Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Quidel Corporation (NASDAQ:QDEL)

Q2 2014 Results Earnings Conference Call

July 22, 2014; 05:00 p.m. ET

Executives

Doug Bryant - President & Chief Executive Officer

Randy Steward - Chief Financial Officer

Ruben Argueta - Director of Investor Relations

Analysts

Bill Quirk - Piper Jaffray

Shaun Rodriguez - Cowen & Co.

Tim Evans - Wells Fargo Securities

Matt Larew - William Blair

Thijs Spoor - J.P. Morgan

Mark Massaro - Canaccord Genuity

Nicholas Jansen - Raymond James

Zarak Khurshid - Wedbush Securities

Operator

Ladies and gentlemen, welcome and thank you for joining in the Quidel Corporation, Second Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later instructions will be given for the question-and-answer session. (Operator Instructions).

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

Randy Steward

Thank you, Operator. Good afternoon everyone and thank you for joining today’s call. With me today is our President and Chief Executive Officer, Doug Bryant; and Ruben Argueta, 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, July 22, 2014. Quidel undertakes no obligation to revise or update any statements or to reflect events or circumstances after that date of this conference call, except as required by law.

Today Quidel released financial results for the three months and six months ended June 30, 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 85846-8023.

For today's call Doug will report on the highlights of the second quarter and provide update on our product development pipeline. I will then briefly discuss our financial results, and then we’ll open the call for your questions.

I will now hand the call over to Doug for his comments.

Doug Bryant

Thank you, Randy. For the call today I will comment on two topics; first, our performance in the quarter and second, progress with our new products and our product development.

Q2 is normally our lowest revenue quarter as sales of the influenza tests and other respiratory disease related products are typically at a residual level, mainly in April, as the respiratory season wanes. In this second quarter sales of QuickVue influenza products were even lower due to a particularly weak flu and cold season, offset by new product sales.

In particular, Sofia startups, only one-third of which were conversions from QuickVue and often included RSV, were a meaningful contributor to new product sales. On a year-over-year basis, Lyra and AmpliVue were up nicely as well, although admittedly from a small base.

In the last 12 months we generated $24 million of new product revenue, $5.1 million of which was from non-influenza products. While overall revenue for the second quarter was up 6% versus the second quarter last year, if we were to normalize for the soft flu season, year-over-year growth would have been 10%, due again to revenue from new products. Looking forward, we expect our year-over-year growth rate in Q3 will be similar; that is low double digits, and our growth in Q4 will be somewhat north of that.

The launch of Sofia continued in the quarter pretty much at the pace we would have expected in Q2, helped by our RSV CLIA waiver and gains in the hospital segment. Sofia revenues for Q2 were up 136% over the prior year and on a trailing 12-month basis sales of instruments and cartridges were $21.4 million.

Our Sofia pricing and margins have held steady and our cannibalization rate remains at about 34%. With regard to Sofia development activities, we submitted our CLIA waiver package for Sofia strep A in Q2 as we said we would, and we continue the development of our first two quantitative assays, which are scheduled as 2015 launches.

The commercialization of AmpliVue, the handheld molecular device developed at BioHelix, continues now with three FDA-cleared AmpliVue assays, C - Difficile, Group B Strep and HSV-1 and 2. We submitted a fourth AmpliVue assay to the FDA for U.S. clearance in May and are wrapping up clinical trials for submission of our fifth and sixth AmpliVue tests sometime in the back half of this year.

In the second quarter we received FDA clearances to market two new Lyra real-time PCR assays. The first assay cleared was for Group A plus pyogenic C or G streptococcal. About one month later we received clearance for a second assay for HSV-1, HSV-2, plus VZV. Both panels followed the FDA's De Novo 510(k) pathway as an assay against which we could compare ourselves against does not exist.

Also, in both cases the assays address unmet needs. As a result, we have seen early interest from several higher-volume clinical laboratories. Based upon the traction we are seeing to this point, I believe the two assays will be meaningful contributors to revenue and gross margin in the near term.

