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Cepheid (NASDAQ:CPHD)

Q1 2009 Earnings Call Transcript

April 23, 2009 5:00 pm ET

Executives

Jacquie Ross – Senior Director, IR

John Bishop – CEO

Andrew Miller – SVP and CFO

Rob Koska – SVP, Worldwide Commercial Operations

David Persing – EVP, Chief Medical & Technology Officer

Analysts

Peter Lawson – Thomas Weisel Partners

Bill Quirk – Piper Jaffray

Quintin Lai – Robert W. Baird

Zarak Khurshid – Caris & Company

Daniel Owczarski – Avondale Partners

Scott Gleason – Stephens Inc.

Brian Weinstein – William Blair

Sameer Harish – Needham & Company

Derik De Bruin – UBS

Bruce Cranna – Leerink Swann

Operator

Good day, ladies and gentlemen, and welcome to the Cepheid's first quarter 2009 earnings conference call. My name is Erica, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Ms. Jacquie Ross. You may proceed, ma’am.

Jacquie Ross

Good afternoon. Thank you, Erica. And welcome to Cepheid's 2009 first quarter conference call. On the call today are John Bishop, Chief Executive Officer, and Andrew Miller, Chief Financial Officer. In addition, joining for the Q&A portion of the call are Dr. David Persing, Chief Medical and Technology Officer, and Rob Koska, Senior Vice President of Worldwide Commercial Operations.

Today's conference call is being broadcast live through an audio webcast, and a replay of the call will be available later today at www.cepheid.com. During this call, Cepheid will make forward-looking statements, including guidance of the future operating results. Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in Cepheid's Annual Report on Form 10-K, Form 10-Q. and other filings with the US Securities and Exchange Commission in addition to today's press release. The forward-looking statements including guidance provided during this call are valid only as of today's date, April 23, 2009, and Cepheid assumes no obligation to publicly update these forward-looking statements.

During the call, Cepheid will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release made available on our website at www.cepheid.com.

Finally, and as a reminder, this conference call is being recorded. With that, I would like to turn the call over to Cepheid’s Chief Executive Officer, John Bishop.

John Bishop

Thank you, Jacquie. Good afternoon, everyone, and thank you for joining us for a review of our first quarter results. In summary, Cepheid turned in a very solid performance despite the challenges presented by broader economic concerns. Financial results were in line with our expectations highlighting our resolute focus on execution and cost control that we intend to maintain.

Additionally, we made important progress on the expansion of our portfolio of Xpert test, which I’ll discuss in more detail later in the call. Total revenue was $38.8 million, with year-over-year growth in our clinical business of $6.1 million partially offsetting the anticipated $12 million decline in our legacy Partner and Biothreat businesses.

Clinical sales now represent about two-thirds of our total product sales, which compares to 42% this time a year ago. By the end of the year, we expect clinical to represent about 75% of our total revenue. This is in line with our strategic vision for Cepheid to emerge as a leader in the clinical molecular diagnostic market.

In total, clinical sales of $23.8 million for systems and test grew 35% year-over-year and included 79% growth in test sales to $19 million. More reflective of the tough capital environment, clinical system sales declined to $4.8 million from $7 million a year ago as customers continued to grapple with budgetary restrictions. Nonetheless 95 new GeneXperts were placed during the first quarter, bringing our global installed based to 1,042. This includes 478 GeneXpert systems in the US and 564 outside the US.

While total first quarter placements compare well to the 99 placements in the fourth quarter of last year, the average number of modules per system on a global basis declined from 6 to 4.6 for the first quarter. This was primarily due to the fact that two-thirds of the estimates were placed outside of the US where systems have historically been smaller.

Within the US, the leading system cabinet continues to be the GeneXpert XVI. However, several factors contributed to the low level of modules per system. First, placements were more concentrated at smaller institutions, who now in large part due to the ease-of-use of the GeneXpert system are in a position to initiate molecular testing.

Second, customers while maintaining flexibility with the GeneXpert XVI system generally purchased modules in line with their immediate testing needs rather than future testing volumes. And third, our sales teams are seeing some traction and placing systems for non-MRSA surveillance applications, which are typically a lower volume.

As a result, the average number of modules per system in the US declined from 9.5 last quarter to 7.5 in our first quarter. However, fully or partially configured GeneXpert XVI systems represented almost 60% of US placements during the first quarter. One of our key objectives is to continue to expand our installed base of GeneXpert systems in the face of ongoing economic uncertainty.

We have therefore developed a variety of programs and available financing options to address varying institutional needs. These programs are working to open doors with capital constrained customers. Additionally, we are developing a refurbished system program, which will provide accounts with the ability to trade in existing systems for higher volume systems such as our new Infinity-48 and to provide smaller accounts and ability to move toward larger systems on a lower cost basis.

Finally, for those customers with only partially filled out systems, we will be introducing special pricing for add-on modules when combined with a purchase commitment for incremental Xpert test on a standing order basis. These programs will be increasingly important in view of our rapidly expanding test menu.

The sequential decline in system placements was fully anticipated in view of today’s market condition. And we are very encouraged by the continued growth in our Clinical Reagent business. For the first time this quarter we are reporting total Clinical Reagent revenue so that you will have increased visibility into our performance beyond the MRSA surveillance test.

This category now includes the entire portfolio of nine Xpert tests in addition to our ASR reagents used on our SmartCycler System and a small contribution from SmartCycler System disposables. Historical results of this new category have been made available for you on the Investor Relations homepage of our website.

Our total Clinical Reagent sales of $19 million were up 14% from last quarter and importantly, up 79% from the same quarter a year ago with nearly every test demonstrating sequential growth, including the MRSA surveillance test. Active MRSA surveillance testing continues to establish itself firmly as an integral element of a successful infection control program, most recently highlighted by Washington State’s newly passed legislation mandating hospitals to test high risk patients.

Washington would be the sixth state to mandate MRSA testing at some level if the bill is signed into law. Including Washington, a total of seven additional states have introduced legislation, which would, if passed, require some level of active MRSA testing. Active MRSA testing also continues to gain ground on an international level highlighted by the April initiation of an active MRSA testing program in England for elective admissions in all NHS facilities.

