QuidelOrtho Corp (QDEL) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Quidel Corporation first quarter 2012 earnings conference call. At this time, all participants are in a listen-only mode. Later, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Mr. Randy Steward, Quidel's Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining today's call. With me today is our President and Chief Executive Officer, Doug Bryant; and Ruben Argueta, Investor Relations Manager.

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 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, today, April 25, 2012. 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.

As you've seen, we released a short while ago our financial results for the three months ended March 31, 2012. If you have not received our news release or if you would like to be added to the Company's distribution list, please call Ruben at 858-646-8023.

For today's call, Doug will give you some color on the first quarter and discuss a variety of developments in our exciting pipeline of products for new and expanded markets and geographies. I will then briefly discuss our financial results and will then open the call for your questions. I'll now hand the call over to Doug for his comments.

Thanks, Randy. As you've seen from our release, total revenues in the first quarter were $38 million compared to $59.6 million in the first quarter of 2011, and equivalent to the $38 million in revenue that we achieved in the fourth quarter of 2011. While disappointing, these results aren't surprising given the infectious disease category represented the majority of the decline. Sales in this category declined 45% versus the first quarter of last year due to the unseasonably mild winter and flu and respiratory disease season. As disclosed previously, there was a low ILI incidence through the first two months, and activity failed to cross the 2.4% national baseline.

While we have some reason to believe that there was an uptrend toward the end of the season, we don't have complete data on that at this time. Despite the lack of a meaningful flu season, however, the quarter was notable for several significant accomplishments, which are important to our strategic transformation into a broader-based diagnostic company and our efforts to reduce the kind of volatility that we saw in the first quarter. The two developments we are currently most excited about and which we believe are particularly important to our future are the commercialization of our revolutionary Sofia product and the remarkable advances we're making on the molecular diagnostics technology front. I'd like to update you on both.

Sofia, as many of you know, is our next-generation fluorescent immunoassay analyzer system and one of the cornerstones of our business. Our Sofia analyzer and our Sofia influenza A+B fluorescent immunoassay are now CE marked, 510(k) cleared and CLIA waived. Although there have been some challenges around selling flu assays and analyzers to a limited audience in a weak flu season, we're seeing strong interest from customers and others in the scientific community who liked the ease of use, connectivity aspects and enhanced assay sensitivity that the Sofia system provides.

I'm pleased that just last week we received a CLIA waiver from the FDA for our Sofia fluorescent analyzer and our Sofia influenza A+B assay for the detection of flu A and B in nasal swab and nasal pharyngeal swab specimens from patients of all ages. Both of these simple-to-use tests employ Quidel patented technology to yield an automated objective and highly reliable result for aiding in the diagnosis of flu within minutes of obtaining the swab specimen from the patient. This is a significant milestone because the CLIA waiver designation allows us to penetrate more broadly the influenza diagnostic market, gaining access to the larger physician office lab segment, in addition to the hospitals, medical centers and smaller clinics that we already serve. This physician office lab segment accounts for the largest part of the approximately $270 million market for the rapid point-of-care tests that we manufacture currently.

With the waiver, we can now sell the Sofia test system to CLIA-waived physician office labs, emergency departments and other CLIA-waived facilities. What's more, the newer claims eliminate the age limitation and extend the read time of the test, making the product even more flexible and accessible to patients and healthcare professionals alike. Our CLIA waiver allows for both walk-away and read-now modes. Walk-away, of course, means that a test cartridge containing a patient specimen can be inserted into the instrument and the operator can walk away. In a read-now mode, an operator can incubate multiple tests at a time, and at any time within 15 to 30 minutes, the operator can return and read results one right after the other in a read-now mode that cycles every 45 seconds. This is an important distinction as Sofia is the only system available in the rapid immunoassay market today that enables higher-volume customers to test multiple patient samples in a read-now mode.

In addition, the technology inherent in Sofia enables quantitation of targets. As the quantity of emitted fluorescent light is directly proportional to the concentration of analyte being measured. Importantly, as we develop quantitative assays for Sofia, we gain access to even larger markets. We estimate that the quantitative assays currently contemplated address markets representing over $900 million of opportunity per year in the US alone. Overall, we have a number of assays moving through our product pipeline, and we hope to have four assays available for Sofia customers as we exit this year here in the US and even more abroad.

