Quotient (QTNT) Q2 2019 Earnings Conference Call Transcript

Quotient (QTNT)
Q2 2019 Earnings Conference Call
Nov. 5, 2018 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Quotient Limited second-quarter fiscal year 2019 financial results conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Christopher Lindop, chief financial officer of Quotient Limited. Thank you, sir. You may begin.

Chris Lindop -- Chief Financial Officer

Thank you, Melissa, and good morning, everyone, and welcome to Quotient's earnings conference call for our second fiscal quarter ended September 30, 2018. Joining me today is Franz Walt, chief executive officer of Quotient. Today's conference call is being broadcast live through an audio webcast, and a replay of the conference call will be available later today at www.quotientbd.com. During this call, Quotient will be making forward-looking statements, including guidance and projections as to future operating results.

Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in Quotient's filings with the U.S. Securities and Exchange Commission as well as in this morning's release. The forward-looking statements, including guidance and projections, provided during this call are valid only as of today's date, November 5, 2018, and Quotient assumes no liability or obligation to publicly update these forward-looking statements.

And with that, I'd like to turn the call over to Quotient's chief executive officer, Franz Walt.

Franz Walt -- Chief Executive Officer

Thanks, Chris. It has been a little over seven months since I stepped in as CEO of our company. I'm happy to say that so far, the results and milestones achieved have been in line with the expectations we set out at the beginning of that period. And talking of achievements in the first half of the fiscal year, I would be remiss if I didn't acknowledge the incredible strides which have been made in the core liquid reagent portion of our business.

We took on the consolidation of three existing sites into our newly constructed Allan Robb Campus, short ARC, while also moving the complex and highly regulated manufacturing product business. There is a fourth site to be moved, and we expect to complete this all well before the end of the fiscal year. Key prerequisites for our manufacturing move, the facility audits by the European and then by the U.S. regulators.

Firstly, we had the UL audit covering regulations for EU, Canada, Brazil, and specific U.S. products, and we received the ISO 13485 and MDSAP certificates on October 2. Secondly, we successfully completed the FDA biologics audit and received the full FDA licensure October 26. As importantly, the reagent team has been able to continue to achieve strong double-digit growth in both the direct and the OEM business lines over the first half of the year even as they managed the ongoing transition from our original location to ARC.

In addition, in the last 12 months, we have launched eight new blood bank reagents, including the first FDA-approved monoclonal anti-Fyb and anti-Cw, enriching our reagent portfolio further. In total, we have now CE marked 72 liquid reagents and have 63 licensed by the FDA. So over the years, we have developed good experience responding to the requirements of our regulators. Now turning to MosaiQ, our new and disruptive technology designed to advance the transfusion diagnostics market.

We have also made great progress there. As I have often said, what our team had achieved before I arrived was incredible. But my initial evaluation was that in order to be successful at reliably hitting goals, we had to narrow our focus and move forward sequentially to better align our goal setting with precise and resources of our organization. Well, we have done that.

And since making those changes, we have been able to meet our goals more reliably and expect the time frames we have established both for ourselves and for the external stakeholders. I am more confident than ever that we have the subject matter expertise we need to be successful in developing microarray-based diagnostic solutions. We just need to organize ourselves a little bit simply to ensure success. I believe that the experience I have in leading development and commercialization complements the skills already present in the team.

So let me review the progress we have made on MosaiQ in the last seven months. Within the first two months, we wrapped up the verification and validation, or V&V, study for the initial IH microarray and, in mid-May, began the European field trials, putting MosaiQ in the hands of three potential customers for the very first time. This milestone was followed by the publication in the mid-June of successful head-to-head data from that field trial. Later in June, we issued additional 12% senior secured notes as planned.

And at the end of July, our funding was supplemented when several of our key investors exercised warrants and invested a further $46.6 million. This funding event has left us with a strong balance sheet, the strongest we have ever had in the history of the company. Fast forward another two months to late September. We were able to file the CE mark submission for an initial IH microarray.

