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Edited Transcript of GNMK earnings conference call or presentation 30-Apr-19 8:30pm GMT

Q1 2019 GenMark Diagnostics Inc Earnings Call

Pasadena May 28, 2019 (Thomson StreetEvents) -- Edited Transcript of GenMark Diagnostics Inc earnings conference call or presentation Tuesday, April 30, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hany Massarany

GenMark Diagnostics, Inc. - CEO, President & Director

* John Frederick Ek

GenMark Diagnostics, Inc. - CFO

* Scott Mendel

GenMark Diagnostics, Inc. - COO

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Conference Call Participants

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* Brian David Weinstein

William Blair & Company L.L.C., Research Division - Partner & Healthcare Analyst

* Chris Lin

Cowen and Company, LLC, Research Division - Research Associate

* David Joshua Saxon

Needham & Company, LLC, Research Division - Associate

* John Hsu

Raymond James & Associates, Inc., Research Division - Research Analyst

* Mark Anthony Massaro

Canaccord Genuity Limited, Research Division - Senior Analyst

* Ruizhi Qin

JP Morgan Chase & Co, Research Division - Analyst

* Leigh J. Salvo

Gilmartin Group LLC - MD

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to today's conference call to discuss GenMark Diagnostics' first quarter 2019 financial results. My name is Josh, and I will be your operator on this call. (Operator Instructions)

Please note that this call is being recorded today, Tuesday, April 30, 2019, at 1:30 p.m. Pacific Time and will be available on the Investors section of GenMark's website at www.genmarkdx.com.

I would now like to turn the meeting over to Leigh Salvo, Investor Relations.

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Leigh J. Salvo, Gilmartin Group LLC - MD [2]

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

Before we begin, I would like to inform you that certain statements made by GenMark during the course of this call may constitute forward-looking statements. Any statement about our expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements. For example, statements concerning our 2019 financial and operational guidance, the development, regulatory clearance, commercialization and features of new products, plans and objectives of management and market trends are all forward-looking statements. We believe these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future results expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in GenMark's filings with the SEC. GenMark assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events.

I'd now like to turn the conference call over to Hany Massarany, President and CEO of GenMark. Hany?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [3]

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Thank you, Leigh. Good afternoon, and thank you all for joining us. Joining me on our call today is our Chief Financial Officer, John Ek -- Johnny Ek. Sorry, Johnny. And our Chief Operating Officer, Scott Mendel.

On our last call, I highlighted our main priorities for 2019, which included driving ePlex placements, revenue growth and gross margin improvement while continuing to advance product innovation and operational excellence. And today, I'm pleased to report that in the first quarter, we've made important progress on all fronts.

I'd like to start the call with a brief review of our first quarter performance and recent highlights. Scott will then provide an update on our operational progress, and Johnny will conclude our prepared remarks with specific details on our Q1 financials and 2019 guidance. We'd then like to open the call for your questions.

Starting with our top line financial results. I'm very pleased with our strong start to 2019 primarily driven by the growing momentum of our ePlex system. Total revenue for the quarter was $21.5 million, of which ePlex revenue represented 73% or $15.7 million. Importantly, our commercial team delivered year-over-year growth in both total revenue and ePlex revenue even when compared to the exceptionally severe flu season we experienced in the first quarter of 2018. We also saw sequential ePlex revenue growth of 29% versus the fourth quarter of 2018. These results highlight the strong market adoption of our ePlex platform and Respiratory Pathogen Panel.

As Scott will cover in more detail shortly, we've also made good progress driving manufacturing efficiencies in the first quarter. As a result, we saw a meaningful improvement in ePlex gross margin, which, in turn, made an important contribution to our total first quarter gross margin of 27%. Based on current plans and ongoing activities, we remain confident that we can achieve our target of 60%-plus gross margin over the next 2 to 3 years.