Another exciting development for our Company is in molecular diagnostics and related intellectual property. As a reminder, our molecular program consists of three different products. First, of course, is AmpliVue, our handheld disposable molecular platform. Then we have our PCR-based assays that can be used across a broad range of existing and already installed thermocyclers. And third, we have Project Wildcat, our fully integrated, cartridge-based testing system.

Let me comment briefly on each. Starting with AmpliVue, we received CE mark for our C. difficile product in March, and we are working through all the requisites for a European launch this May. In the US, clinical trials should be completed by the end of this quarter, and we plan to submit the 510(k) package shortly thereafter. We're excited about this technology because this format can easily be used in smaller hospitals and labs were molecular assays are not currently run and as a complementary part of the larger hospitals' overall testing algorithm. Several additional AmpliVue assays are currently in development, two of which we're optimistic could be in clinical trials in the back half of this year.

This CE mark, which is, as you know, the official recognition that a product complies with all essential requirements of the European Union is an important step for AmpliVue and opens the door for more aggressively growing our presence globally. While the European market continues to be dominated by traditional immunoassay and cytotoxicity assay methods, we believe that the first handheld disposable molecular assay for C. difficile is unique enough to accelerate the trend of the type of molecular testing that we've seen in Europe for other analytes.

And of course the European launch is an important precursor to our intended launch in the United States where many have estimated the market size for molecular C. diff testing to be over $250 million per year and growing. By expanding into these new markets, we are making this game-changing technology available to patient populations that will benefit immensely from rapid detection of C. difficile and also setting the stage for bringing our wide-ranging diagnostic technology into play on multiple fronts.

Another development worth noting is that we received FDA clearance for our flu A+B assay for use with Cepheid SmartCycler system in March. This follows our previously announced FDA clearance to run this assay with Life Technologies ABI 7500 Fast Dx. The SmartCycler approval demonstrates the versatility of our molecular assays and allows us to continue to pursue a much larger installed base of thermocyclers. By early April we had also received CE mark for two other PCR assays, C. difficile and a combination RSV human metapneumovirus assay. The US clinical trials for these assays have begun, and we plan to submit the 510(k) packages for each later this year. Seven other PCR assays are in various stages of development, and I'll elaborate more on the status of these assays in the future.

With respect to Project Wildcat, we've made significant strides with respect to the rights and patent claims on a novel extraction technology, which marks the critical frontend of the molecular testing process. By way of background, in 2010, Quidel and Northwestern University and its Global Health Foundation entered into a collaborative agreement under which a team of engineers and scientists from both organizations would not only complete the development of the Wildcat integrated molecular platform, but would develop HIV viral load and TB assays. For both types of assays, extraction of nucleic acid from either whole blood in the case of HIV, or sputum for TB, is required.

In the course of our collaboration, Northwestern developed a novel extraction methodology called phase gate that dramatically reduces extraction time by the elimination of conventional wash steps used by other extraction technologies. Since then, we further refined the technology and filed a series of patent applications with the US Patent and Trademark Office. Just recently, we received a notice of allowance from the PTO on the first set of applications and expect others to follow shortly. The Wildcat platform is a true advancement as we bring simplified cost and time-efficient, cross-contamination-proof and easy-to-read processes closer to patients.

And finally, a word on Bobcat, the project name for our automated multiplex DFA analyzer that replaces fluorescent microscopy. Bobcat is progressing well. We're in clinical trials and expect positive results for all eight virus types, even though so far we've had a weak respiratory season. We expect to submit a 510(k) package to the FDA by the end of the second quarter.

As you can tell, we're starting to hit our stride with our developing pipeline, a pipeline that we believe will ultimately reduce much of the volatility that has characterized our historical results. While there's always uncertainty, of course, around development activities, given clinical trials and regulatory clearance timetables, we are excited by our progress. As ever, we're focused on allocating the appropriate professional and financial resources to make our R&D and commercialization efforts best in class.

With that, Randy will cover some specifics on the first quarter financials, and then we'll take your questions. Randy?

