NEW YORK – Diagnostics manufacturer Quidel reported after the close of the market on Thursday that its fourth quarter revenues fell more than 21 percent year over year due primarily to shift in product mix and decreased COVID-19 product sales.
For the three months ended Dec. 31, 2021, Quidel reported revenues of $636.9 million, down from $809.2 million in Q4 2020. The revenues were above analysts' consensus estimate of $567.2 million and consistent with the firm's preliminary earnings estimates.
The firm reported $249.0 million in revenue decline for its Sofia 2 Flu + SARS antigen fluorescent immunoassay as compared to Q4 2020, as well as total COVID-19 product revenues of $511.8 million compared to $405.3 million in the prior year.
During the quarter, revenues from rapid immunoassays declined 17 percent from $631.3 million to $521.0 million, due primarily to a shift from higher-priced Sofia products sold in the professional market to lower-priced QuickVue products sold in the retail, pharmacy, and employer testing markets, Quidel said.
Cardiac immunoassay revenue decreased 25 percent year over year to $52.8 million from $70.0 million due in part to the transition and settlement agreements with Beckman Coulter for the BNP business. Specialized diagnostic solutions revenue increased 6 percent to $12.2 million from $11.5.
Molecular diagnostics revenue, meanwhile, dropped 47 percent to $50.9 million from $96.4 million, which the firm attributed to lower volumes and selling prices for COVID-19 PCR products.
In the quarter, Quidel signed a definitive agreement to acquire Ortho Clinical Diagnostics for approximately $6 billion and launched its Savanna MDx instrumented system in select ex-US markets.
On a call with investors, Quidel CEO Doug Bryant emphasized that the Ortho acquisition will double the company's size and grant it more access to international markets.
"The planned Ortho acquisition is expected to more than double our global market opportunity, estimated to be worth over $50 billion between the point of care, clinical chemistry and transfusion medicine categories," Bryant said. It also allows Quidel to maintain 9 percent to 11 percent top-line growth post-COVID, he added.
The firm will use a similar approach to integrating Ortho as it did in incorporating the assets acquired from Alere, although Bryant expects the Ortho integration to be much more straightforward.
Quidel has identified $90 million in cost synergies by the end of the third year of integration, as well as $100 million in expected revenue synergies by 2025 primarily from "cross-selling opportunities and expanded geographical footprint to sell Savanna and other products in ex-US markets," Bryant said.
Bryant said the Savanna launch with a respiratory viral panel in the EU has been limited but added that the firm has "received very positive customer feedback to date, including requests for additional instruments."
Quidel anticipates launching Savanna in the US this year and expects to realize $300 million in annual revenues within three years. The system can detect up to 12 pathogens per sample in approximately 20 minutes using PCR, with room temperature-stable reagents and capabilities to test either directly from swabs or from liquid samples.
"We expect 2022 to be a busy year for Savanna," said Bryant. The firm will work toward Emergency Use Authorization for a respiratory viral panel called RVP4 and 510(k) submission for one called RVP11, as well as for assays and panels to detect herpes simplex virus, varicella-zoster virus, sexually transmitted infections, and gastrointestinal pathogens, he said.
"We also plan on automating our manufacturing line, thereby substantially increasing our production capacity for our Savanna cartridges," Bryant said, adding, "If we've demonstrated anything during this pandemic, it's that we can scale rapidly, which bodes well for a flawless successful launch."
In terms of COVID-19 testing, while the pandemic appears to be abating in the US, "We've been engaged with a number of organizations that would be interested in helping folks outside the US with products," Bryant said.
While the Ortho acquisition has been met with skepticism from investors — and a 46 percent drop in Quidel's stock value since the deal's announcement — most analysts remained upbeat.
Alex Nowak of Craig-Hallum surmised in a note to investors that Quidel is "massively undervalued in the market" and has a Buy rating on the stock with a price target of $219. "The stock drifting lower with a cash-rich, earnings-rich story has been nothing short of puzzling," Nowak wrote.
William Blair's Brian Weinstein has an Outperform rating on Quidel, stating that the firm's detailed discussion of the Ortho process integration on the call was "encouraging," adding, "Our analysis of the combined company suggests Quidel remains meaningfully undervalued."
Quidel's Q4 net income was $291.3 million, or $6.85 per share, down from net income of $470.1 million, or $10.78 per share, in Q4 2020. On an adjusted basis, Quidel's Q4 2021 EPS was $7.29, trouncing the consensus Wall Street estimate of $5.61 per share.
Quidel's Q4 R&D expenses were up slightly to $26.1 million versus $25.5 million in the year-ago period. Its SG&A costs were up 35 percent year over year to $78.7 million from $58.4 million. The firm also reported acquisition and integration costs of $7.8 million in the quarter versus $519,000 in Q4 2020.
For full-year 2021, Quidel's total revenues increased 2 percent to $1.70 billion from $1.66 billion, ahead of the analysts' consensus estimate of $1.61 billion. The increase was due to incremental increases in COVID-19 rapid immunoassay product sales and increased sales of cardiometabolic immunoassay products partially offset by declines in revenue for molecular diagnostic solutions and specialized diagnostic solutions products.
"2021 marked another truly outstanding and transformational year for Quidel," Bryant said on the call. The firm saw its highest annual revenues in its history, and it also expects to see its highest quarterly revenues ever in Q1 2022.
Rapid immunoassay revenues increased 5 percent to $1.20 billion for the year from $1.14 billion in 2020, which Quidel said was driven by QuickVue sales — which increased by $563.2 million from 2020 to $611.5 million — partially offset by a 47 percent decline in Sofia revenue to $582.2 million in the year.
Cardiometabolic immunoassay revenues in 2021 increased 5 percent to $255.8 million from $242.9 million, while specialized diagnostics dipped 12 percent to $44.8 million from $50.9 million.
Molecular diagnostics revenue decreased 10 percent to $200.5 million from $223.0 million, primarily due to an anticipated decrease in revenue from Lyra COVID-19 products.
In 2021, Quidel entered retail and at-home testing markets with the QuickVue At-Home OTC COVID-19 test, along the way creating partnerships with CVS, Walgreens, McKesson, and the National Institutes of Health. The firm also secured a 12-month agreement with the US government worth over $500 million to supply QuickVue At-Home OTC COVID-19 tests, resolved ongoing litigation with Beckman Coulter, and opened a highly automated QuickVue manufacturing facility in Carlsbad, California.
Quidel's net income in 2021 was $704.2 million, or $16.43 per share, compared to net income of $810.3 million, or $18.60 per share, in 2020. On an adjusted basis, Quidel reported EPS of $17.72, beating analysts' average estimate of $16.12.
In 2021, Quidel's R&D expenses rose 14 percent year over year to $95.7 million from $84.3 million. Meanwhile, its SG&A expenses jumped 29 percent to $259.6 million from $200.5 million.
Quidel ended the year with $802.8 million in cash and cash equivalents.
The firm did not provide any revenue guidance for 2022.
In Friday morning trading on the Nasdaq, Quidel stock was up 13 percent to $99.94.