On the ePlex commercialization front, we ended the first quarter of 2019 with a global installed base of 393 ePlex analyzers compared with 222 in Q1 of 2018, an increase of 72%. We continue to see strong market adoption of our ePlex system by some of the highest-volume testing labs as well as smaller hospitals that continue to realize the value of near-patient rapid molecular testing. Our Blood Culture ID Panels and differentiated approach to sepsis testing were important drivers of ePlex placements in the first quarter. We expect the vast majority of these and future placements to drive new ePlex test volumes to our company as most XT-8 conversions are now behind us.

Outside of the U.S., we continue to execute on our strategy of leveraging distributor partnerships to drive our international growth. In addition to our ongoing success in the core Central and Western European markets, we've made good progress broadening our reach into Eastern Europe and the Middle East. We've also recently commenced initiatives that could help us launch ePlex in Southeast Asia and parts of Latin America later this year.

Turning to menu expansion. We are delighted with the recent FDA clearance of our ePlex Blood Culture Identification Gram-Negative Panel. This officially marks the commercial availability in the U.S. market of our full suite of ePlex BCID panels, including the Gram-Negative, Gram-Positive and Fungal Pathogen Panels. These panels provide broad coverage of organisms and antibiotic resistance genes that can lead to sepsis. We're excited to bring to market the most comprehensive molecular test solution designed to improve the diagnosis and management of bloodstream infections while delivering economic and quality benefits to our customers. We believe that the potential market opportunity for our BCID panels could be as large as the available market for our ePlex Respiratory Pathogen Panel, which we estimate to be around $500 million globally. We expect BCID to be a key contributor to our 2019 performance, driving both ePlex placements and assay sales.

Looking ahead, we remain confident in our ability to substantially increase our share of the multiplex molecular testing market, which we believe has the potential to exceed $2.5 billion annually over the next 5 years. With respiratory disease and sepsis accounting for more than 70% of current test volumes, we believe our ePlex solution, with its highly differentiated panels, provides a tremendous runway for revenue growth and strongly positions us to realize this significant opportunity.

To best accomplish this, we must also continue to invest in world-class commercial leadership and execution. I've previously communicated our expectation to expand our U.S. sales force by more than 30% over the next couple of years, and today, I'm pleased to share that we've recently taken an important step in that direction. I'm delighted to announce that we have recruited an experienced sales executive to lead our U.S. sales force. Mike Harkins has joined our team as Senior Vice President of sales, bringing an impressive background in commercial leadership and execution. Prior to joining GenMark, Mike held several senior commercial leadership roles at Thermo Fisher Scientific and Life Technologies, where he led successful sales teams for nearly 15 years.

With the addition of Mike Harkins to our team, Mike Gleeson, who successfully led our U.S. sales force for almost 9 years, is now focused solely on his new role as Senior Vice President of Corporate and Strategic Accounts. In this role, Mike will establish and lead a team of commercial executives to build long-term partnerships across the most strategic customer segments, including integrated delivery networks, group purchasing organizations and other major accounts.

In summary, our team has delivered another quarter of strong performance across all business priorities, including ePlex placements, revenue growth and gross margin improvement as well as product innovation and operational excellence. I'm highly confident in the differentiated value proposition and competitive advantage of our ePlex system as the platform of choice in molecular testing. I'm also confident that our continued focused investment in commercial and operational excellence will further drive our results in 2019 and beyond.

At this point, I'll turn the call over to Scott for his operational update. Scott?

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Scott Mendel, GenMark Diagnostics, Inc. - COO [4]

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Thank you, Hany. It's been a productive start to 2019 as our integrated product development, manufacturing and quality organizations are focused on delivering the most innovative and highest-quality molecular diagnostic solutions to meet our customer needs and help improve patient outcomes.

From a product delivery perspective, we highlighted our key priorities on our last call, which include ePlex menu expansion as well as platform and software innovation. And of course, we're also very focused on driving manufacturing efficiency and ePlex gross margin improvements.