As a reminder, the strategy for the Lyra real-time PCR assays has been to develop unique products for the high-volume segment that would be unique with respect to format and/or content. In addition, we said that work on these products could be leveraged as we develop assays for Savanna. The strategy that we had originally contemplated is still intact, with the exception of assays for which a shorter time to result would be beneficial to customers. For those Savanna assays we will use our own proprietary isothermal amplification technology, HDA.

Regarding Savanna, our enthusiasm for the opportunity ahead of us grows with each completed milestone. As we’ve said previously, we will unveil the Savanna instrument and cartridge system at the AACC next week. Our potential customers will see a fully integrated sample-to-answer system that is designed to be advantageous in three ways.

First, the graphical user interface is state-of-the-art and running a Savanna test cartridge is as easy as it gets. Second, it's fast. We will use real-time PCR assays with shorter cycling times for quantitative assays, but for qualitative tests for which speed matters, we will amplify with HDA, with assay times roughly half of PCR-based tests.

And third, because of our novel extraction technology and simpler cartridge design, our cost to manufacture the instrument and test cartridges is low, which will enable us to launch with a reagent agreement plan strategy. We remain on track for the development of the system and have recently made a decision to increase spending in an effort to pull forward the timeline for our HIV quant studies in Africa.

I won't be taking questions today on this topic, but since not everyone attends AACC, I should also mention that we will also unveil an instrument system that we’ve named Solana, which runs up to 12 at a time of any of our HDA assays exclusively, and is complementary to our AmpliVue program.

At the AACC, we will tell prospective customers about many of the near term, but won't discuss the order of development or timing, other than to say that we think for Solana it's a first-half 2015 launch. But in summary we had a productive quarter on all fronts, our R&D, clin, reg and commercial, all of which were in line with our expectations. Randy.

Randy Steward

Thank you, Doug. As we reported earlier today, total revenues for the second quarter of 2014 were $31.5 million as compared to $29.7 million in the second quarter of 2013. Domestic revenues in the second quarter increased by 5% over the same time last year, while international revenues increased by 11% to $5.9 million.

Global infectious disease revenues, which include QuickVue, Sofia and molecular products grew 5% to $18.3 million in the second quarter of this year, as compared to $17.3 million last year.

Influenza revenues in the quarter were $3.8 million, compared to $3.3 million in the second quarter of last year, the growth mostly realized in the international markets.

From a platform perspective, Sofia influenza revenue was up 115%, while we realized a 13% decline in QuickVue influenza revenue.

Strep A grew 2% versus the second quarter of last year and RSV product revenue increased by over 130%, heavily driven by our CLIA waived Sofia RSV product. The cell-based respiratory business was relatively flat to last year.

Revenues for the women's health category increased by 4% to $8.7 million, led by a 7% growth in our pregnancy product line, of which approximately 1% of the growth was the result of Sofia hCG revenue. In the quarter, we also realized a 13% growth in Thyretain.

Our gastrointestinal product category revenues were $1.9 million in the second quarter, compared to $1.8 million in the prior year, driven by increased AmpliVue, C - difficile revenue, somewhat offset by decreases in fecal occult blood and H. pylori revenue.

Gross margin in the second quarter was 49.5% compared to 54% in the second quarter of last year. The decrease in gross margin was primarily affected by unfavorable product mix associated with visual lateral flow and greater depreciation for Sofia instruments.

Also unfavorably impacting margin was lower absorption of manufacturing costs in the quarter versus last year and the Alere royalty amortization. Excluding the impact of the royalty amortization that is set to expire in February 2015, gross margin would have increased by approximately 4.5 percentage points in 2014 and 3.8 percentage points in 2013.

Total operating expenses were $25.6 million as compared to $23 million of the second quarter of last year. Research and development costs were $8.1 million, compared to $7.9 million last year. The increase in R&D was due to the incremental costs associated with the acquisitions of BioHelix and AnDiaTec and the added investment in Savanna.

