Quidel (QDEL) Q4 2019 Earnings Call Transcript

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Quidel (QDEL)
Q4 2019 Earnings Call
Feb 12, 2020, 5:00 p.m. ET

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation fourth quarter and full-year 2019 earnings conference call. [Operator instructions] I'd now like to turn the call over to Mr. Ruben Argueta, Quidel's director of investor relations.

Please go ahead.

Ruben Argueta -- Director of Investor Relations

Thank you, operator. Good afternoon, everyone, and thank you for joining today's call. With me today is our president and chief executive officer, Doug Bryant; and Randy Steward, our chief financial officer. Our fourth quarter and full-year 2019 earnings release is now available on ir.quidel.com, our Investor Relations website.

We will also post our prepared remarks on the Presentations tab of our IR website following the conclusion of this call, February 12, for a period of 24 hours. Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ significantly from these stated expectations. For a discussion of risk factors, please review Quidel's annual report on Form 10-K, registration statements and subsequent quarterly reports on Form 10-Q as filed with the SEC.

Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 12, 2020. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for the three months and full year ended December 31, 2019. If you have not received our news release or if you would like to be added to the company's distribution list, please contact me at 858 646-8023.

Following Doug's comments, Randy will briefly discuss our financial results, then we'll open the call to your questions. I'll now hand the call over to Doug for his comments.

Doug Bryant -- President and Chief Executive Officer

Thank you, Ruben, and good afternoon, everyone. As I reported at a recent healthcare conference, we were expecting strong fourth-quarter revenue, so there's no surprise. At $152.2 million, we were just slightly ahead of the $151 million to $152 million that we had suggested. The strength was driven by an early start to the influenza season in which very unusually flu B was the dominant strain.

And now, as you know, we're in the middle of another influenza A epidemic across most of the United States. Sofia and Solana Q4 revenues were favorably affected, of course, but we also saw a pickup in QuickVue revenue as customers who may have purchased generic flu tests in the past because of price returned to our QuickVue brands because of ease-of-use factors and the importance of a shorter turnaround time when patient volumes are high. For many of our larger multi-site customers, our proven ability to scale during an epidemic, leveraging our supply chain to manufacture millions more flu tests when needed, has also been a compelling reason to switch back to QuickVue. Molecular product revenue, which was also helped by the early start to the influenza season, was up 21% to $7.1 million.

Cardiometabolic revenue contributed to the strong quarter as well, up 5% on both an actual and a constant-currency basis, as the unfavorable foreign exchange impact that we saw in the first three quarters was largely mitigated in the fourth. For the year, overall revenues were roughly $535 million, in line with our expectations for 2019, despite soft influenza revenue in Q1 and the delay in regulatory clearance for the new Triage Toxicology panel. Equally important, we had a number of operational accomplishments in the year. The global integration of the triage businesses was completed in November delivering $20 million in annual synergies, which was ahead of our plan.

We reduced our debt by another $98.6 million, also a little earlier than we had expected. The R&D, clin reg and instrument systems development teams made significant progress in 2019 as well. All of the 20-or-so R&D projects that we are working on are important, and I'll be happy to discuss any of them as you like during the Q&A, but I want to mention three. First, the Savanna cross-functional product development team did achieve a couple of critical milestones.

One, the first six assay panels that were previously discussed in our presentations are complete. I can review those again, if you want, but there's no change at this point to our initial menu strategy. And two, the cartridge design was finalized, and cartridges are now being manufactured, clearing the way for the integration of assays and cartridges with the instrument which is currently in development. Second, sniffles, our next-generation Sofia platform, is still on track for U.S.

clinical trials during the respiratory season next winter. And third, we're expecting the publication of the APACE study data that demonstrates the excellent performance of triage high-sensitivity Troponin in a major cardiology journal any week now and hope to finalize our U.S. clinical trial design for the product this spring. Moving forward to 2020, we expect increasing efficiency and productivity of the sales and marketing teams globally, leveraging key account and distributor relationships to sell an increasingly broader product offering.

While we expect to continue promoting our flagship products and believe that there is still more share to be gained in 2020, we are counting on seeing traction and getting help from the newer products, Sofia Lyme, Triage Toxicology, high-sense troponin in Europe, Triage PLGF and the new Sofia GI products. These products should account for about $10 million in incremental revenue. Before turning it over to Randy to review financial detail for last quarter and the year, I should make a brief comment on the potential impact of the novel coronavirus in China. Most important, none of the numerous employees we have in China has been ill, and none of several employees returning from trips to China has been ill.

Routine trips to China, like my own, have been postponed until the spring. Shipments of our products this quarter have been received by our repacker and distribution partners, and we have additional product in China that cleared customs this morning. If there is a risk to our ability to ship and recognize revenue this quarter, it would be in the next shipment. If, for some reason, there were a problem and we were unable to ship, our total downside risk for the quarter would be about $5 million.

And with that, I will summarize by saying that Q4 was really good. 2019 was fine, in line with expectations, and we're really looking forward to 2020 on a number of fronts. Camaraderie in this company is terrific, and the morale and happiness of our employees has never been higher. Quidel has truly become a great place to be, and the recruiting of extraordinary talent from the outside has been increasingly easier.

Randy?

Randy Steward -- Chief Financial Officer

Thank you, Doug. Good afternoon, everyone. As we reported earlier today, total revenues for the fourth quarter of 2019 were $152.2 million as compared to $132.6 million in the fourth quarter of 2018. This 15% increase came from revenue growth across all four major categories.