Our R&D, clinical and regulatory teams did an exceptional job collaborating with the FDA throughout the submission and review processes, and we are proud to have received clearances for all pathogens and resistance gene targets submitted across all 3 BCID panels. These teams are now focused on developing future ePlex panels and technology capabilities, with the GI panel being our top menu priority. We are delivering on our internal menu development time lines and look forward to sharing specific updates on our progress as we complete important milestones.

As expected, our efforts to improve ePlex manufacturing efficiency are delivering great results when compared to prior year as well as prior quarter. The impact of these improvements can already be seen in our first quarter gross margin, which improved meaningfully versus the first quarter 2018. This is very encouraging since this year, ePlex accounted for 73% of first quarter revenue compared with only 58% of first quarter 2018 revenue.

So what were the key drivers of the strong improvement? Exactly what we've been communicating: improved manufacturing yields of our ePlex cartridges driven by reducing scrap throughout the manufacturing process and at final QC. Beyond our focus on overall yield that improves efficiency across the entire manufacturing process, our teams are also driving specific initiatives to reduce both direct labor cost and direct material cost per cartridge.

We have established clear goals from the top of our organization down to our manufacturing technicians on the lines and are utilizing well-known manufacturing management tools and practices to monitor production output and identify opportunities to drive improvements.

Lastly, our ePlex overhead cost per cartridge continued to decrease as the investments that we've made to scale manufacturing capacity over the past couple of years are now being absorbed by higher production volumes. We continue to make strong progress towards achieving our ePlex yield and cost-reduction goals but still have additional room for improvement. This year, we're on track to achieving our full year gross margin goal of 28% to 30%, and we remain committed to achieving our target of 60-plus percent over the next 2 to 3 years. I look forward to providing additional updates as we continue to drive gross margin improvement.

I'd now like to turn the call over to Johnny for a review of our financial results for the first quarter.

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John Frederick Ek, GenMark Diagnostics, Inc. - CFO [5]

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Thank you, Scott. As previously mentioned, our first quarter 2019 total revenue was $21.5 million, up 4% versus the first quarter of 2018, with ePlex growing by 31% compared to the prior year. Sales to U.S. customers continue to account for the vast majority of our revenue.

The impact of this year's moderately extended flu season, combined with an increasing number of customers utilizing ePlex in routine clinical testing, drove the average annuity per ePlex placement in the first quarter to approximately $160,000. We remain confident that average annual revenue per ePlex placement will be in the $135,000 to $145,000 range, with the potential to increase in future years as our test menu expands.

First quarter gross profit was $5.9 million or 27% of revenue versus $4.2 million or 20% of revenue in the first quarter of 2018. Importantly, overall gross margin remained constant in the first quarter of 2019 compared with the fourth quarter of 2018 despite the mix shift to higher ePlex product sales relative to XT-8.

As Scott highlighted in his remarks, our focus on manufacturing improvement initiatives and efficiencies to drive higher ePlex gross margins is beginning to demonstrate positive results. Total operating expenses were $16.8 million for the quarter, representing an increase of $1.8 million compared to the first quarter of 2018. This increase was largely due to additional spend on R&D related to ePlex menu development. Our net loss per share for the first quarter of 2019 was $0.21, consistent with the first quarter of 2018.

Moving on to the balance sheet. We ended the quarter with $48.4 million in cash and investments. We used approximately $8.2 million of cash in operations during the first quarter offset by $11.1 million in cash that was provided by our recently expanded and restructured term loan. Cash used in operations increased by $2.1 million over the prior year due to the annual payment of short-term incentive compensation based upon achievement of our 2018 corporate objectives. Excluding this payment, our cash used in operations in the first quarter of 2019 was equal to that of the fourth quarter of 2018 at approximately $4.4 million.

Turning to 2019 expectations. We are reiterating our previous guidance, including total revenue in the range of $85 million to $90 million, additional ePlex placements of 170 to 190 analyzers and an average annuity per analyzer of $135,000 to $145,000. We continue to expect more than half of our placements and revenue will be in the second half of the year, which is common in the diagnostics industry and takes into account both the addition of new ePlex RP customers throughout the year and the BCID launch timing following the recent clearance of our third BCID panel.

