Third Bridge专家称QuidelOrtho出售POC业务有战略合理性但资产质量和价格存在折价风险

[[00:01:10]]
What are your thoughts on the likely strategic rationale of QuidelOrtho exploring a sale of its point-of-care business, especially to manage its USD 2.6bn debt load?

[[00:01:26]]
Personally, I think it makes sense. I think it was something, in the very beginning, it felt like it was going to happen. It will help. I think it will also give the point-of-care portfolio an opportunity to have some commercial support and maybe a little bit more focus than what's been happening. I think that's a lack of commercial innovation. Focus has been happening over the past couple of years since the acquisition.

[[00:02:04]]
Given the current high interest rates that we're seeing in a slower environment for sponsor-backed buyouts, how realistic is it for Quidel's point-of-care portfolio to attract premium bidding interest currently?

[[00:02:19]]
I think it's an interesting business. I think there is a great deal of opportunity that could be had if it was managed well. As I said earlier, if there was innovation put back into the pipeline, the portfolio and the pipeline expanded to encompass more point-of-care testing than just the current menu that most of the key players are in. I think it is an interesting point of business to be in. I do think it is, at this point in time, very seasonal. With that comes risk that we've seen. I also think the lack of innovation would cause some discounting on it than the premium price, but I do think that it would make sense for someone to buy it. I just think there are things to take into account. The amount of seasonal testing that is happening, it's continuing to decline. Some of that is due to tests in the retail market impacting it. Some of it is due to people just not wanting to test anymore, fatigue in testing. Again, as I said earlier, I think the expansion outside of respiratory in this point-of-care could be an exciting business in addition to just revitalising it.

[[00:03:45]]
What specific assets within the point-of-care portfolio make it an attractive or unattractive target for a buyer? Are there any gaps in the portfolio that you think are important to highlight?

[[00:03:59]]
Yes. I think that, obviously, you're buying the operational infrastructure to manufacture the test and have that. You've got a great brand with Sofia. You have a pretty large market share that you're buying. You've got a nice installed base. With Triage as well, I think Triage is performing pretty well in the marketplace. Again, those are two older platforms that will need to be updated significantly in order to continue to maintain. Fortunately, no one else in that space has been very innovative as well. That helps. There are gaps in the market. Obviously, for Quidel, it is that molecular piece or having something that is a low-cost molecular strep is really important in that space, having STIs low cost in that space. Then as I said earlier, just even expanding outside of molecular into other areas of testing could cause some good synergies, positive momentum for the business if there was a strategic point-of-care platform strategy put together. That strategy could include everything from retail through not only respiratory, but other key tests that should be done at the point-of-care location and you integrate that with digital health or even telehealth in that way, I think that it could be a really strong business. Today, though, you are buying a business that has a great brand. You've got the QuickVue brand along with it, but you do have those gaps in the molecular portfolio, specifically when the Nulexa comes out.

[[00:05:59]]
Do existing distributor contract frameworks ultimately limit or delay a clean transfer of the point-of-care business to a new owner?

[[00:06:13]]
I would not believe it would. That would have to be in the contract, how it's written, but normally, just in my experience, those contracts usually have wording in there saying if there's an acquisition, they transition over. I wouldn't believe it would be a problem.

[[00:06:35]]
Could you discuss how distinct the sales teams and customer relationships are for the point-of-care unit compared to Quidel's core lab business?

[[00:06:46]]
Yes. They do overlap for sure. The point-of-care reps… There's two sales teams. You've got the point-of-care reps who call on ERs, IDNs. They'll call on also urgent care, physician office. They're working really close with those distributor reps that are in that point-of-care market space. Then you've got the core lab that's calling on the same IDNs, the same core hospital systems, but their messaging is very different. At this point, there is not a lot of bundling that happens between the two groups. I don't think separating those out would be difficult at all. They were separated just three years ago or so. It shouldn't be an issue.

