Feb 11, 2010
Executives
John Radak – CFO Doug Bryant – President and CEO
Analysts
Scott Gleason – Stephens Ashim Anand – Natixis Brian Weinstein – William Blair Brian Jeep – Sidoti & Company Ross Taylor – CL King Jeff Frelick – ThinkEquity Zarak Khurshid – Wedbush Securities Steven Crowley – Craig-Hallum Capital Group
Operator
Welcome to the Quidel Corporation fourth quarter and full-year 2009 conference call. At this time, all participants are in a listen-only mode.
Later, instructions will be given for the question-and-answer session. (Operator instructions) I would like to turn the call over to Mr.
John Radak. Please go ahead.
John Radak
Thank you and good afternoon. This is John Radak, Chief Financial Officer at Quidel.
Thank you for participating in today's call. Joining me today is our President and Chief Executive Officer, Doug Bryant.
This afternoon Quidel released financial results for its fourth quarter and full-year 2009. If you have not received this news release, or if you would like to be added to our company's distribution list, please call Joe O'Shea [ph] at Porter Novelli Life Sciences at 619-849-5381.
Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ materially from these stated expectations.
For a discussion of risk factors, please review Quidel's recent press release announcing the agreement to acquire Diagnostic Hybrids, the company’s Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, as filed with the SEC. Furthermore, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, February 11, 2010.
Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. For today's call, I will begin by reporting the financial results for the quarter and full year and provide insights on our business drivers and perspective on the impact of Influenza A (H1N1) on the business in 2009.
Then Doug will discuss our execution strategy going forward. We will then open the call to your questions.
During our last quarterly financial conference call on October, Doug and I said that we expected to see meaningful revenue growth from the dramatic increase in influenza-like-illness and increased adoption of our QuickVue influenza products. Test-use in both the international and domestic markets continue to escalate in the fourth quarter, providing us a very significant benefit in capping off a full year of record revenue.
Total global revenues for the fourth quarter of 2009 were $66.6 million, an increase of 99% compared to $33.5 million in the fourth quarter of 2008. Domestic revenues were $54 million, an increase of 102% period over period; while international revenues came in at $12.6 million, an increase of 88% from the fourth quarter of 2008.
International revenues accounted for 19% of total revenues in the fourth quarter of 2009 compared to 20% in the fourth quarter of 2008. Looking now at revenues by product family; worldwide infectious disease revenues rose 118% to $57 million versus $26.2 million in the fourth quarter of last year driven by significant increase in influenza sales.
Worldwide circulation of the 2009 Influenza A (H1N1) virus and an increase in the number of physicians using our rapid flu test to aid in the diagnosis of influenza are the key contributing factors as mentioned. Strep sales were also a positive contributor to the growth rate of the infectious disease product family in the past quarter.
The global revenues of our reproductive and women’s health category grew 36% in the fourth quarter of 2009 to $6.1 million from the prior year. Revenues from other products were up 22% to $3.4 million, resulting from strong sales of our H.
pylori products, autoimmune and complement product lines, as well as a nice uptick in use of our fecal immunochemistry test for colorectal cancer screening. Gross margin came in at 71% for the fourth quarter, up from 59% in the fourth quarter of 2008.
This improvement in gross margin was due to both a product mix shift to higher margin influenza tests as well as leveraging our fixed manufacturing costs over a higher production volume. Operating expenses in the fourth quarter of 2009 were $15.8 million compared to $10.9 million in the same period of the prior year.
This increase was due to higher variable compensation expense, higher R&D costs related to our new product initiatives, increased marketing programs aimed at flu awareness, and costs associated with the Diagnostic Hybrids transaction. Operating income for the fourth quarter of 2009 was $31.8 million or 48% of total revenue compared to operating income of $8.8 million or 26% of total revenue for the same quarter in 2008.
Net income for the quarter was $20.1 million or $0.67 per diluted share, compared to $6.1 million or $0.19 per diluted share for the fourth quarter of 2008. Now I will summarize the financial results for the full year of 2009.
For the 12 months ended December 31, 2009, total revenues increased 28% to a record $164.3 million from $128.1 million in 2008. Our net income increased 75% to $32.9 million from $18.8 million in 2008.
Earnings per diluted share was $1.08 versus $0.58 in 2008, or a growth of 86%. Included in our 2009 results is a restructuring charge of $2 million or $0.04 per share.
