Applera Corporation Q3 2008 Earnings Call Transcript

Applera Corporation (CRA)

Q3 2008 Earnings Call Transcript

April 24, 2008 11:45 am ET

Executives

Peter Dworkin – VP of IR and Corporate Communication

Tony White – CEO

Kathy Ordonez – President, Celera Group

Dennis Winger – CFO

Joel Jung – VP of Finance, Celera Group

Chris Hall – Chief Marketing and Clinical Operations Officer, Berkeley HeartLab

Analysts

Sara Michelmore – Cowen & Co.

Derik De Bruin – UBS

Bruce Cranna – Leerink Swann

Peter Lawson – Thomas Weisel Partners

Bill Quirk – Piper Jaffray

Presentation

Peter Dworkin

Now we're going to move on to the second half of our call today.

Tony White

Is that all the questions on AB?

Peter Dworkin

Yes, it is. And in the second half of the call, Tony White will make introductory remarks about Celera. And then Celera President Kathy Ordonez will review the Celera business. Also on the call today for the Q&A portion are other Celera and Berkeley Heart executives, as well as David Speechly, Senior Director for IR for Celera.

For those who may have just joined us this morning, please note that during this call, we will be making forward-looking statements about the company's businesses. These statements are subject to the risks and uncertainties relating to our businesses and corporate structure that are referred to in the releases issued this morning and in Applera's filings with the SEC. We also will be discussing historical and forward-looking non-GAAP financial measures for Celera. These non-GAAP financial measures are not in accordance with or an alternative for GAAP and may be different from non-GAAP financial measures used by other companies. A reconciliation of GAAP and non-GAAP financials for Celera can be found in today's press release and on the financial reports page of the Investor Relations section of the Celera web site at Celera.com.

Tony White

Thank you, Peter. Good morning, everyone. I am encouraged with the continued progress at Celera this quarter as the management team has made substantial progress on the integration of the Berkeley HeartLabs, or BHL, and Atria Genetics. The commercial and organizational focus that's been implemented over the recent quarters has started to gain traction, and is resulting in a business with a stronger financial profile.

With a strong balance sheet, Celera is in a good position to exploit the growth opportunities in molecular diagnostics and personalized disease management. The business is still expected to be profitable on a non-GAAP basis for the year. And as planned, we filed a registration statement with the Securities and Exchange Commission this last quarter in an effort to complete the separation of Celera and Applied Biosystems businesses by the end of our current fiscal year.

I will now hand it over to Kathy Ordonez, who will discuss Celera in more detail.

Kathy Ordonez

Thank you, Tony, and good morning, everyone. This was another productive period for us across all parts of our business. Our recent acquisitions of BHL and Atria Genetics continued to contribute both financially and strategically this quarter, while sales of our alliance with Abbott grew. We also made substantial progress in our cardiovascular program, particularly around the development of our KIF6 assay, which are expected to contribute to the future of our business.

As described in our registration statement, we now have three categories of revenue – revenues from services, consisting primarily of sales by BHL; revenues from product sales, which include equalization payments from our alliance with Abbott Laboratories; and lastly, the revenues from licensing and collaboration activities.

I will start by describing our service business, which contributed $22.6 million of revenues during the third quarter of fiscal 2008, representing more than half of Celera's total revenue for the period. There are two key components to our strategy for growth within the BHL business – first, to increase the number of patients and physicians participating in the Berkeley program; and second, to expand the menu of tests performed at BHL.

During the quarter, we continued to add resources in the field at BHL, and expanded our presence and focus on selected market areas as we seek to identify more physicians and patients to participate in the Berkley program. We have completed the training of most of our new hires, and rolled out new tools to support the sales efforts. Most of the field positions that we had planned for a few months ago have since been filled. In January, we opened an important For My Heart center in Inglewood, New Jersey and currently have 18 For My Heart centers, supported by additional clinical educators who are mobile or supporting patients by phone. We are now seeing an uptick in sample volume in the laboratory as a result of these efforts.

Our second strategy for BHL’s growth entails adding relevant new tests to the menu. Following the publication of three papers on Celera's findings around KIF6 in the Journal of the American College of Cardiology in January, BHL completed the development and validation of a laboratory service assay for KIF6 status in the middle of March, and began offering the test to a select group of physicians participating in a trial market. Uptake of the KIF6 assay to date has been strong, and thus far appears to be outperforming previously successful trial markets conducted by BHL for Apo E, NT-proBNP, and Lp-PLA2 tests at the same stage of trial marketing. The test market is expected to refine pricing and positioning for the KIF6 assay, and also determine how the test will be reimbursed by major payers. The trial market activities for KIF6 are targeted to be completed by the end of the current quarter in anticipation of a full-scale launch of the KIF6 testing service at BHL over the summer.