[[00:07:33]]
What would you say is the reality of separating decentralised Sofia and Triage device streams from Quidel's core lab IT networks without dropping clinic connectivity?

[[00:07:46]]
I don't think that's an issue at all.

[[00:07:50]]
Is there nothing in regard to it being time-consuming or cost-consuming?

[[00:07:54]]
I don't think so. I don't think that IT connectivity that Sofia or a Triage has is really tied into core lab's connectivity. Normally, when you've got point-of-care devices, they may go through a middleware that connects into the lab information system. I don't think that there's any issue with that piece.

[[00:08:17]]
What parts of the manufacturing process reagent assembly lines or material sourcing contracts are shared between the point-of-care segment and the core lab business? Are there any other joint manufacturing dependencies or shared plant overhead costs that will be the most expensive for a buyer to replicate as a standalone?

[[00:08:42]]
From a manufacturing process, assembly lines, sourcing contracts, I think those are pretty separated out. When I was there, they were clear differences in it. I don't know what has happened. I don't think that's an issue there. The contracts with customers, are we talking about sourcing contracts with point-of-care and core lab businesses? I think those are different sourcing areas. I don't think there's an issue there. Joint manufacturing dependencies, I think those are pretty separated as well since you have completely different lines that you're building off of and even different locations that they're being manufactured from. I think if someone purchases this business, it will be a relatively standalone business to carve out. It's not like it's a company that's been integrated for years and years. They were two separate businesses simply three years ago.

[[00:09:45]]
If a sale ends up going through, does that mean there's only upside here for Quidel, or are there any risks or negative impacts with regards to the near- or mid-term that would occur as this divestiture or carve-out happens?

[[00:10:06]]
For Quidel itself, there would probably be less risk because they will be giving up some of that business, that Triage positive business that Triage has. They're having the decline in the respiratory business. That offset the seasonality will probably be a better move for Quidel to have it sold off, I would think. For that buyer, how I was reading the question was, will it be an easier transition for a buyer to be able to carve out? I think it will be.

[[00:10:46]]
If a sale falls through, can management realistically hit its company-wide 23% adjusted EBITDA margin target while continuing to operate this segment standalone?

[[00:10:59]]
Yes. I don't have a crystal ball. I can't answer that. It's going to really depend on what the season holds for us this year with respiratory season.

[[00:11:12]]
How directly have headcount reductions impacted service velocity and customer account stability?

[[00:11:21]]
I think from a service perspective, the organisation does an excellent job servicing customers. They historically have been acclaimed for service awards for doing a good job with their customers. I don't think service is impacting, and they have a really strong service team, both on point-of-care and in the core lab. The structure is very, very, very good. I think from a sales perspective, maybe from some of the strategic business agreements that were in place with some of those lay-offs, it may have impacted some of those relationships and those could potentially impact how quickly the Nulexa comes to market as well. In any organisation where you've got such transition, continual RIFs, continual cost-reduction strategies, you're going to impact morale. I think that is one of the impacts that you may be seeing in the marketplace with it is that you may not be getting 100% from your team as if you would be if you had higher morale investment into this business and clear direction.

[[00:12:42]]
How much pricing power does the point-of-care business lose with large hospital networks when it can no longer be bundled alongside core lab contracts?

[[00:12:51]]
I thought that was an interesting question because it's not bundled with core lab. Very few contracts are bundled together where you're leveraging a true bundled pricing strategy. That won't be an issue at all. I don't even believe that many of the players out there are really doing good bundling programmes. I think that's an opportunity for all the major players to do a better job at it. If anyone could have done it, I would have thought Quidel could have been best because less silos, less BU cost targets, but it's not really done that much.

[[00:13:33]]
What exactly is holding back these organisations and especially Quidel currently and in the past from bundling these contracts, considering you're saying that there could have been some benefit from it? I don't know if there's any structural bottlenecks that have caused the reason for it not occurring.

