QuidelOrtho Corp (QDEL) 2014 Q4 法說會逐字稿

Ladies and gentlemen, welcome to Quidel Corporation fourth quarter and full year 2014 earnings conference call.

(Operator Instructions)

I would now like to turn the call over to Mr. Randy Steward, Quidel's Chief Financial Officer. Please go ahead.

Thank you, operator. Good afternoon, everyone. Thank you for joining today's call. With me today is our President and Chief Executive Officer, Doug Bryant; and Ruben Argueta, Director of Investor Relations. 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 significantly 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, today, February 11. 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. Today, Quidel released financial results for the three months and full year ended December 31, 2014. 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 report on the highlights of the fourth quarter and full year and provide updates on our product development pipeline. I will then briefly discuss our financial results and then we will open the call up for your questions. I'll now turn the call over to Doug for his comments.

Thanks, Randy. Good afternoon, everyone. It's always a pleasure to provide an update on our progress toward our longer-term goals and aspirations, but I must admit that it seems easier and feels better when we've had a good quarter. And that's certainly the case for our final quarter of 2014. Revenues in Q4 were $63.6 million, up $13.4 million or 27% over the fourth quarter of the prior year. Overall, growth in the quarter came from influenza and Strep A products across all platforms, as well as from Sofia RSV, our AmpliVue and Lyra molecular products, and grant revenue.

New product revenues in the fourth quarter were $17.2 million, effectively doubling last year's fourth-quarter new product revenues. For the full year, which includes a soft first quarter this year, new product revenues were $37.6 million compared to $19.3 million in 2013. Another notable fact is that of the $37.6 million in new product sales that were generated this year, $7.7 million were not flu compared to $3 million in non-flu new product revenues generated in 2013.

As we indicated in our pre-announcement for Q4, Sofia placements totaled over 9,000, driven by the largest number of placements in any quarter since launch. I think that it's important to note that while demand for Sofia Influenza A+ B and Sofia RSV created the increase in our placement rate, the timing and relative strength of the flu season were not critical factors as most orders were taken well before the ILI percentage was north of 2%.

As many have noted, this season has not actually been especially severe and in fact the ILI percentage curve published by the CDC has been a mirror image of the 2012-2013 influenza season, which we have previously characterized as a normal flu season. The difference for us is that with Sofia placements and low cannibalization of our QuickVue business, the total number of customers has increased, and our mix of customers has changed since the last normal flu season. In comparing Q3 and Q4 for the two seasons, we see that the number of customers has increased by 5% overall, but the number of customers in the hospital segment has increased 28%.

End-user sales in Q3-Q4 2014 increased by 46% over Q3-Q4 2012. During the same timeframe, end-user sales to hospitals more than doubled while end-user sales to physicians increased by 17%. Also, as we announced in December, we did receive 510(k) clearance and a CLIA waiver for our Sofia Strep A+ assay about a week before the holidays. We're only one month into the launch but early customer receptivity has been very good as expected, and we expect that Sofia Strep A+ will create another wave of placements. Longer term with additional menu, I continue to believe that 20,000 to 30,000 placements are achievable.

Sales of molecular products continue to grow in the quarter as well led by a doubling of AmpliVue C difficile revenue from the fourth quarter of 2013 and helped by the introductions of AmpliVue Group B Strep, Group A Strep, and HSV-1, HSV-2. In the fourth quarter, we received 510(k) clearance for our AmpliVue Bordetella Pertussis product and submitted AmpliVue Trichomonas to the FDA. In all, we've started the year commercializing five AmpliVue assays and we could add a sixth shortly. Our Lyra product line also grew in the fourth quarter led by our de novo Lyra Strep A + C/G assay. We're finding that although some of our molecular assays may be niche products that aren't necessarily generating considerable revenue, these products prove to be compelling enough to begin the dialogue with the customer and to build our brand.

We received FDA clearance for Lyra Parainfluenza and Lyra Adenovirus in the fourth quarter, and are actively engaged in customer studies with these assays. Although the molecular sales process can be lengthy, when customers in the highly complex labs complete the validation process and come online, they do so with large volume commitments. Solana, an instrument designed to run our HDA isothermal amplification assays is progressing as planned. When we unveiled the system for the first time last summer, we said that we intend to be in the market in the US by mid-year 2015 and that's still the case.

