Feb 29, 2012
Executives
Randy Steward - CFO Doug Bryant - President and CEO
Analysts
Steven Crowley - Craig-Hallum Tycho Peterson - JPMorgan Zarak Khurshid - Wedbush Securities Ashim Anand - Natixis Scott Gleason - Stephens Jeff Frelick - Canaccord Genuity Ross Taylor - C.L. King
Operator
Welcome to the Quidel Corporation fourth quarter and full year 2011 earnings conference call. (Operator Instructions) I'd now like to turn the call over to Mr.
Randy Steward.
Randy Steward
Good afternoon. This is Randy Steward, Chief Financial Officer of Quidel.
Thank you for participating in today's call. Joining me today is our President and Chief Executive Officer, Doug Bryant.
Today, Quidel released financial results for its three months ended December 31, 2011 as well as for the full 2011 period. If you have not received this news release or if you would like to be added to the company's distribution list, please call Ruben Argueta at Quidel Corporation, 858-646-8023.
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 those stated expectations.
For a discussion of risk factors, please review Quidel's annual report on Form 10-K, registration statements 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 29, 2011.
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 report the financial results and Doug will provide a company update on the more recent developments.
We will then open the call for your questions. For the fourth quarter of 2011, total revenues were $38.4 million compared to $31.7 million in the fourth quarter of 2010, an increase of 21%.
The infectious disease product category comprised a majority of the revenue increase, growing 28% versus last year along with 8% growth from our women's health category. Inventories at distribution remained at low levels, indicating that revenues in Q4 were reflective of that in user demand.
Global sales of infectious disease products totaled $27.3 million in the fourth quarter of 2011 compared to sales of $21.4 million in the fourth quarter of 2010. Strong sales from our influenza product line of which sales $9.7 million for the quarter drove the increase along with continued growth from our Strep A, RSV and herpes product lines.
In the fourth quarter of 2011, Strep A and RSV each grew 8% over the fourth quarter of 2010. Revenues for the women's health category increased by 8% in the quarter to $8.2 million due to the timing of orders in our autoimmune and bone health business and an 18% growth from Thyretain, our Graves' disease product.
Our gastrointestinal product category revenues were $1.7 million, equal to the fourth quarter of 2010. Gross margins in the fourth of 2011 expanded nearly 400 basis points to 60% from 56% in the fourth quarter of 2010, largely due to improved product mix, manufacturing efficiencies gained at our Athens, Ohio, facility and continued cost reduction activities, the latter two of which we consider to be permanent.
Included in cost of sales for the quarter were $2.2 million of intangible amortization related to the Alere lateral flow royalty buyout discussed last quarter. Operating expenses were $21 million in the fourth quarter of 2011 compared to $18.5 million for the fourth quarter of the prior year.
Research and development costs in the fourth quarter of 2011 were $6.8 million compared to $5.6 million in the fourth quarter of 2010. Attributing to this R&D increase was a $1.1 million impairment charge related to a discontinued product and $500,000 related to a discontinued research and development project.
Sales and marketing costs increased to $6.8 million in the fourth quarter of 2011 from $5.9 million in the fourth quarter of the previous year due to an increase in sales commissions associated with the increased sales in 2011. General and administrative expenses in Q4 of 2011 increased to $5.7 million from $4.9 million in the fourth quarter of last year.
This is primarily related to an increase in employee incentive compensation in 2011 versus 2010. Stock-based compensation expense was $2.3 million in the fourth quarter versus $1.3 million for the comparable period in 2010.
In the fourth quarter, we've recorded in the other expense line item $400,000 primarily associated with a facility shutdown in Ohio. In total, all of the aforementioned one-time items had a negative impact of approximately $0.04 per share.
Our tax rate for the fourth quarter of 2011 was 30.1% and for the full year our effective tax rate was 33.5%. This compares to a tax rate of 35.3% for the full year of 2010.