In the quarter we received $400,000 of expense reimbursement as a result of the Life Technologies, R&D collaboration agreement signed in March of 2012. There was no expense reimbursement in the comparable period last year. This reimbursement completes our agreement with Life Technologies. We also realized in the quarter approximately $900,000 in rebate from a key service provider on the Savanna project.

Sales and marketing expenses in the second quarter were $9.4 million, compared to $7.1 million last year. The increase in sales and marketing expense is due to an increase in personnel of approximately 20% over last year.

As we have stated previously, we believe this increase in personnel will help support the introduction of new products we have commercialized to-date, as well as the new products we plan on introducing in the near term.

General and administrative expenses were $5.8 million in the second quarter of 2014, compared to $5.9 million for the same period last year.

Our tax rate for the second quarter was approximately 33%, with the anticipation of a full-year tax rate at approximately 34%. Last year's tax rate was affected by the reversal of approximately $3.5 million relating to released tax reserves for the tax years 2008 through 2010. Excluding the nonrecurring tax benefit, the effective tax rate would have been approximately 34%.

Net loss for the second quarter was $6.9 million or $0.20 per share, as compared to a net loss of $1.8 million or $0.05 per share for the second quarter of 2013. On a non-GAAP basis, excluding amortization of intangibles, stock-based compensation expense and certain nonrecurring items, net loss for the second quarter was $3.4 million or $0.10 per share, compared to a net loss of $1.9 million or $0.06 per share for the same period in 2013.

As part of the non-GAAP calculation, included in operating expense for the second quarter was stock-based compensation of $1.2 million and amortization of intangibles of $3.8 million.

Revenue for the six-month period ended June 30, revenues were $78.2 million, compared to $91.7 million last year. Infectious disease revenues were $54.1 million versus $66.7 million last year, a decrease of 19%, primarily due to softer demand for influenza products during a weaker flu season in the first quarter of this year as compared to last year.

For the six months, strep A revenues decreased by 8%, while RSV revenues increased 14%, driven again by our CLIA-waived Sofia RSV assay. Our cell-based product revenues declined by 6%, also impacted by the light first-quarter 2014 influenza season. The women's health segment was $16.8 million, compared to $17.1 million in the first half of last year.

For the first six months of the year our gastrointestinal segment was $3.6 million, compared to $3.4 million last year. The revenue from other categories was $3.7 million, compared to $4.6 million last year, the difference being mostly the result of timing of customer product orders.

Gross margin for the first six months of 2014 was 54% compared to 64% over the first six months of 2013. This increase was primarily driven by product mix, due to lower influenza revenues in 2014, as well as lower absorption of manufacturing costs due to lower production volume versus last year. The Alere royalty amortization had a negative impact to gross margins of approximately 4.9 percentage points in 2014 and 4.7 percentage points in 2013.

Net loss for the first six months of 2014 was $8.4 million or $0.25 per share, as compared to net income of $10.6 million or $0.30 per share for the six months of 2013. On a non-GAAP basis, excluding amortization of intangibles, stock compensation expense, and certain nonrecurring items, net loss for the first half of 2014 was $500,000 or $0.01 per share, compared to net income of $14.7 million or $0.42 per diluted share for the same period in 2013.

For the first six months of 2014, depreciation, amortization and other was $13.7 million as compared to $12.1 million in 2013. In the second quarter the company used $4.9 million in cash for operating activities and incurred $2.7 million in capital expenditures. As of the end of June, the company had no outstanding borrowings under its senior credit facility and had $18.1 million in total cash.

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

Question-and-Answer Session

Operator

(Operator Instructions). And our first question comes through from Bill Quirk with Piper Jaffray.

Bill Quirk - Piper Jaffray

Great, thanks. Good afternoon everybody.

Doug Bryant

Good afternoon Bill.

Bill Quirk - Piper Jaffray

First question for me, yes, certainly looking forward to seeing Savanna here at AACC. When should we think about it guys in terms of timing around some of the data? Is this something that we could see as soon as perhaps AMP?

