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Quotient Ltd (NASDAQ:QTNT)
Q3 2020 Earnings Call
Jan 30, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Quotient Limited Third Quarter Fiscal Year 2020 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Chris Lindop, Chief Financial Officer for Quotient Limited. Thank you, sir. You may begin.

Chris Lindop -- Chief Financial Officer

Thank you, Jessie, and good morning, everyone, and welcome to Quotient's earnings conference call for our third fiscal quarter ended December 31st, 2019. Joining me today is Franz Walt, our Chief Executive Officer; and Peter Buhler, our incoming Chief Financial Officer with effect from February 5th.

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 US Securities and Exchange Commission as well as in this morning's release. The forward-looking statements include guidance and projections provided during this call are valid only as of today's date, January 30th, 2020, and Quotient assumes no obligation to publicly update those forward-looking statements.

With that, I'd like to turn the call over to Quotient's Chief Executive Officer, Franz Walt.

Franz Walt -- Chief Executive Officer

Thank you very much, Chris. This quarter represents the seventh in my tenure as CEO of Quotient, and I'm happy to report another set of milestone achievements, which were in line with the plan that we announced shortly after I began my role.

Once again, we have been very busy both advancing the MosaiQ technology, while enjoying the future of our company by supplementing our already strong balance sheet. From a technology and financial perspective, we are in the best position in the company's history and well prepared to exploit the commercial opportunity, which is just in front of us, so to speak.

So let me review the key elements of our progress this quarter and how they fit into our long-term plans. With respect to the menu expansion and market access, the European filing for the initial SDS microarray was completed in late June, and we now expect to hear from our notified body within the six to nine months expectations, which we originally set for such reviews.

Having filed our application for the initial SDS microarray's European CE Mark earlier in the third quarter, we completed the initial SDS US field trial. The data from the field trial showed very strong results and, based on those results in late December, we filed an application with the US Food and Drug Administration for a 510(k) approval for both the initial SDS microarray and the MosaiQ instrument. This is a critical step because it's our first US market access filing, which once approved will accelerate hands-on customer experience with MosaiQ in the important US market.

Also in the quarter. In December, we completed and reported upon a third party feasibility study conducted to demonstrate the effectiveness of our molecular testing platform. Once again, this is a multiplexing solution, which, using a low-cost microarray, permits the detection of any one of several target viruses in a single test environment using high throughput automation. The study was run using our proprietary reagent in assays on a standard MosaiQ instrument with microarrays manufactured in our ISO certified manufacturing environment in Eysins, Switzerland.

A prototype of our proprietary extraction in amplification model was used for the sample preparation step. We set ourselves a high bar by comparing our performance to the industry-leading Roche Cobas molecular testing platform. Given where we are in development, the results were spectacular. 98% concordance with Cobas and 100% specificity. This means that we saw no faults positive, which points to a lack of cross-talk between individual assays on the microarray. Interference between assays is one of the big risks when one multiplexes in diagnostics and B-cell non [Phonetic].

Sensitivity on the other hand was around 95%, and we know that has to improve to 99.9% in the final product. Sensitivity measures the occurrence of false negative in diagnostic testing. It is the nature of such studies that the testing of random samples is supplemented by samples known to be positive for the targeted disease and that those known positive represents varying viral loads. It is also common that these known positives are tested multiple times over the course of the study. MosaiQ detected all known positive at least once, which points to our engineers to the variability contributing to the sensitivity occurring [Phonetic] in the prototype sample preparation model rather than in the microarray or the ancient design. This is then an engineering challenge, which is our development team bread and butter. Our plans call for a verification and validation study approximately 15 months from now. And in that intervening period, our focus will be on designing a scalable and reliable sample preparation model to work beside or within a modified MosaiQ device. So we feel very encouraged by the results of this seminal study, which once again underpins our claim to be the only high throughput automated multi-modality multiplexing solution available for diagnostics today. Remember, we don't invent new tests, we just repackage existing tests on a high throughput platform delivering automation and productivity while taking costs out of the testing laboratories to help empower diagnostics.

