LumiraDx Limited (LMDX) on Q1 2022 Results - Earnings Call Transcript
Operator: Hello, and welcome to LumiraDx First Quarter 2022 Earnings Call. All participants will be in the listen-only mode. [Operator Instructions] I would now like to turn the conference over to Colleen McMillen, Vice President of Communications. Please go ahead, ma’am.
Colleen McMillen: Hello, everyone. We’d like to welcome you to today’s call to discuss LumiraDx’s first quarter 2022 financial results issued earlier today. With us are LumiraDx’s Chairman and CEO; Ron Zwanziger; Chief Financial Officer, Dorian LeBlanc; and Chief Product Officer, Pooja Pathak. The press release announcing our financial results is posted on the Investor Relations section of the company’s website at LumiraDx.com. Before we begin, I would like to caution listeners that statements we make today other than historical facts, are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please be aware that all such forward-looking statements involve risks and uncertainties and such as those detailed in our annual report on Form 20-F for the year ended December 31, 2021, which was filed with the SEC on April 13, 2022, and other filings that we make with the SEC. Any forward-looking statements that we make must be considered in light of these factors. Actual results may vary materially. Also, during the course of today’s call, we may refer to certain non-IFRS financial measures. Non-IFRS financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with IFRS. There is a reconciliation schedule showing the IFRS versus non-IFRS results currently available in our press release issued earlier today, which can be found on our website. I will now turn the call over to Ron Zwanziger for opening remarks. We will then provide financial and business updates before answering questions. Ron?
Ron Zwanziger: Thanks, Colleen, and thank you all for joining our call today. Our company had a strong start to the year. We’ve continued to innovate on our platform to deliver the fastest test results on the market with lab comparable performance. As anticipated, we ended the quarter with approximately 25,000 instruments shipped across 100 countries. Customer receptivity continues to drive market adoption and use cases for our platform in health systems and community-based settings. We’ve also gained momentum with our R&D pipeline and product launches of assays for common health conditions. We believe that this progress will enable us to drive strong growth of non-COVID revenues in the medium term and deliver on our vision of transforming the $15 billion addressable market for point of care diagnostics. Turning to our financial results. We generated $126 million in revenues for the first quarter. The performance was driven by strong demand for rapid antigen COVID testing on our platform as well as molecular lab testing by Fast Lab Solutions customers. This was especially the case in January at the height of the Omicron variant surge in cases. We’re making progress in our pipeline of the 30-plus diagnostic tests for common health conditions, including infectious diseases, cardiovascular disease, diabetes, and coagulation disorders. On the product delivery side, we’ve gained momentum with our R&D portfolio with new product launches expected such as hemoglobin A1c plan to starting this summer as well as additional claims with end markets for CRP, D-Dimer, COVID Ultra and our [ph] COVID and flu combo. I would like to take a moment to highlight our new Ultra test trip for which we plan to achieve CE Mark for shortly and summit for the FDA EUA in this quarter and which will further reduce our market-leading turnaround time to five minutes to test results with high sensitivity. Speed and accuracy of test results are core to LumiraDx with transformative potential and competitive advantage in point of care diagnostics. Five minutes compared to 15 minutes to 30 minutes from most other point of care diagnostic tests on the market and hours or even phase for high sensitivity lab testing. The time saved in diagnosis could mean lives for acute care patients and result in significant increase in throughput for hospitals, pharmacy change, and other locations with high testing volumes. On the commercial side, we’ve had the opportunity to work more closely with customers to understand their overall platform experience and enhance its potential impact. That includes positive feedback on recently launched tests such as D-Dimer and CRP in addition to insights on how our platform can help our customers improve clinical pathways now and additional features and products that will help them expand point of care applications in the future. Our customer success story should give you a sense of the growing validation by health care providers and resulting market adoption and use cases for our platform. Let me share three such examples with you. One, such example on the flexibility of our platform is in the Liverpool Heart and Chest Hospital. The customer is using our CRP test to support patients who have a diagnosis of COPD, bronchiectasis, and pneumonia, pneumonia as part of their community care. Their respiratory team visits patients in the community, and they are able to measure CRP at the point of care when needed within four minutes. The platform, the LumiraDx Platform, portability has been ideal for this near-patient use case and has the connectivity features that allow transfer of patient results to their health records. On our last call, we discussed the experience of the Gloucestershire England Health system using our platform to triage patients in community care settings before they arrive at the hospital and to support a number of tests, including COVID antigen D-Dimer, CRP to streamline resources. Recently, they have tripled their installed base of LumiraDx Platform and are planning to implement INR and hemoglobin A1c test later this year. Finally, for those of you who have not already watched Bill Gates recent Ted talk at TED2022 in April, LumiraDx Platform featured in its talk on preventing the next pandemic. As you know, the foundation has partnered with LumiraDx to distribute 5,000 platforms in African countries to vastly expand testing and transform patient diagnosis and treatment at the point of care. We have now made our platform available in 49 countries in Africa in a variety of care settings such as fuel clinics, airports, primary health facilities, occupation and health settings, and walk-through clinics. In addition to our current testing menu, we expect that assays in our R&D pipeline for TB, diabetes, HIV/AIDS and other health conditions will have a meaningful impact on global health. I will now hand things over to Dorian to go deeper into our financial performance. Dorian?