Doug Bryant

That's possible. I should be clear though Bill on this topic. We won't show internal data and we won't be making claims in advance of FDA clearance. What is allowed, and I think this is what you are suggesting is the presentation of studies in the form of papers, posters and abstracts at scientific venues like AMP, as you suggest.

For example, it's possible that the studies will begin in Africa for HIV. At the end of this year it could generate a publication that could be presented at an event like CVS, which should be in April, and then followed by ASM a month or so later, and then AMP later in the year. So certainly as we enter the spring, you would be able to expect to see how the tests are, the system performs on at least one assay.

If you want, I will also talk a little bit about the milestones. The most recent milestone that we achieved was a demonstration that HIV performed well in a Savanna cartridge on a fully integrated system. In other words, the product works as designed. As some of the folks say here, the rubber has now met the road, which is important and explains as Randy has discussed before, why we are spending more on R&D now to pull this program forward.

We mentioned before that we were in the process of setting up cartridge manufacturing in Ohio. That is still progressing nicely and we expect that to be operational this summer. We're building alpha units now, and then again as I just mentioned, we expect to start studies in Africa this year.

So that's essentially where we’re at. We are very excited obviously to be showing folks next week the product, and I know for example, we’ll see you there too, Bill.

Bill Quirk - Piper Jaffray

Sounds good. Next question for me Doug, and thanks for incidentally for elaborating on the milestones there. It’s just a question for Randy regarding the Savanna rebate. Can you just elaborate on that a little bit, and I assume this doesn't, but just to be clear, this doesn't affect timing of product availability. It sounds like it doesn't, but I just want to clarify.

Randy Steward

There is no impact on timing at all. We were just I guess good negotiators and we were able to achieve based on where we were today, again a rebate on investment we’ve made to-date on Savanna. So it was kind of a cumulative catch-up from spend from day one. It is a one-time occurrence and will not repeat itself going forward.

Bill Quirk - Piper Jaffray

Okay, got it, thank you. And then just last one for me and I’ll jump into the queue. Recognizing that you probably don't want to talk too much about Solana, can you just help us think a little bit about some of the features that we might see in the instrument here next week?

Doug Bryant

Well, we’ve said that you could run up to 12 at a time. It would be HDA assays; you could mix and match. So effectively, a customer that might run, let's say 30 a day and could effectively just as the samples come in, put up to 12 on Solana and run those assays very quickly and very economically. Other than that, as I said, I don't really have a whole lot to comment.

I think it would be probably important to say that the program has been in the works at BioHelix for some time, and all the R&D expense was and is in the current run rate. We’re just now, we believe well within a year of launch and we think therefore the AACC would be a good venue to tell customers about it.

Bill Quirk - Piper Jaffray

Okay, got it. Thanks a lot guys.

Doug Bryant

Thank you.

Operator

The next question comes from Shaun Rodriguez with Cowen and Company.

Shaun Rodriguez - Cowen & Co.

Hi guys, good afternoon and thanks for taking my question. So first of all, thanks for providing the new product revenue contributions over the last 12 months. That is very helpful and I appreciate it. But is the right way to think about that in the context of thinking about a go-forward growth rate to the extent we can include some sort of assumption on flu dynamics there? But should we think about that as two-thirds of Sofia revenue being incremental on pretty much all of the molecular franchise contributions as incremental?

Doug Bryant

Currently, that would be the case. I would expect over time however, that many of our QuickVue customers will also convert to Sofia. So my expectation longer term would be that we would, for our existing core products we have a bit more cannibalization, but in total though, offset by the new products that aren't cannibalization at all. So, any of the quantitative products that we launch obviously would be zero cannibalization. So that's how we get overall ultimate reflex the way we thought about the divisions, how we got to the 65, 35 split.

Shaun Rodriguez - Cowen & Co.

Yes okay, that's helpful. And then, jumping over to Savanna, you were talking about accelerating the HIV Viral Load development there and initially trialing in Africa, which I think has been the expectation. But I guess just to clarify, are you suggesting that could be a developed world product, because I thought you were excluded from that per your agreements, or are you just kind of framing it that way as one of the first programs you are going to push through?