This was a tremendous achievement for the team, making their culmination of literally years of work, which was documented in great detail in the technical dossier, which was part of the CE mark submission. And very importantly, this milestone was achieved in line with the internal and external timelines that they established when I took over as CEO. While I'm very pleased with our performance over the last seven months, we should not lose sight of what the team achieved before I arrived. They brought forward three major development projects: the instrument, the manufacturing system and the initial microarray in parallel.

This, of course, added to the complexity of their task with interdependencies resulting from a change in one part of the system impacting other elements, causing variability, resulting in some delays. One of the other key achievement over the last seven months is that we have in effect completed the development of the instrument and manufacturing system, thereby reducing the potential development variability going forward. The instrument is self-certified for the European market. And as of last month, we achieved the conditions to permit us to CE mark the MosaiQ instrument device.

The microarray manufacturing system is subject to audit and ISO certification by our EU regulator. And today, I'm very pleased to report the achievement of another important milestone, MosaiQ milestone, the completion of the ISO 13485 audit of the MosaiQ manufacturing facility in Eysins, Switzerland on October 5 without any findings. So the certification can be expected within 90 days thereafter. The field data plus the ISO 13485 certification of our manufacturing facility were maybe the two most important hurdles toward the CE mark of the first microarray.

We, therefore, reconfirm that we are optimistic that we can start commercialization in the first half of calendar year 2019, as previously communicated. It is a real tribute to the diligence of the team that worked so hard for so long to design, implement and operate what is a very sophisticated manufacturing facility together with its integrated quality system. Now, from a development perspective, it is really all about adding microarray content while leveraging our market-ready device and manufacturing system. And with respect to menu expansion, the V&V study for our initial serological disease panel is ongoing, and we remain on track to provide an update later this month.

We have also done some important work in the past several months to address the question where else in diagnostics could the MosaiQ platform be deployed. With its cost-effective, automated, multi-modality testing capability, where could it be introduced with competitive advantage in a much larger clinical diagnostic market? Blood transfusion diagnostics is a very attractive market for a variety of reasons. If you just consider the portion of the clinical laboratory market, which relies on immunoassays and molecular techniques, it is more than 10 times the size of the transfusion diagnostics opportunity. And these segments of the broader market are among the most profitable and fastest-growing ones.

Early December, we commissioned a study, which has yielded insights into existing -- exciting long-term opportunities for MosaiQ beyond transfusion diagnostics, and we will be prepared to share those findings in the near future. We also funded plans to move forward the molecular disease testing platform with the development of an industrial design for our novel sample amplification module, which we hope to put in the hands of a third-party researcher for further study and evaluation next year. Our goal is to generate and publish independent clinical results using our revolutionary molecular disease screening technique. So while the last several months have certainly been eventful, the next six to nine months are also shaping up to be very exciting time for Quotient.

In the near term, the key focus is on completing the V&V study for our initial SDS microarray and then advancing it to European field trials. This is important because once completed, it will demonstrate our microarray technology operating in the hands of a customer for serological disease testing, a key element for both transfusion diagnostics and for the larger, non-transfusion diagnostics opportunity. Once the field trial phase of the initial SDS microarray is complete, we can move to the CE mark submission. This dossier, when filed, will leverage the CE mark MosaiQ device in the ISO-certified microarray manufacturing system.

And lastly, we're trying to successfully deliver V&V data for our expanded IH microarray, which will encompass up to an additional 14 clinical-relevant antigens and, with that, 27 IH tests in total in the first half of 2019. This menu expansion will commit MosaiQ to represent a viable alternative to the current combination of high-throughput devices with a limited menu and low-throughput or manual techniques used today, making MosaiQ a must-have technology in the donor transfusion diagnostic market and, I repeat myself here, able to also replace a lot of the manual work. During this period, we also hope to have positive news on our initial microarray CE mark submission, which, when received, will commit us to compete in tenders for device placement and evaluation in calendar year 2019 as we will bring forward our expanded microarray menu for antigen identification and the initial serological disease screening microarray. So with that, let me hand over the call to Chris Lindop, our chief financial officer. Chris?