Importantly, it should be noted that our customers are coming to appreciate that Cepheid offers more than just the market-leading molecular MRSA surveillance test. Notably, about a quarter of the 31 systems reported in the US for the first quarter were placed with orders for two or more Xpert assays. This contrasts sharply with a year ago when the vast majority of our systems in the US were placed on the basis of the MRSA surveillance test alone.

Though it’s too early to assess the full impact of the dedicated account management program we established in January, the early indicators are good with test menu utilization during the quarter and more than a third of our accounts now buying more than one Xpert tests. Additionally, we placed for the first time in the US a GeneXpert along with all five FDA cleared tests. Indeed armed with our largest menu of Xpert test ever, our account managers are starting to build long-term strategic partnerships that we believe will drive both the new adoption and utilization over time.

Looking forward, with Cepheid already well established as the leader in molecular surveillance and diagnostic testing for MRSA, we believe we are well positioned to expand that leadership into HAIs more broadly. Today, I am pleased to announce that we have filed our 510(k) with the FDA for clearance of our Xpert Clostridium difficile test.

We are continuing to plan for a US release during the second half of the year. In the meantime, our research-use-only product is available for customer familiarization. As a reminder, molecular testing offers significantly higher sensitivity and specificity as compared to toxin EIA and GDH tests on the market today. And relative to competing molecular test, Cepheid’s Xpert test offers far greater ease-of-use with the simplest sample prep and maximum workflow capability and flexibility on an on-demand or batch basis.

Additionally, Cepheid’s Xpert C. Diff test is the only test designed to simultaneously and separately report whether a positive patient is carrying the epidemic 027 strain, which is associated with higher morbidity and mortality. So a Cepheid test could identify a sample as possible for C. Diff and presumptively positive for 027, whereas the competing test will simply report out a positive C. Diff result, which might or might not be 027. The separate 027 callout is extremely valuable for infection control purposes and in optimizing antibiotic stewardship within the institution.

Moving to our vanA and vanB tests for VRE, we continue to target FDA submission during 2009 although this might move into the second half of the year. In the meantime, the CE Mark product is available in Europe and is also available on RUO basis here in the US. The revenue contribution for the IVD release of this product represents an extremely modest element of our full year revenue guidance. So the expected timing of the submission will not alter full year guidance.

While VRE tends to garner less media coverage than MRSA or C. Diff, it is still considered one of the big three in hospital-associated infections. So this is an important addition to our HAI portfolio. We also recently expanded our HAI product portfolio with the European market introduction of our Xpert MRSA and SA nasal test as a CE Mark product for use in pre-surgical testing. This test will provide a simultaneous and separate indication as to whether or not a patient is colonized with either staph aureus or methicillin-resistant staph aureus, thereby allowing for decolonization prior to surgery.

This procedure is growing in importance as it is recognized that a significant number of infections may be prevented by eliminating what is essentially an auto infection. A clinical trial is currently underway for submission of a 510(k) to the FDA, which should allow for potential US release before the end of the year.

Beyond our broad HAI test portfolio, our test pipeline is continuing to rapidly develop. Next week we will initiate European release of our Xpert test for multi-drug resistant tuberculosis or MTB/RIF. Xpert MTB/RIF not only detects the presence of tuberculosis, but also identifies whether it’s resistant to Rifampicin, a common first line drug for treatment of the disease and a reliable surrogate marker for strains that are multi-drug resistant. Often this is referred to as MDR TB.

This product is particularly exciting for a number of reasons. First, we believe it is the most technologically advanced test for tuberculosis ever developed. Yet it is simple enough to be performed in all corners of the world, including resource-limited settings in developing countries where it is most needed. The Xpert MTB/RIF test is also the first product to utilize our new reagents onboard configuration.

This new test configuration includes the packaging of liquid reagents along with the previously included dry reagents in the test cartridge. This added feature makes the test even easier to perform and further reduces hands-on time to about one minute. The new test configuration is also expected to form the foundation of Cepheid’s projected future line of clear wave [ph] products.

Additionally, with the launch of our compassionate sales program, we are proud to be working with FIND to address the 2 million lives lost each year to tuberculosis in the developing world. Separately, we are looking to leverage the product in the international for-profit market where more than 1.2 million tuberculosis tests are performed annually.

Meanwhile in the US, we are also expecting clearance to market our Xpert HemosIL Factor II and V product during the year. This product was developed on a collaborative basis with Instrumentation Laboratory who will distribute the test on a worldwide basis.

We are also in development and expect to release our first product for the detection of sexually transmitted diseases in 2010. This product is expected to provide the ability to simultaneously detect and separately identify Chlamydia and gonorrhea organisms in under 40 minutes. We are receiving a high degree of interest in this product as labs are looking to further decrease their cost by bringing in tests such as this in-house versus sending them out.

We believe that our ever-expanding Xpert test menu will position the GeneXpert system to become the molecular platform of choice offering a unique ease-of-use and flexibility that enables more efficient lab workflow, improved patient care, and cost-effective bed management.

In view of our expanding test menu and interest in employing the GeneXpert system in high volume settings, the new Infinity-48 is taking on increasing importance. Given the potential position of the system as the key central lab molecular workhorse, it will be important that the Infinity system with its robotics will have the same high level of reliability as that already demonstrated by our other GeneXpert systems. Therefore we have decided to withhold shipment of production systems until the end of the third quarter to complete remaining reliability testing.

In conclusion, Cepheid had a solid first quarter, particularly taking into account the severity of the economic downturn. We executed well against our financial plan, implemented what we expect will prove to be some of very important transitions within the sales organization and continue to make substantial progress in the development of our test pipeline.

With that, I’ll hand the call over to Andy for a more detailed look at our financial results. Andy?

Andrew Miller

Thank you, John. As always, please note that I will be discussing our non-GAAP results unless I indicate otherwise. First quarter revenue of $38.8 million was up 2% sequentially, but down 14% year-over-year due to the anticipated declines in our Biothreat and Partner businesses of almost $12 million. Of total revenue, product sales comprised $36.6 million and other revenue consisting of contracts, grants and research was $2.2 million.

Total clinical revenue of $23.8 million represented a 35% growth over the same quarter a year ago. Clinical revenue comprised $4.8 million in Clinical System sales and a record $19 million in Clinical Reagent sales. System sales, as John discussed in detail, declined as expected due to the broader economic environment. Clinical tests and reagents, however, grew 79% year-over-year and 14% sequentially, driven by both strong growth in our MRSA surveillance product as well as growth broadly across our expanding Xpert test portfolio.