Stock based compensation expense was $4.5 million for 2009 versus $2.7 million for the full-year 2008. Our gross margin improved 560 basis points to 66% in 2009 compared to gross margin of 61% in 2008; a more favorable product mix and lower manufacturing costs per test produced were the primary drivers of the improvement in gross margin.
Operating expenses for the full-year 2009 were $56.5 million, an increase of 15% over $49.3 million in the prior year. Over the past three quarters, we’ve increased investment in R&D to build the point-of-care product pipeline in order for us to achieve our goal of launching two to three new tests per year.
Operating income for 2009 was $52.5 million, an increase of 84% over the prior year’s $28.6 million. It is important to note that our results for 2009 were affected by several significant unusual factors that we would not expect to repeat in the future.
First, a transition in our influenza pre-season stocking strategy; second, normalizing distributor inventory levels for our strep and pregnancy products; third, the absence of a normal flu season in Q1; and finally, an influenza pandemic that began in May. We are certainly pleased that our performance this year provided us with the cash generation that has allowed us to fund some of our growth initiatives earlier and more aggressively than perhaps we had planned.
Our cash position remains very strong, and over the past few quarters you saw evidence of our strategy to utilize our resources to add shareholder value. During 2009, we repurchased approximately 3.1 million shares of Quidel common stock for $32.8 million under our previously announced share repurchase program.
A total of $19.1 million remains available for stock repurchases under this program. Even after the effect of the share repurchases, cash, cash equivalents and marketable securities as of December 31, 2009 were $93 million, a 61% increase over the $57.9 million at the end of 2008.
We expect to opportunistically make additional share repurchases from our existing Board authorized program. The 3.1 million shares that we acquired in 2009 represent approximately 10% of our outstanding shares, which we purchased for an average price of $10.52 per share.
We expect to continue to strategically deploy our cash resources to build the business. As we announced on January 10, 2010, Quidel signed an agreement to acquire Diagnostic Hybrids for approximately $130 million in cash.
We expect to fund half the purchase price with cash from our balance sheet and half from borrowing against our credit facility. The transaction is proceeding smoothly through the customary closing requirements, and we are on track to close before the end of the first quarter.
DHI reported $51 million in revenue in 2009, an increase of 34% over 2008. Of that, approximately $5 million to $7 million may be attributable to exceptional demand for the company’s market-leading direct fluorescent antibody kits for the detection of Influenza A and B viruses.
Excluding the impact of the flu pandemic on the business, DHI’s pre-organic [ph] compounded annual growth rate has been a solid 20%. Their gross margin for 2009 was 56%.
Over the last two years, DHI has been investing 17% of revenues in research and development. In 2009, their operating income was $9.3 million or 18% of revenues.
With that, I will now turn the call over Doug.
Doug Bryant
Thank you, John. Soon after my arrival at Quidel nearly one year ago, I laid out three key priorities that we would be focused on to drive our longer-term growth.
First, getting better control over the channel to the customer; second, revitalizing our product development efforts to deliver two to three new products per year; and third, developing and executing on a molecular diagnostic strategy. During my comments today, I will report on our progress on each of these initiatives to include how DHI fits into the diagnostic continuum and into our goals for 2010.
Let me begin, however, with a couple of brief comments on our results for 2009. Early in the year, we were challenged by a very mild flu season and an overall decline in doctor visits due to the weak economy.
Predictions for influenza incidents quickly changed in April with the worldwide outbreak of the 2009 influenza A (H1N1) virus, resulting in physicians and hospitals worldwide using rapid test to help diagnose the flood of patients who presented with influenza-like-illness. We believe this pandemic has accelerated the penetration and the overall growth of the influenza testing market, a market in which we are a leader in terms of price, share and brand.
The dramatic increase in Flu sales has been important to us both for earnings and cash generation. We are very pleased with how the business responded to the variety of challenges that we faced and our financial performance reflects our successful execution.
Strong financial results allowed us to fund some of our long-term growth initiatives sooner, as John mentioned. I will turn now to the key priorities that I laid out a year ago.
First, we discontinued the practice of providing distribution partners incentives simply to buy large quantities of tests, and we implemented a new process to monitor domestic orders to help ensure that our distributors do not overstock our products. The rigorous controls now in place result in a more accurate picture of the demand, fulfillment and use of our products at the end user level.
This disciplined approach gives us better control over the distribution channel. Our second key priority was to restart the R&D pipeline and commit to launching two to three new products per year.
Last October, our specialty products group launched a new research use only product for the detection of the C5a peptide, a mediator in several inflammatory diseases. By the end of 2010, we expect that we will have launched at least five new products, including several that we have previously discussed.