Chris Lindop -- Chief Financial Officer

Thanks, Franz. Well, I'm happy to report that second-quarter product sales were $6.2 million, an increase of 6% from last year's second quarter and exceeding our original guidance range of $5.7 million to $6 million. In the first half, product sales were $14.1 million, an increase of 16% from EUR 12.1 million in the first half of the last fiscal year. The increase in product sales is attributable to both OEM customers and to direct and distribution sales.

The prior year's first six months' total revenue included other revenue of $600,000 earned from the approval for sale in the U.S. of certain rare antisera developed for our largest OEM customer, which did not recur in the current year. In the quarter, OEM sales of $4.4 million grew 3% year over year and represented 70% of product sales, while direct customer and distributor sales of $1.9 million increased 12% year over year and represented 30% of product sales. Product sales from standing orders in the quarter were 70%, versus 68% last year.

For the first half of the fiscal year, OEM sales grew 14% and direct sales grew 22%. Shifts in the timing of red cell reagent ordering can cause quarter-to-quarter variability year over year, which tend to average out over longer comparative periods. Gross profit on product sales of $1.7 million declined from $3.1 million last year. In the quarter, gross margin was adversely impacted by incremental costs of approximately $1.6 million, of which $300,000 represents the rent due under the sale and leaseback of the core real estate assets of ARC, and $700,000 represents noncash expenses associated with bringing ARC online.

The company also incurred $200,000 of duplicate facility costs in the second quarter related to its existing manufacturing site. As a result, gross margin on product sales was 27.1%, compared to 52.9% last year. The relocation to ARC is an investment in future growth and efficiency opportunities. But in the short term, gross margins will be impacted by the higher cost base of this facility, offset in part by contracted price increases, which will occur in the future.

The transition of manufacturing to the ARC is expected to be complete well before the end of the fiscal year. In the second quarter, the operating loss was $21.1 million, compared with $18.1 million last year. Operating expenses increased $1.6 million from last year to $22.8 million. The majority of the increase relates to general and administrative expenses and includes greater personnel-related costs, incremental costs arising from the move to and validation of ARC, as well as the funding of external initiatives for improved communications and strategic expansion.

Stock compensation expense was $1.2 million in the second quarter, unchanged from the prior year. In the second quarter, net other expense was $6.3 million, compared with $3.6 million in the same quarter last year. Net other expense consisted of $5.8 million of interest expense and $500,000 of foreign exchange loss arising from the revaluation of monetary assets and liabilities denominated in foreign currencies. Interest expense payable currently in cash was $3.6 million, and that increased $1.1 million over the prior year as a result of incremental borrowings at the end of the first quarter.

Accrued noncash interest expense related to an estimated future royalty payable to the note holders also increased as a result of incremental future royalties under the senior note facility following the June note issuance. Overall, our net loss for the quarter was $27.4 million, or $0.53 per ordinary share. Moving to the balance sheet. Following a funding through the exercise of warrants in July, cash and other short-term investments were $68.5 million on September 30 while senior notes outstanding were $112.8 million, net of an offsetting long-term cash reserve account of $7.2 million.

On September 30, accounts receivable totaling -- had totaled $2.5 million and inventory totaled $15.3 million. Capital expenditures totaled $200,000 in the second quarter. Moving to guidance. We are increasing previously provided guidance ranges for product revenues to between $25.5 million and $26.5 million.