Thank you, Doug. For the first quarter of 2012, as Doug noted, total revenues were $38 million compared to $59.6 million in the first quarter of 2011. As expected, the infectious disease category represented the majority of the decline, as sales decreased 45% versus the first quarter of last year due to the mild flu season. Global sales of infectious disease products totaled $26.4 million in the first quarter of 2012, as compared to sales of $47.6 million in the first quarter of 2011.

Weaker sales from our influenza product line were responsible for the decrease, which totaled $7.5 million for the quarter, as compared to $25.3 million of flu sales last year. Strep A and RSV were also affected by the weaker respiratory disease season, and sales of each decreased by 21% as compared to last year.

Our herpes product line grew by 5% over the first quarter of 2011. Revenues for the women's health category increased by 3% in the quarter to $8.3 million, led by strong growth from our bone health business and from Thyretain, our Graves disease product, which increased 20%. Our gastrointestinal product category revenues were $1.6 million in the quarter.

Gross margin in the first quarter of 2012 was 61% compared to 66.4% in the first quarter of 2011. Our gross margin in the quarter were negatively impacted by an unfavorable product mix associated with reduced flu test volume. Included in cost of sales for the quarter were $2.1 million of intangible asset amortization related to the Alere lateral flow royalty buyout.

Operating expenses were $22.7 million in the first quarter compared to $21.6 million for the first quarter of the prior year. As anticipated, research and development costs in the first quarter were $8.5 million compared to $7.5 million in the first quarter of 2011. The main driver for the increase over last year was the timing of increased costs associated with clinical studies and a Project Wildcat milestone payment. Therefore, for the full year we anticipate -- we continue to expect the R&D spend to total approximately $27 million to $29 million.

Sales and marketing costs increased slightly to $6.5 million in the first quarter of 2012. During the quarter, we completed our sales force expansion initiative. For the full year, our sales and marketing expenses are currently estimated to be in the range of 18% to 20% of sales, and are certainly dependent on sales volume.

General and administrative expenses in Q1 of 2012 decreased to $5.9 million from $6.1 million in the first quarter of last year, the result of lower compensation expenses. Included in operating expenses were $1.7 million of intangible asset amortization from purchased technology in connection with the acquisition of DHI and stock-based compensation expense of $1.9 million.

Our top tax rate for the first quarter was 37%, an increase over last year due to the exclusion of the federal R&D tax credit and the current-year rate since the tax credit for 2012 has not yet been approved by Congress. For the remainder of the year, we expect our tax rate to be approximately the same without the R&D tax credit. That income for the first quarter of 2012 was $51,000 as compared to net income of $11.4 million and $0.35 per diluted share for the first quarter of 2011.

On a non-GAAP basis, excluding amortization of intangibles and stock compensation expense, that income for the first quarter of 2012 was $3.7 million or $0.11 per diluted share, compared to net income of $13.6 million or $0.42 per diluted share for the same period in 2011.

In the quarter, our operating activities generated negative cash flow of $11.9 million, the result of paying down the remaining balance of $15 million owed to Alere on the lateral flow royalty.

Capital expenditures in the quarter were $1.1 million. We also paid down a total of $24.5 million of our outstanding debt in the quarter. And as of March 31, our total debt balance was $25.2 million of which $19 million was outstanding on our senior credit facility. As of March 31, our cash on the balance sheet was $21.6 million.

And with that, we conclude our formal comments for today. Operator, we are now ready to open for questions.

Thank you. (OPERATOR INSTRUCTIONS) And our first question comes from the line of Jeff Frelick with Canaccord. Please proceed.

Yes, good afternoon, everybody. Hey, Doug, just -- you called out the walk-away mode versus the read-now mode with Sofia. Maybe just talk a little bit how has that been received. I know early on you had the approval and you were selling it into the hospital market. Was one mode more acceptable? And did that help drive acceptance into the early launch into the hospital market?

There are a number of factors that contribute to the placement of Sofia. The connectivity is one. The assay performance is probably the biggest. But certainly our customers would tell you that having the ability to run multiple samples at once is a nice feature. Imagine a family of four, for example, shows up in an emergency room. They all four are going to get swabbed for flu, and there's no way that the technician and emergency room wants to run those one at a time. So with Sofia, the operator would simply take all four swabs, set them up simultaneously, come back at his or her discretion after 15 minutes and before 30 and simply insert those into the Sofia instrument and read them 45 seconds at a time. So if you've got an incubation time that's 15 minutes on the frontend, and then thereafter just run multiple reads of those samples. So it's not the most critical feature of the product but certainly helpful.