[[00:13:56]]
I can't answer for the question at Quidel why it didn't happen when we purchased QuidelOrtho other than the fact that the businesses were run very separately for a while. Even separate sales organisations, it was very much a core lab team and a point-of-care team that was out there. I think because we're going through integration probably and had other synergy projects that we're working on, I'm not sure it was at the top of the list for people to look at better ways of doing contracting and bundling. I know for larger organisations out there, it's separate BUs and who's going to be willing to give up the price to get the bundle going. If you're looking at a point-of-care device that may be under more competitive pressure than a core lab deal, and those core lab deals are usually much longer term, I believe, than the point-of-care deals are. Somebody is going to give something up. I think that's where it gets more difficult in larger organisations to decide which BU is going to be sacrificing in order to get the bundle overall. I think the core lab is going to carry the point-of-care more so than point-of-care carrying core lab.

[[00:15:21]]
What would you say is the typical payload volume or cartridge timeline required to fully breakeven on the upfront cost of a new instrument placement?

[[00:15:32]]
Historically, our goals were always about 200 tests a year. Now, those tests are going to depend on what test it is because some are more profitable than others, but if you were just looking at a flu test, it'd be somewhere around 100-200 tests per year.

[[00:15:54]]
Can Quidel sustain its company-wide target of hitting mid-to-high 20% adjusted EBITDA margins by mid-2027 if this business unit is completely stripped out?

[[00:16:08]]
Can we sustain it if the business is stripped out? Again, I can't predict anything. I think it would be possible, yes.

[[00:16:20]]
Where do labour reductions present the most significant threat to service support and overall sales speed?

[[00:16:29]]
Where do labour reductions? I don't know if I can answer that because I don't know what reductions… I know they've done so many labour reductions over the past three years that… I'm not privy to where those opportunities would be because I know that just speaking with people I know they're doing multiple jobs right now. I'm not sure where they would come from, and I'm not close enough to the business to answer that.

[[00:17:06]]
Given the steep margin step-up that's required in H2 2026, where would you say is the highest immediate risk for a manufacturing or distribution network to disrupt that timeline?

[[00:17:20]]
It's probably going to be supply chain.

[[00:17:24]]
With that being an immediate risk, are there any levers that are being utilised to mitigate those risks or cushion it?

[[00:17:39]]
I don't know. I do know that the supply chain has always been, I think, one of the areas that things pop up and you don't know what's going to happen. It could be in a component or some type of channel issue that happens. I think that is always one of the hardest areas to predict what's going to happen.

[[00:18:09]]
How severely will the recent termination of the joint business arrangement with Grifols drag down long-term lab segment margins and volume pull-through?

[[00:18:20]]
That question and the next question, I'm just not close enough to answer that number 10 and 11.

[[00:18:27]]
What would you say are the early warning signs that a major healthcare account could be preparing to drop the platform for a competitor?

[[00:18:39]]
This is an interesting question. This is an area of opportunity, I think, for a number of these organisations. I do not believe that there is enough notice unless a customer tells you they're going to begin discontinuing, you're usually not notified. You would have to have proper triggers in place in the organisation to start to trigger when volumes are declining outside of a trend. They don't really do that. At QuidelOrtho, that was not being monitored very well. Getting early warning signs, I think that would be the best way to find them would be through some triggers. Unfortunately, they don't happen.

[[00:19:29]]
What would you say are the reasons a customer would seek out a competitor? Which specific competitors pose the most risk here?

[[00:19:40]]
Are we talking point-of-care business?

[[00:19:43]]
Both point-of-care and lab.

[[00:19:48]]
Customers look at competitors for all sorts of reasons. I think workflow is critical to labs because labour is such a huge piece of the cost, and workflow impacts things like maintenance, how often your product is up or when it's down, the impacts of reliability on those instruments, the ease of use of processing those tests, the integration with processing those tests, all of those workflow components are really, really critical. Obviously, pricing is an important factor and then the clinical reliability, the clinical performance of the test, all of those three things are what really go into customers making decisions if they're going to move forward or not. It's cost in some way, shape or form. It could be acquisition, it could be labour, it could be workflow. It could be outcome performance and the costs associated with poor outcomes or not. Each customer will be looking at those three triggers.