As a reminder, KIF6 is a novel gene variant that conveys up to 55% increased risk for coronary events versus people who do not have the risk form of the gene. This incremental genetic risk for coronary heart disease has been shown to be essentially mitigated by statin therapy. KIF6 is the most advanced of a number of new tests that are in various stages of development at Celera, and have the potential to expand the menu of tests offered by BHL.

Another example was reflected in the publication of a paper in JAMA in March based on our collaboration with scientists at the University of Leiden in the Netherlands that identified several novel gene variants that are each associated with approximately 50% increased risk of deep vein thrombosis. Other findings of our research could lead to potential tests that identify people who benefit from aspirin therapy and others that identify those people at elevated risk for stroke and early MI, or early heart attack. All of these complement the BHL vision for personalized disease management. Celera's pipeline of diagnostic discoveries and their application in personalizing disease management was integral to our thinking in making the acquisition of BHL.

I will now turn to the performance of our diagnostic, or IVD product sales category that includes equalization payments from Abbott. This category also consists of Celera's portion of sales of Atria human leukocyte antigen, or HLA, products and shipments of Celera-manufactured products to Abbott at cost. Product sales in this category grew by 44% in this last quarter to $9.1 million from $6.3 million in the prior-year quarter. Total end-user alliance sales were $30.8 million compared to $24.3 million in the prior-year quarter. And the equalization payment from Abbott in this last quarter was $4 million compared to $3.7 million in the same period a year ago.

Increased volume of HIV, HCV, and HBV RealTime viral load assays used on the m2000 system and thrombosis ASRs all contributed to the year-over-year growth. These increased sales were partially offset by lower sales of cystic fibrosis reagents, and the removal of HCV genotyping ASRs in the US and a CE Marked product in Europe due to an injunction against sales of these products by Abbott previously issued in litigation with Innogenetics. As described in today's press release, Abbott and Innogenetics settled this litigation this month and these products have already been reintroduced onto the menu of products offered through the alliance. Efforts are also underway to register the HCV genotyping assay for use on the m2000 system.

We were pleased with the sustained penetration of the m2000 system in its existing markets in this last quarter, and the system continues to contribute substantially to the growth of alliance end-user sales. Last week on its first-quarter 2008 earnings conference call, Abbott reported that the m2000 Real-Time PCR system continues to gain share worldwide with more than 450 instrument placements at over 300 customers.

There were other advancements for new products in development that are part of our alliance with Abbott. First, the chlamydia and gonorrhea assays that run on the m2000 system are under review with the FDA. These tests, which are already marketed in Europe, are expected to achieve FDA clearance and commercialization in the US over the summer. Secondly, the alliance has developed an m2000 assay for human papillomavirus, or HPV. We have been working on this project for several years, and anticipate this new test could be approved for launch in Europe during the first half of calendar 2009.

A third development is in the HLA product line within the recently acquired Atria portfolio. During the quarter, we were awarded a bone marrow registry tender by the French National Blood Service for high resolution HLA typing using Celera's HLA sequencing-based testing products. The term of the award is for three years, and is effective immediately. It is anticipated that approximately 45,000 individuals will be tested over the coming years, with each one tested over multiple loci, representing approximately 200,000 HLA tests performed on these repository samples.

Separately, data on a new chimerism HLA product that assesses engraftment success was presented at the European Federation for Immunogenetics in Toulouse, France. This new product may have utility with both bone marrow and solid organ transplants. And since the test is expected to be performed multiple times on a transplant patient, we believe it could add substantially to the Atria business.

In the third category of revenues from royalties, licensing, and milestones, revenues were $7.8 million in the third quarter of fiscal 2008 compared to $3.5 million in the prior-year quarter, with the increase due primarily to higher licensing and royalty revenues. In April, we licensed up to 10 cancer targets to Merck for the development of RNAi-based therapeutics, and continue to make progress in previously announced pharmacogenomic collaborations with Ipsen and Merck. Lastly, we have now completed the rebalancing of our R&D resources and other activities in line with our current business activities. This resulted in a charge of $2.2 million in the quarter.