And then with respect to Sofia strep, I know you just got the CLIA waiver on flu and we're not going to give you time to catch your breath here, but can you just walk us through kind of the next steps in logistics leading up to Sofia strep commercialization? What do we need to pay attention to and kind of check the box throughout this year?

Thanks, Jeff. We said before that we're in clinical trials in the US, but I'm not actually going to communicate further on that. Generally I'd like not to talk about things that would be valuable for our competitors, and certainly identifying when we plan to launch each assay going forward would be valuable to those folks on the line here. But what I will say is that we're confident that we'll have multiple assays available as we exit this year, and it's highly likely that strep is in that group.

Okay. And just a last quick question. Can you just give us a quick comment, either you or Randy, on the flu or strep inventory exiting kind of Q1?

Well, I'll jump in immediately and ask Randy to give more details. What I would say is flu at end-user level we believe to be quite low given the orders that we've seen in April. And we now have an inventory level of many of our products that's actually very, very low at distribution. And Randy, why don't you give them a flavor for the numbers.

Yes, we're -- on a year-over-year basis, our inventory levels at distributors are down about 20% for March of 2011, so we're close to historical lows on flu and strep.

And so what that means, Jeff, is that even though ILI is quite low, even now, we're actually shipping product. A low level of product, of course, but we're shipping product.

Okay. Thanks, guys.

Sure.

And our next question comes from the line of Steven Crowley with Craig-Hallum Capital Group. Please proceed.

Hey, guys. Good afternoon.

Hi, Steve.

Just to be clear, you gave us some nice data -- well, some data on the extent of flu sales. I think the inference of the number you gave us is that flu was actually down sequentially maybe a couple million dollars. Is that the right way for us to think about it? It emphasizes how tough a period it was for that product.

That absolutely was the case, Steve. We were down from $9 point something million -- was it $9.7 million, Randy?

Yes.

To $7.5 million, $7.6 million.

Okay. And in terms of market dynamics and market share, the best you can gather even qualitatively, do you feel like any market share moves accounted for some of that weakness, or is it purely just the seasonal incidence phenomenon?

We've discussed market share in the past and have always said that it's difficult to take sales that are reported and figure out market share. But what I can tell you is that in order to complete our compensation payout for last year, we did conduct a marketing research project to assess exactly by segment what happened to market share. And in that analysis, we showed actually a slight uptick in market share. I don't think it was a meaningful shift necessarily, but it was up slightly. And in fact, probably not enough that our competitors would have even noticed. So the short answer is I don't think there was huge shifts in market share necessarily. Well, in fact, I can't see any evidence whatsoever that was the case. And in fact, if there was any movement at all, we saw a slight uptick based on our limited dataset.

Okay. And then picking up on a couple of things I think you tried to emphasize in your prepared commentary or your press release, you've talked about having made enough success -- significant success on the product development front and getting stuff to market that you're now doing things to really enhance the commercialization capabilities of the Company and some things out in the field that represent greater commercialization abilities. Could you put a little bit more meat on the bones of what you've done and what you're doing out there in the marketplace?

Well, again, Steve, I'm not going to go into a great deal of detail on our marketing plans, of course. What I will say is that we do have a marketing plan, and it's a good one. But I do think that we have publicly disclosed that we are increasing the size of our commercial infrastructure, and much of that has been completed. We're doing things externally that a company does when you have unique new products. So of course our participation in meetings, scientific meetings in Europe and scientific meetings here in the United States has increased. So without going into further detail I would say larger commercial organization and the fact that we have new, unique products that customers want to talk to us about creates a need for us to participate in a slightly different way [at these] shows.

Great. Last one for me, and I'll hop back in the queue. In terms of your commentary about having seen positive response to these new products, even in the flu segment where selling winter coats when there is no winter is kind of a hard -- a difficult task, can you give us some flavor for that or at least a couple of examples that might represent microcosms of your success, so we can chew on it a little bit?