Furthermore, we continue to anticipate 2019 gross margin to be in the 28% to 30% range, with operating expenses of approximately $65 million to $70 million and cash usage between $25 million and $30 million.

This concludes our prepared remarks. So at this time, Hany, Scott and I would like to open the call for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Brian Weinstein of William Blair.

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Brian David Weinstein, William Blair & Company L.L.C., Research Division - Partner & Healthcare Analyst [2]

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Just starting out with the BCID product. Can you be a little bit more specific about what you're seeing from customers, what you're hearing from them and how it's impacting the funnel of accounts that you guys are looking to convert at this point?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [3]

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Yes. Thank you, Brian. This is Hany. Our customers are very interested in our BCID panels and our approach to sepsis. Certainly, BCID played an important role in first quarter placements and also made a contribution to revenues, although we expect the bigger impact to come in the third and fourth quarter as we implement more and more customers now that we have the full suite of panels, the 3 panels, and we can bring more customers to routine testing to go live on this product over the next few quarters.

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Brian David Weinstein, William Blair & Company L.L.C., Research Division - Partner & Healthcare Analyst [4]

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Scott, a question for you. Now that you've been in the new role for a little while, can you just talk a little bit about what you've discovered that may have surprised you? Obviously, the gross margins are moving in the right direction. But can you talk about anything that was maybe different than what you kind of expected now that you're able to kind of fully get under the hood? And can you just give us any other details about some of the improvements that you guys are making on the gross margin side?

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Scott Mendel, GenMark Diagnostics, Inc. - COO [5]

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Sure, Brian. Really nothing surprising, nothing that I wasn't aware of before. I was pretty much involved in operations and product delivery overall prior to taking this new role. We have a very strong team. They've got project plans laid out that are multiyear project plans. And really, the focus has been, Brian, executing against those project plans. The team did a really nice job delivering good yield, especially from an RP perspective. That was the majority, obviously, of our business in the first quarter. So progress is as expected. No big surprises, and the team is executing its plans.

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Brian David Weinstein, William Blair & Company L.L.C., Research Division - Partner & Healthcare Analyst [6]

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Okay. And then last one from me. On the R&D spend this year, can you be a little -- can you guys be a little more specific on the projects that you guys are pursuing? Obviously, GI is sort of next up. But can you talk about projects beyond that? And can you give us some update as to when we can get -- when you expect to give us an update on GI specifically?

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Scott Mendel, GenMark Diagnostics, Inc. - COO [7]

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Sure. I'll start. Hany can jump in if I miss anything. So as you mentioned, GI is our top priority. We'll continue to give updates as we hit these important milestones. And so that's our focus, the team's focus. But beyond GI, from an R&D perspective, we have to remember there's several other areas that we're investing in and that are important to the ePlex story, including future technology development. So we're constantly looking to iterate and innovate on our ePlex platform that would help improve future assays and panels. We also invest heavily in software, Brian. Software has been an important part of our value proposition. So we continue to invest in software that helps provide great usability and user interface for our customers. And then lastly, from future menu, although we haven't disclosed specific ones that we're focused on, you'll remember we are focused on infectious disease as an overall category with specific interest in things like meningitis, encephalitis, skin and soft tissue, bone and joint infections, et cetera.

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Operator [8]

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And our next question comes from Mark Massaro of Canaccord Genuity.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [9]

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Really clean quarter, I guess. My first question is on -- can you give us a sense on the time it takes to win a new customer on the BCID? And then can you give us a sense for your expectations around validations and the time it takes to go live for a customer to start -- or for you to start generating revenue on a BCID customer?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [10]