As I have often said, the first commercial menu combination will be the initial SDS microarray plus the expanded IH microarray, and we are making great progress on that front also. Having completed the verification and validation study for the expanded IH microarray in the quarter, we published that performance data just before the annual American Association of Blood Banks conference. AABB hosts blood bankers from all over the world. Customer feedback on the expanded IH data and on MosaiQ unique automated approach to deliver a comprehensive antigen profile was overwhelmingly positive.

Following this validation study, we commenced European field trial activities for the expanded IH menu. As we consider these field trials in particular, it is important to remember that we are comparing MosaiQ's automated results to predicate technology results derived from both automated and manual processes in order to determine concordance. This means that the pace of the trial is limited to the speed at which manual antigen testing of the expanded menu can be performed in order to be compared to MosaiQ's test results.

Even some larger labs only have the capacity to do a comprehensive antigen workup on up to 50 donations per day. Therefore, this field trial will take longer than previous IH field trials. Part of our strategy to compensate for this is to file our expanded IH CE Mark applications in a modular fashion, leading with the critical technical files which underpin the design of the product and then follow up -- or following up with the field trial performance data once finalized.

So, our plan includes an initial -- yeah, we talk about a modular approach, initial European filing for the expanded IH menu in the first half of this calendar year and subject to the uncertainties of regulatory approval timeline, which is out of our direct control, to have the first powerful menu combination expanded IH and initial SDS approved in the market by end of this calendar year.

Our competitive strategy is one of platform replacement with the objective of saving blood donor laboratories, scars and valuable resources. So simplification, standardization and walkaway automation with the most comprehensive menu available in the market, two competitive platforms in about 95% of all manual blood grouping testing can be replaced with this initial menu combination. MosaiQ will provide a more highly characterized blood product and a lower cost of blood products for the healthcare system. We believe this proposition will be very attractive to blood donor organizations and healthcare providers all over the world.

While we have made good progress on development, we also have focused on organization alignment with this next rapid growth stage on our evolution. In the past, our organization had grown organically and it is common for entrepreneur-led businesses. Not long after taking over as CEO, it was obvious to me what needed to be done to create a more sustainable organizational structure. But in the first year of my stewardship, I wanted to focus on execution and also to add some key talents and skills, which we're obviously missing. With this work done and with good momentum on the development side of the business, we began to simplify and redesign the organization over the last nine months. This work accumulated recently with the rollout of a flatter organization design with two layers removed in certain functions, broad responsive control and enhanced empowerment and accountability for the new leaders.

This work was not done specifically to save cost. Although there were and will be some cost savings, it was down to have a more agile and responsive organization in advance of commercialization later this year. In connection with this transformation, I am very pleased to have Ed Farrell step into the newly created role of Chief Operating Officer to lead the day-to-day execution of our plans.

Lastly, our reagent business continues to shine brilliantly with product sales growing almost 10% for the year-to-date. In addition, our team successfully moving forward key regulatory approvals for new OEM products, triggering a milestone payment of -- in total $1.1 million, apart from the very welcome injection of increased operating profit from this business over time. We also benefit from its deep transfusion diagnostics credentials both with customers and regulators around the world.

Lastly, it is with mixed feeling that we announced retirement later this year of Chris Lindop, our CFO. Chris came out of retirement to help to put the company on a solid financial footing, and I have to say mission accomplished and job very well done, Chris. He is now retiring from a full time employment for a second time to focus on his sport interest and to spend more time in the US where his family is based. Chris always made it clear that while this outcome was a goal he had that he would not leave us until we found a very strong successor to continue to lead the company's financing control function. I was therefore delighted earlier this month to be able to announce Peter Buhler as Chris' successor as CFO.

Peter is a Swiss national based in our own backyard, so to speak, with 20 years' experience in the financial leadership of healthcare and technology companies around the world. After an extensive international search we found Peter right next door. He will take over his responsibility on February 5th, and Chris will transition to serve as an Executive Vice President reporting to me and working on various strategic priorities until his retirement at the end of May. Post retirement, Chris also has agreed to be available on a consultancy basis as needed.