In total, the clinical business now represents 65% of our total product sales, which compares to 42% in the same quarter a year ago. Biothreat sales of $7.9 million were about $4.6 million lower than the year-ago quarter, highlighting the tough year-over-year comps (inaudible) its non-core legacy businesses continued to decline as anticipated.

Sequentially, Biothreat sales increased from $5.2 million last quarter, reflecting the regular distribution of the post offices 1 million test minimum annual commitment. Consistent with this scheme, our Partner business, formally called Clinical Partner, declined to $1.2 million from $8.1 million in the same quarter last year and $2.6 million last quarter. In Q1 ’08, Clinical Partner sales represented some 19% of our total product sales. In Q1 ’09, this legacy element of our business has declined to 3%. Finally, industrial sales of $3.7 million were relatively flat to the same quarter last year and to last quarter.

Moving to the income statement, first quarter non-GAAP gross margin of 45.8% was down slightly from both the last quarter and the year-ago results, driven by lower labor and overhead absorption. Generally, non-GAAP operating expenses trended downward for the second consecutive quarter, reflecting cost reduction and containment actions during the quarter.

Recall that fourth quarter operating expenses benefited from the one-time reversal of bonus accruals and the one-time gain from a legal settlement. We remain committed to firm cost control to contain expenses as our top line grows, although the timing of clinical trials and marketing events among other things will continue to introduce variability into the trend line.

Moving to the balance sheet, cash, cash equivalents and investments net of debt associated with our auction rate securities was $36.6 million as of March 31, 2009, an increase of almost $2 million. Cash and cash equivalents were $26.8 million, an increase of $3.3 million from last quarter.

Investments at $24.4 million reflect the fair market value of our $25 million par value auction rate securities in addition to the fair market value of the option which enables us to put the ARSs to UBS at par value, starting in June 2010. Next quarter, these investments will be reclassified to current assets, as we will then be within one year of the exercise period of the Put.

Improvements in working capital management contributed to improve cash flow from operations during the quarter of $3.2 million despite a larger net loss. DSO was strong at 43 days, down from 46 days last quarter. And days payable outstanding increased. However, inventory increased by $2.2 million primarily due to strategic buys in support of our manufacturing. Clearly, we have more opportunity here. And improving our working capital management will remain an area of intense focus going forward.

Capital expenditures during the quarter were $1.4 million, reflecting progress on our objective to reduce full year CapEx by up to one-third relative to the $15 million invested in CapEx in 2008. Overall, cash flow benefited this quarter from one-time working capital gains. So we do expect continued fluctuation even as we work to narrow our net loss.

That said, we believe that this quarter’s positive cash flow from operations further highlights the strength of our balance sheet and our belief that we will not need to raise capital to finance operations. We are taking steps, however, to maximize our flexibility in cash management, as you would expect. For example, we’ve transitioned our hedging program this quarter to a bank that did not require us to hold $1.5 million in restricted cash. And we shortly expect to add new credit facility, which will add additional flexibility in the management of our capital structure.

Moving to guidance, there is no change to the full year guidance we issued on our February call. For the full year ending December 31, 2009, Cepheid expects total revenue in the range of $164 million to $174 million. As a reminder, we expect Biothreat revenue to approximate $24 million for the year, with $7.5 million in the second quarter and $3.5 million in the third quarter.

The purchase order for the US Postal Service’s next fiscal year that begins with our fourth quarter 2009 will not be received until later this year. So the fourth quarter amount can vary. Partner revenue is expected to total approximately $3 million to $4 million for the full year.

Moving to the bottom line, we continue to expect GAAP loss per share in the range of $0.42 to $0.47. Excluding stock compensation expense of approximately $16 million, amortization of acquired intangibles of approximately $1 million, and restructuring expense of approximately $700,000, we expect non-GAAP loss per share in the range of $0.11 to $0.17.

I’ll now turn the call back to John.

John Bishop

Thanks, Andy. Before we open up the call to your questions, I’d like to make a few closing remarks. First, we have not seen and do not anticipate any relaxation in the very constrained sales environment that we have experienced since late December of 2008. As we gain experience in operating in this unprecedented environment, we are adapting our sales tools to leverage the truly compelling nature of our GeneXpert system and the increasing breadth of our test menu.

We hear constantly that the GeneXpert is the system that lab directors want in their labs. And we believe we have identified some creative opportunities to place the system without calling on capital budgets in the medial term. Second, while we are respectfully mindful of the progress needed to achieve profitability, we are satisfied with our first quarter results and committed to ongoing rigorous cost control.

With $36.6 million in cash and investments net of the auction rate security related debt, we believe that we are comfortably able to fund operations until we achieve profitability. I repeat last quarter’s firm commitment that we do not foresee the need to raise capital for operating purposes.

Finally, I’d like to thank our employees who like so many others in this downturn suffered a headcount reduction in early February, but nonetheless delivered a very solid quarter performance without ever compromising Cepheid’s commitment to quality. It is this commitment coupled with our unmatched ease-of-use and expanding test menu that we believe is enabling the GeneXpert system to become the molecular platform of choice in both traditional and non-traditional testing environments.

And with that, operator, we are ready to open up the call to questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Peter Lawson from Thomas Weisel Partners. You may proceed.

Peter Lawson – Thomas Weisel Partners

Hi, John.

John Bishop

Hi, Peter.

Peter Lawson – Thomas Weisel Partners

I wonder if you can give us an indication of those 95 systems, which were new. Was there any trade-ins? Or if so, it is cash or were they rented?

John Bishop

The systems, as we’ve indicated, Peter, with the programs we have actually quite a number of programs that allow placement of systems on both on a capital basis in that arena. Of course, there is outright purchase. We have capital leases available. We also have a program that has bridged capital, which allows them to obtain a placement on the system and then they have purchased the system generally running at about 6 to 12 months time frame. And then on a non-capital basis, we have the operating lease program that we initiated in the January time frame. So it’s actually a combination of all of these programs that are utilized for the 95 systems that you see placed there.

Now specifically in Europe, you want to remember that large number of our systems are sold through distributors. Reagent rental is really the norm of business for Europe. However, the distributor carries that responsibility purchasing the product for us. We then recognize that revenue immediately. Now, where that differs is, for example, where we are direct primarily in the UK where systems there we do place on a reagent rental basis. We are carrying those systems on our books as we place them. However, we have secured financing for those systems, so we are not impacted on a cash basis. So it’s a combination of all of these programs.