Our estimated operating loss of $60 million to $70 million has been revised to $65 million to $75 million to include increased investments in our planned development goals. Estimated operating losses are now estimated to include approximately $18 million of noncash expenses such as depreciation, amortization, and stock compensation. Capital expenditures are still expected to be between $5 million and $8 million for the full fiscal year. Other revenue estimates include $900,000 of product development revenue that is contingent upon achieving -- excuse me, achievement of regulatory approval for certain products under development.

As such, the receipt of these milestone payments involves risks and uncertainties. For our fiscal third quarter, we expect product sales in the range of $6 million to $6.5 million, compared with $5.7 million in the third quarter of fiscal 2018. Now let me turn the call back to Franz.

Franz Walt -- Chief Executive Officer

Thanks, Chris. Over the next year, our regulatory and commercial milestones include moving into -- moving the initial serological disease microarray into its European field trials, committing us to file promptly for European regulatory approval in 2019. This represents a major proof point for the viability of our strategy to incorporate disease screening into our solution set and opens up many other large markets to the MosaiQ technology beyond transfusion diagnostics. Many expansion plans also include our second IH microarray, which we continue to plan to move to U.S. field trials in the first half of '19 and to a submission for EU CE mark in the second half of 2019. The combination in Europe for an expanded IH microarray with the initial FDA's microarray should give us a very attractive menu by end of 2019, which we intend to expand our offering then to our installed base and to attract new customers to the MosaiQ platform in 2020 and beyond. In addition, we plan on bringing forward further proof points for our molecular disease screening capabilities and for other disease panel opportunities. So to sum all of this up, we have an exciting agenda supported by a strong balance sheet and a commitment to fund our company through successful commercialization of the transformational products in the pipeline, which I have outlined today.

In 12 months from now, we expect to have further de-risked the MosaiQ vision significantly, having addressed the question, firstly, does it work; secondly, will it get approved; and thirdly, will anyone buy it, even as we expand the menu and open up exciting new market areas. MosaiQ has been designed to advance transfusion diagnostics while, at the same time, providing cost savings to the healthcare system. The advantages it has to offer in transfusion diagnostics and beyond are very compelling and include: a single unified testing platform for immunohematology, serological disease screening and, ultimately, for molecular testing, simplifying testing processes and consumable management; low-cost microarray design permitting affordable multiplexing; significant reduction in sample testing volume requirements; significant savings in labor, handling and consumable costs; and streamlined and automated testing workflow. So we are more convinced than ever that the attributes which will make it successful in the transfusion diagnostic market have the potential to offer major efficiencies and lower costs for testing laboratories worldwide.

The initial addressable target market for MosaiQ is both highly developed and, at over $3.4 billion of reagent spend, substantial. And I believe that the capabilities which make this a unique and valuable technology for transfusion diagnostics will also have tremendous potential for the other very large diagnostics screening applications in the future. We will update you on our plans to go beyond transfusion diagnostics market early in 2019. Near term, we will continue to be absolutely focused on execution of the remaining steps to bring MosaiQ to the market in transfusion diagnostics in advance of the commercial launch in Europe.

With that, I'd like to thank all our employees and partners for their tremendous contribution toward the continued success of Quotient. I will now ask the operator to begin the Q&A session.

Questions and Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Brandon Couillard with Jefferies. Please proceed with your question.

Brandon Couillard -- Jefferies -- Analyst

Thanks, good morning.

Franz Walt -- Chief Executive Officer

Good morning, Brandon.

Brandon Couillard -- Jefferies -- Analyst

You spoke to the serological disease screening timeline. I think you said internal V&V studies could be released later this month. Can you just sort of speak to your level of confidence of what you're seeing with that assay and the difference in complexity relative to the initial IH microarray?

Franz Walt -- Chief Executive Officer

Yes, I think the -- it's two tests, CMV and syphilis. We are very confident that we will have to report good results very soon. I think the complexity -- I mean, I'm not a technical person here, but my judgment is that the IH was our a more tough hurdle to take. First of all, because of all the interdependencies with instrument, development, manufacturing ecosystem and the first microarray and our instruments and the factories out of the way, it's just a pure focus on content.