Doug Bryant

It is the first program we are pushing through. It is our intent to have this product only for the developed world. Obviously, all the other products we are developing are for the U.S., Europe, and other markets. It is helpful; however, to pull forward HIV because the same alpha unit that we would be building in order to accomplish all that, now also become available for development work on the assays that we would be launching here.

Shaun Rodriguez - Cowen & Co.

Right, yes. No, thank you for that. And lastly, actually two clarifications. I think you have mentioned them, but I missed them, so I apologize. But what exactly was the 10% growth rate in the quarter you provided? I think it was excluding flu, but was there another exclusion there, and also did you provide the strep growth rate, and if you did, could you please repeat it for me? Thank you, guys.

Doug Bryant

Sure Shaun. We weren't excluding flu from the calculation; we were simply normalizing. In other words, if we had a normal Q2 in terms of the residual influenza sales that we might expect with QuickVue, and then also recognizing cannibalization with Sofia, instead of being at $31.5 million, we probably would have been closer to $32.5 million or so. And so if you compare that with $29.7 million, that’s roughly about 10%. Make sense?

Shaun Rodriguez - Cowen & Co.

It does. Yes, thanks. I’m sorry, the strep, yes please.

Randy Steward

Yes, it was 2% growth in the second quarter.

Shaun Rodriguez - Cowen & Co.

Great. Thank you guys.

Randy Steward

Your welcome.

Operator

Next question is from Tim Evans with Wells Fargo Securities.

Tim Evans - Wells Fargo Securities

Hi, thank you. Randy, with the new product in development to Solana now and the launch of Savanna coming up here, how should we be thinking about gross margins and also operating expenses, both in the back half of 2014 and into 2015?

Randy Steward

I think from a gross margin perspective, we do anticipate it being somewhat accretive versus the comparable period of 2013. So we do see some gross margin expansion in the back half of the year.

Operating expenses, I think we’ve kind of given guidance previously that we said full year. We thought research and development would be in the $33 million to $35 million range and we said sales and marketing would probably be in the $38 million to $40 million range, and we still believe that holds.

Tim Evans - Wells Fargo Securities

Okay, that's helpful, thank you. And maybe, can you comment at all on Sofia, the competitive dynamic and anything that you’re seeing on pricing there?

Doug Bryant

Pricing is steady. We have constructed a pricing matrix that is available to our sales personnel, as well as to the distributor reps. In other words they work out the same matrix. The matrix is volume driven. I guess it was about a year ago we adjusted the matrix up slightly to account for what real end-user pricing turned out to be, but other than that, we have not actually made any changes to that pricing matrix.

Tim Evans - Wells Fargo Securities

Okay, great. Thank you very much.

Operator

Next we have Brian Weinstein with William Blair.

Matt Larew - William Blair

Hi guys, thanks for taking the question. This is Matt asking the question for Brian today. Just curious, you mentioned that certainly RSV has been a part of some of these new placements. Do you by chance have a breakdown or maybe a percent of these new placements driven by RSV, and if you have seen a noticeable uptick once that CLIA waiver came through? Thanks.

Doug Bryant

Well Matt, we did see a noticeable up-tick in placements as a result of CLIA waiver, and I would suggest that, we anticipated that. We thought that we had a queue of labs that were waiting for RSV; labs that wanted to run both flu and RSV. So that was not unexpected and I would say it's a noticeable uptick in placement rate, yes.

Matt Larew - William Blair

Okay, thanks for that Doug, and then just one more from me. You mentioned that both Lyra and AmpliVue were nice contributors and obviously still a small base, but it sounds like you’ve been pretty pleased here with the way that the molecular franchise is moving. Any additional color you could provide there would be really helpful, and then I’ll jump back in. Thanks a lot guys.