[[00:20:57]]
Quidel's current portfolio lacks recent next-gen Sofia hardware refreshes. Are field teams essentially stuck giving away margin-eroding cartridge discounts just to retain decentralised clinic accounts?

[[00:21:12]]
I think there is a lot of the margin erosion that's happening or happened. I don't know if it's starting to hit bottom now because we're really working through the end of the COVID pandemic. Lots of reductions have happened to help stabilise the business. Hopefully, that's been built into those discounts that are in place right now. It's going to also depend upon, I think, what happens not so much on hardware refreshes, but on EUA to 510(k) movement on the combo tests that are out there today. What's going to happen with that. Today, you've got a combo test. It's priced at a certain price point. It's an EUA. At the end of the year, that's going to have to become a 510(k). Otherwise, you're going to run two tests separately like you did in the past. If you run those two tests separately, that's going to be more expensive than the combo test. That could drive prices down a little bit more in the market, or it may maintain as long as they match what the combo would have been, but there will be a little price shift if those companies decide not to do the 510(k).

[[00:22:36]]
Approximately, how much of a discount would you say is given to retain these accounts usually? Is there a certain price point where customers are usually willing to pay to stay with Quidel?

[[00:22:50]]
Yes, there are price points out there on the specific tests that are market-driven. Those prices are out there. Not all customers pay the same price as we know. The question is you're asking if I knew the average price right now, how far is that off from the low where it could go? I would say maybe 20% more, I don't know, maybe that may be too much. I'd have to really have the exact figures in front of me, but there's probably 10-20% room to decline.

[[00:23:33]]
Do platform transition issues at key competitors give Quidel a clear opportunity to capture market share by offering targeted instrument upgrade incentives to the Sofia user base?

[[00:23:48]]
No. A software incentive isn't something a customer would switch product to. What they're going to switch the product to is going to be, like I said earlier, it's a workflow improvement. It's a cost structure improvement, or in this case, I think the big question is the menu, what is the menu that's being offered.

[[00:24:12]]
Overall, to what degree do corporate lay-offs ultimately threaten Quidel's account retention rates and the commercial roll-out schedule of the Nulexa molecular platform?

[[00:24:28]]
I don't think the corporate lay-offs threaten the launch of Nulexa that much right now. You did lose some very senior people who had significant relationships with major distributors out there that could have helped support that launch. The launch, what I believe is going to be more limited as it begins to get rolled out. It's not going to be a national launch. It will probably be a more controlled launch by a group of pretty established team members. Of course, they don't have the depth of relationships that other people had. There is an impact because that depth of relationship is not there. I think the bigger impact on that launch is the lack of menu. That's going to be the biggest issue in the success of that launch until that menu is broader.

[[00:25:35]]
Does that basically mean that labour reductions don't necessarily have a direct correlation with account retention rates?

[[00:25:52]]
They have a correlation to strategic account retention rates.

[[00:26:00]]
How can Quidel ultimately keep clinic and hospital customers from switching to Abbott, specifically when the baseline Sofia system has gone a significant amount of time without a major hardware update?

[[00:26:15]]
That is more of a technology question. You're looking at a Sofia that's an antigen test at a lower cost. Today has the combo. The question is going to be what do they do with the 510(k). Then you've got Abbott, which is a molecular test that is running them separately. It's more of a technology question in the lab, what do they want to do with that test. If you're just testing to determine if you need treatment, an antigen test is usually good enough, but if you're in a hospital, you probably will want to lean more towards a molecular platform at an ER or even at some of the urgent care providers who want the molecular test for that. The Abbott has a really nice hold over Quidel and that it offers strep. The strep test in a molecular level… Strep is a really big volume test. With the Abbott platform, you don't have to confirm. Whereas on a Sofia, it's an antigen test. Even if you test for it and it's positive, you can dispense or do a prescription, but you still are supposed to confirm if it's negative. I believe you're still supposed to do confirmation. That is another workflow thing getting back to that and then the cost of confirmation. Where Abbott has a win is in the menu. Switching to Abbott or switching Sofia, I don't know. To me, it's a technology question and a menu question.