Savanna, our fully integrated sample to answer platform, is making good progress as well. And in fact, we are in the process of validating a tweak to the assay cartridge which would make it even simpler for us to port over the menu of PCR and HDA assays that we've already developed once we are in the final stages of instrument development. Overall across all facets of the business, we have had a great fourth quarter, a solid year, and are poised for a successful 2015.

Our R&D and clin/reg teams have developed and submitted to the FDA an impressive number of products. We now have the commercial organization in the US that will bring these products to market, and I look forward to their success as we move through the new year. Randy?

Thank you, Doug. As Doug mentioned, total revenues for the fourth quarter of 2014 were $63.6 million as compared to $50.2 million in the fourth quarter of 2013, 27% increase. Global Infectious Disease revenues, which include QuickVue, Sofia, and molecular products, grew 29% to $50 million in the fourth quarter of 2014, as compared to $38.9 million in the previous year. Influenza revenues in the quarter rose 45% to $36.3 million as compared to $25.1 million in the fourth quarter of the prior year.

From a platform perspective, Sofia influenza revenue was up 97% from the 2013 fourth quarter to $14 million while QuickVue influenza revenue increased 25% to $18.9 million. We continue to gain momentum with our Sofia platform as illustrated by the fact that approximately 40% of our influenza sales were from Sofia. Strep A grew 20% versus the fourth quarter of 2013 and RSV product revenue was equal to last year with more than half of the revenue generated from Sofia.

Revenues for the Women's Health category increased 7% in the fourth quarter to $8.8 million, led by double-digit growth in both our autoimmune complement and Thyretain product lines. Our Thyretain revenue grew 14% in the quarter. This growth was partially offset by a decline in our bone health business driven by decreased spend in the research segment. Our pregnancy revenue grew 3% in the quarter. Our Gastrointestinal product category revenue was $1.9 million in the fourth quarter compared to $1.8 million in the prior year.

We realized a strong increase in our AmpliVue C difficile revenue, but this increase was partially offset by a decrease in our H pylori business. Revenue from our other categories were $3 million in the quarter compared to $1.3 million last year. The increase was due to the recognition of approximately $1.6 million in grant revenue from the Bill and Melinda Gates Foundation for the development of Savanna. As the comparison in the fourth quarter of 2013, we realized approximately $600,000 of Gates Foundation grant revenue.

Gross margin in the fourth quarter was approximately 67% compared to 63% in the fourth quarter of last year. The increase in gross margin was primarily due to product mix and improved absorption in our manufacturing facilities. In the quarter, we realized an unfavorable impact of higher access and obsolete inventory expense, the result of shelf life expiration dates on several product lines. Excluding the impact of the Lyra royalty amortization that is set to expire this month, gross margin in the quarter would've increased by approximately 4 percentage points in both 2014 and 2013.

Total operating expenses were $50.7 million as compared to $49.9 million for the fourth quarter of 2013. Research and development costs were $9.2 million in the quarter. The R&D costs were lower than last year, primarily due to decreased spend on labor, the result of timing of incentive compensation, and clinical trial costs. Sales and marketing expenses in the fourth quarter were $11.2 million compared to $9.7 million in the fourth quarter of the previous year.

The increase in sales and marketing expense versus last year was mostly driven by additional investments in our sales organization. We added approximately 20 additional sales personnel during the year. General and administrative expenses were $6.9 million, relatively flat for the fourth quarter of 2013.

Our tax rate for the fourth quarter was approximately 41%. In the quarter, we recorded a $1 million tax benefit from the release of tax reserves related to the statute of limitations expiration on tax audits. There is also a full valuation allowance taken against state specific deferred tax assets in the amount of $22.3 million. In December of 2014, we closed on a $172.5 million convertible note offering, which included exercise of the over allotment option of $22.5 million. The interest rate is 3.25% on the note.

For the quarter, we recorded $600,000 of interest expense, of which approximately $300,000 is cash interest expense, and the remainder is the amortization of issuance costs and that discount. Net income for the fourth quarter of 2014 was $7.1 million or $0.20 per diluted share as compared to net income of $1.1 million or $0.03 per diluted share for the fourth quarter of 2013. On a non-GAAP basis, excluding amortization of intangibles, stock-based compensation, and certain nonrecurring items, net income for the fourth quarter of 2014 was $13.3 million or $0.37 per diluted share, compared to net income of $7 million or $0.20 per diluted share for the fourth quarter of 2013.