Doug Bryant

Sure. I think we continue to develop relationships with AmpliVue and to find the right customer for the product. We had originally thought that it was exclusively smaller labs who were doing EIA. We have now modified our thinking a bit and we are actually working with some fairly large customers who like to run things in off-shifts one or two at a time, and so I think that's been going quite nicely for us. We’ve recently introduced a couple new products, that was also helpful.

I think the more meaningful contributor, at least in the near term however, will be these two new Lyra assays that we just introduced, the first of which was for Strep A and pyogenic C or G and then more recently the HSV VZV combination assay. Both products have an extreme level of interest by some very large labs we’ve shipped product already in Q2, and the forecast actually looks pretty good.

Operator

And our next question is from Tycho Peterson with J.P. Morgan.

Thijs Spoor - J.P. Morgan

Hey guys. This is Thijs filling in for Tycho. Thanks for taking the question. Can you comment a little bit in terms of the split in Sofia placements between hospitals and labs? And then also, are you still on track for your 2015 target of 10,000 placements?

Randy Steward

The Strep as we said previously, last year the split was about 80% POL, 20% hospital and currently it's at approximately 35% hospital and 65% POL.

Doug Bryant

And on the placements, I will comment there Randy. There is nothing really new to report there. The 10,000 unit forecast depends on four CLIA waived assays, the last of which as I said was submitted in Q2. If we get a quick review from the FDA, then the end of this year for 10,000 placements is still possible. If it takes six or seven months, then the first half of 2015 is more likely.

I am very confident we are getting at least 10,000 placements. I’m not concerned at all about that. The question is, do I exit this year at that level or does it leak into the first or second quarter? Again, that depends on how quick of a review we get with Strep.

Thijs Spoor - J.P. Morgan

Okay. Yes, go on.

Doug Bryant

That would be my answer.

Thijs Spoor - J.P. Morgan

Okay, on AmpliVue just one quick one here. In terms of the average test per customer, I mean has that number ticked up from the 600 or so per year that you were seeing last quarter?

Doug Bryant

Not dramatically. The number of very large customers that you might think would influence that, so far has been relatively few. They are creating an uptick, but I don't think it's noticeable to the average yet, okay.

Thijs Spoor - J.P. Morgan

Okay, thanks.

Randy Steward

Thank you.

Operator

Next question is from Mark Massaro with Canaccord Genuity.

Mark Massaro - Canaccord Genuity

Hey guys, thanks for taking the question. Doug, maybe just a big picture question; could you walk us through how you're positioning Savanna relative to say, other competitive platforms and I might throw in the GeneXpert and the Alere I (ph)?

Doug Bryant

Well, sure. We think that we have advantages in three different categories; the first of which is the graphical user interface is as I said state of the art and it’s as easy as it’s going to get to run an assay and I guess I'm suggesting we think it's easier. We think therefore that it might be CLIA waivable and that's pretty important.

With HDA assays, for things that customers would say they’d like sooner rather than later, having assays that run in the 20 to 30 to 40 minute timeframe versus an hour to an hour and a half has a significant advantage.

And then finally, I think we've talked about this before, well I know we have. We believe our cost of goods sold will be dramatically less, and why is that important? Because that really effectively allows us to reagent the agreement plan, our own offer and a reagent agreement plan for a customer, and frankly, we don't therefore require significant volumes for that placement.

I can be competitive from a price perspective; at the same time have higher gross margins than I have today in this company, including the depreciation of the asset itself over some useful life.

So, those are the three things that we think are advantageous. I also think we have a pretty good track record of developing menu. We are behind at the moment, but I'm pretty confident we can catch up pretty quickly, in the infectious disease space specifically.

Mark Massaro - Canaccord Genuity

Great, and just a follow-up. The POL mix for Sofia has come down. Are you able to comment on maybe traction you might be making with distributors, and do you see that mix changing over the next four quarters or so?

Doug Bryant

Well, I think the CLIA waiver of hCG, which we would expect this summer, followed by Strep is going to create pretty significant demand again, and so while the hospital segment looks like they are going to town at the moment, I expect the physician office segment to do fairly well beginning in Q3 and we’ll probably be back right where we were before, where 70% or so of the placements are in the physician office segment.