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Yes. Thanks for the question, Mark. Look, it's a little bit early to give a specific answer in relation to BCID since we have been busy with the semi-extended flu season in the first quarter. And now that we have all 3 BCID panels released for sale in the U.S., we're gearing up with our commercial organization to really drive that over the next few quarters. But I would say, in general, as you know, we've been talking with our customers about BCID for some time now. And so we have a pretty good funnel of opportunities that we've already been sort of cultivating over the past several quarters. And we expect many of those customers to sort of move ahead with their validations and implementations of BCID over the next few months. However, we are also expecting that BCID will take a little bit longer than RP for validation and implementation for routine use in the lab. Since it's not as well penetrated, BCID is relatively new to diagnostics in terms of syndromic molecular panels compared to RP that's been around for many, many years. And so over time, we expect that to speed up a bit and catch up with RP. But I would say if you sort of push me for a number, I would say it could take up to -- I mean from 3 to 6 months to bring a customer from conventional blood culture techniques over to routine use of molecular panels in the sepsis area.

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Mark Anthony Massaro, Canaccord Genuity Limited, Research Division - Senior Analyst [11]

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Great. And my last question. I guess congrats on the hire of Mike Harkins. That frees up Michael Gleeson to focus on Corporate and Strategic Accounts. Can you just give us a sense for how penetrated you think you are in some of the big IDN networks and GPOs? Obviously, it's a big opportunity. I'm just curious how much of the opportunity you think you've got so far and what do you think is left.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [12]

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Well, Mark, we've obviously been working very closely with some of the biggest sort of hospital groups and IDNs and also big national reference labs in the U.S. market. And without naming any names, I mean you know that we have some great relationships and business with big networks both on the East and West Coast as well as some of the biggest national reference labs. However, I think that we have a significant opportunity ahead of us. And now that we have a more comprehensive solution with the BCID panels, we're able to more effectively sell to and develop agreements and contracts with some of the big group purchasing organizations around the country as well as some of the IDNs as well. So we see this as a significant opportunity for our company moving forward, and we're committed to investing and building a team under Mike Gleeson to really drive this opportunity across the board.

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Operator [13]

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And our next question comes from Tycho Peterson of JPMorgan.

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Ruizhi Qin, JP Morgan Chase & Co, Research Division - Analyst [14]

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This is Julia on for Tycho. So first off, maybe regarding your guidance, I was wondering from your -- based on your visibility into the current pipeline, do you see more upside to your guidance in terms of revenue and placement now that you have full approval of all 3 BCID panels? I recall you previously said that some customers were maybe holding back until they get all 3 panels approved. So just wondering if you see any upside since the approval of the Gram-Negative Panel.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [15]

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Well, thank you for the question, Julia. Of course, we will push hard to deliver the best results we can. But the clearance of BCID and the assumptions that we've made in our internal models and the guideline -- the guidelines we provided are sort of consistent with what we're seeing and what we're expecting. So at this stage, we're not expecting any more than what we've guided to.

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Ruizhi Qin, JP Morgan Chase & Co, Research Division - Analyst [16]

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Okay. And then regarding the current pipeline for BCID-driven customers, could you give us a rough sense of how many will be using both Respiratory and BCID versus how many will be just doing BCID alone?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [17]

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Yes, sure. Look, I want to start by saying that we do not intend to sort of break up placements and volumes and revenues by panel. However, of course, as you know, the vast majority of placements now are Respiratory-only placements since this is the product that we've had on market for some time now. Many of our RP -- ePlex RP customers are also interested in BCID and have been waiting for it. And there will be some customers that are interested in BCID but not necessarily immediately in RP if they're already, for example, using an alternative method. We think that, over time, maybe by the end of this year, somewhere like 20% to 30% of our installed base will be running all panels, but that's something that we have to work through over the next few quarters.

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Ruizhi Qin, JP Morgan Chase & Co, Research Division - Analyst [18]

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Okay. That's very helpful. And then lastly, I know you expect BCID sort of panel penetration to ramp faster than Respiratory. So when do you think we can reach that sort of 70% to 80% penetration for BCID versus the 20% to 30% currently?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [19]

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I think it will take less time than what it did with RP. I mean it took many years. Maybe, I don't know, 7, 8, 9, 10 years with Respiratory. But I believe that there's a lot more interest and sort of momentum behind the syndromic approach to sepsis testing given the significant advantages that the panels offer with speed and the sort of the urgency that's required to act on septic patients. And so we think that it will be a faster adoption or a steeper adoption curve, if you like. But I can't sort of put a number on it at this stage.