With that, let me hand over the call to Chris, our outgoing Chief Financial Officer. Chris?

Chris Lindop -- Chief Financial Officer

Thank you, Franz. I'm happy to report that third quarter product sales were $7.6 million, an increase of 13.6% from last year's third quarter, and exceeding our original guidance range of $7.1 million to $7.5 million. Other revenues at $300,000 were also recognized in the third quarter, following achievement of the final product approval milestone related to certain liquid reagent products for sale in the United States. And there were no other revenues earned in the third quarter last year.

In the first nine months, product revenues grew 10% to $22.9 million, while total revenues were $24 million, an increase of 15% from $20.9 million in the first nine months of last fiscal year. The increase in total revenues is attributable to both OEM customers and to direct and distributor sales and to $1.1 million of other revenue related to three milestones earned in connection with the application and approval of the liquid reagent products that I noted earlier.

The prior year's first nine months total revenue included other revenues of only $19,000. In the quarter, OEM sales of $5.1 million grew 7.5% year-over-year and represented 66% of product sales, while direct customer and distributor sales of $2.6 million increased 28% year-over-year and represented 34% of product sales. Product sales from standing orders in the quarter were 72% versus 67% last year.

For the first nine months of the fiscal year OEM sales grew 4.1% and direct sales grew 23.9%. Shifts in the timing of red cell reagent orders can cause quarter-to-quarter variability year-over-year, which tend to average out over longer comparative periods. Gross profit on product sales of $3.1 million increased From $2.5 million last year and the quarter gross margin on product sales was 40.6% compared to 37.7% in the prior year's third quarter. Product gross margin in both years is adversely impacted by roughly $600,000 of non-cash expenses associated with bringing our new ARC manufacturing facility online. And as we've observed in the past, this relocation to ARC is an investment in future growth and efficiency opportunities.

In the third quarter, the operating loss was $22.4 million compared to $19 million last year. Operating expenses increased by $4.2 million from last year to $21.6 million. The majority of the increase relates to $1.3 million of termination and transition benefit costs accrued in the quarter, legal and advisory fees in connection with the OCD contract termination and dispute, and higher-than-normal payments to an R&D collaborator -- collaboration partner totaling $800,000 and about $400,000 of clinical trial costs related to the first US field trial. Stock compensation expense was $1.2 million in the third quarter compared with $1.1 million in the same quarter last year.

In the third quarter, net other expense was $5.1 million compared to $7.2 million in the same quarter last year. Net other expense consists of $7 million of interest expense and $1.9 million of foreign exchange gain arising from the revaluation of monetary assets and liabilities denominated in foreign currencies. Interest expense payable currently in cash of $4.4 million increased $800,000 over the prior year as a result of incremental borrowings in the first quarter of this fiscal year. Accrued non-cash interest expense related to an estimated future royalty payment to the note holders also increased as a result of incremental future royalties under the senior note facility following the first quarter note issuance. Overall our net loss for the quarter was $27.5 million or $0.37 per ordinary share.

Moving to the balance sheet, following funding through an underwritten public offering of 13.8 million ordinary shares at a price of $7 per share, available cash and other short-term investments were $138 million on December 31st. The net proceeds to the company from this offering was approximately $90.4 million at the end, and at the end of the quarter senior notes outstanding were $136.3 million, net of an offsetting long-term cash reserve account of $8.7 million. On December 31st, accounts receivable totaled $5 million and inventory totaled $19.8 million. Capital expenditures totaled $1.4 million in the third quarter.

Now moving to guidance, we expect product sales of between $30.7 million and $31.1 million for the full year. Our estimated fiscal '20 operating loss is $78 million to $80 million and includes increased investments in our planned development goals. Estimated full year operating losses include approximately $18.5 million of non-cash expenses such as depreciation, amortization and stock compensation and $2 million of non-recurring termination and transition benefit costs.

Adjusted for non-cash and non-recurring items, our operating loss run rate, net of non-cash expenses, is expected to be roughly $60 million for the full year. Capital expenditures are still expected to be around $5 million to $7 million for the full fiscal year. For our fiscal fourth quarter following a very strong performance year-to-date, we expect product sales in the range of $7.8 million to $8.2 million compared with $7.8 million in the fourth quarter of fiscal 2019.

