GNMK - Earnings call transcript Q4 2017 | GenMark Diagnostics, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to today's conference call to discuss GenMark Diagnostics' Fourth Quarter 2017 Financial Results. My name is Joey and I will be your operator on this call. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] Please note that this call is being recorded today, Tuesday, February 27, 2018 at 1.30 Pacific Time and will be available on the Investors section of GenMark's website at www.genmarkdx.com. to meeting like Ek to now GenMark. of would turn over the Johnny I ahead. go Please

Johnny Ek

and Joey, us joining all today. Thanks, you thank very much for

certain plans, may forward-looking constitute I inform statements. performance Any during Before are like our forward-looking or course statements expectations, future about that or beliefs, the call begin, GenMark assumptions made statements. this we of statement by objectives, would you to events

financial plans For features guidance, objectives concerning example, XXXX the and market products, our clearance, these statements and forward-looking of regulatory management reasonable are new all based statements. and believe development, of commercialization are on statements trends assumptions. We

GenMark However, uncertainties these different future actual results these from Mr. involve and and GenMark's that events and the no any after may such and performance call now circumstances statements unanticipated turn expressed to or cause I those materially reflect from in any occurrence implied results are events. guarantees in Important cause statements statements materially of could are by factors expressly the to President which to of duty the of be results this risks known filings Hany? update occurring the SEC. over disclaims or or reflect any Hany will and to statements. differ Massarany, detailed forward-looking unknown actual forward-looking with assumes to call not CEO to conference obligation GenMark.

Hany Massarany

system our multiplex made joining by specialized accessible Faiz you thank Dr. well toward across pathogen released settings, for our year, volume our we as labs. Late needs health near the and us. Mendel panels call family Last joined NP Scott our most sites and as our XXXX, care afternoon culture Good respiratory Kayyem. system we centralized designed not in to advancements oral the all mission CE-marked Johnny. and lower and US molecular you, the year, introduced molecular also just we to CFO, on I'm making settings. of in Thank the the FDA diagnostics Sepsis test sophisticated today of in and panel significant Founder, Europe. ePlex the we address market ePlex blood patient received clearance In ID ePlex of

ePlex than implemented our additional manufacturing and far automation, cartridges, which up also strong test We manufacturing demand us so of of ePlex pathogen fully respiratory line to an doubled our with more this capacity allowing the panel quarter. keep

As million. we and XXX a base result with of closed placements of an initiatives, ePlex $XX.X other of revenues these installed and XXXX generated

testing and of were increased to we analyzers ePlex expanded growing the fourth well XX quarter, quarter the to as in XXX clinical financial ePlex in from an aggressive US $XX placements Revenues closed December. number the utilizing XXXX. XXXX season in contributed early the the respiratory our and the with installed by ePlex onset European testing Now, as for flu resulting customers over of XXXX, volumes, In routine labs. QX, million revenues quarter X% turning base ePlex in highlights. due largely the fourth our of of meaningfully increase of the to

of world's the continued base revenue product. largest are market pleased of our majority ePlex strong the with vast US, our momentum We the represents and the especially for which in

accounts results for routine of the excellent commercial US use. XXXX, ePlex and the adopted have some Our displacing largest of delivered second who key in team clinical strategic competitors in the now half most

the our represented placements During the placements. of same total period, ePlex US in XX%

market. in towards more a market increase meaningful We of expect blood year we this with in panels the culture XXXX upside once end the to to receive FDA the percentage US clearance ID

ePlex of US reporting business the this in understand important it's for on near feel appropriately not to and we expect European impact investors our to we continue do the split the While between US term. placements, market

Moving testing only a the may types as hospitals labs to need of modular as our cartridge to towers. analyzer scalable of meet various and highlights, six one you to reference six tower platform ePlex cartridge that decentralized of as needs require sites developed large or as many we that laboratories or know, four business may from small many

test samples up that we ePlex patient needs smaller ePlex delivery XX lower configuration even three functionality increase ePlex platform We're The its the developed are ePlex compared the volume user as configuration well lower shift of the market capacity use, their with testing This that ePlex, quarter which and We upgraded, a reporting hospitals capabilities results and also additional to to networks launched. very core the by is of as the with the sites, ePlex NP, allowing fourth pleased called intuitive the easily the of volume to continues the alternatives. and analyzer customer benefit sites per response address was a same are to cartridge late capacity in grow from we or And ePlex process NP as can NP. low panels integrated interface which customers where will underscore XXXX. of NP testing. feedback, multiplex encouraged high comprehensive to ePlex decentralized quality rapid is to of launched address early believe can satellite, volumes very as available the ease respiratory