And then I think the two tests are less than the 12 in IH. I think it's -- that the bar is lower. And so from there -- from that perspective, I don't see any additional hurdle to be taken or on top of that for us to make. We're very confident as you will see something like in the next couple of weeks.

Brandon Couillard -- Jefferies -- Analyst

OK. Thanks. And then with respect to the commercial organization, could you sort of speak to how you're getting the team ready and what some of the key messages and salient points will be around the initial rollout early next year?

Franz Walt -- Chief Executive Officer

Yeah, it's -- we are not active in any sales activities because we don't have an approved product yet. So what we do have is a customer advisory board with top experts around the globe, and they gave us input what their expectations are. We also -- a number of customers, actually in total 12, already addressed us and wanted us to participate in their tenders, and we had to tell them, "Very sorry, as much as I would like to, we don't have an approved product yet." And some decided to incorporate technical upgrade clauses in there. There were even cases where they postponed their tenders up to two years to make sure we can participate in that, and some others that just had to execute because they had to spend their money now.

But I think these are very good science. But we are definitely not in sales activities right now. And I believe the core positioning for MosaiQ is that you can do with one very low blood sample several tests across multiple modalities. Therefore, you have a direct flow improvement and better results basically in an economic benefit.

But we are not inventing new tests, yes. We're just providing existing required tests in a smoother or more economic way.

Brandon Couillard -- Jefferies -- Analyst

Super. Then one for Chris. This is the second time -- sorry, excuse me, the second quarter in a row you had sort of increased the operating loss outlook for the year. Can you elaborate on exactly what those development costs are that you plan to spend on and then what you see as sort of revised cash burn outlook? Thanks.

Chris Lindop -- Chief Financial Officer

Yeah. Just to hit the last first, the cash burn is still, from an operating perspective, $4 million to $5 million. If you take that slightly revised operating loss and adjust for the noncash expenses, the cash is about $48 million to $60 million, roughly annually and, therefore, $4 million to $5 million monthly, consistent with what we said previously. We did have some fine-tuning of the noncash expenses related to accounting for the sale-leaseback.

Other things that we're investing in and we've made sort of conscious decisions to step into them includes enhanced communication, including the Investor Day that we did earlier this year; the investigation into the other clinical areas or diagnostic areas where MosaiQ would have a strong potential to be highly competitive for sure; and obviously, the advancing of the molecular disease technology testing that we described at our Investor Day back in July. That's one where we've done all of the proof of concept, we've filed the patents. But what we want to do is now bring the amplification module, which is quite novel and provides a lot of advantages for -- ultimately for users, we want to bring that through into a fully developed or, I'd say, substantially developed industrial design that we can then hand to a research facility and have them run data -- run tests and establish data so that we can demonstrate with, let's say, external credibility the sensitivity of the -- and the performance of that assay. So -- or those assays.

So those are some of the things we're spending. I think they all make sense, and it doesn't really change the big burn number very much because much of the adjustment we just saw in the outlook was to do with a noncash item.

Brandon Couillard -- Jefferies -- Analyst

Great. Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Josh Jennings with Cowen and Company.

Josh Jennings -- Cowen & Company -- Analyst

Hi. Great. Thanks. Good morning.

I was -- just a follow-up on -- Hi, how are you guys doing? I was hoping to follow up on one of your answers to Brandon's questions just about interactions with future customers. Well, AABB just wrapped up a few weeks ago. You now have EU field trial in hand. Can you just provide some incremental, anecdotal color on, I guess, some of the responses by clinician experts to MosaiQ's capabilities and value proposition? Sounds like you've had some nice, positive feedback, but was there an incremental level now that you have the EU field trial in hand for H1?

Franz Walt -- Chief Executive Officer

Yeah, I mean, I think it was really very interesting. And by the way, it was my first AABB. I attended the ISBT and then now the first AABB because [Inaudible] type of conventions. So it's the AACC, not the AABB.

