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QuidelOrtho Focuses on Three Growth Drivers in 2023 as Q4 Non-COVID Business Grows

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NEW YORK – QuidelOrtho this year plans to intensify its focus on three growth drivers within its business — the Sofia immunoassay system, the Savanna rapid multiplex molecular system, and the Vitros system — company executives said on a Wednesday call recapping the firm's fourth quarter and full-year 2022 results and 2023 guidance.

QuidelOrtho CEO Douglas Bryant said on the call that he views the firm as "a growth company" and noted it has more than 100 active R&D and clinical and regulatory projects.

But "the three key near-term growth drivers that we are acutely focused on in 2023 are our Sofia, Savanna, and Vitros systems and product lines," Bryant said. "These three businesses matter most," he added.

QuidelOrtho has placed more than 85,000 Sofia immunoassay reader systems globally, with 77,000 systems under multiyear contracts in the US. Roughly half of these instruments are in physician office labs, while 23 percent are in hospitals, 17 percent are in urgent care clinics, and 10 percent are in corporate accounts. Bryant also emphasized that only 8 percent of Sofia customers are running the system exclusively for COVID testing.

For the Savanna rapid molecular diagnostic system, Bryant said the supply chain constraints that had previously limited its US testing have been largely resolved, and the firm is "nearly ready" for an expanded global launch.

To wit, QuidelOrtho has filed for Emergency Use Authorization from the US Food and Drug Administration for a Savanna panel called RVP4 which tests for flu A and B, COVID-19, and respiratory syncytial virus. Bryant said the firm expects EUA in April and will file for 510(k) clearance shortly thereafter. The firm is also in the process of increasing manual manufacturing lines, hiring additional staff, and installing high volume automated lines to make Savanna cartridges, Bryant said.

QuidelOrtho also expects to begin clinical trials for an 11-target Savanna panel called RVP11 soon, Bryant said. Future Savanna tests will include ones for sexually transmitted infections, gastrointestinal panels, pharyngitis, and vaginitis, he said.

The Vitros chemistry and immunoassay systems are part of QuidelOrtho's labs division, which Bryant said makes of half of the firm's total business. While the Vitros is still backordered by 650 instruments, Bryant said the firm is making progress on solving supply chain issues.

QuidelOrtho is now installing two additional automated slide manufacturing lines in Rochester, New York, to meet increasing slide demand for the Vitros. In Q4, the firm also entered a joint venture with Shanghai Runda Medical to develop and manufacture Vitros assays in China. Bryant said this will "translate into a faster time to market and more compelling menu for Vitros assays in support of our growth strategy in China."

Q4 and FY2022 results

In the quarter ended Dec. 31, QuidelOrtho reported revenues of $866.5 million, up 36 percent from $636.9 million in the year-ago quarter. The revenues were in line with the firm's preliminary revenues of between $853 million and $868 million and above the consensus Wall Street estimate of $779.6 million.

On a supplemental combined basis, total Q4 revenue decreased by 23 percent in constant currency compared to $1.16 billion for the fourth quarter of 2021.

Excluding COVID-19 revenues, QuidelOrtho said total supplemental base business revenues grew 42 percent in the quarter.

In the quarter, the firm's labs business declined 13 percent to $314.7 million from $363.4 million, which executives attributed in part to lockdowns in China. On a constant currency basis, the labs business declined 11 percent but increased approximately 1 percent excluding COVID 19-related revenues. The transfusion medicine business, meanwhile, declined 4 percent to $162.5 million from $169.7 million, but was flat ex-COVID and up 1 percent at constant currency.

QuidelOrtho's point-of-care business dropped nearly 35 percent to $374.7 million from $573.8 million. At constant currency, the decline was 34 percent, but excluding COVID sales revenues nearly tripled.

Molecular diagnostics revenues in Q4 fell 71 percent to $14.6 million from $51.0 million a year ago. At constant currency, the decline was 71 percent, but more than doubled excluding COVID-19 revenues.

QuidelOrtho's Q4 net income was $30.3 million, or $.45 per share, compared to a net income of $291.3 million, or $6.85 per share, in the prior-year quarter. On a supplemental combined adjusted basis, the company reported EPS of $1.76, above the consensus Wall Street estimate of $1.43. QuidelOrtho said the decline of 66 percent from the prior year reflected the strength of high margin COVID-19 revenue in the fourth quarter of 2021.

For full-year 2022, QuidelOrtho reported revenues of $3.27 billion, up 92 percent from $1.70 billion in 2021. The revenues beat the Wall Street average estimate for $3.21 billion. On a supplemental combined adjusted basis, the firm reported full-year revenues of $4.05 billion, an increase of 11 percent excluding COVID-19 revenues. Supplemental combined adjusted EPS for 2022 was $16.43. The supplemental combined adjusted revenue were also above the firm's preliminary expectations for total revenues in the range of $4.04 billion to $4.05 billion.

Full year 2022 labs business revenues declined 7 percent to $1.33 billion from $1.42 billion. On a constant currency basis, the labs business declined 4 percent, and declined approximately 3 percent excluding COVID 19-related revenues. The transfusion medicine business revenues, meanwhile, increased approximately 1 percent to $668.1 million from $664.2 million, and was up 5 percent at constant currency and excluding COVID-19 revenues.

QuidelOrtho's point-of-care business was down nearly 1 percent to $1.96 billion from $1.45 billion. At constant currency, the POC revenues increased 35 percent and were up 67 percent excluding COVID revenues.

Molecular diagnostics revenues in 2022 fell 52 percent to $96.7 million from $200.5 million a in 2021. At constant currency, they increased 27 percent, and they were up 78 percent excluding COVID-19 revenues.

QuidelOrtho's 2022 net income was $548.7 million, or $9.56 per share, compared to a net income of $704.2 million, or $16.43 per share, in the prior-year quarter. On a supplemental combined adjusted basis, the firm reported full-year revenues of $4.05 billion, an increase of 10 percent in constant currency, and an increase of 1 percent excluding COVID-19 revenues. Supplemental combined adjusted EPS for 2022 was $13.80, above the consensus Wall Street estimate of $13.62.

On the call, CFO Joe Busky guided for total 2023 revenue of $2.8 billion to $3.1 billion.

Excluding respiratory sales, 2023 revenues are expected to grow 4 percent to 6 percent on a constant currency basis to $2.21 billion to $2.25 billion, Busky said. QuidelOrtho expects respiratory revenues of $610 million to $875 million, including COVID revenue of $300 million to $500 million, rapid flu revenue of $230 million to $270 million, and other respiratory revenue of $80 million to $105 million.

In early morning trading on the Nasdaq shares of QuidelOrtho were up a fraction of a percent to $86.95.