Then don’t remember, I’m frankly pretty excited about the refurbishment program that we are coming up with. We are getting ready to implement that. And that one will be directed, as you have indicated, on trade-up programs. Frankly, I named the XVIs, but we are extending it to GX-IVs. So people who have a GX-IV want to trade it on a XVI or more go to Infinity-48. These programs are going to be available. We’re also seeing good interest in accounts who want to enter a system even with a IV on lower cost basis or more readily on a XVI on lower cost basis. So I think it’s going to be a very good program.

Peter Lawson – Thomas Weisel Partners

How about changes from last quarter? Is it now like 20%, 30% of placements are going to these alternative strategies?

John Bishop

Right now, Rob, I’ll ask you to –

Rob Koska

Yes. What we have seen is, we have seen an increase in the bridging – utilizing of the bridging program. That’s what we call our pawn program where somebody brings in the instrument, the instrument does carry with it a surcharge on a per-test basis, and then they generally commit to buying out that instrument between 6 and 12 months. Generally it’s usually about six months. And so we did see an increase in the utilization of that program during the first quarter. And these are for institutions that are anticipating a free-up of capital a little bit later in the year, as well as a number of institutions that do have the capital but they are looking to be able to keep powder dry at this point due to the economic uncertainties.

John Bishop

So clearly there, Peter, we reflect the placements that we don’t recognize the revenue until that six-month period that Rob was talking about.

Peter Lawson – Thomas Weisel Partners

The gross margins in the quarter, they look under pressure. What’s happening there?

Andrew Miller

There are two factors there. So one is our – actually we indicated this in the fourth quarter call. We expected it during the year. Our European manufacturing facility has primarily been supporting reagent production for our partner reagents, which of course that has gone down to much lower number than it was last year. So we have under-observed overhead related to that. And that will continue to most of the year until they really ramp up and begin producing some of our HAI tests that we’re producing there in the latter part of the year. The second factor is we look at the remaining use for lives [ph] at some of our licenses. One of those, we pulled in. We shortened the remaining use of lives. So we have increased amortization, which is a non-cash cost. But we just increased amortization related to a large license that basically is about a half point or 50 basis points of gross margin impact as you compare to last year, last quarter.

Peter Lawson – Thomas Weisel Partners

Thank you. And then just finally on the C. difficile FDA submission, it seemed to be a bit of a delay there. What happened?

John Bishop

Actually there was no delay, Peter. We tracked per-hour plan. We have been indicating right along they expected to get that submission in during the first half of the year with them, expected release during the second half of the year. And we are tracking as per what we expected. I would add to that – I will expand on that for you that – actually that submission was, in my view, with our regulatory team, one of our best submissions, have been very well done. And the data looks every bit as good as what the data we saw on the beta trials.

Peter Lawson – Thomas Weisel Partners

Okay. Thank you so much. I’ll get back into the queue.

John Bishop

Thank you.

Operator

Your next question comes from the line of Bill Quirk from Piper Jaffray. You may proceed.

Bill Quirk – Piper Jaffray

Thanks. Good afternoon.

John Bishop

Good afternoon, Bill.

Bill Quirk – Piper Jaffray

John, I know you don’t want to go into the exact MRSA results any more. Our math is just a low-teens level sequential growth, pretty much in line with the sequential move for the clinical business. Is that – am I roughly in ballpark?

Andrew Miller

We are not going to give product details. MRSA really continues to be an important driver of our reagent growth. And we think that it will continue to grow as we move forward. We are very early still in the MRSA surveillance market development.

John Bishop

So I think – you know, just to add a little bit of color there, Bill, so we did see growth in the US and the international markets, as you would expect, particularly with the initiation in April of the NHS program in England.

Bill Quirk – Piper Jaffray

Okay, very good. And then, John, just want to switch over to the recent IL distribution relationship, do you have any background on what their sales force looks like? I think you mentioned it was a worldwide deal, so you don’t happen to have some maybe even rough figures for US, Europe and Japan?

John Bishop

Well, it’s going to be an interesting phenomenon. I don’t have rough figures for you there. IL is actually positioned well primarily in Europe. They are actually owned by Werfen. So they are part of the Werfen Group. So they are actually relatively sizable with regard to their overall capabilities. Now, interestingly in the US marketplace, they have distribution rights to the test. However, within the US market on their hemostasis test, those products are distributed for them by Beckman Coulter. So ultimately this is going to be handled with Beckman Coulter in the hemostasis laboratories in the US market.

Bill Quirk – Piper Jaffray

And that was kind of where I was going, John. And so, have you – I guess you have to put a separate agreement together with Beckman then, or does this potentially fold into their existing arrangement with IL?

John Bishop

It folds into their existing arrangement with IL.

Bill Quirk – Piper Jaffray

It does. Okay, all right. That’s very good, very clear. Thanks much.

John Bishop

You’re welcome.

Operator

Your next question comes from the line of Quintin Lai from Robert W. Baird. You may proceed.

Quintin Lai – Robert W. Baird

Hi, good afternoon.

John Bishop

Good afternoon, Quintin.

Quintin Lai – Robert W. Baird

With respect to the new placements that you had, looking at I guess where they are going or who is buying them, how much of it do you think was influenced by things like the UK startup and perhaps maybe California? Or how much of those were I guess customers that have been evaluating through 2008 and finally we are able to find the money in first quarter of 2009?

John Bishop

So, no surprise to you. I mean, you’ve got an element of all of those that we are involved there as we look at some of the ’08. We mentioned – as Rob has mentioned, some people will wait [ph]. There was a wait-and-see. And they want to hit and pull the trigger on those. I would also say, in the US, some of these were as a result of our new sales reps that are out selling tests out there. So we are seeing increased interests frankly for some of them first time where incremental (inaudible) are being placed not because of MRSA surveillance, but because of some of the other products like the GBS or the enterovirus products there. Now internationally, which is part of your question, yes, we saw some placements with regard to England on the NHS program. That though was just really getting going, but didn’t become effective until the 1st of April. We are seeing other activity, and we continue to do very well in other parts of Europe, particularly in Germany.