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Operator [20]

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And our next question comes from Doug Schenkel of Cowen.

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Chris Lin, Cowen and Company, LLC, Research Division - Research Associate [21]

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This is Chris on for Doug today. Just to start, maybe based on what you reported, it seems like ePlex gross margin was around 15% in the quarter. Is that correct? And then are there any changes to your gross margin cadence expectations for the year based on initial adoption of BCID assays?

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Scott Mendel, GenMark Diagnostics, Inc. - COO [22]

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Yes. This is Scott. I'll answer that question. Although we don't split it out specifically, you're correct. If you can back into ePlex gross margins, they're in the mid-teens in the first quarter. So that's significant improvement over fourth quarter and very significant improvement over first quarter of last year. We did talk about this on prior calls that we expect to exit this year around the 30% gross margin for ePlex standalone. We're on path to deliver that. And I think it'll be a pretty regular cadence between here and the end of the year to get to that 30% range.

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Chris Lin, Cowen and Company, LLC, Research Division - Research Associate [23]

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Okay. And then I know it's really early, but could you comment on the initial mix of BCID customers? And specifically, do your existing customers constitute the majority of BCID adoptors? Or do you expect -- or are you seeing a healthy amount of new-to-ePlex customers as well?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [24]

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Yes. I think it's a little bit early to comment on this other than to sort of repeat what I've already said. Many of our existing ePlex customers made the decision to go with ePlex, taking into account future menu, which at the time, obviously, included BCID. So while they brought ePlex into their labs to do Respiratory, they took into account that we would have BCID, and that would -- and that was an important factor for their consideration. So we certainly know which of those customers that will be going to sort of now start implementing BCID. But equally, there's a lot of interest in BCID across the board even from non-ePlex customers. So I mean again, at this stage, it's a little bit early to sort of give you any more quantitative answers on -- in relation to this, and maybe in the future, we can comment with a lot more information behind that.

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Chris Lin, Cowen and Company, LLC, Research Division - Research Associate [25]

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Okay. And then for my last question, can you just provide any additional details on GI panel development beyond what you shared in your prepared remarks? And really, I'm hoping to hear anything on -- updates on clinical trial start and launch timing.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [26]

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No. We can't provide any additional information other than to say it is a priority for us. We spent a little bit of time understanding the situation competitively, reimbursement-wise, clinical utility-wise and so on and so forth with a lot of input from voice of customers and key opinion leaders. We have a product that's already well and truly in development. It's a big focus for our company, and we will communicate information as appropriate in the future in relation to time lines and milestones.

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Operator [27]

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Our next question comes from Mike Matson of Needham & Company.

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David Joshua Saxon, Needham & Company, LLC, Research Division - Associate [28]

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It's David on for Mike. First, just wondering if you can talk about the breakdown between reagent rentals versus capital sales, what your expectations are for the rest of the year and kind of how the competitive landscape might impact that breakdown.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [29]

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Yes. The mix has really remained relatively constant over the past few quarters and what we expect to continue for the rest of this year. We're seeing more reagent rentals than capital placements. And the mix is somewhere between 20% to 30% capital and the rest, reagent rentals. And that's what we're modeling and expecting for the rest of the year.

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David Joshua Saxon, Needham & Company, LLC, Research Division - Associate [30]

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Okay. And then you mentioned expanding the U.S. sales force by about 30%. Can you kind of give us a sense on what inning you are in and kind of what the, I guess, average new sales rep profile is? Or are these mainly competitive reps?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [31]

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I'm sorry. I missed the first part of your question. You asked -- you're asking about sales force expansion in the U.S. And what specifically do you want me to comment on?