So, now let me turn the call back over to Franz.

Franz Walt -- Chief Executive Officer

Thank you very much, Chris. As we think about our plans for the next year, we are excited about the opportunity to engage with potential customers with an ever-increasing microarray menu. Our strategy is all about installed [Phonetic] lab automation with each additional microarray menu permitting our customers to more fully automate and standardize what they do.

Our value proposition clearly responds to the acknowledged need in transfusion diagnostics for real innovation, which addresses mounting cost pressure, skilled labor shortages and improved blood product through the use of a high throughput automated multi-modality multiplex approach to donor screening.

Menu is going to be the key to market penetration. And by the time next year, we expect to be in the market with our first disruptive menu combination, expanded IH and initial SDS in Europe. We estimate market awareness of MosaiQ is probably over 95% in Europe and in the US, and we know that what we have developed is very much aligned with the needs of transfusion diagnostics as they have been explained to us by our expert advisory [Phonetic] panels

Following behind our initial commercial menu, V&V will be the expanded SDS microarray, which we expect will enter its US -- sorry, EU field trial later this year. In addition, as mentioned earlier, we will continue to advance our molecular disease screening capability, sharing further sensitivity data once it's available later this year.

So in summary, we made a lot of progress, delivered on all the milestones under our control in the last seven quarters and have solid plans in place to execute on going forward. Let me repeat once more that we have designed MosaiQ so that it allows for multiple tests across different modalities, and we believe it has the potential to transform transfusion diagnostics and beyond in both the commercial plasma industry and for screening panels in the central laboratory.

Last but not least, we are in the best financial position in the history of our company and well positioned to enter into the full commercialization of MosaiQ in the near-term.

With that, I'd like to thank all our employees and partners for their tremendous contribution toward the continued success of Quotient with special thanks to Chris for his leadership and his pivotal contributions over the last three years. I would also like to welcome Peter Buhler and ask him to provide a short self-introduction. Peter?

Peter Buhler -- Chief Financial Officer Elect

Thank you, Franz. And good morning and good afternoon to each of you listening to this webcast. As Franz mentioned, I'm a Swiss national living in the Geneva area near to where Quotient is headquartered. After a career in public accounting, I have spent 20 years focused on the financial management and leadership of healthcare and technology companies. After starting a global firm on biotech, I had a variety of leadership roles in medical device, diagnostic and IT business, including serving as the CFO of Stallergenes Greer Plc, a listed company.

I'm excited to have been selected to join Quotient. I'd look forward to working with the whole team to continue to deliver on the expectations as we move into MosaiQ's commercial phase.

With that brief introduction, let me hand back to Franz.

Franz Walt -- Chief Executive Officer

Okay. And thank you very much, Peter. I will now ask Jessie to begin the Q&A session, please.

Questions and Answers:

Operator

Absolutely. Ladies and gentlemen, we will now be conducting the question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Brandon Couillard with Jefferies.

Matt -- Jefferies -- Analyst

Thanks guys. This is Matt [Phonetic] on for Brandon this morning. I appreciate you guys taking the questions. Franz, you discussed this a little bit in your prepared remarks, but just wondering if you could touch a little bit on how the recent organizational changes you've undertaken have better positioned the Company for the commercial launch as we approach that in the back half of this year?

Franz Walt -- Chief Executive Officer

Yeah. So depending on the department, we took around two in certain cases, even three layers out. So it's a flatter organization. We are quicker and faster to respond. It's also a functional setup across the entire business, which would allow us to have more transparency on the flow as we go along. And so our reaction is better. We also have done an analysis of skills needed to get the job done, and there were a couple of gaps, which we have successfully filled. So we have everything in place now to execute. So it was not about cost savings, but of course, we have realized and will realize cost savings with that as well. But it was more about responsiveness, agility and being faster, and the right people in the right responsibility. And I'm also very happy that it accepted his role as Chief Operating Officer. He is driving force behind MosaiQ, and I think he is the best Chief Operating Officer we could get. So that was the thinking.