Net income in the fourth quarter of 2011 was $1 million or $0.03 per diluted share compared to net loss of $400,000 or $0.02 per share for the fourth quarter of 2010. On a non-GAAP basis excluding non-recurring items, amortization of intangibles and stock compensation expense, net income for the fourth quarter of 2011 was $4.9 million or $0.15 per diluted share.
This compares to net income of $1.5 million or $0.05 per diluted share for the same period in 2010. With respect to the financial results for the full year of 2011, total revenues grew 40% to $158.6 million from $113.3 million in 2010.
This revenue increase for the year was primarily driven by a 53% increase in sales of infectious disease products from 2010, a year with minimal influenza activity. Gross margin for the year expanded to 60% compared to gross margin of 54% in 2010.
Our margins were affected by increased volume, favorable product mix associated with higher margin on the influenza products, the full year benefit of owning DHI and realized manufacturing efficiencies at the Athens, Ohio facility. Operating expenses for the full year were $82 million compared to $76 million in 2010.
The increase in operating expenses were driven by a 11% increase in research and development spending to $26.3 million associated with our initiatives to reinvigorate our new product development pipeline including clinical studies. Operating expenses were also driven by the full year ownership of DHI.
Stock-based compensation expense was $7.5 million for 2011 compared to $5.2 million for the full year of 2010. Net income for the full year was $7.6 million or $0.23 per diluted share.
This compares to a net loss of $11.3 million or $0.39 per share for 2010. On a non-GAAP basis, excluding non-reoccurring items, amortization of intangibles and stock compensation expense, net income for the year was $19.8 million or $0.59 per diluted share compared to a net loss of $1.5 million or $0.05 per share for the same period in 2010.
In February, we paid off the remaining balance owed on the Alere lateral flow royalty buyout. To summarize, the total buyout amount was $29.5 million, $13.8 million of which was paid in October 2011.
The remaining balance has been paid in full. For accounting purposes $700,000 was expensed as a one-time charge in Q3 and the remaining $28.8 million will be amortized to February 2015.
In Q3 of 2011, we expensed $1.8 million in amortization, in Q4 $2.2 million, and going forward we will expense $8 million per year for 2012 through Q1 of 2015. I will now turn the call over to Doug.
Doug Bryant
Thank you, Randy. 2011 was a very good year for Quidel.
It was a year during which we demonstrated our R&D capabilities and regulatory expertise. We achieved a couple of key technological breakthroughs that enabled the completion of ongoing projects in 2011 and should enable an increase in the rate at which we develop products going forward.
During the year, we completed the development of 10 new products. We received 510(k) clearance from the FDA for four products and the CE mark for five.
Two other submissions are with the FDA currently and we are currently conducting clinical trials in the U.S. for five other new products.
We've made significant progress on the development of numerous products as well. And in fact, as we exited 2011, we had another 17 products that were fully funded and in either Phase I, Phase II or Phase III of our development process.
In addition, from the middle of the year we began building commercial infrastructure and by yearend had brought on board a number of people in key leadership roles. Overall, we had a terrific year and I believe we demonstrated that we are a different company than we were just a few years ago.
I'd like now to provide an update on our progress by key platform, beginning with Sofia. Sofia is our next generation Fluorescent Immunoassay Analyzer System.
In the fourth quarter of last year, we received U.S. FDA clearance for the Sofia Analyzer itself as well as for the Sofia Influenza A+B Fluorescent Immunoassay, the first in a series of new assays for infectious disease and other conditions and disorders.
We began shipping instruments late last year through an early placement program, and the response so far has been positive. The feedback received from the field has been excellent not just with respect to assay performance but also with respect to ease of you and current activity.
We believe we have a unique product and are focused in the very early stages on maximizing the number of Sofia systems placements in anticipation of the initial wave of Sofia assays that is currently in development. Last year we made the decision to investment in commercial infrastructure and expect to add sales people throughout the first quarter of this year as we prepared to support our distribution partners in launching the Sofia line of products.