Quintin Lai – Robert W. Baird

With respect to I guess the competitive landscape, could you give us kind of any update on how your placements are fairing I guess when you go head-to-head with your other large competitor?

John Bishop

Yes. Well, with our one competitor relative to the MRSA surveillance market, we continue to take substantially more than the lion’s share of the marketplace. We also continue to pick up takeaways in that area. We continue to hear about the problems on the manual sample prep and all the problems associated with that in regard to the batch testing programs. The other items that we are hearing is that, no surprise that people just love the GeneXpert and that they really like the ease-of-use.

And importantly, they also like the accuracy of the system. And that’s one of the items that – you know, all of us have spoken about that some in the past, but I think it’s something that is a point that’s really missed on the GeneXpert. And that is not the fact that it’s just easy to use. What’s missed is how powerful the GeneXpert really is with regard to giving very accurate, high quality results on a consistent test-to-test basis. And boy, I’ll tell you why.

You really see that with our test that I announced we are releasing next week in Europe on the tuberculosis product. I mean, that product had never before seen levels of sensitivity on smear-negative, culture-positive cases of TB. So I can tell you that the scientists that we are seeing there are just very excited by what they are seeing there. So the other aspect that we are seeing is on the C. Diff on a different arena.

A couple of things are happening there. A lot of people are really seeing the issues with regard to the lack of sensitivity with the EIA constant test. It’s also true for the GDH test irrespective of what the package instruction sheet on the GDH test says, and the hands of the laboratories, they are not getting high levels of sensitivity. They are highly expecting the molecular test. But what we are hearing is a lot of them are really waiting and wanting the GeneXpert again because of the ease-of-use. And we actually have in that arena molecular-wise now two competitors, both of which are batch test oriented, a lot of hands on work in that area, and a big problem.

The other item that we are seeing also is interest in the multiplex that we are giving on the GeneXpert. And the C. Diff is a good example of that. I mean, the C. Diff is the only fully solution to the C. difficile problem within the hospitals. In that, we are multiplexing. We have three different targets that we are actually reporting out there compared to a single target coming for the others. So it’s a compilation of all of these areas, and we are hearing for ourselves. I mean, when we go out – when I go out on the field and I’m doing non-deal investor presentations, I’m hearing constantly that people were saying, look, we’ve been on our own due diligence and there is nobody we are talking to who really doesn’t want a GeneXpert. So what we are focused on is to turn that want into reality with all these various programs we’ve been talking about.

Quintin Lai – Robert W. Baird

Thank you very much.

John Bishop

You’re welcome.

Operator

(Operator instructions)

Jacquie Ross

Erica, do we have our next set of questions?

Operator

Your next question comes from the line of Zarak Khurshid from Caris & Company. You may proceed.

Zarak Khurshid – Caris & Company

Hi, good afternoon and thanks for taking my questions.

John Bishop

Hi, Zarak.

Zarak Khurshid – Caris & Company

Right. Could you perhaps talk to us about the cartridge stocking and inventory levels in light of some of the reductions that occurred in the fourth quarter?

John Bishop

Rob, do you want to take that one?

Rob Koska

Inventories due to operating constraints went down in the fourth quarter. And we’ve seen a continuing concern on operating budgets at this point. But that’s been offset by new accounts that have been brought on. So we don’t really see an issue there. I think it’s unusual at this point that any customer in these lean times are keeping more than 30 to 40 days worth of inventory within their facilities.

Zarak Khurshid – Caris & Company

Okay, great. And then in terms of – speaking of new customers, can you just talk to us a little bit about the systems that were placed kind of later last year, third quarter or fourth quarter, and what appeared to be kind of maybe a lag phase in those folks turning on the instruments? I guess, how maybe those folks finally coming around contribute to the first quarter solid performance that we saw with the consumable threat [ph]?

Rob Koska

Well, I think that speaks to one of the considerations of having our MPC [ph] sales force out there and establishing those relationships with the customers and assisting them with our FTSSs in getting assays that are up and running. We saw a nice increase in the number of accounts that are starting up a little bit more quickly, as well as accounts that are bringing on additional assays. So although results are early, we are very pleased with the impact that those account managers are having versus the approach that we had last year where our sales force would sell a system and then move on to the next opportunity.

Zarak Khurshid – Caris & Company

Great. And then a quick follow-up. Could you just remind us what’s happening with the VA currently? Did we see an expansion of any other programs recently?

John Bishop

Well, actually on the VA, we’re not going to be breaking those out separately. But I will say, as you already know, I mean we have over 90% penetration of the VAs. So from an account standpoint, that continues very nicely. Relative to utilization, yes, we did see the VAs move toward all admissions testing. They are continuing in that vain. In addition to that, there were a number of meetings held. Just recently, Dave Persing was just at a meeting specifically focused looking at staph, and the VAs were reporting on their very, very good success rate and the utilization of their program in reducing rates of infection. Now, Dave, if you want to make any comment on that?

David Persing

Yes, they have been reporting in various venues, including NPR and Wichita, from Wichita VA to this recent staph meeting their successes in reducing MRSA infection rates overall. And the most recent staph meeting was actually a VA system-wide interim report that went through both the success rate in their ICUs and in their general medical population from the entire VA system with all the data compiled at a central site. So that would constitute the largest cohort of hospitals and patients ever evaluated in this capacity. And it was rather a remarkable reduction they were able to achieve. And that was just after the first year of implementation, which was a partial year for many VAs just getting their ICU started for many of them early in the year and then moving toward outpatient testing later in the year for many of them.

Zarak Khurshid – Caris & Company

Sounds good. Thank you.

David Persing

You’re welcome.

Operator

Your next question comes from the line of Daniel Owczarski from Avondale Partners. You may proceed.

Daniel Owczarski – Avondale Partners

Yes, thanks. And congratulations on your performance in the quarter.

John Bishop

Thank you, Dan.

Daniel Owczarski – Avondale Partners

John, you talked about the FDA and the C. Diff test. I was just curious as to whether you are dealing with a review team there that is familiar with your technology or could there be an extension of the timelines because it’s a different review team that’s not familiar with the GeneXpert technology.

John Bishop

Well, we are dealing with likely a reviewer hasn’t been assigned yet. However, this particular division or group that this goes into is one that has a lot of experience with our technology.

Daniel Owczarski – Avondale Partners

And so could that lead to shortened review time?