And I wanted to do it before we start actual commercialization, and we didn't want to do it earlier because we really had all hands on deck to get a lot of the R&D work done. This was the least disruptive timing. So from now on going forward, all hands are on the commercialization and no disruptions anticipated anymore. So the structure should be solid enough for the next couple of years.

Matt -- Jefferies -- Analyst

Thanks. And then in terms of OCD, what do you get out of the recently severed relationship? And then, I guess, have your midterm views changed at all around the patient testing market more generally, until you find a new partner?

Franz Walt -- Chief Executive Officer

I would say, there are two parts of this relationship. We have a very good and solid relationship with Ortho on the -- our reagent business, Alba Bio reagents. Everything is fine there. But we felt that Ortho is in reach for this limited distribution contract on MosaiQ. That's why we terminated the contract. So as you know, in about half the year, the hearings will start, and we are in arbitration right now. And because it's an ongoing legal process, I don't want really to comment further on that, except to say that we are very confident where this is heading to.

Regarding the patient side of the market. As you know, the donor side is highly concentrated, we can serve it ourselves. Patient is extremely fragmented. So it's not like two customers, like 90% of the business in the US, it's literally thousands of hospitals. You need a lot of feet's on the Street. And if you don't have any other businesses with those hospitals, it might very well be a low profitability opportunity if we do this investment ourselves. In addition, in addition to that, we think there may be other low-hanging fruits like moving into the commercial plasma market, which is a $750 million opportunity.

So I would say our focus right now is razor sharp on the donor side of the business because this is highly concentrated. We don't need a lot of resources. We have all the resources in place to succeed there. We have all the contracts with them. There is 95% awareness about our product before even we started the launch. So that's really extreme. So we expect that we will be very well received in this segment alone, not to the hospital, but I don't think I should comment further on that. I think if we are on our own, the next step would be the commercial plasma business.

Matt -- Jefferies -- Analyst

Okay. Thanks And then finally, you released the concordance data from the molecular feasibility study back in December. Curious if you could walk through next steps from here and any future milestones we should be aware of outside of the kind of 15-month timeline you mentioned in your prepared remarks? And then anything you can do on your end to further optimize performance from here? Thanks.

Franz Walt -- Chief Executive Officer

Yeah. I mean, I was quickly referring to that during my prepared remarks. I think what I could add on here is that we did this comparison with cobas and we processed, respectively -- the customers processed over 900 samples. I think the target is very clear, to get to a state-of-the-art analytical sensitivity. And because this is all work in progress, it's too early to comment on this, but we think that we will have an update on the analytical sensitivity at the end of this year -- toward the end of this year.

And we are working on the automation aspect, as I mentioned already in my remarks, so it's the upfront. And here, we have to make a decision, whether it's a dedicated part separated from the MosaiQ instrument or where we integrated right away. Longer term, of course, the goal is to have everything integrated. So it's a lot of engineering work needed. And then, of course, microarray optimization, but we are extremely, let's say, positive on this -- of this concept study, has proven to us that it works. And the results were much better than you would actually expect at this stage of the development.

But it was a proof-of-concept and it worked exceptionally well. As we found out -- it's kind of awkward, but we found out that the starting point in immunohematology was the most difficult hurdle to take. It's a microarray class into print red blood cell and glass is much more difficult than straight format chemistry. So we are hopeful, and we are confident MDS will evolve very well, and we will keep you updated as we go on.

Matt -- Jefferies -- Analyst

Thanks. Appreciate it. And Chris, congratulations and best of luck on retirement 2.0.

Chris Lindop -- Chief Financial Officer

Thank you. I'll try to do better this time.

Operator

Thank you. [Operator Instructions]. Our next question comes from Josh Jennings with Cowen and Company. Please proceed with your questions.

Josh Jennings -- Cowen and Company -- Analyst

Hi, thanks. Good morning. Congrats on a nice progress. How you're doing? Congrats on the progress and the second, good luck on the returning to the retirement chapter, Chris, and congrats to Peter on the new seat and add-on the new title. Just wanted to start off on -- maybe just a question on the hypercare launch in Europe? And just with here what type of feedback you're getting from those sites? And what's -- what are the next steps -- could we see you getting out to 10 hypercare sites before launch in Europe?