[[00:27:56]]
Given Quidel's portfolio relies on price-driven contracting, how significantly would you say the margin-eroding price battles are required to protect decentralised clinic accounts?

[[00:28:13]]
Okay, how severe margin-eroding price battles required? I think we addressed that one up above a little bit. You're going to have those competitive accounts that you're going to have to have some erosion on. It's going to depend on what happens at the end of the year with the menu and the 510(k)s, what the strategies are going to be for each of those companies based on what they decide they're going to do. Are they going to have the 510(k) or not? That's going to really drive, I think, some of the change in pricing or potential battles that happen at that point in time. There's going to be some change in the marketplace, I think, at the end of the year.

[[00:29:01]]
Is there anything else you'd like to discuss surrounding the durability of customer contracts? Are there any other leading execution risks to discuss?

[[00:29:14]]
Yes. I think customer contracts specifically are something that really could be improved. I can only speak to QuidelOrtho in just managing compliance of those contracts. It goes back to the question earlier about seeing when you're losing the business. That is an area of opportunity for the organisation because at this point in time, those contracts are not enforced very well. Having a contract, not having contracts, maybe some companies do a better job than QuidelOrtho did, but closing that loop and managing those contracts, I think, would be a nice change to the business model as well.

[[00:30:02]]
How would you assess the customer conversion strategy and timeline required to successfully transition legacy Sofia rapid antigen accounts onto the new Nulexa molecular platform?

[[00:30:19]]
If I'm QuidelOrtho, I'm probably not going to try to go cannibalise my Sofias out of the gate. I'm going to focus on going after competitors where they're at. I would look at those places first, looking at ways that I could take that business possibly away from other antigen competitors that are in the marketplace. Personally, I would look at something like BD, places where you can go get a molecular test in for a short period of time, but I wouldn't cannibalise my own business until I've got enough menu to offset that Sofia business because it's a limited menu at launch. I don't think at launch, it would make sense to cannibalise the business.

[[00:31:15]]
Why do you think a customer would ultimately choose to stay with the legacy offering rather than transitioning to the Nulexa platform?

[[00:31:25]]
There's a lot of cost and time that goes into switching to a platform. You have to have a benefit. What is the benefit going from a combo test to the combo Nulexa platform, just like what's the benefit from going from your combo test to any other platform. It's got to be some major driver because there's a transition cost that has to happen, too. It's not only the price per test, but you're going to have to validate that product, set it up. I think, personally, that transition isn't going to be as easy until there is a larger menu available and people can justify a transition to a new platform.

[[00:32:08]]
Can the Nulexa platform's 6-10-minute speed profile realistically overcome its restricted initial testing menu to rapidly convert the legacy Sofia account base?

[[00:32:25]]
I don't think that 6-10-minute PCR test on its own for COVID and flu because it's just flu, A, B and COVID. I don't think that in a PCR platform is going to drive a lot of change until there's more in the menu. You've got to have strep. When Nulexa has strep, then it's going to be a critical player because now you're going to have, hopefully, a strep test that doesn't require confirmation and then you can go after other competitors that have that strep test in their PCR platform.

[[00:33:09]]
Given initial expectations to place a few hundred Nulexa units, are there any real-world challenges to scaling that placement ramp into 2027?

[[00:33:22]]
I think whenever you launch a new product, the scaling is really critical because I don't know the timeline for parts on that product. If you get a large customer saying, "Go," it could eat up all the revenue units for the whole year from somebody else. I think the biggest real-world operational challenge will be the correct forecasting and the lead time on parts of those units to make sure that they can support demand.

[[00:33:54]]
Does a wide net margin spread per test cartridge drive rapid adoption compared to traditional distributor ties and workflow habits?