manufacture of we implemented season in more use. earlier, systems, cartridges. for routine new during quarter And clinical during the implemented customers flu that year, significant flu fourth As some season, the hesitant doubled are respiratory number bring to an analyzers ePlex the testing were to of peak before capacity a while placed the than mentioned additional I line ePlex ePlex manufacturing automation test our last and

and manufacturing ePlex this despite this with cartridges of capabilities, customer to ePlex demand test able being keep With cartridges ePlex the test historically been for season. capacity first stress have additional we the true even of flu RP manufacturing our up severe during

efficiency yield. labor by manufacturing We improving capacity and expect to further increase

completion end of for the addition, ePlex line in this In are planning with help to toward season and year flu menu expansion. the the XXXX-XXXX stages we manufacturing service expected ongoing a our third

guidance, and on like to XXXX progress Before menu I comment Europe. I'd move on in expansion to ePlex our

to address Europe, process the revenue continue the ePlex to acquisition from implementation in We generation. in placement particularly length and relation the of routine to challenges

testing. of completed more also assessment few Over we European of us our months, slowdown, of a placements installed more XXXX. readily commercial also grow in our half Europe to have base certain first We're that expect the we expect enable the sites analyzers ePlex routine new in repositioning can detailed the changes challenges underutilized will by them for past strategy to Europe - implementing in Therefore, system clinical expect navigate and temporarily these begun to particularly annuity to we that deploy effectively.

KOLs panels. scientific continue as longer market confident will and to details our designed look studies In term. are and We that in to growth multiplex We to of regarding over development providing the believe our the earnings forward in economic clinic, driver an of initiatives approach additional the European important we several to market strategy Europe working other emerge call. future the company's remain addition, impact European molecular and demonstrate support with quality on

menu also Turning of to states. proprietary leveraged our our in expansion, ePlex advance disease to we infectious XXXX, across multiplex multiple menu molecular panels technologies

labs including has that ePlex routine of and competitive been cleared some most by the to prestigious the implemented offerings. RP from transitioned largest in broad already Our panel of testing for clinical FDA word customers, other a range

designed and later year get about We and this use are and ease multiplex bloodstream today regarding help continue drug We the pathogen also on tool its flu we resistance. year's public launch family light critical are and ID highly sepsis. to offer culture review third by resistance exceptional end, clinical first in to diagnose of subject three of of particularly expect infection ePlex the timeline. can such, FDA's condition help a second the to meaningfully of the improve address feedback year this US blood that to processing the the We to new performance, crisis panels of and the design the of during recently panels confident clearance market excited and submission the Three aggressive they critical will and of of this initiation markers antibiotic lead the inclusivity year that health three of announced I'm capacity, and provide manage FDA to to panels the next unique these of solution our broadest season. any management molecular studies assays. of that to of quarters growing this all disease as continue

driven to decisions blood decision to are excited in their adopt panel, it are for are culture customers current ID primarily process. by the and accounting about ePlex approach our While RP

with utility panel pathogen our reportable Finally, demonstrating we're XX a highly ePlex's also controllers, type gastrointestinal multiplex most to differentiated highly continuing and targets on work over challenging sample and with ePlex this panel.

for strategy expansion centers XXXX and commercialization, improvement. driving our around gross menu ahead, Looking margin

includes; in repositioning some placement Our the the first, to of range guidance early ePlex potential XXXX range This net European analyzers. for underutilized XXX new of allows broad placements. for XXX

million the with profitability. placement margin $XX,XXX of greater $XX Second, revenues mid-XX% in drive gross and cost supply to per continued the of initiatives in key with And XT-X investment and $XX to per XXX,XXX and annuity million $XX,XXX range, ePlex in than range to placements. chain manufacturing third, efficiency