Franz Walt -- Chief Executive Officer

Yeah. So four hypercare sites have already completed their hypercare trial, and six more are planned for the rest of the year. The feedback we get are very positive. They are mostly related to flow improvement, as expected, as we are not in the business of introducing new tests, we just provide existing test in a better workflow. The best remark I have heard -- for me personally is that's the best year I've seen in 27 years, which means he has not seen anything in 27 years and confirms that there was no true innovation for at least two decades in this specific market. So it's all about workflow improvement and convenience like also some of the quality check capabilities, the whole set up of the instruments to get everybody up and ready to go, takes only two days, and they told us, it takes about a week with a competitor instrument. So it's kind of very user friendly. Then, of course, we also try to get feedback on how could we improve the instrument, software and everything further.

And we get multiple recommendations and we execute on them, incorporate that, go back to the customer, show it again and ask them, is it now exactly as you have expected. So the plan is once we open the flood gate, to have a thoroughly field tested system in place. And we have to have the nerves and restrain ourselves to thoroughly test this in real life. Because internally in the company, under laboratory condition, everybody loves the instrument, it's a different story. Then if you give it to technicians who are not so close, and it's kind of a robustness testing. So far, extremely good feedback.

Then the plan for us is going forward also to let the microarrays, which are in development, like IH2 tested by this field -- by this hypercare customers, what we need is a CE marked product and additional microarray to ISO certified factory, that's all in place. But now for -- not for record testing, but for applied science, they can use those microarrays, which are not through the regulatory process, which gives us and also additional input and helps the customer to understand what the technology can do. Because when we enter into a tender basically you win or lose the tender already before the tender to start -- when the tender starts, it's kind of a quiet period.

There are very limited things you can discuss with the customer. So it's all about making sure the customer knows this technology and that the customer is writing the tender specifications in a way that we are qualifying to participate and have a chance to win. But it's an important step of the overall commercialization value chain. If that answers your question?

Josh Jennings -- Cowen and Company -- Analyst

That's great. And just on the US hypercare strategy. Can you just help us -- just give us an update there? I know you're waiting on approval for the MosaiQ system and the initial SDS I Microarray, but is it going to be the same path that you're taking in Europe in terms of building out hypercare sites and all the advantages that you just cited for the hypercare strategy in Europe? [Speech Overlap]

Franz Walt -- Chief Executive Officer

Yes. It will be the same concept. But in order to do that, we need an FDA approval first. And that's also why we have practically selected SDS I as our first microarray, because it's only a 510(k). In a 510(k), we can get in up to six months, we think. And the -- all the auto microarrays are BLAs and take much longer up to 18 months. So with that, we have in a relative quick time, the instrument and the first microarray FDA-approved, with that, we can give it to the customers, and they can play around with it, become familiar exactly the same until the expanded IH is available, and then we have a complete product solution, and which would allow them to save like 95% of the manual work. So I think the resistance level to adopt this technology. If you take cost out of the system that's a very different discussion than when you come with a new technology, and it adds cost to a system which is already under budget constraints. So it's the same play. And we had also very positive feedback -- if I -- feedback from the field trials for SDS I in the US. So we don't only have customer feedback in Europe, we also have feedback from customers in the US, and they're pretty much the same.

So the next exposure will be then also the commencement of the IH2 field trial in the US. We will start out in Europe first, three sites. We have already selected, it's already ongoing. Then once we have confidence in the performance in Europe, we will start the field trial in the US then as well because the regulatory hurdle, we have to take that with the FDA, it's significant, and we have to make sure that everything is perfect before we do this, it's our most important field trial. So no shortcuts, no risks whatsoever.

We were -- we did very well in the past by taking things very accurately and kind of slowly and sequentially. So this will be an additional exposure in the US and additional feedback possibilities and all the accounts involved in Europe and in the US are also late to tender customers. And related to the tender customers, if I may just add this information, I mean over the last 12 months, there were 17 tenders, which have been postponed. So we did not miss out on a single tender participation. If that answers your question?