As far as our other Sofia system assays, we received CE Mark for Sofia Strep A immunoassay in Q4 of last year and U.S. clinical trials are currently underway with the Strep A product and one another assay.
Among the 17 products I mentioned that are currently in development, five are Sofia assays. Bobcat, our automated multiplex DFA analyzer that replaces fluorescence microscope continues to make steady progress.
We redesigned a new enclosure for the instrument. More important into clinical trials in the fourth quarter of last year and those trials are ongoing, provided that we find enough samples of each of the eight virus types to conclude the trials, we could submit the 510(k) package to the FDA as early as the second quarter of this year.
We also saw significant progress with each of the elements of our molecular program, beginning with AmpliVue the handheld disposable molecular platform. We began clinical trials for C.
difficile in the fourth quarter of last year. And these trials are ongoing.
We plan to submit our 510(k) package to the FDA sometime in the second quarter. Further we expect to enter into clinical trials for two other AmpliVue assays over the next couple of quarters and I'll talk more about those products later in the year as we get closer to the launch.
Moving to our real time PCR assays that can be run on commercially available thermocyclers we received back-to-back FDA clearances for Flu A+B and Human Metapneumovirus assays before Christmas of last year. We're in the process of developing more menu and expect that our next assays C.
difficile and RSV human metapneumo to enter the clinical trials by the end of this quarter, we recently submitted and additional assay to the FDA for 510(k) clearance, just recently. In addition, we have a further seven PCR assays in development.
Finally, we continue to see steady progress with respect to project Wildcat, our fully integrated molecular instrument. We're working on the next phase of instrument development and our advancing healthy expected rate.
As a result we may hit the next milestone payment to Northwestern. We continue working toward our goal completing the development of Wildcat by the end of 2013.
As I have said before products and development always remain subject to change in terms of content and timing because there is always uncertainty around development activities clinical trials and clearances by regulatory agencies. Nevertheless, we are excited by our progress thus far and remain confident in our ability to execute our pipeline strategy.
Our strategic intent is to build a broader base diagnostics company with products in market segments in which we have significant product development, regulatory and commercial expertise and know how. Not so long ago, we said that we would focus on three strategic comparatives.
First, we said that we would develop at least two to three new products per year. We've clearly demonstrated that we are capable of that and more.
Second, we said that we would become a molecular company and in 2011 we achieved that objective. Finally, we said that we would use the new products that we would develop as an opportunity to commercialize more effectively.
In 2011, we began to build the commercial leadership team and by the end of this quarter we'll have doubled the number of sales representatives we have in the United States. While we have accomplished much in the last couple of years, the real challenge of continuing to execute our product development strategy while commercializing many new products globally is still ahead of us.
And we look forward to that challenge. That concludes our formal comments for today.
Operator, we are now ready to open the call for questions.
Operator
(Operator Instructions) Your first question today comes from the line of Steven Crowley with Craig-Hallum.
Steven Crowley - Craig-Hallum
You emphasized the couple of points in the press release. I was going ask you about how you could crank up the pace of new product development but you covered that pretty darn well in terms of how you're expanding that.
The one of the other points you made related to having overcome some key technology hurdles that you hopefully wouldn't have to overcome again as you move forward. Can you give us a little bit of color as to the significance of those hurdles and what they open you up for?
Doug Bryant
Sure, that's a real good question. We actually achieved a number of technical breakthroughs throughout the year.
I'll just give you one example. In the AmpliVue product for example, one of the tasks was instead of developing a new strip for every single different assay that we might develop to actually develop a universal Strep that would be applicable to any assay, so that the cartridge itself would be universal.
In other words, the same product would be used regardless of whether it was the C. difficile assay, MRSA assay, a Group B Strep tests, et cetera.
That took a little doing and it took a while. In fact, I would say that challenge took us over 12 months to overcome.
Now that we've solved that, we don't need to do that again. In other words, that particular aspect of the product design is incorporated in all the products that we'll have moving forward for AmpliVue.