R&D to is Before Directors. the to take of Faiz Head moment our management team technical Board our to call strategic I announce advisor transitioning to Scott, want a Kayyem to over I of that and a turn from and

company's most multiplex lives. contribution over and Faiz's electronic proprietary well the and way, success. multiplex future that, mission contribution to technology a company you which improve continued turn detection now and diagnostics the call tests involvement And of Scott financial will with the looking providing assembled As will GenMark's and to innovate organization, company Along that I perform a molecular to with Faiz We're inventor has initially medical and continue further R&D to eSensor ePlex. significant founder. to our our patients' his our tremendous is the of and high the simple with his forward recently for review. field value, of to as XT-X of know, our more as made Faiz He

Scott Mendel

you, Thank Hany.

previously XXXX million, $XX As quarter versus fourth up the was X% of revenue quarter XXXX. our fourth mentioned,

majority XT-X fourth of for the total accounted of becoming a rapidly While and percentage larger is growing during the ePlex quarter, revenue revenue. revenue

there sites. were perform platform at $XX,XXX. XT-X analyzers expectations. Our with continues annuity XXX was installed of our during analyzer customer XXXX end QX, and per The At well XT-X in the to line

expenses will or couple $X.X million of XX% annuity ePlex, gross with market. further of was we operating profit XXXX, placement ePlex expansion experience as panels quarter was Total of in of the $XXX,XXX per ePlex development the reflects the XX% with were decrease proportion possible revenue. million XXXX. to we compared to additional only margin quarter Although fourth of fourth believe for gross $X.X $XX.X a a Fourth million million ePlex largely due the have of decrease of versus XXXX expenses. X quarter to quarters This in which be reduced range in quarter, the the of revenue come to Fourth quarter $XXX,XX increasing was revenues.

the was net to quarter quarter for $X.XX of the Our fourth in fourth per compared XXXX. loss share $X.XX

balance and on million we quarter cash ended $XX our investments. Moving to sheet, in the with

we Our as for levels cash includes balance flu the impact the season. increasing inventory of prepared

addition, quickly balance our season also in receivable In the end as year flu at ramps increased. accounts December,

flu balance in XXXX, We our accounts accounts approximately to $X.X We have while which and days this our current. an support finished while million, by managed $XX.X to of balances, our million even XXXX X.X was by When XX% inventory prior adequate of of capital consistent quarter DSO severe third inventory receivable managing XX.X to do at quarters we quarter are balance ensuring XXXX. working of needs, third focused and have our the very we to with versus receivable the million minimizing closely compared customer sequentially on accounts our XX inventory of million, increase season. need increased with receivable was

growth, significant R&D by which by mainly in manufacture ePlex is menu ongoing driven SG&A. the primarily improvements XXX expect implementing of expected margin now reduction expected to gross is ePlex revenue range, million. million of we mid-XX% Therefore, to margin expect to labor in a drivers with our the in the main in guidance margin new the volumes Turning the towards in overhead gross reduced XT-X. by global test to XXXX we modest is reflecting in studies. $XX in The for revenue for improvement the stabilizing analyzers. XXXX see move operating Faiz? clinical XXXX Faiz. $XX to expense as that development margin and revenue, reduction result expense our process team transitional is mid the as that absorption we believe that increasing expectation is our R&D with reductions the in as decreases And to expenses for perspective, finally, and direct turn a cost relative profitability. million I'd for step noted, and driven expected cost from our net to offset We be direct cost material increases ePlex Gross are to $XX drive Because should The over will into ePlex year middle call our range, expenses, turn we like associated improvements this be the placements finish decrease XXX XXXX, to expect increased part operating year range this GenMark proportion to to a efficiency. of cartridges, be year. significant and ramp, providing will Hany financial

Faiz Kayyem

the Thank continued the recently Sloan notably a room published led evidence pilot Memorial of the clinical paper. XX ePlex this results Clinical also isolation the progress on clinical more the compared ePlex study, you, Journal as to a for in Esther the The with recently clinical author Microbiology therapy. Kettering peer anti-viral and to their US a in time utility reviewed to lead Babady most over In of to RP result that RP and result the of for Investigators rapid panel make processing batch appropriate antibiotic potential use showed globally, on adoption of and were time We've published by robust Dr. in paper reduced hours method. developing study they of that more support to our demonstrating Scott. reduction RP ePlex RP Netherlands

are in culture of of Hany submission. assay, external blood the on FDA and As and internal studies mentioned, support our also the to ID ePlex we driving addition our system US tests commercialization in of RP of family focus

on the three blood we're ID culture excellent Specifically, clinical progress making studies. first of

with of While the it during submissions the is complete this discuss the third completed, until to of second BCID all results date we three track and to the pleased year. on cannot extremely quarters study details of and remain the panels we're