As part of the non-GAAP calculation included in operating expenses for the fourth quarter of 2014 was stock-based compensation expense of $2 million and amortization of intangibles of $5 million. Revenues for the 12 months ended December 31 were $182.6 million as compared to $175.4 million for 2013. Infectious Disease revenues for 2014 were $130.4 million versus $128.1 million in the prior year. For the full year, influenza revenues increased 5% to $81.6 million from $77.5 million in 2013, with our strong fourth quarter more than offsetting a weaker respiratory season last year that impacted first-quarter results.

Strep A revenues increased 6% from 2013 to $26.4 million. RSV revenues increased 13%, driven by our CLIA-waived Sofia RSV assay. The Women's Health segment grew approximately 3% to $34.3 million as compared to $33.3 million for the prior year. For the year ended December 31, our Gastrointestinal segment grew by 12% to $7.4 million led by growth in AmpliVue C difficile. The revenue from our other category was $10.5 million in 2014 compared to $7.4 million in the prior year, mostly due to increased grant revenue associated with the Bill and Melinda Gates grant development agreement.

Gross margin for the 12 months ended December 31 was approximately 59% compared to 62% last year. This decrease was mostly driven by an increase in excess and obsolete inventory, as well as incremental depreciation on Sofia instrument. For the 12 months, operating expenses, excluding the impairment loss and facility charge, increased to $188.3 million as compared to $168.7 million in 2013. The increase in R&D of $3.7 million is primarily due to increased spending on our Savanna platform and additional costs from the BioHelix and AnDiaTec acquisitions.

For the full year, sales and marketing expenses increased $7.7 million to $41.5 million, primarily driven by continued investment in the sales organization. Net loss for the full year 2014 was $7.1 million or $0.21 per share compared to last year of $7.4 million and $0.21 per diluted share. On a non-GAAP basis, net income for 2014 was $12.3 million or $0.35 per diluted share compared to net income of $21.3 million or $0.61 per diluted share last year. For the 12 months of 2014, depreciation, amortization, and other was $28.4 million as compared to $24.7 million in 2013.

From a cash flow perspective, for the full year, operating activities provided $35.7 million of cash and purchases of property and equipment was $11.2 million. As of the end of December, the Company had no outstanding borrowing under its senior credit facility and had $204 million in total cash, including restricted cash, of $3 million. For 2015, we are currently estimating R&D expenses in the range of $40 million to $42 million, which includes the accelerated spend for project Savanna. For sales and marketing, we are estimating total expenses in the range of $45 million to $47 million.

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

(Operator Instructions)

Bill Quirk, Piper Jaffray.

First question is, I was hoping you could talk a little bit about the CLIA-waive market. Now that you've got a couple of approvals in hand, obviously you've more to go. But can you just speak to I guess maybe the early reception there?

Hi, Bill. Are you asking about the Sofia Strep A CLIA waiver?

Yes.

We're just a few weeks into the launch, but I would say that it has gone fairly well. The receptivity is certainly there. The pricing assumptions that we had thought about as we went into the launch are holding true so far.

We see a number of existing flu customers that are taking on board the Strep A+, and we also see those that are needing a Sofia placement. So in both categories I think so far so good, but with the caveat that it's obviously pretty early in the launch.

Understood. And then maybe one for Randy. Can you help us think a little bit about the pacing of the two operating expense items that you talked about here on the full year?

Yes. With sales and marketing, I think you'll see that it's probably pretty consistent over the four quarters. R&D obviously will be predicated on spending, especially on a molecular platform.

Probably would -- really don't see a significant variance quarter-to-quarter in that spend either. Maybe little bit lighter Q1 and then consistent spending Q2 through Q4.

Okay. Got it. Thanks, guys.

Nicholas Jansen, Raymond James & Associates.

Regarding Solana, I'm just trying to get a sense of what your go-to-market strategy there is. Is it going after the AmpliVue customers that you have already? Maybe just give us a flavor of how you think about approaching Solana once it's launched mid-year.

Initially, we believe that we should target the market segment that is 400 beds and fewer, in other words, the hospital labs in hospitals with 400 beds and fewer. That's approximately 4,100 sites. We believe that particularly as you go smaller into the market, those customers are capital constrained and more price sensitive.

We believe fundamentally that in the long term, the cost of goods sold is going to matter, and healthcare costs are going to need to come down. Therefore, a low cost of goods sold position is advantageous in that segment, the segment where our competitors have not had a great deal of success so far.