In closing, we are pleased with the developments and growth across all parts of our business. We are encouraged by the integration to date of BHL and Atria into Celera, and with the consequent expansion of revenues from these sources as well as the growth of our IVD product business. We anticipate the expansion of the service menu through the broad commercial launch of KIF6 testing over the summer, and this test is likely to contribute visibly to service revenues in our next fiscal year.

With a balanced portfolio of revenues across products and services, we see opportunity for further improvement as we manage our pipeline of products in development more strategically and inject further discipline into our operations. Based on the performance this quarter and thus far year-to-date, we are tracking toward our stated goal of profitability on a non-GAAP basis for the fiscal year. We are also working diligently to prepare for the planned separation from Applera by the end of June.

Now, Dennis Winger will make a few comments regarding the financial results for Celera and our financial outlook for fiscal 2008.

Dennis Winger

Thank you, Kathy. In the third quarter of fiscal 2008, Celera reported a net loss of $7.4 million, or $0.09 per share, due to factors outlined in today's press release, compared to a net loss of $4.5 million or $0.06 per share for the third quarter of fiscal 2007. Reported revenues for the third quarter to fiscal 2008 were $39.5 million compared to $9.8 million for the third quarter of fiscal 2007. Excluding revenues that were derived from services and products related to BHL and Atria acquisitions, Celera's reported revenues for the third quarter of fiscal 2008 increased $4.9 million compared with the prior-year quarter. The increase was primarily related to higher licensing and royalty revenues and a slightly higher equalization payment from Abbott.

In the recent quarter, R&D expenses decreased by $2.8 million compared to the same quarter last year, primarily due to reduced spending in proteomics discovery efforts. SG&A expenses increased by $14.2 million in this last quarter compared to the prior-year quarter, primarily reflecting expenditures related to the BHL business.

Celera ended the recent quarter with cash and short-term investments of approximately $338 million, down about 4 million in the quarter.

The guidance that we can provide for Celera for the remainder of fiscal 2008 is as follows. Total reported revenues are anticipated to be in the $135 million to $140 million range. Reported R&D expenses are anticipated to be between $40 million and $50 million, and SG&A expenses are anticipated to be between $70 million and $75 million. Celera anticipates that it will be profitable on a non-GAAP basis for fiscal 2008, although non-GAAP earnings maybe near or breakeven for the fourth quarter, which is expected to include, among other things, ongoing integration expenses from the Berkeley HeartLab and Atria Genetics acquisition, and internal costs incurred for the preparation of becoming an independent public company.

The reconciliation of GAAP to non-GAAP financials can be found in today's press release as well as on the financial reports page of Investor Relations section of our Web site, www.Celera.com.

Amortization of intangibles relating to acquisitions were [ph] excluded from the determination of non-GAAP earnings per share, are expected to be approximately $0.06 per share for the fiscal year. The total pre-tax impact of FAS 123R in fiscal 2008 is expected to be approximately $6.5 million, with an EPS impact of approximately $0.05. Currently, Celera anticipates it will end the fiscal year with $330 million to $340 million of cash and short-term investments due in part to payments to the alliance with Abbott for settlement and charges associated with the Innogenetics litigation and working capital requirements.

The Group believes this outlook and its financial performance could be affected by a number of factors and other risks and uncertainties outlined in today's press release and our filings with the SEC. These comments reflect management's current outlook. Celera does not have any current intention to update this outlook, and plans to revisit the outlook for its businesses only once each quarter when financial results are announced.

We will now be happy to take your questions regarding Celera.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from the line of Sara Michelmore from Cowen. You may proceed.

Sara Michelmore – Cowen & Co.

I was wondering, Kathy, can you just remind us how big a product the HCV genotyping product was prior to that getting taken off the market? Is it really material amount of profit and revenue when it gets to you guys? Just a clarification on Dennis's comments, how does your portion of the Innogenetics settlement payment work through the P&L? I assume that there is a reduction in the amount of equalization payments perhaps that you get from Abbott? If you could just talk us through the mechanics of that, and what's assumed in the guidance that you mentioned? Thanks.

Kathy Ordonez

Sure, Sara, and good morning. First of all, your question about HCV genotyping, as you know, we don't break out sales by product. But, as we have said before, this product is not a significant – was not, at its peak, a significant contributor to alliance sales financially. But strategically, we consider it to be very important because it is, to our knowledge, the only real-time approach to HCV genotyping. And while most of the testing today is performed on the AB7000 or 7500 system, a version of the test has been developed for the m2000, and we think that that strategically will be very important going forward. I will let Joel answer the second question.