Dorian LeBlanc: Thanks, Ron. For the first three months of 2022, LumiraDx revenue was $126.4 million compared to $106.9 million for the first quarter of 2021. COVID antigen test strips on the LumiraDx Platform contributed $77.5 million and Fast Lab Solutions delivered revenue of $38.3 million in the quarter. Q1 revenues for COVID-related products were substantial in January during the height of the Omicron wave. Total gross margins for the first quarter of 2022 were 40% compared to 41% in Q1 last year. The 4,000 instruments shipped in this quarter were primarily delivered free of charge for the required customer purchases of the minimum number of test strips. Costs for these instruments, which were largely placed with new U.S. customers were recognized as a period cost fully within the quarter and the impact of these costs decreased reported gross margins by more than 11 percentage points. We remain focused on continuing to grow our instrument placements with these high-quality, long-term point of care customers capable of utilizing our existing and future test menu. Overall core test strip margins in the quarter continued to exceed our long-term guidance. Adjusted research and development costs, which exclude amortization and stock-based compensation, were $39.8 million in the first quarter. This represents an increase of 53% of the first quarter in 2021. R&D spend has increased with the opening of our new R&D center in Glasgow and more recently to support the imminent launch of several new tests. First quarter 2022 sales, marketing and administrative expenses were essentially flat to Q4 2021. The adjusted operating loss for Q1 2022 was $22.9 million and the adjusted net loss for the period was $32.1 million or $0.13 per share. The unadjusted net loss of $55.7 million in Q1 2022 included approximately $20 million of unrealized foreign exchange losses related to the accounting for intercompany loan transactions with no consolidated cash impacts to the company. Our cash balance on March 31, 2022, was $166 million. As we previously announced in April, we entered a new financing agreement to provide working capital to fund additional instrument manufacturing. We announced the first closing of $26.1 million and anticipate closing the maximum $50 million in aggregate investment before the end of this quarter. Given the strong interest in learning more about LumiraDx, we are pleased to announce an Investor Day on the morning of June 21 in New York City. Further details will be announced in the coming weeks, and we look forward to the opportunity to cover some key topics around our technology and pipeline in more detail. Ahead of our Investor Day, Pooja will provide a short update on our recent progress. Pooja?