ECCMID, related can that of a data five We this also in inclusive at are panels evidence to Europe. sites bloodstream demonstrating continue results BCID abstracts rapid, and assays utility accurate, meet microbiology to clinical performance the design produce with of for real presentation are our the These meeting largest BCID our for adopter family results in world that our panels management with currently of and broadly early the goals There change patients April Europe. provide panels posters accepted that infections. in comprehensive

years mind leadership R&D delighted important for of I'll this And our GenMark's of that to plans. ePlex time back In team moved global back cost the the focus that expansion. we've on of I month challenges Hany, ePlex the reductions. please Before R&D new on in of has rapid transition class turn for this and improvements, I I while add expansion, I'm board. ePlex, Board this call to our transition current to allow best to is ambitious technical role, many team of continues Hany. turn new I me to had certain that the we're the strategic assembled goods on head Directors executing conquering menu beyond transition from beyond advisor and capable management will system and a highly endeavor elaborate call menu driving commercialization is this and feel my company ways as value now to the in to the in technical right this and

Hany Massarany

Thank you, Faiz.

feedback necessary made expansion execution of energized to a to foundation in of future We for a tremendous commercialization the opportunity year the business. both have and terms by mention of into and to threatening customer ePlex positive us, our investments robust on opportunity, life with realize global excited and commercialization we drive was about the the XXXX very continue receive tests, are we variety of as a wide we laid to covering diseases. this expanding and move confidently important

now questions. the call will to We open

Operator

comes first Instructions] of [Operator the line Our question from Tycho Peterson.

Tycho Peterson

placement to system with start the I Hany, guidance. want

think around been I run a had rate coming street the basically and XQ out taking XXX.

of to placements that. bit a would guiding repositioning the we systems this for magnitude in if are you below below year? bit You're Can maybe the where the little repositioned, still street Europe, talk you're even all XX assume a be

Hany Massarany

pent systems before really want said start top first is of there, based But I a net I want over think up of number. market. the little since ePlex rate we I are we remind some upon we on placement you we're reminding out that there customers assumptions. sort QX that get a have but taking to sort had run is even executed guide XXXX actually of strong to lot XXXX second waiting this probably do by ePlex, US to time or of had And we expectations of where certain as availability number launch to is you guiding I and Also, first of the demand to placements. understand the half that the we a the a bit that it's range in as a that the

of - taking can that out that sites number. revenue these that's to them they've So that of we gross that the repositioning the number on against of sort of netted generate lengthy becomes been European systems, with out sort sort them to stuck we moving do in with some expect are previously, that where more process acquisition and either systems actually of and utilize about place systems systems, this with gross talked a but no sites,

in XXX that allowing to a believe certain that with a million guidance guidance the hit providing there's revenue our do range, $XX XXX at number the expectations our to range that certain to is XXXX. of - consistent but or we million percentage we're for we're $XX of So

Tycho Peterson

percentage And be repositioned? the do EU so will Okay. clear, we're just systems of you expect what

Hany Massarany

giving not exact that, an we're Well, number on Tycho.

improvement based that some actions we've We are on taken. of sure seeing in Europe for the

than So revenues already our already fourth - Europe the I quarter XXXX. of in placements of in more that have generated can XX% say are

not you've well, systems certainly that be not out of expecting, we're we're be in come placement in a what of we will said reposition productively. I number expecting, think, sites that's more sites course them that need to even So of every if but there other placed Europe, can utilize and

Tycho Peterson

And one of third your terms one, I a last expectation know ePlex is placement. provide on then of Okay. NP can regular around still in any you assuming the versus capital mix about color what and you're

Hany Massarany

largest want and I point the is which Europe our about and previous is the play XXXX a question and Tycho, market opportunity add just full definitely the role first to importantly, NP one ePlex Yeah. being certainly opportunity in to other product US, to year say to be excited in the XXXX, ahead in of going for of will biggest your market. US for the in the we're that ePlex regarding us very in that. that's