In addition to C5a, our specialty products group will launch MicroVue C3a plus and Sclerostin, a regulatory protein that inhibits bone growth. Our second-generation fecal immunochemistry test for colorectal cancer screening is currently being reviewed by the FDA and expected to launch as soon as possible after we receive 510(k) clearance.
We will re-launch our QuickVue mono test next quarter, and we will re-launch a QuickVue pediatric RSV test that is intended to run on the same format as our QuickVue flu test in time for the 2010/2011 flu season. We have a significant number of R&D projects focused on new rapid immunoassay and complement products.
We are now well positioned to exceed our commitment of two to three new products per year. Our third priority and longer term objective is to establish and execute a molecular diagnostic strategy.
As previously communicated, we have three ongoing activities. First, we have had for three years now, an internal R&D effort focused on developing a microfluidic cartridge-based molecular diagnostic platform.
Second, in October we entered into a joint development and commercialization agreement with BioHelix Corporation. With BioHelix, we have begun exclusive work to jointly develop a number of in vitro molecular diagnostic assays for rapid detection of infectious pathogens in a non-instrumented handheld format using BioHelix’s novel isothermal amplification technology.
And finally we continued to evaluate other opportunities from a business development perspective that will provide us with access to technologies or assays that will address unmet clinical needs. John described a sequential increase in our quarterly investment in R&D.
From an annual perspective, our R&D expense increased 12% in 2009 over 2008, and based upon the exciting projects we have in the new product pipeline, we expect to have another meaningful increase in our R&D investment in 2010, building toward a target of 13% to 15% of sales in 2011. I think it is important to spend a few minutes outlining our view of the diagnostic continuum and the growth opportunities that exist for Quidel.
It is clear to us that different diagnostic products serve different customer needs, and for the most part those needs are defined by cost, time to result, and accuracy. There is a diagnostic continuum.
This continuum is comprised of three parts; first, rapid diagnostic tests; second, direct fluorescent assays and cell-based culture tests; and third, molecular diagnostic tests. What is interesting to us is that many laboratory technologists and leading hospital virology labs today increasingly employ diagnostic solutions using cell-based assays and direct fluorescent antibodies, and this is certainly reflected in the growth rate that we’ve seen at DHI over the last three years.
Why is this segment growing so rapidly? Because to start, cell-based assays provide an exceptional value proposition when combining accuracy, cost and user flexibility; in addition, cell-based assays allow lab technicians to confirm that cells taken from a patient are actually infected with the pathogen of interest.
And they know that in many cases these tests are as accurate as molecular tests. Over the last several years, genetically-engineered cell lines have been used to improve the accuracy and ease-of-use of these assays, and DHI has been at the forefront of these advancements in this very exciting technology.
With the combination of DHI, we will have a strong position in the first two segments of the diagnostic continuum, and both companies have already embarked on molecular diagnostic solutions as well. To summarize, our long-term strategy is to build our company, to offer the marketplace diagnostic products that address customer needs across the continuum to triage patients, confirm diagnosis, and provide actionable results to improve patient care for the best economic value to the healthcare system.
And in each of these segments, we intend to offer best-in-class solutions. John and I have spent the last several minutes reviewing a very successful 2009.
I would like to shift gears to briefly discuss our view of the current influenza season. All the indicators and data suggest that the flu season has not yet arrived, and as of today, we are not seeing any uptick in flu activity.
Additionally at this point, most reports indicate that the influenza isolates have been the novel H1N1 as seasonal flu viral strains have not taken hold. In the domestic market, as of the CDC’s January 30 report for week four, the percentage of patient visits for IOI was 1.9% which is below the national baseline of 2.3%.
In addition, all regions reported IOI below their region-specific baselines. No states reported widespread influenza activity and only six states reported regional influenza activity.
These data are also consistent with the prescription data for antivirals and the data from Google’s Web search engine on flu. Both show a no increasing levels of flu-related activity in the United States.
In its week four report, WHO reported that only five countries reported clinical respiratory disease rates above levels observed during the same week in 2009 and levels in most countries are well below recent pandemic peak levels. For the first week since week 25 of 2009, all of these countries reported frequencies of influenza positive of less than 20%.
At this time, we won’t make any definitive conclusions about the current influenza season and we will continue to watch for trends for additional clarity. I would like to wrap up today’s prepared comments by establishing the barometer by which to measure our success in 2010.