[[00:34:04]]
I don't really understand that question.

[[00:34:08]]
Overall, I wasn't sure, with this offering possibly having higher margins, if that is able to provide a much…

[[00:34:23]]
Like incentive for distributors to sell more because they'll make more on it?

[[00:34:28]]
Yes.

[[00:34:29]]
That always helps. It definitely helps. Having a higher margin to your distributor does help, but again, you're going to have to drive it down to that customer in those workflow habits. That's where I think the menu is going to be… To drive those customers change, it's going to have to be some value to that customer, even though the distributor rep can position it as such and will be working on our behalf because they're getting paid more margin, but you have to have a compelling position to drive that demand to get the customer to change platforms.

[[00:35:09]]
When evaluating a decentralised molecular diagnostic system, how do clinical buyers trade off a restricted initial testing menu against an ultra-fast 6-10-minute RT-PCR [reverse transcription-polymerase chain reaction] turnaround time?

[[00:35:24]]
The 6-10 minutes is really amazing. I don't want to discount that at all. I think, again, when that has a larger menu, it's going to be very, very well received, but again, personally, I don't think a 6-10-minute flu COVID test in PCR is going to change the game until you've got strep out there. You're just going to have to have a broader menu to really start seeing the value, I think, in the unit. I do think the unit has a lot of potential at 6-10 minutes. I'm not discounting it. I'm just saying there's got to be more to the menu.

[[00:36:05]]
Beyond Nulexa, what other specific product launches across the US and international markets are expected to stabilise revenue floors?

[[00:36:16]]
I'm not that familiar outside of the point-of-care space. I probably can't answer that one.

[[00:36:25]]
Given that the USD 30bn labs market is leaning heavily on the international roll-out of the Vitros 450/ECL platforms and the domestic high-sensitivity troponin launch, are there any near-term menu caps or distributor push-backs that could ultimately cap Qudel's projected addressable market expansion?

[[00:36:47]]
No, not that I could think of.

[[00:36:51]]
Regarding regulatory price resets and some China headwinds, are there any immediate logistical push-back or shipping delays that teams are experiencing in China as a result of the ongoing NHSA transition?

[[00:37:10]]
I don't know about that. I couldn't answer that one.

[[00:37:15]]
What would you say is the realistic timeline required to migrate a customer-specific billing code from standard dry chemistry pricing onto a premium differentiated billing track?

[[00:37:29]]
That is something, again, I probably… I'm not a billing expert or a payer expert, so that might be hard for me to address.

[[00:37:40]]
Given that achieving a full-year 23% adjusted EBITDA margin target depends heavily on the back-half performance spike, what are the raw material procurement initiatives that are driving down unit manufacturing costs?

[[00:38:25]]
Those are usually going to be, making sure you've got enough product for the season. The biggest challenge is managing inventory. When the season hits, you're not caught off guard or you don't have delays in getting those products there. I know the team works on all sorts of things from getting the antibodies, getting the slabs, getting the films, all that stuff has to be in raw materials and ready to go so that they can hit the demand if the season hits hard.

[[00:38:59]]
What departments would you say are currently experiencing or have previously experienced the highest turnover or capacity strains following Quidel's labour reductions?

[[00:39:25]]
I don't know what the numbers are for that. I know I've seen a lot on the commercial side of the business. I've seen a lot specifically on the Quidel side of the business, more so than the Ortho side of the business. I don't know if that was voluntary or involuntary on those sides. Obviously, most of the senior team on the Quidel side is gone. It's hard for me. I'm not really exposed to manufacturing and supply chain, so I can't speak to those, but I have seen a definite impact on the commercial side of the organisation, on the point-of-care business more so than the core lab.

[[00:40:12]]
How material of a headwind would you say is the loss of the Grifols joint business arrangement on the core lab's business long-term top-line volume pull-through?

[[00:40:22]]
That was one I couldn't answer it. I think that was earlier.