US, delivery opportunities broader placements solutions in part of integrated networks. in fourth smaller standalone contributed during already also as to already quarter. Europe multiple has for NP larger in the volume So the funnel, in our the we but accounts, have And

annuity will past. the that in in number market and the and about with of believe the I to certainly one-third what US placement to sort as consistent we think NP So that well the said of we've contribute is number

Operator

question Doug line Schenkel. Your of from next comes the

Doug Schenkel

guess Tycho's want good back to afternoon. I go first question. Hey just guys, I to

to two optimize the commercial you've European Over quarters, efforts. changes past made

flexible with You've become placement terms. more

your expand of format, still addressable NP more growing seems the more under relatively you're getting rapidly that, was sites. I pretty If be introduced it like trend believe market anything, that's smaller think probably efficient. into which market should penetrated. and we could is swapping that a year On a XT-Xs continue top than out You your this expected, this salesforce

XX just of missing by your So record, the number on would given feel here? something your year-over-year sales record, your confused especially midpoint but a I'm Tycho, why response disappointed I with placements heard at drop that, the guidance. Are you'd we with. especially your side, be by track like pretty track to around Hany, that's I

Hany Massarany

we're we Doug board than position the prediction have of of Well, work sort thank reposition opportunity the some you've place the that's drivers to placements market think the net providing place across of picture for like higher of additional a And during Europe very as sort or out sort how be gross the the will of placements XXXX. of well. able a and and to I we through how planning said, are many you much, laid we have placements obviously and number - strategy of that in a see placements, all as Europe I better be and range we'll we'll be the in clearer on to I

provide have the have and for of a come expect blood sort taken as number of sort a the certainly especially the of ID the as and an year, number launch second panels in we relation certainly that of an that. we we conservative increase exceed US market that half to in the update well. we'll culture do, prepare So Also, to to back opportunity if to We to Europe. in placements view we

Doug Schenkel

Okay. XXXX? or is Relatedly, of headcount end the sales Where at it? was where force XXXX

Hany Massarany

the of in third in in to BCID are Europe, and sort launch of Yeah. in the sales professionals US. We for going more low year ended number up likely with US XX-ish, sales before, XX those is add the in with field two-thirds during the are of communicated the about that of the people second we of the of we in XXXX, around sort and ratio in preparation which globally one sort half

Doug Schenkel

Okay.

really So maybe outlook term a growth it's more question. and longer one

Street much slower here get suggest level, instruments with close associated sounds mathematically consumable real pretty guidance like growth as on, revenue it the revenue installed than to low there's long level be quickly where is to In would expectations. possible out assumptions, well your as a happening growth and basic expanding put, at a that expectations, seem the harder XXXX lot basic doesn't and placements to that's it there guidance if hangover below said, long-term actually at spite base levels term many goal as to expected drive you've a placement your you're more got The year consensus at You've but a your to really stands of hit gets expand pacing ePlex today. this simply which to by holds sales going ability when sales, of extension to boxes. scaled the back the back force, place least at Yeah.

I'm So, seems right year revenue is street that for pretty around the And, combination XX% per aspirational. render now, the growth. to looking describing

revenue longer more guidance, like with feel concerns get it and if again XX. you us relatively not the this okay, Would and outlook with the for heightens I growth So, can comfortable XXXX in agree but XX outlook? term really help with about looks that you

Hany Massarany

perhaps that I with Yeah. to Well, no, I per system that, modeling. see Doug. annuity agree menu don't than going higher installed with believe especially are your we expansion,

years, also, and with culture future increase, the you'll expand of So, sort more field over menu compared ID QX of blood already we in system menu, sort be And think then see in be in US I future. expectations sort then placement perhaps will introduction and per that in the starting menu the XXX,XXX as ePlex actually placing beyond sort to later there. expect of with annuity increased in per out that systems as the that, as the in we of expand to seeing that, we we're the time, around XXX the the we XXXX of ePlex than was expectation what higher are is our plus

believe you've those that factors I growth enable So, us the two achieve quoted. that combination the numbers certainly to of will

Doug Schenkel

helpful I'll is to Okay. to leave a transition to logical guidance, gross probably that That's it ask. but and somebody else margin