Well, what I can say, Steve, is although I would be very hesitant to provide specific numbers on placements at this stage, we're very pleased with the placement rate so far and still believe that ultimately we'll place thousands over the next few years. It's going really well for us so far. We're actually a little bit surprised that we're able to capture the interest of hospital and the larger moderately complex physician office so far. But again, it's early.

And in terms of the revenue streams that you're able to generate with the placement model, can you give us some ballpark for how we should be thinking about the value of a placement to you?

It would be very difficult to do that based on flu alone. I will say that we do have sales of Sofia flu. We are shipping product. Again, we like the placement rate. We like the number of customers. We like the quality of customer that we're getting. And in fact, when I look at hospital customers alone, I see that over half of those hospital customers are actually not previously Quidel customers. So we're doing quite well.

I think once we have a more complete menu as we exit 2012, we'll be able to help you a little bit more in terms of forecasting what a placement would look like in terms of revenue per box over the strategic plan.

Great. Thanks for the answers, Doug.

Thanks, Steve.

And our next question comes from the line of Zarak Khurshid with Wedbush. Please proceed.

Good afternoon, everyone. Thanks for taking the questions.

Sure.

So, Doug, can you talk a little bit about the Sofia pricing as it stands today and also just the test manufacturing or cost of goods? You know, I'm just trying to understand how the ramp in that product may or may not affect gross margins going forward.

Again, we have actually, Zarak, as you can imagine, I'm looking at screen, we have more competitors on this screen than I have analysts. And so I'm absolutely reluctant to talk about what our pricing would be with any specificity. What I would say is that we certainly are not having to discount pricing in order to place these analyzers or to ship product. For sure we're at least at the pricing that we were before.

In terms of cost of goods sold, we've said previously and publicly that our cost of goods sold for the Sofia analyzer is quite low, and that enables us to either sell the instrument if the customer wishes, or to place it for the typical reagent agreement plan type of commitment.

Understood. Thanks for the color. And then, Randy, maybe I missed it. What was the CapEx in the quarter, and how should we think about that playing out through the rest of the year?

Yes, for the quarter it was $1.1 million. We do believe that on a full-year basis, CapEx will be somewhere in the range of $8 million to $9 million.

Okay, great. And then last one just on kind of the build out of the team, that didn't seem to really show up too much, at least the build out of the commercial team. That didn't seem to play out in the sales and marketing line. Will we see more of that inflection in the full quarter for second quarter?

Yes, we did -- most of the hiring probably occurred in March, the March time period. And certainly with the lower sales number, the compensation expense was lower than in a normal flu season. But you will see an increase in Q2 through Q4, and that's why we thought it appropriate to kind of give you the modeling, where we think sales and marketing will be as a percentage of sales on a full-year basis.

Got you. Thanks for taking the questions.

You bet.

And our next question comes from the line of Tycho Peterson with JPMorgan. Please proceed.

Hi, guys. This is [Ramish Donsedsedian] for Tycho. Thank you for taking the question. I think previously you had mentioned as you ramped content on Sofia that you could get to, say, $10,000 to $15,000 pull through box. I'm just wanting to kind of go back to that and think about how you think about pull through and just to help us put some parameters on a customer pro box. And I can understand that you don't want to disclose too much at this point, but I think that number was out there previously.

That number was out there previous describing what we have in our long-range plan. So when you look at the terminal value, if you will, of a placement, in the out years, we had previously said publicly that we would be aiming for the $10,000 to $12,000 range actually. And so that's based on the products that we see that we currently having in development over the next couple of years.

Okay, great. And then just in terms of international revenues, I'm not sure if you disclose those, but any color you can give on sort of trends there and sort of your outlook maybe in the anywhere from the next 3 to 18 months, particularly with some of the CE mark assays.

For the quarter, our international was up 4%. We did see some good growth in Asia-Pacific, a little softness in France and we do anticipate middle single-digit growth for the full year in international.

Great, guys. Thanks.

You bet.

And our next question comes from the line of Brian Weinstein with William Blair. Please proceed.

Hey, guys. Just to kind of follow up a little bit on that last comment. You guys have had some significant product approvals in the EU. Can you just review your commercial infrastructure and distribution agreements overseas and how these approvals fit into those? And just if you could just repeat what you just said about contribution we can expect out of these products in Europe over the next year or so. Thanks.