Joel Jung

Sarah, the actual settlement within Innogenetics between Abbott and Innogenetics is actually accounted for separately from the equalization payment, so it really doesn't have an impact on equalization. And those costs – a portion of that was taking in prior periods. And the remainder is taken in this quarter and is reflected in the adjustments to the non-GAAP numbers.

Sara Michelmore – Cowen & Co.

Okay. And if you could just talk a second about gross margin dynamics in the quarter – the cost of goods did come in a little bit higher than what we had modeled. If you could just talk about if there is anything unique in this quarter or is that just sort of the ebb and flow of the costs. Thanks.

Dennis Winger

We're not sure what you've modeled, so we can't reconcile that. But the cost of goods is sort of consistent with where we thought they would be.

Sara Michelmore – Cowen & Co.

Okay. And it was sequentially lower than the last quarter, though. Was there any –?

Dennis Winger

It fluctuates based upon shipments, et cetera. So I don't think a comparison quarter versus quarter is entirely meaningful to the business, to be honest with you.

Tony White

And we don't think it makes – if you annualize it, it makes any difference either.

Kathy Ordonez

Yes, I can't think of any material reason why there would be a shift. Can you, Joel?

Joel Jung

No, it's impacted by shipments to Abbott at cost obviously – has an impact on that. The impact of the service business in this quarter would certainly have impacts on that. So, again, we don't really – can't really reconcile to what you've modeled, but it was in line with our expectations.

Operator

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

Derik De Bruin – UBS

I had a lot of incoming calls, and so I might have missed some things. So the reason for the modest tweak-down in the revenue forecast, what's the biggest contributor to that?

Kathy Ordonez

Derik, this is Kathy. As you noted, we have narrowed our guidance for revenue. And as you are pointing out, that narrowing is to the lower end of the revenues that we have projected earlier. And that's just actually a realization of where we are. You have to note that the business is growing very, very rapidly, and projecting exactly where it's going to hit is difficult. But the business is tracking our expectations, and there's nothing specific to say.

Derik De Bruin – UBS

And I guess when you start looking at it, at all the things you have in the pipeline and the growth opportunities there, are you going to – once you get the spins done, are you planning some sort of analyst meetings to basically give us a more focused review of the company and what's on, or –?

Kathy Ordonez

Sure. We've been talking about that. Our current thinking is that we will schedule an analyst day shortly after the spin, potentially right after Labor Day.

Derik De Bruin – UBS

Given that – looking at the Berkeley Heart business and everything, how – is that potentially impacted at all by some of the consumer spending concerns that are going on? Is it more of – do people tend doing (inaudible) other times – has there been a history of people going less to do those types of services in the past?

Kathy Ordonez

I don't think so, but I think I will ask Chris Hall to comment on that.

Chris Hall

This is something that dynamically we haven’t seen traditionally. There's been a couple of things that have underlined the business. One has been that we are dealing with secondary prevention heart disease patients. So these are patients that have known disease, they have known issues, and their doctor is pushing them into the program. And I think that dynamic insulates us a little bit from the consumer spending because – and we've seen that traditionally because the doctor is driving it in the context of disease that's progressing. The second piece of the business is that most of these patients pay minimal or very little out of pocket. Medicare is covering most of – or covering everything that we're doing if the patient is a secondary prevention patient. We are increasingly getting into networks, and the PPO patients are paying sub-$100 because of strong reimbursement across the board. So, I think with the relatively small out of pocket combined with the doctor pushing in the disease environment, we haven't seen and we're not really expecting to see that occur over the next few quarters.

Derik De Bruin – UBS

Great. And Kathy, there had been some concern about the ramp of the m2000 in the US relative to the Europe. How has that changed? Are you still seeing – are you seeing better pickup now in the United States?

Kathy Ordonez

Abbott continues to do a great job in Europe, Derik. The uptake of the m2000 in the United States, particularly among the large customers has not been as strong as we would have liked to see.

Derik De Bruin – UBS

So when you look at where your customers are in the States what type of centers, what type of places are buying the product?