Steven Crowley - Craig-Hallum
Now, in terms of the follow-up on the new product strategy, you've described kind of overarching strategy of multiple base hits and at least being able to get up to the plate and hit singles. And invariably, good hitters hit some into the gap and out of the park and that would be the expectation.
Wondering given some of your experience real world with new products in the marketplace and moving some things along the development pipeline, what the scouting report is on some of the product lines that could be more significant and more quickly received versus others, if you can do a little bit of that for us?
Doug Bryant
Sure, I think the right way to think about that question is just to provide an update perhaps on the new products that we have developed and launched so far and then talk a little bit more about what's coming down the pipeline. Just as a refresher, the new products are Sofia and Sofia Flu in the United States and Sofia and Sofia Flu and Strep A in Europe and in Asia and of course the molecular products which I can talk about separately.
In the United States, we've shipped Sofia instruments and flu reagent kits to several key hospital customers, and we view endorsement by key opinion leaders to be an important first step. Several hospital customers are running studies right now, and we expect that a number of posters and abstracts will be presented at numerous upcoming scientific meetings beginning in March and continuing through spring.
In the meantime, we expect clear waiver which will help with traction as well, and following that the launch of Strep A will certainly be helpful. And in fact, if you're looking about the difference between a base hit and a homerun to use your analogy, I would say that for us right now, the launch of flu in the United States and a very light flu season is at best a base hit.
And the home run for us will be when we have a bit more menu and we will have not only flu, but Strep and handful of other products as well. That will be the homerun.
And I would say once we get these instruments actually interfaced to information systems, either in hospitals or either in the lab or the ERs or in some cases in physicians' offices, each subsequent launch becomes easier and easier. And in Europe, we have actually shipped seating sites in Germany and the Nordics.
And similarly, we have a number of customer studies underway. And the same is true in Asia as a matter of fact, Steve, where we have shipped more Sofia instruments there than we have in any of the other areas of the world actually.
New molecular products, as I mentioned, are the PCR kits for flu and for human metapneumo. And for these products, as you would expect, we are at the stage where a handful of customers are evaluating the product.
And in Europe, to be more specific, there are 18 customers currently evaluating our PCR kits. Again, I would expect that effort to be more base hit like.
Certainly, as we introduced both in Europe and here in United Sates the hospital-acquired infection tests, notably the first C. difficile I think, that actually is probably more than a base hit for us.
And I will just stop there.
Operato
Your next question is from the line of Tycho Peterson with JPMorgan.
Tycho Peterson - JPMorgan
Maybe just sticking with Sofia for a minute, I know it's obviously early days here. But as we think about the market opportunities you see maybe 12 to 18 months down the road, what do you see is the mix by customers in terms of larger versus smaller hospitals and maybe some reference labs?
And then also, can you talk to how you think about consumable pull-through per box as the system ramps?
Doug Bryant
In terms of mix, today our mix of customers is nearly 50-50 between physician offices and hospitals in terms of total volume. Early on, I see the flu product as being in high demand in the hospital and that we're constrained early on by the fact that we don't have clear waiver yet for the product.
So early days, I think you'll see us concentrating more on the hospital segment than in the physician segment, but obviously that will change depending on what the menu items are. As you look down into the strategic plan and you've heard us talk before about assays like vitamin D and other quantitative assays, I think those become more logical physician office assays.
In terms of consumable pull-through, we've done the exercise of running this out through our strategic plan and I would comfortably say that we would see somewhere between $10,000 and $15,000 per year per box.
Tycho Peterson - JPMorgan
The timing of the quantitative assays, have you said anything specific about? You just mentioned vitamin D, but obviously there are others too.
Anything specific on the timing of some of those quantitative assays?
Doug Bryant
Sure. I'll start by saying, Tycho, that we have proof of principle.
We've achieved feasibility with the concept of quantitative assays. We have three programs specific.
I just named one. The first of which is not likely to be vitamin D.