Well, again, we're not going to breakout Europe separately from that $10,000 to $12,000 over the strategic plan, but you're right, we have had a number of approvals. First of all, we're currently selling Sofia products in Europe for flu and for strep. And I would anticipate as we exit 2012 that our folks over there will have the opportunity to sell about six products. And so they'll have about six products in their bag. We have a mix between countries where we think it's interesting and enough that we should go direct, and we're doing that. But we also have distributors in each of the major countries, and those are all in place.

Okay. And AmpliVue, clearly a lot of excitement down there at CVS over the last couple of days, but is there anything in terms of a second generation for that product that would bring down the number of steps, even by a couple there, and if so what's the timing? And then also on AmpliVue, I think you had said previously that your next test would be the MRSA blood culture. Is that still what we should think of as test number two for that product? Thanks.

Sure. You're right, Brian, there was a lot of activity, I've been told, around AmpliVue's C. diff at the Clinical Virology Symposium, of which just wrapped up today down in Daytona Beach. It's the first assay that we've introduced in Europe, and we're in clinical trials, as I mentioned in the script, currently. Behind that are three other assays, which I won't go into detail on, and one of those is MRSA. So I also mentioned that it's highly likely that two other assays will be in clinical trials at some point in time in 2012. So that's sort of where we're at with AmpliVue so far.

In terms of next generation, is there a plan for a next-generation product, yes, there is.

Okay. But no comment on timing or anything about that?

No, I can't comment on timing. It's clearly in development, a next-generation product, which I can give you a little bit of color on. But our intent would be to simplify the housing design and give it a better look and feel and perhaps some other ease-of-use factors. But in terms of the practical assay performance, no, we would intend to continue with the performance that we see right now. The performance actually for the assays that we have in development looks quite good. So we're not interested in changing the chemistry of the design from that perspective. We're talking about practical workflow sorts of things that would be more useful to a customer.

Okay. And then last question on Wildcat, any update as far as kind of longer-range timing that we'd be able to see something here in the States? Are we still thinking kind of 2014, '15? Is that the -- is there any update on that? Thanks.

Thanks, Brian. We're still on the same timeline. The encouraging thing I think you heard Randy said was that we just made the milestone payment, which would tell you that we just completed that first phase of development on time, and that we're moving forward with the schedule that we had detailed actually about a year ago at our analyst day. So we're still on that timeframe where we look to have an analyzer that's nearing completion of development towards the end of 2013 and available for the high-burden developing countries sometime in 2014.

Okay, thank you.

And our next question comes from the line of Ross Taylor with C.L. King. Please proceed.

I just have maybe two questions left. You know, first, with regard to Sofia, I mean, how quickly do you think Sofia might replace your legacy flu product? And would it ever completely replace it, do you think?

The short answer is I think there will always be a demand for the simple rapid point-of-care diagnostic test, particularly in the lower-volume segments. You have to remember that we have tens of thousands of customers, and only a certain subset of those would be the type of customer who would prefer an instrumented system. They will, of course, be the larger customer. That's probably why when you think about the total dollar value per instrument that we would look at in the strategic plan that we're at that $10,000 to $12,000 level because we don't see a significant number of placements in super low volume sites. So, again, the short answer is I think we're going to have both the Sofia customer as well as the lower volume physician office customer.

Now, I will add though that the number of physicians who are in these smaller practices appears to be declining. So obviously at some point these practices could get large enough, these super small practices could get large enough to actually support the volume necessarily for a Sofia.

Okay. And also related to Sofia, this is more curiosity than maybe significance, but how would some of your reagent rental placements work given the volatility of flu? I mean, if we have a year like this year where there's hardly any flu sales, how would customers manage through those types of agreements?

That's a great question, Ross, and that's why (technical difficulty) several different things. Flu is the first of many assays that we plan to put on Sofia, and we don't intend that flu is the driver of the placement. Early on though obviously we have very flexible programs that enable a customer to get the Sofia analyzer without necessarily understanding precisely what their flu volume might be.

Okay. And my last question relates to AmpliVue. Do you think you need multiple tests on the market in the AmpliVue platform to really gain acceptance of that, or could just C. diff by itself you think get a lot of traction in the marketplace? I mean, I understand these are all individual, handheld tests, but I just wondered do you think you need a kind of family of them, or can single ones work very well on their own?