[[00:40:26]]
How often are competing clinical lab manufacturers able to break in and essentially poach mid-volume hospital accounts during a standard contract renewal cycle?

[[00:40:42]]
Are we talking core lab or point-of-care?

[[00:40:45]]
Core lab, but then also if we could discuss point-of-care after, that would be great.

[[00:40:50]]
Core lab, those are longer contracts, and they usually start shopping in the year two or three. That's when competitors are starting to get into those accounts and starting to change out what the customer value is. Now, on point-of-care, even though they've got three-year contracts in most cases, those are more at risk and can change more quickly because as I said earlier, I think on those point-of-care contracts, they're not really managed that well or they're not held to the contract terms, and there's less control over commitments.

[[00:41:36]]
Is the current mid-single-digit underlying growth profile of the core lab segment stable enough to reliably self-fund Quidel's continuous debt deleveraging strategy?

[[00:41:51]]
I'm not close enough to it, but I do know the core lab business is relatively strong. I know that the point-of-care business has been more of a drain, specifically over the last few years. My guess would be it will be fine, and it will have gotten rid of some of those assets that were more of a drain on it, but they also weren't focused on for innovation either. I do think it can sustain itself on its own. I also think that if someone buys this point-of-care business, there is an opportunity for them to be a major player, not only getting the market share and the benchmark. They've got a nice technology to grow from. There's a lot of opportunity to add more products and create a fully positioned point-of-care company out there rather than just a respiratory company. I think there is opportunity on both sides for the carve-out to be successful.

[[00:42:52]]
Do you think the immunohaematology segment's strong performance in North America and Japan can continue to act as a buffer against highly volatile respiratory sales drops?

[[00:43:07]]
Yes, possibly. Yes.

[[00:43:10]]
Do you think that these accounts can expand fast enough to continue being a reliable insulator when the point-of-care respiratory sales or the potential deal closes or if the deal doesn't close and that point-of-care business hits a down cycle?

[[00:43:31]]
Yes. Again, this is where I'm not the core lab expert. I don't want to predict or say something. It's just my opinion. I can't really answer that. I'm not close enough to the international markets and what's happening out there.

[[00:43:48]]
Does Quidel's plan to place a few hundred Nulexa units in 2026 assume aggressive capital trade-in structures, or do you think it relies heavily on traditional reagent rental contracts?

[[00:44:09]]
That depends on what their strategy is, if they're going to go into placements or rentals. I think to get to the few hundred, you probably want to go with rentals because at this point, you don't have a menu and you want to going to get in there and get your units placed. When your menu comes, you can then leverage those accounts. I think it will be harder selling in a capital sale into accounts for a product that at this time, really is more me-too, even though it's PCR a little bit faster, it just doesn't have the menu. I think customers will want to have that roadmap outlined for them on where that product is going and what the potential for it is going to be. I think they're going to have to be reagent rentals personally.

[[00:45:01]]
What specific non-respiratory testing panels do you think can be effectively added to the Sofia base to stabilise out-of-season clinical testing volumes?

[[00:45:13]]
There's a lot of different tests. With Sofia, you're limited by the technology, but I think that there are a whole host of tests that could be looked at on either the Nulexa or the Sofia. At one time, we were looking at vitamin D. There could be hormone testing done. There could be STIs, which would go on the molecular platform. There's a whole list of tests in that point-of-care segment that would be nice to either put on either one of those platforms or bring on another platform where you're really addressing and have full integration in that point-of-care space. We just don't have those right now.

[[00:46:05]]
How rapidly has the domestic hospital roll-out of the high-sensitivity troponin assay progressed? What's the typical customer conversion timeline here?

[[00:46:15]]
That, again, is on that core lab side, so I can't answer that.

[[00:46:21]]
Do you think primary care and urgent care clinics tend to show historical loyalty to the legacy Sofia instrument, or do you think they're highly sensitive to multi-product volume bundles from other peers?