I think we can probably be very close to end market with the quantitative assay in early 2013.
Tycho Peterson - JPMorgan
And then last one of gross margin. Any numbers you can give us on how much was from mix versus some of the cost reduction activities and efficiency gains?
Doug Bryant
Sure. Mix was obviously a big part, but I would say no more than a couple of cents per share was due to permanent cost reduction.
But I do think it's worth mentioning that we had a program to reduce cost to become more productive and certainly that's part of it. So I'll say a couple of cents per share would be the impact there.
Operator
Your next question is from the line of Brian Weinstein with William Blair & Company.
Unidentified Analyst
This is actually Pete in for Brian. I've heard you guys comment and I think you've talked about in the call as well about needing to build commercial infrastructure ahead of 2013 launch of a lot of these products.
And I would assume just based on the number of assays you guys are talking about that you're going to have to build up R&D infrastructure as well. I was wondering if you could give me a little bit more color on how much of investment in 2012 would be required in these line items.
Doug Bryant
For SG&A, in other words, expenses due to sales and marketing, we've said before that we thought it would cost us a couple of cents per share for 2012. For R&D expenses, we don't anticipate a significant increase.
Randy, do you want to get me a specific number?
Randy Steward
We're estimating that our R&D expenses should increase by 10%, 12% year-over-year.
Operator
Your next question is from the line of Zarak Khurshid with Wedbush Securities.
Zarak Khurshid - Wedbush Securities
I wanted to ask a little bit about AmpliVue and how should we be thinking about the customers for that product? What would be the sales pitch versus the other more rapid C.
diff tests that are out there in the space?
Doug Bryant
Both C. difficile and MRSA, we'll introduce AmpliVue assays this year as you're alluding to, Zarak.
AmpliVue is a handheld disposable molecular device that incorporates quick isothermal amplification and inexpensive detection using, as I just mentioned a bit ago, a universal lateral flow strip. These assays will be accurate, reasonable correct, easy to perform, inexpensive and require no abstraction and no instruments.
There are people who would say that the field for this type of products is crowded at this stage. To those folks, I would say that the field for a handheld disposable non-instrumented device isn't crowded, because as far as I know, AmpliVue is the first of its kind.
And there are many a labs that don't do molecular testing. So to answer your question very specifically, I think the main target for this device is folks that don't do molecular testing today.
Zarak Khurshid - Wedbush Securities
Would that be hospitals in that 200, 250 bed range?
Doug Bryant
I think that the market research we have says that there is a lot of pent-up demand in the range that starts at about 250 beds and goes a bit lower.
Zarak Khurshid - Wedbush Securities
Looks like the free cash flow was pretty good in the quarter. Can you break that out more specifically?
And maybe talk about the sustainability of that going forward?
Randy Steward
I don't know of the specifics. But, yes, we did have an excellent cash flow quarter.
We ended the year with a little over $61 million in cash. So certainly we're thinking through the strategy of how to utilize that cash going forward.
We did use some of that to pay down the Alere obligation in the first quarter of this year. Does that help?
I apologize. I don't have the specifics on CapEx.
I think it was approximately $2 million in the quarter.
Operator
Your next question is from the line of Ashim Anand with Natixis.
Ashim Anand - Natixis
Doug, I was wondering, you guys have talked about hiring more sales force. If you can remind us what is the present structure and how much you are going to expand?
Any details you can give on that?
Doug Bryant
Sure. In the segment about 250 beds, we have 21 sales territories, and we're going to go to 42.
Ashim Anand - Natixis
And these people will be having all the products or they will be specialized? Now you have a big gamut of products.
So these guys will be taking all the products?
Doug Bryant
In the high-end the guys are focused on Sofia right now and also the introduction of molecular products. They are supported by specialists.
So there are specialists who focus on the Sofia instrument in the assay, and there will obviously be folks who are focused just on molecular, to support a general sales force. And at the lower-end, we actually don't go all the way down into our smallest position of its customer.