That's helpful. And then thinking about the first quarter with the flu, trying to think about it relative to the 2012-2013 season. How should we think about -- obviously, the curves looks pretty aligned.

How should we be thinking about kind of flu contribution in the first quarter to make sure our models are aligned appropriately? Thanks.

If this season continues to mirror the 2012-2013 season, as I mentioned a couple of minutes ago, and to follow the normal pattern of decline following the peak, then Q1 2015 influenza revenue should be about the same or in the best case, slightly higher than Q4 2014. Just as Q1 2013 was about 3% higher for us than Q4 2012. Quarter-to-date, we've continued to see ordering patterns that are consistent with a normal flu season.

Great. And then last one for me in terms of contract revenue. I know that that can be lumpy from quarter to quarter but how should we be thinking about contract revenue contribution in 2015?

Are you talking specifically the Gates grant revenue?

Correct.

We have indicated I think that we're looking probably in the range of $6 million to $8 million through the year. Obviously dependent on the spending pattern but probably consistent on a quarterly basis.

Great. I will hop back into the queue. Nice quarter.

Yes and that compares to $6.3 million that we did in 2014.

Thanks.

Matt Larew, William Blair.

Just in for Brian this afternoon. In the context of a record quarter of placements you mentioned for Sofia, and then sort of a building CLIA-waived menu. Can you talk a bit more broadly about how you see the point of care space shaking out over the next couple of years particularly with CLIA-waived molecular product on the market?

Do feel comfortable with Sofia's competitive position in the space? Is there something you have internally you could bring to a CLIA-waived market there in terms of molecular? Could you just talk a little bit more broadly about that?

I would say that Sofia has a lot of room for a while to run. As a said, I think we see a path to 20,000 to 30,000 placements fairly easily.

We also see the access point to healthcare changing and that sites other than the physician office that might also use a product like Sofia. In that world, we think connectivity is important and of course, connectivity is already a part of the offering that Sofia provides. So we see Sofia as having reasonable stickiness.

The second part of your question has to do with molecular. It is true that we have a platform called Solana and if it indeed is CLIA eligible, then we think we'd be very, very competitive relative to other things that we see so far, either in the market or that are planned by our competitors. We think we have an advantage as I mentioned before in terms of cost.

But I would say I would stack rank my guys that are developing and putting together packages for the FDA against any other team in the industry. And I think that we've proven that we can develop product and do it fairly expeditiously. So I would rank our chances there as fairly high in head-to-head versus those guys that we compete with today.

Okay. Thanks, Doug, and then one just on Savanna. You mentioned the tweaks to the cartridge.

Does that imply any changes to the timeline? Could you just remind us of what the expectations are for the timeline of launch on Savanna?

I would say that it has created certainly some mindfulness and some thinking around what we should do with that cartridge. But the technical hurdle of all of that we think is behind us and we're not actually validating the change. So I certainly don't see any significant delay necessarily. I was actually trying to imply the opposite and that is that once I have the instrument developed that we will have the ability to port those assays much more quickly over.

And as I said before, we intend to have at least 20 targets put together before we have the instrument developed. So the speed with which we can get those through the FDA we think is enhanced by the change in the cartridge design.

In terms of timing, we've said before that the end of this year, early next year for CE market's what we're aimed at. Previously we've said that before the end of last year, we would have an alpha unit in Africa; that did happen.

We said that we would start studies this quarter and although they are not started today, we are about to start those studies. And I'm pretty comfortable that we're moving down the path there.

I think all of the milestones that we have in front of us are achievable. And within reason, I think that we'll stay on track from now through the end of the instrument product development.

Shaun Rodriguez, Cowen and Company

I think, Doug, last quarter you said that Street expectations for mid-teens revenue growth in 2015 was a reasonable expectation at that point in time. Is that something that you still view as reasonable today?

We feel like with Sofia Strep A+ and hCG pending and continued commercialization of our molecular products, with some help from Solana in the back half of the year that a low to mid-teens growth rate is reasonable. Of course, this assumes, Shaun, that we would see a typical beginning to the respiratory season in Q4 just as we did this year. But assuming that's the case, then yes, we still see a low to mid-teens growth rate.

Okay, and then maybe to be more specific. So you provided kind of a potential target for flu in Q1 and who knows what Q4 of next year is going to look like. But obviously, if you think a mid- to high-teens expectation for the top line next year is reasonable, there is some embedded expectation for what's reasonable for flu.