There's no overlapping customs in that sense. So that was a good experience for me. And of course, we did briefings also mainly to get further inputs from the customers. And actually, the feedback I got several times was, well, that you guys, you're the only ones with really something new.

Everything else is just a little bit more of the same. And there was a lady who was running a lab and she said, "Well, I just hope I can see this technology in the market before I retire," and she's very short before retirement. And so only positive, really positive feedbacks here. I think the common denominator there is they have the knife on the throat in terms of economics.

They have tight budgets. They have to do more with less. And they also have a significant challenge with the staffing, yes. A lot of the labs, like 80%, are understaffed.

And then if you look at technicians coming out of the educational pipeline are not even sufficient to fill the current open positions. And then there are statistics indicating that in the next five years, like 20% of the staff they have will retire. And I think over the next 10 years, even 50% if you look at the age distribution. So we hear a lot.

We have to automate, and we have no option but to automate. We don't have enough staff. So it's how to run their lab more efficiently. How can we do more with less? And they see it as a vehicle to make this vision come true for themselves.

So I heard only really positive feedback. And I think it's a small market. I mean, if you look at the donor side, it's so extremely concentrated. And I think most of the customer know exactly where we are and what our product offering is, and I think we are in touch and in contact with almost all of them.

But it's a different type of dialogue, as we are trying to get inputs to develop the best possible product for their needs. And then I think everybody's looking forward to get their hands on it. Otherwise, they wouldn't approach us for participating in tenders although they know we don't have yet an approved product.

Josh Jennings -- Cowen & Company -- Analyst

Excellent. And I just want to follow up just on -- understand the dynamic of some European customers approaching you guys. Can you help us -- or just review for us your historic interactions with U.S. blood centers and the donor market.

And just a couple other questions on just the U.S. opportunity. And have you identified those field trial sites? And are there any nuanced differences in terms of the requirements for U.S. filings versus what you went through for the CE mark filing that you plan to go through? Sorry, a couple of questions.

Franz Walt -- Chief Executive Officer

Yes, I mean, -- yes, yes. I mean -- and the field -- for the field trials, the customers, that's confidential. We have a nondisclosure agreement. Also with the customers where we did the first field trials.

So the customers are open to disclose who they are, but we are not entitled to do so in their behalf. And -- but it's highly concentrated. It's like two customers in the U.S. accounting for 90% of the business.

So you can assume with whomever we are dealing with here, they have a significant say in the U.S. market. And they are keen to be part of this. And we also have a lot of customers already reaching out to us to be part of the hypercare launch in Europe when they come and visit us in Eysins.

And they know exactly what the initial microarray is covering. And it's not a complete assay, as everybody knows, and they're keen in getting their hands on it and trying it out. For the U.S., it will be different, yes, where we have 27 tests on the IH and the two SDS, of course, tests as well. This will be extremely comprehensive, so we do the trials there and we do a bridging study for Europe and then we submit for EU and U.S. both simultaneously. So yes, we're in contact with these two customers on the very highest level. And there are also customer videos that express how the ideal product would look like, and we, of course, incorporated their issues and thinking into the development of MosaiQ.

Chris Lindop -- Chief Financial Officer

But to be clear, Josh, U.S. field trials will happen in the second half of '19, and we'll bridge that data back to the European market so that we get an accelerated entry in Europe. And -- but as with -- as you've experienced with our most recent field trials, they don't take a long time to do. I mean, you're dealing with a NaN of, say, 3,000 or -- and maybe more, but let's use the example of the European field trials, which you can rip through in a month.

It takes you longer to analyze the data really than it does to...

Franz Walt -- Chief Executive Officer

And to get -- and the customer has to be ready and have the time to do the trial, and that takes maybe more time than the actual trial. But we know they are on track -- we're on track with that.