Quidel executive management and staffs have established the following goals for the year. First, we look forward to closing the DHI acquisition soon and are planning for a successful integration.
We envision this deal would be neutral to accretive to Quidel’s earnings in 2010. We look forward to keeping our price of the integration and providing details during our first quarter earnings call in April.
Second, we are on track to launch at least five additional products this year and are poised to deliver at least two to three new meaningful products per year over the next several years. And finally we will continue to look for opportunities to license technology and acquire companies that will increase our ability to meet our customer needs across the diagnostic continuum.
These goals reflect the short and long-term strategy of increasing market penetration of our current product portfolio, greater diversification through new products, and development of molecular diagnostic solutions to reach the third segment of the diagnostic continuum. This concludes our formal comments for today.
At this time, operator, you may open up the call for questions.
Operator
Scott Gleason – Stephens
Hi John and Doug, thanks for taking our questions. Doug, is there any way to categorize when you look at this year how many new physician customers and hospital customer you guys had relative to 2008?
I guess, is there any way to think about what the stickiness of those folks will likely be when we start looking at 2010?
Doug Bryant
First, we do conduct outgoing calls to confirm that customers that were customers previously remain so. We are beginning to count the number of customers that are new to the testing.
It is difficult to say, though, what the stickiness is because we need to get through the next flu season, and as I suggested, we haven’t seen a lot of flu quite yet. So, one thing I can tell you is that when we looked across hundreds of customers so far that the inventories at the end user level, in other words, the number of boxes they have on their shelves are quite low.
So when the flu season does start up, we should see them ordering product, and then at that time I think we will be able to get an accurate count on how many new customers actually stick.
Scott Gleason – Stephens
Great, thanks. Then John, just a quick question; when we look at the Diagnostic Hybrids deal, can you give us an estimation of maybe what the amortization expense is going to be associated with deal on a quarterly basis?
John Radak
We will be able to do that on the first quarter earnings call, Scott. We are still on the process of completing the purchase price allocation study.
So I will defer that to the first quarter call.
Scott Gleason – Stephens
Okay, great. Thanks for taking my questions.
Operator
Your next question comes from the line Ashim Anand from Natixis. Please proceed.
Ashim Anand – Natixis
Congrats on a good quarter guys.
John Radak
Thanks, Ashim.
Ashim Anand – Natixis
I wanted to know more about the BioHelix HDA deal in terms of just the strategy, when do you think the products could be – they are like now in one year or two years? And more importantly about IP especially in terms Qiagen for example, it is also using this technology for couple of their platforms.
So, is there any component to paying royalties to somebody in that regard, or anything of that sort?
Doug Bryant
Ashim Anand – Natixis
That’s all, guys. Thank you.
Doug Bryant
Sure.
Operator
Your next question comes from the line of Brian Weinstein from William Blair. Please proceed.
Brian Weinstein – William Blair
Hi, good afternoon.
John Radak
Hi, Brian.
Doug Bryant
Hi, Brian.
Brian Weinstein – William Blair
Hi. So just to make sure that I heard your comment right, you said that the inventory at the end user level was – I don’t know the exact term that you used, but it was relatively low; last quarter, I think you said it was about three weeks.
Would you say it is about the same at the end user level and then also what do you think it is at the distributor level at this point?
Doug Bryant
Well, first, last time I recall we said that there were three weeks, but it was at the distributor level.
Brian Weinstein – William Blair
Okay.
Doug Bryant
I will just clarify in case I didn’t hit it precisely. We have called several hundred customers.
We have also called several hundred non-customers, in other words customers belong to our competitors, in order to try to get an idea of how much is on the shelves. I couldn’t tell you how many weeks inventory, but it is not very much.
Brian Weinstein – William Blair
So, that is at the customer level and then at the distributor level, any idea?
Doug Bryant
It is about the same as it was at the end of the third quarter, assuming that you are in a flu season.
Brian Weinstein – William Blair
Sure, of course. Okay.
And then, question kind of a historical tidbit maybe, but how many flu seasons have actually started this late, and when they have started this late, how severe do they tend to be?
Doug Bryant
Well, last year, Brian, started this late. Actually, it was later than this if you recall, and it was quite mild.
For the 2007/2008 season, it was also quite late and all the sales occurred within a six-week to eight-week period, and it was also after this period. So, those are the facts.
And as you know 2007/2008 prior to this season was our largest flu season in the last 12, I think.
Brian Weinstein – William Blair
Okay. All right, I will jump back in the queue.