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David Joshua Saxon, Needham & Company, LLC, Research Division - Associate [32]

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Yes. Just kind of where you are in the 30%...

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [33]

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Oh, okay. Yes. Well, we have approximately 30 or so people -- commercial people in the U.S. who are driving revenues and selling our products in the U.S. market, not including, of course, technical people in the field that are doing a great job supporting our customers, helping with installations and so on and so forth. And so that's the number we have, and that's the number that we're expecting to increase over time with the addition of Mike Harkins to focus on that and to drive sales excellence in the U.S. as we scale up and expand our sales force over the next couple of years. That's sort of the path that we are taking. It takes up to 6 months for a new sales executive or a sales representative to come up to speed and be fully productive, especially if they're coming from a different area than diagnostics. We tend to hire experienced people in diagnostics with a good track record of success, but sometimes, you don't find those people easily. So we sort of allow a couple of quarters for a sales rep to come up to speed. And like I said, over the next couple of years, we think we'll add another 10 or so people. So I hope that answers the question.

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Operator [34]

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And our next question comes from John Hsu of Raymond James.

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John Hsu, Raymond James & Associates, Inc., Research Division - Research Analyst [35]

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First question, I think you said recently that $5 million to $6 million as a way to think about the BCID impact in 2019 is a reasonable expectation. Just kind of given the focus of questions on the call, I just want to make sure that you're still -- that that's still in line with your thinking as far as what's a reasonable expectation for the BCID impact for this year.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [36]

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Yes. We're not guiding by assay or by panel, but that's about the right sort of ballpark to be in.

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John Hsu, Raymond James & Associates, Inc., Research Division - Research Analyst [37]

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Okay. Great. And then obviously, the 1Q had a tough comp from a record flu season last year. However, this year is actually record in terms of the length of the flu season. And so with that in mind, how should we think about the longer flu season, the 2Q factoring into maybe ePlex placements and utilization? Any thoughts of the pacing of that as we move throughout the year?

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [38]

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No. We don't think that, that's going to change anything materially, and we believe that the guidance that we've provided takes that into account.

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John Hsu, Raymond James & Associates, Inc., Research Division - Research Analyst [39]

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Okay. Great. And then last one, just with -- obviously, there's 2 pretty established competitors, and then there's a couple more that are looking to enter the U.S. specifically in the near term here. So just wanted to kind of take your temperature as far as how well you think you're positioned from a competitive standpoint.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [40]

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Yes. Look, I think as I've said before, we welcome all of the new market entrants. We believe that this is a significant area of testing here. This multiplex molecular syndromic approach to diagnostics is very important. Of course, for now, the focus is on infectious disease, at least for our company. But we see this applying to many other disease states and bringing a lot of value to patients and also a lot of value financially, economically, et cetera, to health care providers as well in terms of therapy decisions and length of stay and so on and so forth. We feel very confident in our competitive position, our competitive advantage based on the value proposition that ePlex provides in terms of its functionality, integration with the lab information systems and sort of providing rapid, actionable results that really enable physicians to make the right decisions very fast. And as you know, we're dealing with very sick patients, where action needs to be taken quickly. We are not as familiar with all of the new entrants, and some of them have different capabilities in terms of how many targets that they can cover, like, true multiplexing versus lower-plex systems, for example. However, we think it's all good. It's all good to bring more visibility and have more good companies working to develop this market over the next few years.

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Operator [41]

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And I am not showing any further questions at this time. I would now like to turn the call back over to Hany Massarany for any further remarks.

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Hany Massarany, GenMark Diagnostics, Inc. - CEO, President & Director [42]

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Well, thank you very much for your time this afternoon, everyone, and for your continued support. I look forward to updating you on our progress in the coming quarters. And if anyone is planning to be in Savannah for CVS, for the Clinical Virology Symposium, come by our booth. I'll be there on Sunday, and we'd be glad to answer any other questions that you might have. Have a good afternoon, everyone.

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Operator [43]

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Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.