Josh Jennings -- Cowen & Company -- Analyst

Great. Appreciate that. And my last question, another follow-up for -- or on one of Brandon's questions, but, I mean, I guess it would be great just to hear just overall, you talked about the complexity of the serologic screen efforts versus -- or just -- or engineering hurdles versus IH I. And I'd like -- hope to just hear about an answer to the same question on the IH II menu expand -- IH II menu.

And, I mean, should we be thinking about the engineering challenges as the highest hurdles being cleared already? Or are there some incremental antigens or antibodies on the IH II menu where the complexity actually takes a step-up in terms of the engineering/design of those microarrays? Thanks for taking the questions, and congrats on the continued progress.

Franz Walt -- Chief Executive Officer

Thank you. So if you do 12 tests, it's already complicated. If you do to 27, it's more. If you're doing serological disease screening, too, that's complex, but if you want to do nine, it's more.

The more tests, the more complexity. But on the other hand, the overall complexity is less because, as I mentioned before, instruments, software and factory ecosystem is already there. So these two -- two-thirds of the complexity is already out. It's just the content.

But of course, the content itself, the more tests you put on, the more difficult it becomes. And so far, because we are full steam developing IH II, we have not seen any problem. But as we go along, test after test you discover whether it's difficult or not difficult. And even if it's difficult, we will find a way to make it happen.

And we did this in the past as well, so we're very confident, if the IH I gets approved, that we have a clear path forward with the IH II and with the SDS one as well.

Chris Lindop -- Chief Financial Officer

And another important point, Josh, just to follow up on that is that as we think about IH II as an offering, it's really designed to replace a lot of manual tasks.

Franz Walt -- Chief Executive Officer

Yes.

Chris Lindop -- Chief Financial Officer

So let's just assume, and this is a big assumption, that we just find one antigen that is difficult for some reason in production. It would be absolutely possible to launch this without another incremental 14 antigens. You might have another 13 antigens. And all you would be doing was then saying that if someone is looking for antigen-negative blood for this particular antigen, then you would do a manual test.

So it's sort of -- still gives you a lot of the benefits. And we're not -- I'm not trying to say that we're anticipating that. What I'm saying is that if you really think of how this would get commercialized, you're no longer up against -- for this part of the menu, you're not really up against another automated platform, you're up against a lot of manual tests.

Franz Walt -- Chief Executive Officer

Yes. But -- so it's a very good point, Chris. We have not seen a hurdle we cannot take yet.

Chris Lindop -- Chief Financial Officer

Right.

Franz Walt -- Chief Executive Officer

And if something like this would happen, it's still not in our way to be successful in the market. And if there would be one product out there which is in -- which will be perfect, it wouldn't have competition. And if there would be one platform who can do all the tests, you would not have multitude of platforms. So I think the benefit of our solution is that you really have a significant opportunity as a customer to simplify the lab drastically.

And whether it's from -- in one go from 100 to zero or whether it's -- you just achieve 95%, it actually doesn't make a difference once your -- have the critical scale and leverage there, if that answers your question.

Josh Jennings -- Cowen & Company -- Analyst

No, it does it. That's really helpful. Thanks, guys.

Franz Walt -- Chief Executive Officer

Thank you.

Operator

Thank you. Mr. Walt, there are no further questions at this time. I'd like to turn the call back to you for any final comments.

Franz Walt -- Chief Executive Officer

Thank you very much, Melissa. So thank you, everybody, for joining us on this call today. So Quotient continues to make considerable progress on MosaiQ, and we look forward to its initial commercial launch next year. So thank you very much for now.

Bye-bye, and thank you for dialing in.

Operator

[Operator signoff]

Duration: 50 minutes

Call Participants:

Chris Lindop -- Chief Financial Officer

Franz Walt -- Chief Executive Officer

Brandon Couillard -- Jefferies -- Analyst

Josh Jennings -- Cowen & Company -- Analyst

More QTNT analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.