Operator

question comes from Weinstein next from William Brian of the Blair. Your line

Brian Weinstein

the most thought following first questions kind XXX of are have sort would from of the did of you the and that? for kind would the talk visibility here the the the where greater between in competitive are a versus just in more right mix multiplex kind little couple I think on you placement the in can also, the of question of be can have XXX, QX to here, US Hany part And those you new placements, that you guys about So entirely then I funnel? And guidance that these going about of of kind talk you cannibalization hear to technology QX, of users bit of year? that third that up expect? be, wins then actually you versus

Hany Massarany

we'll that than of Yes. have and QX and in quarter Thank QX we placements of severity current expected of placements with second a expect a we and the strong terms Look, QX first you, half of flu XXXX, certainly fewer yes, XXXX. did still the Brian. the we have XXXX in ePlex season, did of sort we and of

technologies as sort systems willing a know, flu that when severe testing time. during volume or dealing are labs of with during change bring new of you able to less in So to peak they're season,

quarter, of did we expected, a in We as in and placing of QX many as but first last systems have as success lot the had year. certainly not QX

So, expansion. is you're go a seasonal the we to year, depending in of season, the ID the on flu systems of result into fourth right end with we'll we to QX that, later menu also But as be placing expect more and disease, back which the XXXX-XX in of then blood introduction expect culture year the of not as a as X the how see flu the season, in and quarter the well. go course we

communicate certainly me remind quarter quarter second to than with again come was, maybe that's So the competitive part later of it's necessarily the why expect than well. we as I think was What in not placements. placements the your - do to the that more second in important year question first and to

wins, that the addresses, of in new vast the systems been or we upgrading to have those other XX%, field. time. sort alternative existing vast placements continue the so an mean and in majority, of been system the by competitive not XX% majority vast words, of replacing And displacing competitive have more So new addresses of than ePlex the see or in majority XT-X I

Brian Weinstein

talked out you some - how do market are overall may what at, multiplex think that the you say guys growing is, here Does overall about people accounts overall that you multiplex opportunity role growing as not that are but the market So quickly between it a maybe is really be cannibalization swapping than play and guys underpenetrated have at should we've point. how about thought. and seems competitive you and thinking placements what as this market that about

Hany Massarany

Well, we multiplex talk about market, when it beyond we see look, the respiratory. definitely

respiratory more Brian, of you that. most progress the of GI testing, and after already multiplex lines We're That the seven, and areas plus seeing over along going sure. past As is those market is developing eight to really culture certainly they're there years ID, get good established to know, much established. for the is making panel other compared sort blood

continue - in not significant labs ePlex But are help So performing across is I still certainly a The say test those there for we multiple that market to is there testing, states, room and there in to access in respiratory underpenetrated expect that will number and disease of this even the would regard. RP, upside. NP definitely, labs. significant

labs. it the to earlier, the meet mentioned needs smaller designed we sort volume of of I As

done to of sort better labs able access labs larger for and the fits on of the sort the the their molecular have labs smaller believe that but panels of panels multiplex tests the ones, that adopted to volume many be to of well. that number the with as needs, already be tend RP multiplex configuration that we'll we and the pie, technology this expand now So of

Brian Weinstein

got jump let but I've questions. some some Okay. ask more, I'll and other people some

Operator

Your comes Bank America. from next of question of line from Anne the Edelstein

Anne Edelstein

you're costs strategically, Just be that for bringing expecting or the the Are unit line margins about guess a down gross additional of year. cartridges? depressed question ePlex because adding margins your how are on on to thinking you capacity the you I

Scott Mendel

Hi, Anne. I'll answer is This that. Scott.

that and do by I we will gross a have couple like XXXX, increasing perspective, think margin stabilizing we gross a of margin from said, as things. driven it's throughout move So

off see expect goods sold. volumes we'll overhead part as a cost of absorption severe play in First, to flu our quarter, in the that the you'd the given improving first season, repertory of what take aspect

going third The are we're around materials. to direct how aspects gross improvements to margin second drive and

we move of have a that cost long or of of across to visibility is to areas and really the and as we're So have the many we we're after whole last that list process year. kind laundry drive that throughout manufacturing an different and labor stool efficiency. direct XXXX effect direct efficiency And a going improvements the will employing that perspective have from direct take we then leg on we material labor reductions