So in that context then, you did $72 million or so in flu revenue in 2014, and you're off to what looks to be a strong start in 2015 there. So is this a line that will do $85 million, $90 million in revenue in 2015? And that's part of how you get to that mid- to high-teens growth rate?

Well again, we're making an assumption that the ordering patterns that we see right now continue to go through the end of the quarter, and that would get you a number that's comparable to Q4 2014. I assume when you say next year you mean 2015 this year.

Correct.

Therefore, is the Q4 that we just saw in 2014 repeatable again in 2015? I don't know that in our planning process that we haven't discounted that somewhat as we normally would. But certainly as I mentioned, we're counting on Strep contribution, we're counting on hCG, and we're counting on Solana as well.

So it's a combination of that the reasonably robust flu situation given our obvious share gain coupled with those other new product -- non-flu product gains as well. Does that make sense?

Okay. No, it does. It does make sense. And actually to maybe close the loop on this.

What I am trying to essentially get at is, there is clearly a lot that is flowing through the pipeline, right? A month or two doesn't go by without us seeing a press release on a new product. And there's a lot of momentum there and clearly a lot of opportunity. But when I just take this simplified view of the revenue model, I see that non-flu product revenues declined $7 million in 2014 over 2013.

So clearly there are some offsets there but you still speak to a lot of incremental revenue from new products being generated. I'm really just trying to get a sense for what the negative offsets have been and how those might have an impact in 2015 or whether there were certain reasons for why they were not going to have an impact. Because clearly we're just sort of waiting for the new product contributions to really show through.

Shaun, I'm sitting here watching Randy go through the book and he's trying real hard to find what those offsets are. So maybe we could take a closer look and do a follow-up and see how you're following.

(multiple speakers) Yes, Shaun, I don't see a full year $7 million loss on our core products ex-influenza.

Okay. I get there if you exclude non-product revenue as well as influenza revenue and you're left with non-influenza product revenue. But obviously we can walk through it line by line offline.

That's helpful. Okay, guys. Thank you.

I will be happy to do that with you offline. Not a problem.

Tycho Peterson, JPMorgan.

This is actually Patrick Donnelly in for Tycho. When looking at flu this quarter, obviously the headlines were that the season was going to be pretty bad. Did you see any kind of pull forward or inventory stocking when those headlines were out there?

I think the headlines had to do with the morbidity, not the actual ILI. So the number of patient visits that were associated with influenza illness were not higher than a typical season. It is true that we probably benefited from a week or so of ordering prior to that, and perhaps that stimulated some of our distribution partners to order product, seeing it on CNN, et cetera. But the reality is this is not more severe than a typical flu season, as I said earlier.

So therefore there wasn't any pull forward from first quarter into fourth quarter, and the reverse was not true. We just let the orders flow as they came in and we certainly didn't seen any decline in the first, second, third week of this year. As I tried to say before, we see ordering patterns that are very consistent with a normal flu season as described in years past.

We actually saw inventory levels at Q4 were actually lower than Q3, as well as lower than the end of December in 2013 as well. So as Doug said, we just let the orders flow as they came in.

Interesting. Okay. Thanks.

And then on the sales force, I think Randy said you added 20 during 2014. How do you view that kind of trending into 2015 as you launch some new products?

I think that we have indicated that we have a -- I think a full complement of sales. As a sales organization, we have good coverage geographically as well on specific markets. So we do not currently anticipate any significant increase in our sales force at this point.

Great. Thank you.

Zarak Khurshid, Wedbush Securities.

Thanks for taking the questions, guys. I have a clean up/clarifying question on flu.

I was just reading last year's transcript and it said that flu was $21 million in Q4 of 2013, and then you said today it was $25 million. Just wondering if you could -- looks like that was in the press release and the transcript from last year, and I'm just wondering if you could reconcile that.

I would be happy to. In those influenza number that we reported currently it does include the respiratory business from DHI. That's consistently 2013, 2014 been approximately $12 million annualized. So to include all of the respiratory business we thought it appropriate to include that business as well.

Great. That makes sense. Thanks.

And then, given -- Doug, given some of the vague comments this week from a competitor on market share, can you just give us your state of the union on market share in the rapid point-of-care flu space?