And across the Board we will rely upon our distributors for fulfillment.
Ashim Anand - Natixis
And if you could break out international revenues this quarter, that would be great?
Randy Bryant
Yes, for the quarter international revenue was $7.7 million. And for the full year it was at 14% of total revenue.
Operator
Your next question is from the line of Scott Gleason with Stephens.
Scott Gleason - Stephens
I guess, just to start off with, I know you guys don't give guidance. But maybe just given how light the flu has been today?
Can you talk a little bit about what you guys are expecting for the first quarter, so we could start onwards? And I guess, is there a situation that could develop where you wouldn't end the quarter, I guess, with the same low inventory levels that you typically end the year?
Doug Bryant
Well, I think what you're asking for in an indirect way maybe is how we're stacking up with flu. So let me just start there and if there is a follow-up, we can address it Scott.
By numerous measures flu has not yet reached epidemic levels. Everybody is aware of that.
Activity did increase earlier in February, earlier this month. And the orders that we've received have been normal non-epidemic sort of sized orders.
So our sales are not zero of course, they're just light so far. And although, flu activity can be tracked in a number of ways, the CDC says that the flu season is considered to have begun, when greater than 10% specimens tested are actually positive for flu, and that actually occurred the week ending February 4.
And then in the following week it went up to 15%. And I haven't seen the data since then.
Again, we are seeing a very beginning of the season. But I don't know how that will honestly impact sales for March, because of course we only have four weeks left.
We have minimal inventories out there, such that if there were flu our distributors would need to order. But on the other hand, we're not asking them to order either.
So we have low inventories. We intend to keep it that way.
Just some interesting data, the data that we see or at least I'm told, says that 90% of those that are testing positive for flu right now are Flu A and 10% are obviously the B Viruses. And what's kind of funny is that over 80% of the As are actually H3N2, meaning that the H1N1 variant virus we saw in 2009 accounts for far or less as a proportion of the total.
But what's interesting is in the last few weeks that that number has been climbing. In other words the number of the pandemic H1N1 virus, particularly in the southern part of the United States has been increasing.
Nevertheless, when you look at IOI as a percentage of office visits it still, it's been ranging between 1% and 2%, and has not even gotten close to the 2.4%. And we only have one state that we've seen so far where there was a lot of IOI activity.
So by all measures so far, including the pneumonia and influenza as a cause of death is not actually gotten close to the epidemic threshold either. In fact, in the most recent report only 6.7% of all the deaths reported were due to pneumonia and influenza.
The CDC looks at a threshold of about 7.9%. And then we had some reports earlier about some novel A viruses that we haven't seen before, which could also be of concern.
But there were two cases of a swine variant of H3N2. There was a case of an H1N2 variant virus.
And then there was an infection reported in Wisconsin of a different H1N1 variant than we had seen before. But not one of those folks has died.
So finally, I'll just say we haven't received the size of orders we were expecting in epidemic. Frankly, we're not asking our distribution partners to order product at this stage.
And I wouldn't be forecasting frankly a whole lot of sales between now and the end of March either.
Scott Gleason - Stephens
And then I guess just when we look at the BD Veritor System that was recently launched, was kind of a (inaudible) product to your Sofia system. Is there any intellectual property issues that maybe could come up there in terms of potential infringement or maybe system intellectual property that you guys have?
And I guess you guys are being a little bit guarded, when talking about the pipeline. I imagine it might be for competitive reasons.
When will we get more kind of information and kind of the timeline, I guess, for Sofia assay launches? I know you've given a little bit of detail, but a much more granular detail?
Doug Bryant
Starting with BD. First, there's no infringement.
The two products are not even in the same category. We've actually purchased five BD Veritors and have done preliminary analyses of the products performance.
In my view neither Quidel's QuickVue product nor Alere's Binax business is likely to be under significant threat. Not in the near term anyway.
And in terms of Sofia, there is really no comparison between the two products, either in terms of performance or functionality. So the BD product should not be an impediment to the launch of Sofia.