Thanks.
Doug Bryant
Thank you.
Operator
Your next question comes from Brian Jeep from Sidoti & Company. Please proceed.
Doug Bryant
Hi, Brian.
Brian Jeep – Sidoti & Company
Good afternoon, gentlemen.
John Radak
Hi, Brian.
Brian Jeep – Sidoti & Company
On the DHI, I missed the operating income number that you guys gave. Can you give us that again?
John Radak
Think it was $9.3 million.
Brian Jeep – Sidoti & Company
You are planning to launch after 2010 two to three new products a year. Does that include product launches for DHI?
Doug Bryant
No it doesn’t. So, obviously the number would be significantly higher.
Brian Jeep – Sidoti & Company
Okay. So, it would be fair to assume then that the 17% they were spending in R&D previously would continue.
Doug Bryant
At least in the near term, the projects that they had started we will continue. So I don’t know what the percentage is John that we were aiming at longer term.
I think what we suggest is that certainly within 2011 or so we might be as a total company around the 15% mark.
Brian Jeep – Sidoti & Company
Okay. Initially, I know you plan to run DHI as a separate company, if I understand that correctly or separate entity.
Any plans to completely integrate it at some point or do you think that’s the way it will remain.
Doug Bryant
Well, it is wholly-owned sub, but we will integrate a number of functions across the board. For example, there could be shipping and distribution that could be consolidated.
There could be some manufacturing that also could be moved from here up there. There are number of things that we will integrate as one.
So I don’t think a separate company is a good description.
Brian Jeep – Sidoti & Company
No, sorry. I just miss spoke.
Thank you. That’s all my questions.
I appreciate it.
Operator
Your next question comes from the line of Ross Taylor from CL King. Please proceed.
Ross Taylor – CL King
Hi. I just had a couple of questions, I guess, primarily related to financials and modeling.
But DHI, of the $9.3 million in operating income this year, can you quantify at all how much of that might have come from the strong flu demand during the year?
Doug Bryant
What we did say is the sales should be in the $5 million to $7 million range that were attributable to pandemic flu; and then the fall through there with –.
John Radak
(inaudible) 56% gross margin.
Ross Taylor – CL King
Okay. All right, that makes sense.
Last question, with regards to taking up the R&D as a percent of sales to around 15% or so over the next two years, is there any offset to that as a percent of revenues elsewhere in your income statement so that that won’t pressure the operating margin?
John Radak
Yes, we would expect to continue to see the ability to leverage the G&A structure because we won't grow that as fast as sales.
Doug Bryant
And we should also be able to leverage sales and marketing.
Ross Taylor – CL King
Okay. All right, that helps.
Thanks very much.
Operator
Your next question comes from the line of Jeff Frelick from ThinkEquity. Please proceed.
Jeff Frelick – ThinkEquity
Yes, good afternoon Doug and John. First question, did you guys pick up any large volume accounts in the quarter, like an IDN or large hospital?
And then the second question is do you plan on any price increases for the 2010 year?
Doug Bryant
It would be difficult to say that we did not pick up larger customers. Certainly we did pick up some larger customers; but would they material, no.
And what was the second part of the question, Jeff?
Jeff Frelick – ThinkEquity
Any planned price increases for the year ‘10?
Doug Bryant
They are minor. But yes, minor price increases.
Jeff Frelick – ThinkEquity
Across the board?
Doug Bryant
Yes.
Jeff Frelick – ThinkEquity
Okay. Thanks.
Operator
Your next question comes from Zarak Khurshid from Wedbush Securities. Please proceed.
Doug Bryant
Hi, Zarak.
Zarak Khurshid – Wedbush Securities
Hi, guys, good afternoon. Thanks for taking the questions.
John Radak
Hi, Zarak.
Zarak Khurshid – Wedbush Securities
Hi, John. So any new data on the current underlying organic growth in flu market and in your market share?
John Radak
It’s very difficult to determine what our share is. I will give you a little bit of detail.
We first got a report from a third party suggesting we had gained a significant share and we actually didn’t believe it. Since then that same party has come back and made a correction to the report and I think it’s more in line.
What’s difficult to know is how much gets shift from one quarter to another, and I will give you an example. In 2008, in one month, we were showing according to a third party that we had 85% market share, while we knew that wasn’t the case, although our marketing people would have thought, I suppose; but what happens is that when you are tracking product that’s strictly shipped from our building to a distributor’s warehouse, it doesn’t really accurately reflect what’s going on in the market.