Kathy Ordonez

Well, it's all types of customers. There are hospitals and reference laboratories. Both are contributing to the growth here. But we haven't penetrated the very large customers as effectively here in the United States as we would've liked to, as I said before. On the other hand, in Europe, the spectrum of customers is all sizes – small, medium, large. And so as we said today, we are pleased with the performance of the m2000. The 450 placements is a very solid performance. These customers on average continue to generate well over $100,000 in the revenue per year for us. And so it's a very important part of our portfolio.

Operator

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

Bruce Cranna – Leerink Swann

Kathy, I don't want to push it too hard on this, but the change on the top end of the guidance is it fair to say that it's – you are a little bit more conservative because of US placement trends with m2000, or is cystic fibrosis maybe easing a little more than you had thought previously?

Kathy Ordonez

Well, actually what we've done is just narrow the guidance. We've done this every year, actually, where we start with a wider range, and when we get to the fourth quarter, we narrow it. And in this particular case, we narrowed it to the lower end of the guidance that we had put out there previously. But that's just reflecting how we think we are going to end the year.

Bruce Cranna – Leerink Swann

So you wouldn't point necessarily at one of the other of those two things, or maybe something else as being a little more disappointing in your portfolio?

Tony White

You've just got three-quarters of actuals down.

Bruce Cranna – Leerink Swann

I understand.

Tony White

So we can be more accurate that’s all.

Kathy Ordonez

Yes, but it's also what I said before – just be clear about this. The revenue growth at Celera has been very, very strong. And when you have a business with this much dynamic in it, projecting exactly how you are going to come out 12 months in advance or nine months in advance is very difficult. If you look at the growth in our IVD business and the overall business, it's great. And we have just narrowed the guidance as we have done in previous years.

Bruce Cranna – Leerink Swann

In terms of KIF6 at Berkeley and the test marketing, can you give us some sense as – I assume this is really a pure expense for you at this point, or can you actually generate some reimbursement from sort of another code at this point? Or I guess what I am getting at is kind of the same thing as a prior question – is there sort of a gross margin hit as you roll out KIF6 at Berkeley?

Kathy Ordonez

I don't think so. Actually, we are early enough in the test market that we haven't gotten a lot of reimbursed testing yet. But our expectation is that this is going to be reimbursed depending on whether it's private or Medicare somewhere between $80 and perhaps $100 plus. And that's a good reimbursement level for a service test. I will ask Chris Hall to comment briefly on the uptake of KIF6 at Berkeley.

Chris Hall

This quarter, we went and began to talk to a small subset of our clients about the test. And what we've seen as a part of that has been a couple of dynamics. One has been that they have adopted it, and we are further along now in this launch because of how positively the message about KIF6, and integrating KIF6 into the disease management was received than we have been on any of the other tests that we've gone through this process with. The second piece is that the reception from the sales force has been high, and we've got a lot of feedback from other physicians that have heard about it wanting to know where we are in this whole market launch. So we've gotten this quarter really positive feedback about the test and how it's being positioned. As Kathy said, the other things that we are working on rest of this quarter is the reimbursement and confirming where we are and being able to set pricing. And the second piece is confirming clinical utility and how it's being used in the test market.

Bruce Cranna – Leerink Swann

And so that ASP or that reimbursement that you're thinking about – have you guys tempered that a little bit? I seem to remember we were kicking around a bigger number last quarter.

Kathy Ordonez

No, it's consistent with what we've said in the past. We've talked about the list price for this test to be slightly under $500. And that's consistent with other similar testing services. And it's very typical that the reimbursement has that amount of differential versus the list price of the test.

Bruce Cranna – Leerink Swann

Okay. And then I guess last thing, the restructuring cost you booked related to BHL in the quarter or I guess that's my question; related to BHL in the quarter, or were they somewhere else in the business?

Dennis Winger

No. The restructuring costs were not at BHL. There were some integration costs that we –ongoing integration costs in the quarter. But the restructuring or the non-GAAP adjustments for the quarter were actually on the IVD side of the business, and costs related to external costs of preparing the company for the split from Applera.

Kathy Ordonez

And also in proteomics. We've basically, as we said a few months ago, have refocused our R&D effort around our current strategy with a heavy emphasis in the cardiovascular space now, and have curtailed activities that are not supportive of the strategies that we outlined here today.

Bruce Cranna – Leerink Swann

Okay. And then Kathy, can you – I know this is tough, but can you give us any sense as to the win in France with HLA? Can you size that for us at all?

Kathy Ordonez

Well, as you know, we don't break out sales by product. But I can say that it's millions of dollars, but not tens of millions of dollars.