With regard to visibility, on what we're working on, you are right. That I'm looking at a stream and I'm counting the number of competitors on the call.
I am reluctant to announce that we're working on going forward. But what I would tell you this is that, in order to give more clarity, what we would be willing to do is, as we exit clinical trials and we've submitted data to the FDA.
I think that that would be probably an appropriate time to let folks know what those menu items are. In another words, as we get closer to launch, I think that would be fair for us to let you know what those products are.
Having said that, if you go back to the last Analyst Day that we did, that was a pretty good list we provided for what we had in mind.
Operator
Your next comes from the line of Jeff Frelick with Canaccord Genuity.
Jeff Frelick - Canaccord Genuity
Doug, can you give us a sense, so obviously you launched four new products here in the U.S. this year through FDA approval.
You have a few of them slated for 2012. As we think about the plans to kind of march towards the 2014 bogey of $100 million in new product contribution, probably I think that contribution starting out in 2012, 2013?
Doug Bryant
The biggest chunk of incremental sales still so far looks like it's going to come from Sofia. And we do have a couple of molecular assays that we think depending up on a market acceptance could do extremely well.
But just to remind you of what we had forecasted not so long ago, we said that $100 million in incremental would be divided up into a handful of categories. Sofia, which would account for $30 million or so net of cannibalization and new product sales.
We said that molecular would be in the range of $25 million. We said the Bobcat would be in that $30 million neighborhood as well.
And then the reminder I think, if I am doing my math correctly was somewhere around $15 million for the Thyretain product. What I would tell you is that now that we have a little bit more visibility to market sizes and opportunity, we understand how our product is going to perform.
We would probably now reforecast and say that Sofia would probably be slightly north of what we had forecasted, so would molecular. I would then forecast Thyretain down slightly.
Although, I will tell you that in the fourth quarter we were up 18% versus the same period last year. So it's still continues to grow but it's a small base.
And then for the Bobcat, to be conservative I would say that I would probably revise that forecast down so that net-net all-in we're still on track for that $100 million in incremental at that time I believe.
Jeff Frelick - Canaccord Genuity
I missed it earlier in your comments, Doug, on the Sofia Strep and flu waiver, you do expect that ahead of the upcoming cold and flu season for 2012, 2013, correct?
Doug Bryant
We've made application to the FDA for clear waiver. Have performed the studies we've been asked and have responded to a number of questions as you normally do.
And certainly no reason why we would not be approved in the near term and that would be for both the flu product as well as the other future products including Strep in advance of the next respiratory season.
Jeff Frelick - Canaccord Genuity
On molecular, you said there was about 18 customers still evaluating in Europe, what are you seeing, how long the evaluation is taking for your molecular kits?
Randy Steward
Well, right now in the flu season in Europe, it's not speedy. The flu season there is just as light as it is.
Here what I would say as our primary intent, although we'd love to have these people as customers is to have key opinion leaders that are currently the product, actually do abstracts of their studies to put together posters that they might present at upcoming meetings. And one of which in Europe is coming up at the end of this month, et cetera.
Because at this stage I think, almost on a country-by-country basis it's necessary to have third-party evaluations of your products. So that's what those 18 folks are doing, right now.
Clearly we would love to have each of those customers but also many, many others as we go into the next respiratory season.
Operator
Your next question is from the line of Ross Taylor with C.L. King.
Ross Taylor - C.L. King
Most of my questions have been answered but just two fairly simple ones left. I guess, first of all your influenza sales in Q4 were pretty stronger.
You had good growth. Since most of that or there was no build up of inventory in the distribution channel, given that flu has been pretty weak.
Do you think there has been build up of inventory at the end user level or do you think the low level of flu is consumed most of what you've sold so far?
Doug Bryant
Inventories at distribution are low. Inventories, we believe at the end users, whether they'll be hospital or the physician office are modest.
We don't think there has been a build up and so you could almost characterize Q4 as being somewhat close to baseline level of ongoing flu sales of ongoing demand.