[[00:46:38]]
I do think that's our sweet spot is in that point-of-care and urgent care space. I think we've got some pretty loyal customers. Obviously, everything is driven by cost and workflow in the market. I do think that has been a space we've been really successful in.

[[00:46:56]]
Would you say that there's effective cross-selling initiatives that are implemented to prevent legacy Sofia accounts from migrating over to Abbott's point-of-care platforms?

[[00:47:13]]
I'm not sure how much cross-selling is actually happening. I think that gets back to almost earlier talking about the bundling. I think that you've got people who are responsible for point-of-care, selling point-of-care. People responsible for core lab really positioning core lab. If they work together well, great, but I don't think there's a tremendous amount of positioning happening across the board is what I've heard. Obviously, I'm not involved in it every day.

[[00:47:45]]
Following the 34% drop in point-of-care revenue due to the soft respiratory season, are there any specific indicators that point to a stable non-seasonal baseline floor for diagnostic testing volumes?

[[00:48:07]]
What operational indicators point to a stable non-seasonal baseline. You've got the Triage products and you have the strep. Those usually aren't as seasonal as the respiratory product itself. I think there is somewhat of a baseline floor for flu that you could look at. COVID is always changing and continues to be on a downward trend. It looks like it's starting to flatten out a little bit, but you could probably come up with a baseline for flu, but I do think you've got other products in that point-of-care mix that are non-seasonal like your Triage. The strep really has some seasonality, but not a lot.

[[00:48:54]]
How are ongoing distributor purchasing pauses altering localised field inventory levels and downstream fleet placements?

[[00:49:20]]
I'm not quite sure on that one.

[[00:49:22]]
Could you discuss the main overlooked risk regarding the specific point-of-care carve-out and the long-term instrument fleet durability?

[[00:49:38]]
The long-term risks to the product line is really going to be the investment and innovation in building out a menu. That's going to be the biggest long-term risk is having differentiation in the menu, making sure that you're meeting those operational workflow needs. The 6-10 minutes is beautiful because that fits really well in a retail clinic, in an urgent care setting, in a physician office lab where they want to result in less than 15 minutes. That is a really great piece. It just has to have a full menu associated with it. As long as there's investment into that, I think you couple that with expanding into some new product areas as well to maybe broaden a portfolio and point-of-care, you could have a really nice business model there. You could even, as I said earlier, integrate it with a retail business. I know that there are companies looking at coming into the US that have more visual read tests that could be sold OTC if they get approved. How do you integrate the whole process from OTC into point-of-care and link in the physician like we do in pregnancy testing. I think that there is opportunity there for even more testing eventually to come into this point-of-care continuum, even including the consumer. I think there's a lot of upside there, but it's going to require investment and possibly even modifications and changes with FDA approvals in order for it to happen.

[[00:51:24]]
Is there anything else important to mention regarding risk to the near-term patient testing market, competitor placement moves or operational challenges? Is there anything to be on the lookout for during the potential transition, should the carve-out occur?

[[00:51:40]]
I think the biggest issue is going to be the company is looked at as it's in a transition. Is everybody firing on all cylinders in the field? Is there a sense of risk with your customers? Is there an opportunity for competitors to leverage that opportunity? That's out there. It is an older platform, the Sofia, but it's got a nice menu. You've got these trade-offs that are going to be out there. If I was a competitor, you do have this gap right now. You're going to look at that. We'll see. There's always new products in the horizon for lots of different people. If somebody comes out with something that has a broad menu is affordable and fast, that's going to be an issue for anyone.

[[00:52:43]]
Is there anything else you'd like to highlight or discuss about Quidel?

[[00:52:56]]
No, I think this was great. I appreciate it. Hopefully, I was helpful. I know I'm just a small piece of this puzzle on the point-of-care side, but hopefully, I added some value.

[[00:53:06]]
This was great. Awesome. Thank you so much. I appreciate you hopping on the line and all of your insight as well. Hopefully, we can work together again in the future.

Transcription ends at 00:53:21 of the recorded material