Some of be the throughout those year. will probably move as we implemented

quarter customers especially the from in serve and is perspective. priority first Our our panel to a respiratory our patients

see probably will lastly that's that So, labor increase as the direct occur deprioritize down gross direct has better doing improvements taking direct that or an probably we'll saying I we process any believe stabilized move improvement those year then efficiency I'm year. so labor absorption, direct better the throughout of would and experimentation move sorry, move because and the year, things; material or margin to three absorption, we do as throughout we efficiency labor and overhead we and why throughout line the with new as is something

Anne Edelstein

able of the second of linearity you revenue just some provide give over of I with some this question, I then mean, just course given And be the step be of mean, help us season, just down frame flu large to how us of will obviously, the thoughts I confidence you the a unprecedented just guess in you'll QX, be. just the step - year. can sequential that but there'll kind that kind down us I severity can to, mean, on

Scott Mendel

Scott Sure. again. It's

feel a a that total from range guidance perspective, the So we revenue guidance, good overall perspective. from about we provided

on typically first have larger streams We installed should perspective, a somewhat so split going revenue good in would. and to the is from quarter, there's season flu is revenue offsetting than the expecting more consumable we the adopt hesitancy probably that flu QX in there systems drive driven additional might also as From additional any base, we consumable that a being that's new right, visibility quarterly now and predictability our revenue be season. but have you're we mentioned, Hany much severe that higher capital revenue to a

most So up, severe got a mind season. to in keep that obviously of step capital you've and probably a coin flu sequential but revenue we'll QX, other see from that placements are from the side

again, taper starts fourth exactly business, revenue being and take starts sense total You're the off low respiratory the to a of that then point, to typically in QX quarter. off. is again right makes is QX kind

patterns the by typical quarter a little just we'll here in So, seasonal the strength bit capital placements. have exception more with first offset

Anne Edelstein

sneak kind and dramatically this testing mean, the or just has question in the mean, ones. season. health over hospitalizations multiplex the systems season, And thinking you have your just approach of of thinking this of seen season that customers just I segueing I one, then know I versus a change if about over flu number increased and last maybe I prior about their third can course off flu of the large

this wondering woken testing. using systems multiplex at like to kind up flu has if of more benefits potential the Just health of season all

Hany Massarany

Yeah, Hany. hi, This Anne. is

are middle in general, in mean obviously, answer the I it. think is I yes, of the we

be able other decisions to volumes been in testing, We sitting making can relation in we severity to true. learnings thinking, to perhaps bit them better the the technology think a their that areas of flu making for handle So to season were driver flu about but bring - we fence there sampled and be the little well. the of certainly that post-mortem customers And will we that's the on tell of come general, as of actually flu benefit for believe has believe know time a on of a a come this of that's as it out will that customers sort information that do a many sort have bit what approach. - are sort on better to testing little in respiratory season but our that and also sample to from of well and of answer additional season multiplex as out chance as of

Operator

the comes Your from of next Canaccord question line Genuity. Mark Massaro from

Mark Massaro

bit Vice hire is of Senior curious someone Faiz. transition know or I guess if there the one I would another be the a first appoint related President Is just at little system to new you're internally love there someone to in is to comments contemplating conducting launch I ways a on to The that R&D, or and about potentially you're ePlex. hear that, of expecting GenMark to looking Faiz's would are future? you more about beyond search a

Hany Massarany

right. All

us multiple years, and very thank very the a sort So, of with has strong have that leaders fortunate over Mark. for plus with R&D you, assembled We're that organization now Faiz past years. been

chip know new know his going but always the this individuals already not and So course side. will not our two of let with the all outside space. that of side here. to since to teach that role, and us hiring existing for and the talk leadership I about value as will in of we're proposition company two bring add platform as have from with his directly sort we And and improve as between have outside continuity to me we the in sort just to of the in are and them we're you idea of someone from everything those was individuals we have that vision now in Faiz sort looking assay them that well ePlex an been aspects Mark, with report value managed

of molecular opportunities that also what our know, there But augment have. The multiplex are other of and with doing remains focus with technologies are you areas add of initiatives we can to opinion activities. sort as be with similar here that to perhaps but current the Faiz opportunities on there as always testing, for So sort out leaders in may or we Faiz Europe key other can --? types of industry that if sort both And well. solutions help in