Ross Taylor - C.L. King
My last question, I think I missed the data point in your prepared remarks but did I hear something about $1.1 million impairment charge in the quarter?
Doug Bryant
That's right.
Ross Taylor - C.L. King
Can you just detail what that is or which line item that showed and again I'm sorry I missed the comment before.
Doug Bryant
It's the addition of your total number of things, shows up on the couple of items. Why don't you walk him through that, Randy?
Randy Steward
That was in research and development. We had $1.1 million as it related to a discontinued product.
Then we had $0.5 million as it related to our R&D project that we discontinued.
Ross Taylor - C.L. King
Does that include the Cleveland, Ohio?
Randy Steward
No. And that we had a third piece that was incorporated in our other expense line item in our income statement.
And that was approximately $400,000 and that represented a closure of our small facility we had in Ohio.
Doug Bryant
I would add that we had an HIV project that we inherited with the acquisition of the DHI that we've jointly decided to discontinue. And as part of that there was a lab that we were leasing in Cleveland that we've now discontinued.
Operator
You have a follow-up question from the line of Steven Crowley.
Steven Crowley - Craig-Hallum
In terms of flu, it' always a challenge to try and calibrate the bouncing bomb but at the moment it doesn't seem like it's bouncing too high. And I'm wondering if the implication of the flu running it course kind of at the levels that's been running for the last several weeks for you guys.
How do we translate that into sequential difference in your business in your topline from Q4 to Q1? Now, last year was very anomalous and there was a big jump.
But if flu were to run its course as it's been running and then tail off after the end of March, would that mean $10 million or $12 million of incremental sales Q1 versus Q4? How should we think about it?
You can answer it any way you think might be helpful to us.
Doug Bryant
We don't, as you know, Steve, provide specific revenue guidance. I would say obviously that we're going to have to figure out how to communicate what we believe to be the shortfall here in the next couple of weeks.
But there is an underlying base level of flu sales that you would see throughout most of the year. And we certainly see that now.
And on top of that, there is the possibility that we would see some minor ramp as we exit March. But as I stated before, we're neither seeing it nor are we asking for those orders at this stage.
Steven Crowley - Craig-Hallum
But the kind of baseline run rate of the business without big delta from here would imply more flu business in Q1 than Q4. It's just a question of how much more.
Doug Bryant
A good way to look at it really I think is the Q4 sales that you saw for flu is pretty much the underlying level of flu that you've seen normally throughout the year. And we're not seeing any increase of that.
Steven Crowley - Craig-Hallum
Are there other upper respiratory and disease categories that are seasonally stronger in the first quarter than the fourth quarter or not really?
Doug Bryant
Not materially, no.
Steven Crowley - Craig-Hallum
And then one disconnected follow-up and it really relates to the commentary and the points of internal stress about the commercial organization and building infrastructure. You've talked about the sales force.
What are the other critical components and moves besides just adding sales force to get you positioned for the next wave of growth of the company?
Doug Bryant
In addition to the sales force itself, Steve, there are other commercial activities that are obviously critical. So scientific affairs is important at this stage as we launch these products.
There is some level of marketing spend of course as we attend these scientific shows. That's the type of thing if you're looking for something that would be an increase in spend.
Steven Crowley - Craig-Hallum
Do you have most of the enhancements to the commercial organization beyond the sales force that you've described? Are you a third of the way through or you're at the tip of the iceberg or you've put a bunch of the pieces together recently?
Doug Bryant
We're going to be complete by the end of March.
Operator
Ladies and gentlemen, this does conclude the question-and-answer portion of today's conference. I'd like to turn the call back over to management for some closing remarks.
Doug Bryant
Well, this concludes the call for today. Thanks everybody for your time this afternoon and for your continued support.
Take care, everybody.
Operator
Ladies and gentlemen, thank you for your participation today. This does conclude the presentation and you may now disconnect.
Have a great day.