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GenMark Diagnostics Inc (GNMK) Q1 2019 Earnings Call Transcript

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GenMark Diagnostics Inc  (NASDAQ: GNMK)
Q1 2019 Earnings Call
April 30, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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'll be your operator on this call. After the presentation, we will conduct a question and answer session. (Operator Instructions) Please note that this call is being recorded today, Tuesday, April 30th, 2019 at 1:30 PM Pacific Time and will be available on the Investor section of GenMark's website at www.genmarkdx.com.

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

Leigh Salvo -- Investor Relations

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 statements 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?

Hany Massarany -- President and Chief Executive Officer

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 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 teams 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 two to three 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 this 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 US, 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 a place 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 US 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 five 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. As previously communicated, our expectation to expand our US salesforce 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 US salesforce. 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 US salesforce for almost nine 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?

Scott Mendel -- Chief Operating Officer

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 three 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 timelines 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 toward 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 over the next two to three 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.

Johnny Ek -- Chief Financial Officer

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 US 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 for 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 onto 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 and 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.

Questions and Answers:

Operator

Thank you, ladies and gentlemen (Operator Instruction) Our first question comes from Brian Weinstein of William Blair. You may proceed with your question.

Brian Weinstein -- William Blair -- Analyst

Hey, guys, thanks for taking the questions. 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?

Hany Massarany -- President and Chief Executive Officer

Yes. Thank you, Brian. This is Hany. Our customers are very interested in 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 three panels and we can bring more customers to routine testing to go live on these products over the next few quarters.

Brian Weinstein -- William Blair -- Analyst

Scott, 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 you talked 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 a any other details about some of the -- some of the improvements that you guys are making on the gross margin side?

Scott Mendel -- Chief Operating Officer

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 multi-year 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 IP perspective that was the majority obviously of our business in the first quarter, so progresses as expected. No big surprises and the team is executing its plans.

Brian Weinstein -- William Blair -- Analyst

Okay. The last one for me, on the R&D spend this year, can you be a little -- can you guys be more specific on -- 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 it, when you expect to give us an update on GI specifically? Thanks.

Scott Mendel -- Chief Operating Officer

Sure, I'll start. Hany, can jump in if I missed 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 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 developments, 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 can 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 diseases an overall category with specific interest in things like Meningitis, Encephalitis, skin and soft tissue, bone and joint infections, etcetera.

Brian Weinstein -- William Blair -- Analyst

Thanks guys.

Operator

Thank you. And our next question comes from Mark Massaro of Canaccord Genuity. You may proceed with your question.

Mark Massaro -- Canaccord Genuity -- Analyst

Hey guys, thanks for the questions. Really, clean quarter. I guess, my first question is on you know 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.

Hany Massarany -- President and Chief Executive Officer

Yeah. 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 three BCID panels released for sale in the US, we're gearing up with our commercial organization to really drive that over the next few quarters. But I would say in general and 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, the 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 three to six months to bring a customer from conventional Blood Culture techniques over to routine use of molecular panels in the sepsis area.

Mark Massaro -- Canaccord Genuity -- Analyst

Great. And my last question, I guess, congrats on the hire of Mike Harkins, and 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 what?

Hany Massarany -- President and Chief Executive Officer

Well, you know 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 US 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 panel, 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.

Mark Massaro -- Canaccord Genuity -- Analyst

Great. Thanks so much guys.

Hany Massarany -- President and Chief Executive Officer

Very good.

Operator

Thank you. And our next question comes from Tycho Peterson of JPMorgan. You may proceed with your question.

Julia Qin -- JPMorgan -- Analyst

Hey, thanks. 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, not that you have full approval of all three BCID panels. I recall you previously said that some customers were maybe holding back until they get all three panels approved. So just wondering if you see any upside since the approval of the Gram-Negative panel.

Hany Massarany -- President and Chief Executive Officer

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.

Julia Qin -- JPMorgan -- Analyst

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?

Hany Massarany -- President and Chief Executive Officer

Yeah sure. Look I want to start by saying that we do not intend to sort of break up you know 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 sometime 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'll have to work through over the next few quarters.