John Bishop

Well, certainly all of those things can contribute in help. I mean, the FDA needs to do its own thing. I think the main thing that I can say about that is, the quality of the release that was turned in and the quality of the data from our perspective was very good, but we will have to see where that goes.

Daniel Owczarski – Avondale Partners

Okay. And then you talked about the Infinity possibly holding that off until maybe the third quarter. Could you talk a little bit more about what you want to do there to fine tune it?

John Bishop

Yes. The new thing that’s really the big new item for the Infinity of course is the robotics relative to the robotic automated sample insertion and then removing the cartridges. And we really want to be sure of that. That is thoroughly put through its paces, and we’ve got units running. So we want to do extended reliability testing on them. I mean, we are seeing basic meantime between failure over two years at this point on the GeneXpert series of systems, which is very, very good. And we want to be sure that we maintain that track record as we come with the new robotic-oriented system.

Daniel Owczarski – Avondale Partners

Okay, thank you.

John Bishop

You’re welcome.

Operator

Your next question comes from the line of Scott Gleason from Stephens Inc. You may proceed.

Scott Gleason – Stephens Inc.

Hey, John, Andy, congratulations on the quarter and thanks for taking my questions.

John Bishop

Hi, Scott.

Scott Gleason – Stephens Inc.

First, I was wondering – could you maybe give us a little more definitive timeline on when you actually submitted the C. Diff submission to the FDA? Just give us a little bit better idea there.

John Bishop

Sure. The C. Diff submission actually went in on April 15. So they received it. So it’s logged in. So the date you want to use is the log-in date, which is April 16.

Scott Gleason – Stephens Inc.

Okay, great. And then, John, you talked about the research-use-only product being available. Does that allow labs to complete the validation process ahead of time once the actual pivotal times are ready to go?

John Bishop

Well, it certainly helps them become familiar with the product. So they are used to the product and they are much more ready to go once we get clearance.

Scott Gleason – Stephens Inc.

Okay, great. And then, John, just looking at the market United Kingdom a little bit, it sounded like that’s more of a second quarter event. Can you maybe provide us little more granularity on what the contribution for this quarter and then what maybe to expect as we look forward here?

John Bishop

Well, as you would expect us just getting going given April 1 formal start date with the program, I will say that we have got about seven people on the ground over there now. We did acquire the distributor operations. So we have management on the ground there. We are getting a nice funnel built up of opportunity over there. So that’s progressing.

Scott Gleason – Stephens Inc.

Great. And then, John, one last question. I know you guys aren’t going to give out the actual MRSA number. Could you maybe talk about utilization rates and the metrics that you saw there in the quarter and just talk about kind of how utilization trended for most of your accounts?

John Bishop

Well, I think generally – you know, as you look at utilization, the key area that’s kind of similar to a lot of these states right now that the primary focus still continues to be on the high risk patient areas. You’re getting nominal movement beyond the high risk is setting. I think potentially if we get the economy to start to get back to normal here, then we may get some more movement there. But I’d say primary focus right now is still in the high risk setting scenario.

Scott Gleason – Stephens Inc.

Okay. Thanks for taking my questions.

John Bishop

You’re welcome.

Operator

Your next question comes from the line of Brian Weinstein from William Blair. You may proceed.

Brian Weinstein – William Blair

Hi, good afternoon. Can you just talk about what you expect from market conversion to molecular for C. Diff in 2009, 2010 and beyond?

John Bishop

Well, I think clearly – Brian, you bring up a real good point. There is the whole – the C. Diff program is totally different than the MRSA surveillance program. With that, there what we are doing is displacing an entrenched competitor. In that, that area has been there for quite a period of time. That being said, however, I can’t tell you that our view is that there is a pent-up demand within the clinical community in the US marketplace for getting much more accurate at rapid results. So I don’t have some specifics for you obviously, but we do expect a relatively strong movement toward molecular with the C. Diff product coming into the marketplace.

Brian Weinstein – William Blair

Okay. And you’re still looking to price that product at I believe you had said $45 previously, is that still accurate?

John Bishop

That is correct.

Brian Weinstein – William Blair

As far as on the working capital side, it was better – it was pretty good in Q1, but inventories were still up. When do we start to see this come down a bit and where would you like to see it, let’s say, later in the year, at the end of the year?

John Bishop

Well, we do expect that to be coming down as we progress into the year. As Andy indicated in his comments, there we did make a strategic buy. We make those periodically. So that puts some lumps into the inventory. We took it back up as we are working on taking it down. So we expect that to be more effective during the year, of course later in the year to move those turns up a bit. So I don’t have a specific number there for you, but I do expect it to step up at a measurable amount versus where we are right now.

Andrew Miller

(inaudible) as we have a very definite and detailed plan that takes into account our forecast in our build [ph] plan to actually improve the inventory turns throughout the year. But inventory turns don’t improve in a single quarter based upon the supply chain arrangements you’ve got in place.

Brian Weinstein – William Blair

Okay. And then pricing on your reagents, including the surveillance assay, how did that hold up in the quarter?

John Bishop

Actually we are doing well overall with our pricing on our products. A lot of our customers are seeing the clear value proposition that we are talking about here on ease-of-use. We are coming though with programs directed toward menu utilization. So, for those customers looking at volumes, they were looking at three things. They are looking at volume, menu utilization relative to the number of individual tests that they are using, and in addition to that, putting customers on to a standing order basis. So for those customers that are looking to take out all three of those, they are going to get their best price point. And for some of those who are working on a program that will be new in that area that is going to be using a lot more of the matricing [ph] the breadth of menu along with standing orders.

Brian Weinstein – William Blair

Okay, great. Thanks, guys.

John Bishop

You’re welcome.

Operator

Your next question comes from the line of Sameer Harish from Needham & Company. You may proceed.

Sameer Harish – Needham & Company

Hi, guys, this is Sameer from Needham. How are you?

John Bishop

Good, Sameer. How are you doing there?

Sameer Harish – Needham & Company

Wonderful. And thanks for taking the question. I’ll keep it brief, we’re getting to the end here. Was there any change in pricing module system reagents-wide from the company this year – or this quarter rather and do you expect any more this year?