Pooja Pathak: Thanks, Dorian. As Ron mentioned, we’re really excited about the new Ultra test strip design that allows for faster reaction times and greater precision to deliver high sensitivity antigen test results in five minutes. Our first product in this category is COVID Ultra [ph], for which we plan to achieve CE Mark shortly and submit an FDA EUA in Q2. COVID Ultra as a product enables our current customers and the rest of the point of care market to move from results in 15 minutes to 30 minutes to five minutes. This significant improvement in turnaround time has a huge impact to patient workflow. For example, the pharmacy test and treat program where individuals are waiting for test results to get their prescription. As overall testing declines, we believe COVID Ultra will compete effectively and enduring health system testing use cases. Second, developing Ultra as the product line has the opportunity to move the entire respiratory market to fast and high-sensitivity antigen testing, including fully [indiscernible]. Finally, the innovation of the Ultra test strip design has made important contributions to the development of assays such as high-sensitivity troponin used to aid [ph] physicians in the early detection and rule-out of acute myocardial infarction. We also have a number of new developments in our overall pipeline. First, our primary care offering is progressing well. For our CRP test in Europe, we recently expanded the intended use to include testing in children over the age of two, offering this test on the same platform as COVID, flu, and RSV aid physicians to quickly and accurately diagnose as well as treat respiratory conditions in children at the point of care. Our portfolio of rapid CRP and pathogen-specific assays on one platform offers a strong antimicrobial stewardship toolkit for primary care, where the focus on reducing unnecessary antimicrobial prescribing is growing. For example, studies have shown that at least 20% of antibiotics prescribed in Primary Care in England are inappropriate. The LumiraDx Platform is well-positioned to enable rapid testing to aid physicians in assessment of their treatment decisions and reduce unnecessary prescribing in both adults and children. The launch of additional respiratory assays outside of COVID-19 meets the growing demand for point of care diagnostics and primary care across Europe as we move to a post-pandemic world where traditional respiratory viruses will co-circulate with COVID-19 and rapid testing and differentiation will be required. This summer, we expect to also launch our hemoglobin A1C test in Europe for monitoring diabetes patients from a finger stick sample, which results in approximately six minutes. HbA1c is a large and high-growth test in the point of care market, and we’re already seeing the potential impact of this addition with some of our customers. For example, one of our pharmacy customers with a 200-plus installed base currently used for COVID testing is keen to start offering HbA1c due to the rising number of patients with diabetes. With the addition of HbA1C to the test menu, we offer on the LumiraDx Platform, a majority of the currently used assays at point of care in primary care and pharmacy across Europe. For our customers, it will enable the consolidation of three instruments to a single connected platform and workflow. Moving to the acute or hospital segment. Our initial focus is in cardiac testing. For our D-Dimer test, we have ongoing a prospective study in the UK and Germany, Hamburg to support use in ruling out venous thromboembolism, or VTE. Interim analysis based on 278 symptomatic patients presenting in emergency department and ambulatory clinic setting, demonstrated that the LumiraDx D-Dimer test has a strong correlation with the laboratory reference method and also has 100% negative predictive value at the 500 micrograms per liter cut-off when used in combination with a pretest probability score. To our knowledge, this is the first study to prospectively demonstrate the use of a quantitative finger stick D-Dimer test at point of care to rule out VTE in symptomatic patients, which has the opportunity to significantly improve primary care assessment by physicians of DVT and also potentially reduce the time of the patient hospital visits as well as follow-up testing and scan. The point of study D-Dimer test has potential to improve the clinical, operational and cost outcomes for the VTE pathway. Our NT-proBNP and high-sensitivity troponin tests are in development and are progressing well. We will provide further updates during next month’s investor meeting Dorian just mentioned. Continuing with updates on the respiratory portfolio, the COVID and flu combination test was launched commercially in Europe in January, although volumes have been low due to low flu prevalence this season. As previously communicated, the FDA did not authorize an EUA based on the retrospective data that comprise of banked flu samples from the 2019 to 2020 season that we submitted last fall. We commenced a new clinical study at the beginning of this year to provide additional prospective Flu A/B data and plan to submit an updated FDA EUA in the second half of this year. The COVID and RSV combination test is in late-stage development, and we expect to CE mark shortly. We are still planning to submit 510(k) applications for COVID Ultra, HbA1c, INR, and Strep A molecular by end of year. Flu and RSV test will be offered in combination with COVID under EUA and will transition to 510(k) single assays on the Ultra product line as development work and verification and validation studies are completed. With that, we would be happy to take your questions. Operator?
Operator: Thank you. [Operator Instructions] And the first question comes from Vijay Kumar with Evercore ISI.
Operator: Very good. Thank you. And the next question comes from Jeffrey Cohen with Ladenburg Thalmann.
Operator: Thank you. And the last question comes from Andrew Cooper with Raymond James.
Operator: Thank you. And that does conclude the question-and-answer session. I would like to turn the floor to Ron Zwanziger for any closing comments.
Ron Zwanziger: Thanks very much. What I’d like to do is to just reinforce the progress and the acceleration of the rollout of our platform and the pipeline of product as the readiness to come to market in the coming quarters, the capability of the platform, which has been proven, allows for an increased rate of launching of new tests and represents the next leg of our journey to transform point of care diagnostics. I mean, frankly, we’re really on a role at the moment in terms of new product introductions. The traction we are gaining with our technology, the diagnostic menu with customers are helping us to achieve our strategic objectives to drive revenue growth, well into the future. We’d like to thank you again for your questions and for joining the call today. Thanks very much.
Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