Faiz Kayyem

that path the and challenges the a long the don't dramatically we're up and how and in drive luxury I goods the of in it's we improve driving going the efforts to is in the technically just to now well that stable to impact that of impact I Sure. Mark. expect menu mean, to cost we of and patients. business right Yeah. expansion, and here improved lives this patients' I'm But margins. behind we're it's That's a - short continuing things ePlex innovate and most because menu really can or right right thinking term. are innovate mark ahead but other now, be have ways excellent can by - of addition ePlex just Hi, were as expanding to the term, have highlighted team impact delighted the us now way that a commercialization with really so innovate blood the to opportunity for here, major we and platform effective on more are do us that as perhaps, here I efforts to looking is to little going that bit have ways that, clear our lot about GenMark

Mark Massaro

context was a ePlex My the hoping NP. of get second I to little about one is more on, launch the

NP, opportunity, a logical. Some expansion as certainly might market think the that is obviously

configuration larger thought, a the you that, smaller relative launching initially can might be up to that speak might the launch or per you the speak maybe NP the larger opportunities some hand, related already just NP rationale other than more perhaps the On of configuration. but and locked you analyzer can suggest on to to annuity to the to penetrated

Hany Massarany

accessible more way. make to volume ePlex a cost effective sites will NP low in And

ePlex six competing the would a three or opportunities drives And isn't of whether So, you of capacity the tower rental have be to more testing, customer solution that's have sort smaller doesn't more about really it's rather what for a the would effective the cartridges it expensive that if make cannibalizing on it a but therefore, system volume or we're a acquire opportunities of the a best change configuration either or going to reagent expensive more if because not a system amortizing volume. volume customer. not really with is that otherwise a cartridges, cost

to access volume giving testing to profitability. while lower away us enables NP not sides So,

some - expectations not - that for these account. or not our solution sort of And expensive annuity the making or while to too of So making sites. into affordable takes

that the we So annuity ePlex placement includes placements. XXX,XXX higher NP sort well really plus, as as when talk about of regular in capacity

Mark Massaro

ask expect understand that from than wanted last of and that. this year. GI still you're to dollars obviously And about you a OpEx speak I developing three to to your agency to mid-XX, one me, the panels the R&D little higher the just dropping you some submit just is assumptions, panel off? that I one more Can

of OpEx? it So relates little just context as some buckets the a to can provide you to more

Scott Mendel

Sure.

So research is and driver driven by and within research and it's develop the main trials. and of development the expense, really the to expense decrease development the perform cost clinical

it. simple, that comes but as driver. down the cost producing our an their main enjoy ePlex operating therefore plain down, comes team goods expense that's sold It's consumable, on cost reduced R&D what of and is does So, the and driving Mark. pretty That's so

Operator

of from next Andrew Our question Raymond line the from Cooper James. comes

Andrew Cooper

we in you're sort that thinking A will heavier the had and little than I about think XQ of to in the some sort on role about a any of it expected you just XXXX there, cash how lot with obviously, probably the that, played But give thoughts moving Thanks. burn if a think quick a already we my future, be any have great. one, on parts, as was could of been questions of flu bit especially color but asked.

Scott Mendel

is This Scott. Andrew. Sure,

not guide specifically burn, going the blocks while I prepared building laid out remarks. So in we're of are cash to the on some think

the reduction I expense questions, with couple associated foremost, margin I talked about versus operating gross to but also, for what going of and last revenue and First be revenue, year. about is that prior talked

lost in our XXXX idea in or good efficiently. versus a a or versus you even as XXXX. idea XXXX. managing I certainly bit XX% improvement off expecting to expecting in working of burn we're i.e., cash you difference rate guiding cash I our that burn anticipate specifically a improved like if So profitability, a items an XXXX. less what laser pretty in don't on Net-net, of focused starting that much something get And it, expect non-cash big gives kind XXXX rate I we're capital reduction a we're in improvement in XXXX, pretty little can said, do in of not

Operator

There questions I'll further at the the time. this turn call presenters. over are back no to

Hany Massarany

much, Well, we right. believe opportunities also very support. but your of ahead everyone have thank with All us, XXXX. continued on progress out about you We We're some that at for ePlex We platform. RP, on to seeing quarterly very tremendous there our stage look forward just a look energized the menu all you future also reporting basis forward forward at to going various and meetings. not

So thanks much good very afternoon. and Bye-bye. a have

Operator

today's conference concludes This call.

You may now disconnect.

GenMark Diagnostics (GNMK) 27 Feb 182017 Q4 Earnings call transcript