NEW YORK – QuidelOrtho executives elaborated on their strategies for margin restoration on Tuesday at the Raymond James investor conference in Orlando, Florida, saying they intend to focus on serving hospital systems while accelerating and expanding previously disclosed headcount reduction plans and driving assay menu expansion.
In the aftermath of a stock sell-off precipitated by guidance and estimates misses last month, QuidelOrtho's board of directors terminated longtime CEO Douglas Bryant and installed Michael Iskra as interim CEO and Robert Bujarski as interim president, creating an "Office of the CEO" that also includes the firm's CFO Joe Busky.
While Bryant had previously described the firm's future as increasingly focused on point-of-care and at-home testing, Iskra said that although the firm serves customers from centralized reference labs to decentralized at-home testing, the new leaders consider the middle of this continuum — medium- to high-volume hospitals — as QuidelOrtho's strength.
"Hospital systems are responsible for an ever-widening part of the care continuum and are the primary decision-maker," he said, adding that these systems now include physician groups, urgent care, and retail pharmacies.
"We like our position there, we like our product offering there, and we'll want to play from that position," Iskra said.
During QuidelOrtho's Q4 earnings call, Bryant said the firm planned to reduce its headcount by 5 to 6 percent. On Wednesday Iskra said that during the past week and a half, the trimming of its workforce has been accelerated to be completed by the second quarter of this year, while the number of positions being eliminated will be expanded.
"Right now, 100 percent of our people are anxious, [but] less than 10 percent will be impacted; the faster we take action, everybody will know who that is," Iskra said, adding that it will also "deliver improvement on the financials."
While the firm believes it has taken market share in point-of-care and at-home testing for flu, respiratory syncytial virus, and COVID immunoassays, the launch of the Savanna molecular diagnostics instrument signals a new focus on point-of-care molecular testing.
QuidelOrtho still firmly believes in the market opportunity for molecular testing, Iskra said, adding that "Savanna is made for this market," while competitors are perhaps stretching to enter it.
Both Iskra and Busky reiterated the expectations for Savanna instrument and assay sales, which were previously guided to be approximately $250 million in revenues three years post-launch.
According to Bujarski, the "jump-start" in Savanna sales won't happen until the firm's respiratory panel, called RVP4, is both cleared by the US Food and Drug Administration and CLIA-waived.
"Without the CLIA waiver, you just don't get to the breadth of the placement," Bujarski said. The firm previously said it expects placement of 1,000 Savanna instruments in 2024 to generate $40 million to $50 million in respiratory revenues from the system this year. The firm's planned addition of syphilis to its cleared Savanna HSV/VZV test, as well as a future STI panel, and a planned gastrointestinal panel are also expected to drive growth, Iskra said.
"You've got to have the menu to really make this platform a success, and those are the ones that we're focused on straightaway," he said.
In terms of the QuidelOrtho labs business, Iskra said it is currently 65 percent clinical chemistry and 35 percent immunoassays, with the latter market growing more quickly.
The firm's strategy has been to leverage its chemistry to increase its immunoassays, Iskra said, through integrated placements. "We expect double-digit growth on integrated" placements, he said, adding, "We know this model, we can execute against this model, and it's been driving growth."
While the firm is working on next-generation projects for the labs business, Bujarski added that the focus for R&D spend in 2024 will be "more menu on existing platforms."
Iskra also attributed the firm's planned exit from its donor screening business to a next-gen instrument development project that proved unable to transition to sales in its labs business.
The firm plans to remain in the immunohematology business, however, because "as we look to build out our portfolio and our product line, it's a way for our sales teams to get in the door to a relationship that's there," Iskra said. "We have brand recognition, so there's a lot of things that we can play off of it," he added.
Going forward, the firm also sees continued sales in COVID immunoassays, Iskra said, but in discrete areas.
The current business comes from government orders, retail, and the professional market. Government business is "winding down," Iskra said, while the retail business is still seeing a good amount of volume though it is decreasing due to "a tremendous amount of price pressure."
The professional market is proving to be "a little more resilient even than last year," he said, particularly for the firm's Sofia system that is also running influenza and RSV assays. "This is antigen testing in a more decentralized but professional setting, and it's not sitting next to a molecular box, so the business that was going to be eroded by molecular, we think has run its course for the most part," Iskra said.
QuidelOrtho maintained its revised guidance of $200 million in COVID-relates sales for 2024. Busky noted that the firm had more than $80 million in COVID revenue in Q3 last year, adding that those sales are not necessarily tightly tied to respiratory seasons, but more tied to the emergence of variants.
"We've done a lot of review on this number, we've talked to outside consultants, we've triangulated with what others in the space are saying about it, we've talked to our customers, and we think this is the right estimate now," Busky said.