Josh Jennings -- Cowen and Company -- Analyst

No. That's great. Download. Thanks. And then just on the expanded IH microarray or IH2 and the V&V data, you demonstrated and that is solid. But -- and then we've talked about this, but maybe it would be helpful just to review, just the differences in terms of the potential results and the concordance in the field trials versus what you experienced in the V&V concordance data? And why that field trial data could get even better?

Franz Walt -- Chief Executive Officer

Yes. So let me start by pointing out that we showed these results and performance to our customers at the AABB and they were absolutely thrilled, they couldn't believe that all those tests are automated. I mean today, it's like 10, 12 tests, everything else is manual test. And this is, of course, the challenge now also for us because all the manual testing takes much more time. They cannot do them more than maximum 50. And if they have a lot of internal real work of course, we have a second priority, and that's, of course, slowing down the field trial, which also convinces us the positioning is just perfect. They have no resources. It's a very expensive, very slow. And they can only do it in about 13% of the cases. But with our -- in 100% of the cases, all banks of bloods are comprehensively characterized. So they get much more diagnostics information. So the customers are thrilled about it. They were very happy also with the results.

And this V&V data, the internal one, we had to do with the blood we got from the donor labs. So they were transported, they are in the logistics, a lot of those samples came from the US sometimes those samples were like three to five days old. And of course, the performance goes down with every day. In real life, and our customers have confirmed that they will do it as close as possible to the donation. So it will be within one day, maximum two days. And the fresher the blood, the better the results. So our expectation is, and I don't have a crystal ball here, but we have seen that in the past, that in the field trials, the performance goes actually up, and it's not because the system is performing differently, it's just because the samples are fresh.

Josh Jennings -- Cowen and Company -- Analyst

And then last question. That's great. And then just on expanded SDS microarray and seems like -- sounds like you're making progress there, V&V studies slated for the second half. Maybe if you could just tell us what are the remaining steps before you move to V&V trial? And then also just to sanity check, it's my understanding that just from an engineering standpoint, the biggest challenge was just getting the IH1 microarray through the channel, but just wanted to make sure that because the SDS expanded menu is it the last one in development that the biggest design challenges are actually in the rearview mirror? Thanks for taking all the questions, gentlemen.

Franz Walt -- Chief Executive Officer

Yeah. The work right now is on optimizing the algorithm to enhance the performance and we are also focusing right now on the big three first, so that is HIV, Hep-B and Hep-C, and for your information, like what we did with molecular disease screening. We are planning a competitive study versus Roche cobas system for immunoassay testing as well and generally recognized as the big three, are these three tests. So these are the gold standard test. And we will do this in the next couple of weeks. We are very confident that the product is performing extremely well, otherwise, we wouldn't do this comparison at that stage. And I really hope that in the next earnings call, I can give you the performance data. So that's all up in the making.

Then, of course, when you develop assays or microarrays, every single test is difficult to do, but everyone was difficult to do, and we have overcome all those challenges. We personally believe that IA and MDS is easy -- it's nothing as easy, but easier than the IH program we have developed. We really have started with the most difficult and most comprehensive microarray. But it's not for no reason. They are not automated out there. I mean, this industry exists for so many decades, and nobody came with an automated process. So I think that's all I can tell you on the performance at this stage. Everything else will be premature, but we are progressing well, and we will have comparative results very soon.

Josh Jennings -- Cowen and Company -- Analyst

Thanks, Franz.

Franz Walt -- Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back over to Mr. Walt for any final comments.

Franz Walt -- Chief Executive Officer

Yeah. Thank you, everybody, for joining us on this call today. And as you see 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 your attention. Have a good day. Thank you.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Chris Lindop -- Chief Financial Officer

Franz Walt -- Chief Executive Officer

Peter Buhler -- Chief Financial Officer Elect

Matt -- Jefferies -- Analyst

Josh Jennings -- Cowen and Company -- Analyst

More QTNT analysis

All earnings call transcripts

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