Sure. We spent probably more time analyzing this than the typical company because an element of the compensation for our executive team is actually related to year-over-year dollar market share for our influenza products as determined by a third party that we commissioned to do the analysis. That analysis said that in the POL we had gained 4.5% market share, and in the hospitals we had gained 6% market share.

And given what our competitors have said and you just alluded to, Zarak, about sales of their flu products in the fourth quarter, this seems to be correct, at least directionally. Furthermore, it appears from our analysis that our Sofia A and BD's Veritor have made a significant impact on the US market at the expense of several competitors with visually read products. Those are just the facts.

Great. Thanks for that.

And then the last one just on the free cash flow, Randy. Just wondering if you could just comment on 2015 and CapEx and how you are thinking about free cash flow for 2015. Could it be up substantially versus 2014 or flattish? Thanks.

Sure. From a capital expenditure perspective, we don't see it significantly different than what we did in 2014. It may be plus or minus a couple of million dollars but nothing significant.

Certainly, we generate in a normal season, a flu season, and kind of where our projections, we certainly will generate cash flow. I don't want to say a specific number, but we certainly without a lot of CapEx and we manage our working capital very tightly. So we certainly see very good positive cash flow here in 2015 as well.

Great. Thank you.

You bet.

(Operator instructions)

Mark Massaro, Canaccord Genuity.

Looking at the balance sheet, obviously it's a lot stronger now than it was last year. Can you maybe comment on how this has changed your appetite for doing an acquisition?

And assuming that it's higher, can you kind of comment on what you're seeing in the marketplace? And how maybe the acquisition of a technology or a company might fit in the relative to Sofia, Solana, and Savanna?

Well, I want to be careful with the description of what any specifics are around what we would be looking at, of course. But I would say generally that we continue to look at assets of interest that would give us either improved distribution of our products outside of the US or brand strength in the molecular category or that would give us channel leverage in the physician office lab space.

And further, I'd say that would be accretive and not a distraction from the execution of our organic growth strategy. And then I would add, Mark, that we are not in a hurry.

Great. And could you provide maybe an update on the hCG conversations for CLIA waiver?

Are you referring, Mark, to conversations with the FDA?

Yes. Just what are you hearing in terms of the nature of discussions and when you might be able to obtain the CLIA waiver on hCG.

The conversations that we would have at the FDA specifically would be privileged, of course. But I would say generally that the last set of questions and the kinds of data that they're asking us for are reasonable at this point and would lead us to believe that we would stand a reasonably good chance of having CLIA waiver this quarter.

Excellent. Maybe a final question from me.

I know that you've talked previously about nontraditional settings for Sofia potentially helping to obtain the install target of 20,000 to 30,000. Is there additional information you can provide to suggest that that might be near term or maybe by mid-year of 2015 where we might see something materialize that might accelerate the rate of placements for Sofia?

Most of the businesses that you are referring to that are outside the traditional hospital or physician segment are in what they would call pilot phase where they have a handful of our Sofia instruments at various sites. And so, I don't think it's a 2015 event necessarily but it could have an impact in 2016 certainly.

Great. Thanks very much.

Thanks, Mark.

Zarak Khurshid, Wedbush Securities

Thanks a lot for taking the follow-up, guys. I just wanted to dig into the DHI Flu business little bit.

I was wondering if you could just talk about the kind of the trend in that in the last year. Is DHI Flu a growing business and how does that tend to -- what is the seasonal variance look like in the DHI Flu versus your QuickVue and Sofia businesses? Thanks.

This is a pretty easy one, Zarak. It's basically been flat for some time.

It's a certain subset of the hospital lab segment. It's basically clinical virology labs that are still doing DFA; that hasn't changed much. And the variability that you would see from quarter to quarter almost entirely mirrors what you'd see with our QuickVue and Sofia Flu business.

Okay. Thanks a lot, Doug.

You're welcome.

Mark Massaro, Canaccord Genuity.

Just a follow-up for me. Maybe, Doug, can you walk us through the assay timeline? Or I should say, which tests we're most likely to see in 2015 on Solana?

We said publicly before that our Group A Strep assay and our flu assay are the first two out.

Excellent. Maybe we could see others to follow that later this year?

You'll see more of a description of a menu. Whether any of those gets approved this year is doubtful. But you never know.

Great.

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

Thanks, everyone, for your support and for your interest in our Company. We had a great quarter and I believe that we are well positioned to achieve our growth objectives as we move throughout the year. Take care, everyone.

Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Have a good day. Goodbye.