John Bishop

Well, we did not increase any prices. Contrary to what I’ve seen in the news just recently was some of pharmaceutical industry. But on I think where you’re going, on a price decrease part, no, we did mention in my prepared comments that we have a program there where for those customers who have GeneXpert for the cabinets that are not fully filled out that we did put in place a program that they can get modules on a lower cost basis in combination with again breadth of menu utilization and going on a standing order basis. So we are going to be continuing that program. And then of course, we have the new refurbishment program that will give them the ability for trade-ins and trade-out.

Sameer Harish – Needham & Company

Okay, that’s fair. I think this was the second quarter – you know, you mentioned last quarter that you saw the decreases in the modules for systems and appreciate the color you gave this quarter. As we move kind of into the end of April, are you seeing some stability on that side now as to the number of modules that you are seeing –?

Andrew Miller

(inaudible)

Sameer Harish – Needham & Company

I’m sorry?

Andrew Miller

Sameer, it was up last quarter and it was down this quarter for the reasons John discussed.

John Bishop

Yes. I don’t think relative to number of modules per cabinet, right now I don’t think you’re going to see a consistent trend frankly, Sameer, one way or the other. And the reason why I say that is that there are a couple of factors. One, we have done a pretty good job in the high volume accounts historically already. And so as a result, we are now going into the smaller institutions translation taking fewer modules per cabinet.

I do think that it was very telling that even as the smaller institutions are coming with GeneXpert systems, that’s still 60% that are going with GX-XVI cabinet. So that says a lot about capacity and what we will be able to add into those accounts in the future. So – but then running counter as we see accounts coming on adopting more menu utilization, I think that this could come back and cause people to flush out systems that weren’t previously later in the year as we are delivering the Infinity. Of course, that’s going to take the modules of course quite a bit opposite direction. So it will be higher.

Sameer Harish – Needham & Company

You guys had great expense controls this quarter, particularly on the sales and marketing line. Was the re-org that you announced in February the primary contributor to this? What do you expect going forward? Do you expect continual declines in –?

John Bishop

I expect this a little bit. We step up a bit in some of the quarters coming up because one of the issues from a sales and marketing standpoint, you don’t have a lot of your tradeshows during the first quarter. Those really start to tick in during the second quarter of the year. So you will get some step-up in expenses there. Later in the year, as we are introducing the new products, the C. Diff, the vanA/vanB, ultimately the pre-surgical testing, MRSA/SA testing product, you have expenses associated with those launches. Now on the R&D side, you have some quarter-to-quarter variability that comes from clinical trial cost. So in the first quarter, we had wrapped up and we are wrapping up these C. Diff and the vanA/vanB. Right now we are in the midst of the clinical trial for the MRSA/SA nasal product. So that will be a step-up in clinical trial expense.

Sameer Harish – Needham & Company

Okay. Last question, you talked a little bit about reagents onboard again in the US. As I understood from last quarter, you sort of delayed that program. Are you beginning to reinvest in that again?

John Bishop

Well, we have consistently been investing in the reagent onboard program quite a lot [ph]. We have never backed up on that. That’s been very, very consistent. However, admittedly that’s a complicated program. I mean, nobody is frankly that I’m aware has ever put in these kind of vessels dried reagents on board with the liquid reagents all at the same time and get the type of stability that we are seeing with our product. So we had not been – we wanted to be conservative on when were we going to roll that out because we want to be sure that longer term stability was holding. Everything is looking good. And so that’s why we are coming with the product right now.

And of course, it’s a real value-add immediately to the tuberculosis product, because on a compassionate basis, that’s going to be going frankly out to some under-developed outlying areas. And those people are really going to appreciate the ability to put that specimen in the cartridge and close the lid, and that’s all they do. So it will be a real benefit for them. We are going to be looking to then roll that in to the rest of the menu, particularly starting with the MRSA product. So that’s going to give some nice ease-of-use benefits coming up.

Sameer Harish – Needham & Company

Do you have a sense of when you might be able to introduce the reagents on board for MRSA in the US?

John Bishop

Well, that would be a later, possibly – I don’t want to give you any definite – possibly later in the year this year.

Sameer Harish – Needham & Company

Wonderful. Thank you.

John Bishop

You’re welcome.

Operator

Your next question comes from the line of Derik De Bruin from UBS. You may proceed.

Derik De Bruin – UBS

Hi, good afternoon.

John Bishop

Good afternoon, Derik.

Derik De Bruin – UBS

I guess when we start thinking about the market for the new TB test, I guess how do we think about the price per cartridge there and I guess the market opportunity?

John Bishop

Okay. So primarily in the developed markets for Europe – Rob, do you want to comment on this?

Rob Koska

Yes. It’s 50 euros. That’s where we are pricing it.

Derik De Bruin – UBS

I’m sorry, what is that?

Rob Koska

50 euros. And it’s priced in euro because that’s the first place that we are launching the assay for non-compassionate use in Europe.

Derik De Bruin – UBS

And then the test opportunity in Europe for that level product?

Rob Koska

You know, roughly about 1 million tests.

Derik De Bruin – UBS

Okay. I guess – I mean, how successful we’ve been in over the last couple of years and been able to bring down the cartridge manufacturing costs? I mean, have you gotten to the point where if you wanted to be a little bit more aggressive in terms of pricing, you wouldn’t hurt your gross margins significantly?

John Bishop

So far as building flexibility and elasticity into our capability there, Derik, we’ve made very good progress. On that, I don’t want to give you any specifics on that. But a short answer to your question is, yes, we are in a good position in that area. I think it’s got to be important though and it’s really interesting. The comment I’ll give you with the Obama healthcare initiative is I think the real benefit coming out of the initiative frankly is going to go to diagnostics.

And it’s going to be paying more money for the diagnostics, and it will actually bring down the overall cost of health care and it’s really going to probably in the negative side impact the pharmaceuticals. I mean, right now if you look at the value or the expenditure for diagnostics, only about 2% of healthcare goes to diagnostics. And by spending more there we will actually bring down cost. And so I think in that regard frankly we are well positioned. On the flipside, are we building in elasticity into our cost basis, the answer to that is yes. And we have a number of things in line that we are working on there.

Derik De Bruin – UBS

Are you aware of any I guess pending publications or ongoing large scale studies basically doing head-to-heads with (inaudible) culture testing, the molecular testing, and basically just trying to get a little bit more I guess need around the argument on the benefits of molecular testing. I’m just – I’m still looking for when do the professional organizations start to come more on board with molecular testing. Are you aware of anything that’s in the environment that might push that for it?