Julia Qin -- JPMorgan -- Analyst

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

Hany Massarany -- President and Chief Executive Officer

I think it'll take less time than what it did with RP and 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 the 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.

Julia Qin -- JPMorgan -- Analyst

Okay. That's all. Thank you.

Hany Massarany -- President and Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Doug Schenkel of Cowan. You may proceed with your question.

Chris Shibutani -- Cowen -- Analyst

Hey. This is Chris on for Doug today. Thanks for taking my question. 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?

Scott Mendel -- Chief Operating Officer

Yeah. This is Scott, I'll answer that question. Although, we don't put 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 30% gross margin for ePlex stand-alone, 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.

Chris Shibutani -- Cowen -- Analyst

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

Hany Massarany -- President and Chief Executive Officer

Yeah. 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 was -- 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.

Chris Shibutani -- Cowen -- Analyst

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 some of the trial start and launch timing. Thank you.

Hany Massarany -- President and Chief Executive Officer

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 information to timelines and milestones.

Chris Shibutani -- Cowen -- Analyst

Thanks for taking my questions.

Hany Massarany -- President and Chief Executive Officer

Thank you so much.

Operator

Thank you. Our next question comes from Mike Matson of Needham & Company. You may proceed with your question.

David Townes -- Needham and Company -- Analyst

Hi, good afternoon. It's David on for Mike. Thanks for taking the questions. First, just wondering if you can talk about the breakdown between, region 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?

Hany Massarany -- President and Chief Executive Officer

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 rental. And that's what we're modeling and expecting for the rest of the year.

David Townes -- Needham and Company -- Analyst

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

Hany Massarany -- President and Chief Executive Officer

I'm sorry, I missed the first part of your question, you asked, you're asking about salesforce expansion in the US and what specifically do you want me to comment on.

David Townes -- Needham and Company -- Analyst

Yes, just kind of where you are in 30% --.

Hany Massarany -- President and Chief Executive Officer

Yes, look we have approximately 30 or so people commercial people in the US who are driving revenues and selling our product in the US 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 US as we scale up and expand our salesforce over the next couple of years that's sort of the path that we're taking. It takes up to six months for an use as 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.

David Townes -- Needham and Company -- Analyst

Yeah. Thank you, very much.

Operator

Thank you. And our next question comes from John Hsu, Raymond James. You may proceed with your question.

John Hsu -- Raymond James -- Analyst

Thank you. 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 -- that's still in line with your thinking as far as, what's a reasonable expectation for the BCID impact for this year?

Hany Massarany -- President and Chief Executive Officer

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

John Hsu -- Raymond James -- Analyst

Okay great. And then obviously the 1Q had a tough comp from a record flu season last year. However, this year it 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?

Hany Massarany -- President and Chief Executive Officer

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

John Hsu -- Raymond James -- Analyst

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

Hany Massarany -- President and Chief Executive Officer

Yeah. 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 healthcare 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 lab information systems and sort of providing rapid actionable results that really enables 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're 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 ePlex systems for example. However we think it's all good, it's all good to bring more visibility and to have more good companies working to develop this market over the next few years.

John Hsu -- Raymond James -- Analyst

Okay great. Thank you so much.

Hany Massarany -- President and Chief Executive Officer

Thank you very much.

Operator

Thank you. And I'm 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.

Hany Massarany -- President and Chief Executive Officer

All right. 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.

Operator

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.

Duration: 40 minutes

Call participants:

Leigh Salvo -- Investor Relations

Hany Massarany -- President and Chief Executive Officer

Scott Mendel -- Chief Operating Officer

Johnny Ek -- Chief Financial Officer

Brian Weinstein -- William Blair -- Analyst

Mark Massaro -- Canaccord Genuity -- Analyst

Julia Qin -- JPMorgan -- Analyst

Chris Shibutani -- Cowen -- Analyst

David Townes -- Needham and Company -- Analyst

John Hsu -- Raymond James -- Analyst

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