Mark Massaro - Canaccord Genuity

Great. Thanks.

Operator

Next question comes from Nicholas Jansen with Raymond James.

Nicholas Jansen - Raymond James

Hey guys. Most of mine have been answered, but maybe just talk a little bit about capital deployment priorities. You’ve done a couple of tuck-in acquisitions over the last 18 months with BioHelix and AnDiaTec. How do you view potentially filling out the portfolio with a couple other growth drivers in the mindset of kind of your positioning over the longer term? Thanks.

Doug Bryant

Sure. We're focused on looking at things that would fit our strategy. In other words, technologies that absolutely fit what we are trying to do. BioHelix is a perfect example.

We are also focused on opportunities, M&A opportunities that might provide a better geographic expansion or a direct commercial presence, particularly ex-U.S. Our primary plan though is still organic growth and we view M&A as something that’s additive and certainly would need to be accretive in the short term.

Nicholas Jansen - Raymond James

Okay, that's helpful. And then, going back to maybe one of Mark's questions just earlier about the Alere i; how do you view the potential for CLIA waived flu in the upcoming influenza season? Maybe you'd also heard from Cepheid as well relative to your prospects or growth opportunities for Sofia.

Doug Bryant

Regardless of CLIA waiver, I believe that speed and economics are going to be what drives the physician office market. When we design and develop products, we do so with a deep understanding of how our customer would use our products. We certainly understand how a physician office would use Sofia for example. It's unclear to me how that works with these other competitors or with a molecular product, including our own.

When I think about Savanna, which would be very simple, how the economics work and how does it fit into the physician's workflow? So I'm anxious to see how that works. We’ve acquired the Alere product. We are running studies now and we’ll be able to comment further when we get the performance data, but until then I don't really have a whole lot more I could say.

Nicholas Jansen - Raymond James

All right Doug, thanks.

Doug Bryant

Sure.

Operator

(Operator Instructions). And our next question comes from Zarak Khurshid with Wedbush Securities.

Zarak Khurshid - Wedbush Securities

Hey guys. Thanks for taking the questions. So with the strength in Sofia RSV, I was wondering if you could just walk us through how you’re thinking about the size of that opportunity and the potential revenue contribution over the next couple of years.

Doug Bryant

Well, I don't think I can speak to what our specific forecast is, but what I can tell you is that even today about 70% of the RSV volume is in the hospital labs and if I remember my market sizes correctly, maybe you guys can open up the book, it's somewhere between 3 million and 4 million tests per year currently, and a lot of those are done by rapid methodology, so that's sort of the target market. And so if you think about it that way, just doing the math in our heads here, 3 million tests times, well I don't know $8 to $10 let's say, that's sort of the market opportunity there..

Zarak Khurshid - Wedbush Securities

Great, thanks for that. And then I just wanted to follow up on Strep. It seems like that's normalizing pretty well. Can you just kind of talk through what you’re seeing in terms of the disease levels for Strep? Thanks.

Doug Bryant

The disease levels are pretty constant. You are talking about up to five throat infections per year per child and you are talking two to three per adult. And so the number that actually visits a physician obviously causes the number of tests. We still do somewhere around 17 million or so Strep tests. That hasn't really changed a lot one way or another. It does fluctuate a bit up and down, but not significantly.

Zarak Khurshid - Wedbush Securities

Thank you.

Operator

Okay, that's all the questions for today, so I’ll pass it back to Doug for any closing remarks.

Doug Bryant

Sure. In summary, we are pleased with the progress we continue to make as a company and continue to increase our investments in R&D and sales and marketing. We believe that these investments are the cornerstone for successfully positioning our company for both the near and longer term.

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

Operator

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

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Quidel (QDEL) CEO Doug Bryant Discusses Q2 2014 Results - Earnings Call Transcript
This Transcript
All Transcripts