John Bishop

Yes. There’s actually a couple other in the works. One very significant paper that was presented at the recent infectious disease meeting over the summer and then again at the staph meeting in Hawaii is one that it was a study performed in the Netherlands looking at decolonization at admission of patients who test positive for staph aureus and the impact on reducing surgical site infections and infections at all sites in that patient population.

We have a very dramatic impact of about 80% reduction in surgical site infections and about a 60% reduction in all medical complications of staph infection. That paper is going to be – we expect – we heard that this is going to be published within the next four to five months. The bottom line is that that’s going to have a big impact we think on the practice of managing patients as they come into the hospital, especially patients who are just in to have surgery in the hospital setting, because something very definitive can be done for those patients to reduce their individual risk for auto infection, for developing infections themselves from their own nasal carriage. Likewise that’s going to have benefit for infection control programs because there are fewer patients turning into the hospital who are colonized, who can serve as a reservoir for further transmission of MRSA. So we think that’s going to have a big impact.

The other study I would point to is our own study, which is one of the largest multi-center studies of culture versus molecular testing that was recently published in the leading molecular – leading microbiology journal, J. Clin. Micro. And then finally, there are other studies including the write-up of the VA experience that we would expect to see published at some point in the next perhaps 12 months or so.

Derik De Bruin – UBS

Great.

Rob Koska

What about some of the GBS studies?

John Bishop

Yes. Actually there is couple of important GBS studies that are in consideration for publication now that we are aware of that. Look at comparison of intrapartum testing methodologies comparing just culture done intrapartum versus PCR done intrapartum. And they are showing very comparable performance between culture and PCR. But most importantly, they were identifying patients who were not identified as colonized by GBS during antepartum testing, who were later proven to be positive by culture on intrapartum basis and thus are at risk of transmitting GBS to their neonates. The GeneXpert is perfectly capable of identifying those patients intrapartum. And these papers are highlighting utility of intrapartum GBS testing on the GeneXpert discussion a couple sites in Europe.

Rob Koska

This is Rob Koska. I just would like to be able to comment on that from a practical standpoint and what we are seeing in the field, not necessarily being driven by studies, but for instance, the State of California, of course it’s mandated testing. And laboratories wanted to take the path of lease resistance and a number of laboratories of course started doing culture. As you know, the availability of qualified personnel is somewhat short. And the labor component and being able to do culture is fairly large. And so what we are finding almost as a little bit of a delayed response to the legislation is people are coming to us and they are saying, you know what, we are trying to set up culture. We can’t keep up with the workload. We are looking for solution like the GeneXpert. And those are – that situation is causing customers to re-engage with us at this point.

Derik De Bruin – UBS

Great. Thank you very much.

John Bishop

Thanks, Derik.

Operator

And your last question comes from the line of Bruce Cranna from Leerink Swann. You may proceed.

Bruce Cranna – Leerink Swann

Hi, good afternoon.

John Bishop

Good afternoon, Bruce.

Bruce Cranna – Leerink Swann

John, sorry if I missed this. The 95 placements in the quarter, did you guys break it up between US (inaudible) or rest of world?

John Bishop

We did. There were 31 in the US or North American placements, 64 for international.

Bruce Cranna – Leerink Swann

And can you give us any sense of how many placements were new accounts (inaudible) there?

John Bishop

Well, essentially these are all new accounts that they are coming in there while you are talking about placements, how many were new account versus multiplexes.

Rob Koska

All except the two, where two accounts purchased their second system.

John Bishop

Right.

Bruce Cranna – Leerink Swann

I’m sorry, can you say that again?

Rob Koska

All were new accounts except for two, in which those two accounts purchased their second systems.

Bruce Cranna – Leerink Swann

Okay. Thank you. That’s helpful. And then thinking about the Infinity-48, John, is there a level of module use today that we kind of think as a cut point? In other words, when you do get to rolling that instrument out that you will target accounts and currently the certain level of module use that will make more sense.

John Bishop

Yes. The (inaudible) use on the Infinity-48, the minimum will be 16. And that’s really – it's really interesting. And we think we are going to get a lot of interest there. The way that our products are going to be sold, minimum configuration will be 16 modules that I’m mentioning. Then if you want to add, we are going to sell [ph] – the adds will be banks of eight. So we add a bank of eight at a time, but there is a lot of folks that already see with the XVIs that the additional benefit they would get within Infinity going with the XVI configuration, we still think on-demand is the way to go.

On the other hand, if you wanted to batch with the 48 and XVI situation, you would be able to do like 81, a batch of 81 just with a XVI configuration system. So it gives a lot of flexibility. That’s one of the other, frankly, new attributes that we really haven’t had as much with the Infinity is that effectively gets the most flexible and productive molecular system going. Because if you want to operate batch, which I really wouldn’t recommend, but if you did want to do that, then it gives you better flexibility to do that versus any other system, plus gives you the ability to run on demand as well as the ability to run for random access or half-stat capability. So you kind of get everything, all rolled into one.

Bruce Cranna – Leerink Swann

Okay, that’s helpful. Thank you. And then lastly, I kind of missed your commentary on VRE. Did you say you are still submitted in ’09 but maybe moving to the right? I kind of lost you there.

John Bishop

Yes. We originally were talking about – we are still tracking for a first half submission. However, priority was placed on the C. Diff on preparing that submission. So we are working right now on finishing up the submission on the vanA/vanB. And it’s going to be tight for the first half. So I don’t want to get faulted if we fall over the second half on the submission there.

Bruce Cranna – Leerink Swann

Okay, guys. So you are seeing you might flip into two each.

John Bishop

Correct.

Bruce Cranna – Leerink Swann

Okay, great. Thank you.

John Bishop

You’re welcome.

Operator

Ms. Jacquie Ross, I would now like to turn the call over back to you for closing remarks.

Jacquie Ross

Thank you, Erica. As a reminder, a telephone replay of this call will be available for seven days starting later today. The webcast of today’s call will also be available on our website for at least 90 days. Additionally, I’d like to remind stockholders that our annual meeting will take place at our corporate headquarters in Sunnyvale, California starting at 1 PM Pacific Time next Wednesday, April 29. Additional information is available on the Investor Relations portion of our website at www.cepheid.com. Thank you again for joining us, and have a great day.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. And have a wonderful day.

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