Bruce Cranna – Leerink Swann

Over the duration of the contract?

Kathy Ordonez

Correct.

Operator

And the next question comes from the line of Peter Lawson from Thomas Weisel Partners. You may proceed.

Peter Lawson – Thomas Weisel Partners

Kathy, what was the contribution from Berkeley during the quarter? I missed that.

Kathy Ordonez

The revenues were $22.6 million.

Dennis Winger

That's the service business segment.

Peter Lawson – Thomas Weisel Partners

And then are both businesses going to be breakeven by the end the year?

Dennis Winger

Peter, we are not going to break out the actual profitability of the businesses at this point in time. We are still evaluating the segment reporting requirements that we have as a separate, stand-alone company. But as a part of Applera, we are not going to break out business segment profitability.

Peter Lawson – Thomas Weisel Partners

That's good to hear. Now the breakeven, is that going to be just at the EBITDA level, or just the non-GAAP EPS level?

Dennis Winger

Our guidance is for non-GAAP EPS.

Peter Lawson – Thomas Weisel Partners

But they should both breakeven, EBITDA as well?

Dennis Winger

We're not – Peter, the guidance is for non-GAAP EPS at the Celera level.

Peter Lawson – Thomas Weisel Partners

And then HPV, when is that expected for the US?

Kathy Ordonez

We haven't projected for the US The registration process, as you probably know in Europe is pretty straightforward for a test like this. And sites are being set up in Europe, etc. And we are targeting for the first part of calendar 2009 to commercialize the assay in Europe.

Peter Lawson – Thomas Weisel Partners

But you will target the US eventually?

Kathy Ordonez

We haven't made any announcement about our plans in the United States.

Peter Lawson – Thomas Weisel Partners

Were there any shares brought back during the quarter?

Dennis Winger

No. We're not – let me be clear. We don't have a share repurchase program going on for Celera. The share repurchase program is for Applied Biosystems only.

Peter Lawson – Thomas Weisel Partners

So the drop in the share count was not related to any purchases by you?

Dennis Winger

No.

Operator

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

Bill Quirk – Piper Jaffray

First question, can you help us think a little bit about the payer mix at Berkeley HeartLab? I'm thinking largely kind of managed care versus self pay.

Kathy Ordonez

Sure. It's about 50% Medicare.

Joel Jung

50% of the volume is Medicare. Obviously, less than that percentagewise is Medicare. The remaining balance is a mixture of private pay. Mostly out-of-network private reimbursement from the large insurance companies.

Bill Quirk – Piper Jaffray

Understood; thanks very much. Secondly, just thinking about the HPV product – thank you, by the way, for the color there, Kathy – any plans or I should say have you taken license to subtype 52 from QIAGEN, and if you have not, do you have any plans to do so?

Kathy Ordonez

We typically wouldn't discuss patent issues in that much detail. But as I have said previously, Celera and Abbott are very confident that we have freedom to operate under all of the necessary IP to sell this product as intended.

Bill Quirk – Piper Jaffray

Understood. And then lastly, and this is admittedly a bit of a nitpicking question here, but FDA is going to tighten the ASR rule in mid-September of this year. Frankly, it looks to us to be largely more of a logistics issue than anything else. But I certainly would love to hear your comment here. I'm not sure if there's any parts of – I guess particularly the Abbott business – I guess I'm thinking of CF assay in particular – that might cause some problems?

Kathy Ordonez

Well, it could have been a problem for us with our CF assay had we not gotten FDA clearance on the product several months ago. And so, we are in the process of preparing to commercialize the FDA cleared product, and intend to get that completed within the next couple of months.

Bill Quirk – Piper Jaffray

And on the Berkeley side, Kathy, I assume that what you are going to do is just work with your existing vendors to basically separate the individual probes in the ASRs?

Kathy Ordonez

The only ASRs that I'm aware of that are in use at BHL are in the Apo E area. And my understanding is that Third Wave is doing what's necessary to be compliant.

Operator

As there are no further questions in the queue, I will turn the call over to Mr. Peter Dworkin for closing remarks.

Peter Dworkin

Thank you all for participating in the call today. A reminder that management's remarks will be posted within the hour on our website, and the audio replay will be available later today using the phone numbers listed in today's press releases. Thanks.

Operator

Thank you, ladies and gentlemen. This will conclude the presentation for today's conference. You may now disconnect.

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