So we need to see the product flow from us to the distributors to end users and then we need to monitor the inventory that’s at that level in order to determine that. So, all that to say that until we get through this flu season, it’s going to be very difficult to know exactly what our share is.
I will tell you that after surveying hundreds of our major customers, we only lost a small number and of those that belonged to our competitors, we actually gained more. So at the end of the day, I actually think that share has not changed dramatically one way or another.
Zarak Khurshid – Wedbush Securities
What is the major threat from the competitors? Are they competing on with more aggressive promotional activities or anything else on the product front that could change the game?
John Radak
There is nothing that we see right now on the product front. I will tell you that we continue to be our distribution partners’ premium priced product.
We sort of hold that position for them. But since our distribution partners actually represent particularly everybody’s product, they sort of sell the premium priced product to those customers who choose to have that brand and that product.
If they find customers who are not willing to pay that price they sell those products. So that’s why share doesn’t move a whole lot one way or another rather than temporarily in and out, given an end user promotion of sorts.
Zarak Khurshid – Wedbush Securities
Understood, thanks.
John Radak
Sure.
Operator
(Operator instructions) Your next question comes from Steven Crowley from Craig-Hallum Capital Group. Please proceed.
Steven Crowley – Craig-Hallum Capital Group
Good afternoon gentlemen and congrats on a great fourth quarter performance.
John Radak
Thanks, Steve.
Doug Bryant
Thanks, Steve.
Steven Crowley – Craig-Hallum Capital Group
Couple of questions, on DHI, first of all, can you talk towards a little bit about the potential synergies on the sales and marketing side between the two product lines and also on the supply side?
Doug Bryant
Sure. On the customer synergies, DHI in North America has about 700 customers, and I would say the relationship that they have with those customers is very good.
Of those, about half or 350 use their respiratory products. And of those 350, very few of them happen to be customers of ours.
So we see an interesting opportunity for our two organizations to approach those customers to see what we can do, at least to evaluate the effectiveness of our products in the hands of those virology and microbiology customers that belong to DHI now. On the supply side, I assume you are talking about from an R&D perspective, Steve?
Steven Crowley – Craig-Hallum Capital Group
Well, also in terms of the ability for them to supply you with some antibodies for current or future tests. Is there that kind of synergistic opportunity?
Doug Bryant
There is, but I wouldn’t model that quite yet, because that’s a longer term project where as we would make product improvements or develop new assays we would certainly use their new monoclonals. But you can imagine that if we were simply to look at the monoclonal they had to put it into our kits we would create a different product and we’d have to go through the whole clinical and regulatory process.
So I don’t see any short-term gain from that synergy, longer term, of course.
Steven Crowley – Craig-Hallum Capital Group
And the other aspect of sales and marketing, as it may relate to DHI, I think you referenced that they haven’t had a tremendous amount of international presence in the past. Can you quickly change that and how much do you change it?
Doug Bryant
I wouldn’t characterize it, Steve, as quickly but we certainly can look at opportunities for their products internationally. We’ve already been to Japan and had initial discussions there.
We are exploring what we can do jointly in China. We recently just hired an individual who will head our commercial operations ex-US.
And they are exploring what we can do in those countries in Asia as well as what we can do in Europe and in South America. So the short answer, Steve, is yes, there will be opportunities to sell their products ex-US that may have taken them longer to get to.
Steven Crowley – Craig-Hallum Capital Group
Then the second topic, I am intrigued by your comments about an uptick in the first-gen FIT test. Maybe you can talk a little bit about what might be happening with that product?
And then, did that serve as a pretty effective springboard to your second-gen launch, and tell us whatever you can please about what you got up your sleeve there.
John Radak
The uptick that we referenced is really quite small and it’s reflective simply of the fact that more and more physicians are moving from guaiac to FIT, so that’s what I would say with respect to the current product. With regard to the second generation product, because we haven’t launched we really can’t make any claims or tell you whole lot about the performance of the product.
I will simply say that we think it’s an interesting opportunity for us and we certainly would envision resourcing the launch appropriately to see if we can maximize that opportunity.
Steven Crowley – Craig-Hallum Capital Group
Great. Thanks for taking my questions.
John Radak
You are welcome, Steve.
Operator
Doug Bryant
Well, this concludes the call for today. John and I want to thank you again for your time this afternoon and for your continued support.
Take care, everybody. Bye-bye.
Operator
Ladies and gentlemen, we thank you for your participation, and ask that you please disconnect your lines. Good bye.