carry them. But, how do you get those pulled through?

You put the nail on the head there in terms of success with those products because they're not huge products for us or for distribution. It's important for us to rely upon our brand, equity and strength. It's also important for us to support the distributor and the programs that -- that they deem necessary in order to launch these products. And, you know, we have a long history and a terrific relationship with these distribution partners. So we've pretty much get what we -- what we agreed to in terms of the number of calls and the number of regional meetings, the number of things that are done on behalf of distributor for us. That's kind of how -- that's kind of how we have to focus when it's -- when it's the smaller products and these very large distributors that we have to rely on.

Thank you.

That is all the time we have today. Please proceed with your presentation or any closing remarks.

Well this concludes the call for today, John and I thank you again for your time this afternoon and for your continued support. Take care everyone.

Ladies and gentlemen we thank you for your participation and ask that you please disconnect your lines. Good-bye.