Again, Ross, another very good question. I can't speculate as to how well we'll do with any precision, but based on our customer feedback, early on, I think people are trying to solve the problem with respect to C. difficile, and, therefore, we may do pretty well with that product, just with that product alone. In other words, I don't think we need numerous other menu additions in order for C. difficile to be successful. Having said that, there are other analytes for which this format also seems to make sense, but I think they're somewhat exclusive to each other.

Okay. That's all helpful. Thank you.

Sure.

(OPERATOR INSTRUCTIONS) And our next question comes from the line of Scott Gleason with Stephens. Please proceed.

Hey, guys. Thanks for taking my questions.

Sure.

I guess just to start off, would you guys be willing to breakout the diagnostic hybrid segment and how much that was this quarter?

We haven't done that in the past, for the last quarter or so, but I don't have that in front of me. But we can certainly make that available.

Okay, great. And I guess just if we're looking at the flu season, you know, one way to think about I guess kind of your success is the number of doctors that are using the product. Doug, do you have any sense for kind of what the physician growth was and the number of physicians that were using your guy's flu product on a year-over-year basis?

I don't. I really don't. The volume of flu this first quarter was low, so I can't tell you the number that had product on their shelves that were simply using already versus those who ordered product. We have a general feeling that the number is going up. I believe that. But I still don't think we've gone over the 40% number. You remember that we used to say that we thought it was in the 33% to 34% range, and then we said following the pandemic that we really had no ability to know how much it had increased, but that we still thought it was under 40%. And I don't have any reason to believe it's much higher than that at this stage.

Okay. Thanks for taking my questions, guys.

Thanks.

And our next question comes from the line of Nicholas Jansen with Raymond James & Associates. Please proceed.

A bigger picture question, looking at the -- talking about your analyst day a few questions ago, you know, where are you, you think -- you laid out a huge roadmap of new product offerings, I think. Where are you ahead? Where are you behind? And how much do you think the weak flu season kind of sets you back on where you thought you would be on the Sofia placement side by now? Thanks.

Sure. Well, obviously the volume of respiratory disease was down, and obviously that should have had an impact on a number of things, including our placement rate of Sofia, as well as sales of our QuickVue products. But it's really hard to say. We certainly have been shipping instruments and reagents. And as I said earlier, over half of our customers that were gaining with Sofia are new to us. So it's hard to quantify. I can say obviously that it has had an impact. There are certainly a number of occasions that we've talked to customers, and they've said to us that it's difficult for them to bring onboard Sofia when they don't have adequate samples to test. And that has been a factor.

But nevertheless, we're still shipping instruments. It -- the number is growing, and as I said earlier, we feel very good about our placement rate given the conditions.

Should we then think about maybe the Sofia placements, considering that they do need samples, might be more backend weighted versus in 2Q or the first part of 3Q given the timing of the influenza season?

Well, sure, and I would have said that even with the flu season. We would be placing analyzers now. We would be ramping up. And then as we introduce other assays, there's other reasons for people to get a Sofia. And certainly Q4 would be higher than the other quarters, and actually I would anticipate Q1 2013 to be higher than that.

And our next question comes from the line of Zarak Khurshid with Wedbush. Please proceed.

Yes, thanks for taking the follow-up, guys. So back onto Wildcat, you talked about the sample frontend, sample (inaudible) frontend. What's happening on the backend analysis side? And in general, what are things that are left to be ironed out with the instrument development? Thanks.

Well, the next step in a normal development process is we would have test benches for each one of the components of an instrument system, and that's actually what we're doing right now. That's just -- but that would not be proprietary or unusual. That's just the next step. We have obviously prototypes for each of the components, including extraction, and then those each with actual clinical specimens and assays would be used to demonstrate that we have a system that then would be ready to be fully integrated.

Okay, great.

(OPERATOR INSTRUCTIONS) And with no further questions, this concludes today's question-and-answer session. I would now like to turn the call over to Mr. Doug Bryant for closing remarks.

This concludes the call for today then. Thank you for your time this afternoon and for your continued support. Take care, everyone.

Ladies and gentlemen, we thank you for your participation in today's conference. This does conclude the presentation, and you may now disconnect. Have a good day.