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Quidel Q2 Revenues Dip 12 Percent; Misses on Revenues and EPS Estimates

NEW YORK – Quidel reported after the close of the market Thursday that its second quarter revenues fell 12 percent year over year, which the firm attributed to decreased demand for its Sofia and PCR COVID-19 assays, as well as lower demand for influenza products.

The San Diego-based diagnostics company reported total sales of $176.6 million, down from $201.8 million in the second quarter of 2020 and well below analysts' consensus estimate of $194.5 million.

Excluding COVID-19 and influenza products, revenue for the core business grew 24 percent to $91.5 million from $74.0 million in the year-ago period, the firm noted. It also said it broadened its installed base of Sofia analyzers and established strategies to develop COVID testing in the retail segment.

Quidel CEO Douglas Bryant said in a statement that the firm has made "great progress advancing our product portfolio, while continuing to position Quidel for long-term growth."

Sales of rapid immunoassay products decreased 25 percent to $60.1 million from $80.6 million in Q2 2020, which the firm said was due in part to lower revenue for Sofia SARS Antigen and influenza products partially offset by $28.6 million in incremental QuickVue SARS Antigen product sales.

Cardiometabolic immunoassay revenue, which includes revenue from the Triage, Triage Toxicology, and Beckman BNP products acquired in October 2017, totaled $71.7 million, up 32 percent from $54.2 million a year ago.

Quidel's specialized diagnostic solutions revenue decreased 12 percent to $10.4 million from $11.8 million. Molecular diagnostic product sales fell 38 percent to $34.5 million from $55.2 million, which Quidel attributed to a $25.5 million decline in sales of Lyra PCR assays for COVID-19 diagnosis partially offset by incremental revenue from its Solana SARS-CoV-2 assay.

Total sales of COVID-19 products were $83.4 million compared to $109.0 million in the second quarter of 2020, while total sales of Influenza products were $1.6 million compared to $18.7 million a year ago, the firm said.

In the quarter, Quidel settled a legal dispute with Beckman Coulter over its BNP cardiometabolic immunoassay business, with terms of the settlement including Beckman assuming ownership of the business and providing Quidel yearly cash payments of between $70 million and $75 million through 2029 as Quidel supplies reagents for the assay while transitioning the BNP business to Beckman. The commercial transition is expected to be completed before the end of this year.

Quidel obtained the CE mark for its Savanna multiplex molecular analyzer and a respiratory viral panel in the quarter.

In addition, the firm received an amended Emergency Use Authorization from the US Food and Drug Administration in June in order to include its "miniaturized" Sofia Q analyzer within an extant EUA for its Sofia 2 system SARS-CoV-2 immunoassay.

On a call with investors to recap the Q2 results, Quidel's CEO Douglas Bryant said that the Sofia Q will make access to Sofia tests "easier and more affordable" for professional point-of-care customers. "Longer-term, it could create a retail pathway for our full portfolio of Sofia tests for influenza, [respiratory syncytial virus], Strep, Lyme disease, and other conditions," he added.

Also in the quarter, Quidel initiated a "testing-as-a-service" model and signed a contract with the State of Delaware to support school reopening. On the call, Bryant said the firm has now "replicated the model in other states," and is pursuing other opportunities with schools and employer groups.

"While we expect to close more accounts with employers, and have several promising partnerships in the pipeline, they involve a good deal of blocking and tackling and are hard to predict or value, especially when guidance from [US Centers for Disease Control and Prevention] and the landscape of COVID testing seem to evolve daily," Bryant said. "Warnings from public health officials that vaccinated people can become infected and spread the highly transmissible Delta variant of COVID-19 appears to be a near-term driver for more masking and testing, especially as schools and offices look to reopen in the fall," he added.

Finally, although Quidel hopes to soon begin clinical trials to support 510(k) submission of its Savanna multiplex molecular diagnostic test system, at the moment it is facing supply chain obstacles that appear to be also confronting the diagnostics industry as a whole.

"We're competing with automobile and appliance manufacturers for the same sort of chip components, and our third-party manufacturer is struggling to access all of the things necessary to create the volumes of instruments of Savanna that we want to have at launch," Bryant said on the call, adding that he recently had a conversation with US federal officials to request special consideration for allocation of supplies to the Dx industry overall.

Quidel posted Q2 net income of $19.1 million, or $.45 per share, compared to income of $67.7 million, or $1.55 per share, for the second quarter of 2020. Its adjusted EPS for the quarter was $.75, well below analysts' average estimate of $1.46.

The firm's R&D spending increased 8 percent to $22.6 million from $21.0 million, which Quidel attributed to increased spending on Savanna instrument and cartridge development in preparation for clinical trials. The firm's SG&A expenses jumped 37 percent to $59.2 million from $43.2 million in the prior year quarter, which Quidel said was due to increased spending to promote the QuickVue at-home over-the-counter test, increased travel, increased spending on IT projects, and compensation costs driven by an increased headcount.

Quidel finished the quarter with $593.2 million in cash and cash equivalents.

In Friday morning trading on the Nasdaq, Quidel's shares were down 13 percent to $125.07.

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