We realized 29% increase in rapid immunoassay revenue, 5% growth in cardiac immunoassay revenue, 21% growth in molecular diagnostic solutions revenue and 7% growth from specialized diagnostic solutions. In the quarter, there was not a significant foreign currency impact. For the cardiac immunoassay business, revenue was $65.8 million, as mentioned, a growth of 5% in the fourth quarter of 2019. Of the $65.8 million, $33.6 million was derived from the triage business and $32.2 million from the Beckman BNP business.

We've placed an incremental 292 Triage MeterPro instruments in the quarter as we continue to close smaller-volume accounts on the triage side of the business to offset lost customers to the higher-volume multiplex systems. Cardiac immunoassay realized revenue growth in all major geographies. North America increased 5%; China increased 6%; and Europe, Middle East, Africa grew 3%. North America and China realized growth on the Beckman BNP side, somewhat offset by declines in the triage business.

Europe, Middle East, Africa realized strong growth in triage, somewhat offset by declines in the Beckman BNP business. For the year, on an as-reported basis, cardiac immunoassay revenue was $266.5 million, equal to last year. On a constant-currency basis, cardiac immunoassay revenue grew by 2% over the prior year. Of the $266.5 million, total triage business revenue was $139.9 million, a decrease of 6%.

And the Beckman BNP revenue was $126.6 million, an increase of 7%. From a geographic perspective, for the full year, cardiac revenue in North America was $137.3 million; China was $61.4 million; and Europe, Middle East, Africa was $43.7 million. Rapid immunoassay product revenues increased 29% to $64.9 million in the fourth quarter as compared to $50.4 million in the previous year. Within this category, Sofia products grew 38% to $46.6 million, while QuickVue product revenues increased 11% to $17.1 million driven by influenza.

Total influenza revenue, which includes rapid immunoassay, DHI respiratory and molecular diagnostics, grew 44% in the quarter to $50.3 million. The influenza rapid immunoassay revenue was $45 million with approximately 83% of the revenue derived from the Sofia platform. Total strep revenue was up 1%, and RSV was up 29%. Revenue in the specialized diagnostic solutions category increased 7% in the fourth quarter to $14.3 million, driven by a 42% increase in respiratory-related DHI revenues, as well as a 4% increase in our specialty microtiter business.

Our molecular diagnostic solutions category increased 21% in the quarter to $7.1 million due to a 29% revenue growth in Solana. We continue to see strong growth from our Solana platform, specifically with the strep A and influenza product lines, driven by the severe and earlier-than-typical influenza season. We are seeing strong growth from our Solana C. difficile and HSV/VZV products.

For the year, our molecular franchise grew by 12%, driven by a 25% growth from Solana. We believe there is continued strong demand for the Solana platform and that Solana will continue to be the driver of molecular growth, going forward, driven by incremental Solana instrument placements and increased assay utilization. Gross profit in the fourth quarter increased $12.7 million to $94.8 million, primarily driven by improved product mix and higher revenue in the quarter. Gross profit margin in the fourth quarter of 2019 was slightly improved at 62.3%.

For the full year, we achieved GAAP gross margin of 60%, a performance on par with last year. Excluding intangibles, gross profit margin for the full year was 61% with the breakdown as follows: legacy Quidel business gross margin was 66%, triage gross margin was 51% and Beckman BNP gross margin was 63%. R&D expenses increased by $2.3 million in the fourth quarter as compared to the same period in 2018. The increase is due to greater investments made on our new product platforms, including Savanna.

We expect R&D expenses in 2020 should be equal to or slightly higher than in 2019 and will be in the range of $53 million to $56 million. Sales and marketing expense in the fourth quarter increased by $1.6 million as compared to the same period last year due to increased spending on expanding our international sales organization, product promotion costs and higher freight costs, offset by lower transition service fees as we have completed the globalization of our commercial team. For the full-year 2020, we expect sales and marketing expense to be between the range of 20% and 21% of revenue. G&A expenses increased by $2 million in the quarter, primarily due to higher facility costs and information technology spend, offset by lower fees for professional services.

We expect G&A expenses to be between $55 million and $60 million for the full-year 2020. As it relates to the provision for income taxes, the full-year 2019 effective tax rate was 5.5%. This 2019 overall tax provision rate includes beneficial impacts from equity compensation that occurred during the year and from the generation of federal and state research credits. In 2018, the company had a onetime impact of releasing $13.4 million of its valuation allowance against its net deferred tax asset balance as it became more likely than not that these deferred tax assets will be utilized before they expire.

As a result, we reported an income tax benefit of $10.8 million for fiscal-year 2018. Due to the uncertainty of the beneficial impact from equity compensation, we expect the 2020 effective tax rate to be in the range of 19% to 21% of pre-tax income. For the full year, we achieved net income of $72.9 million, GAAP EPS of $1.78 and non-GAAP EPS of $2.97, a very rewarding year. As we've said since our analyst day in 2018, an important part of our capital deployment strategy has been to aggressively delever the business.

In 2019, we continue to execute on that strategy by accelerating our debt reduction through opportunistic convertible bond exchanges and utilizing our excess cash to reduce the balance on our revolving credit facility. As of today, we have completely paid off the remaining balance on the revolving credit facility of only $13 million remaining on our convertible bond debt, which matures this December, and plan to make our third $48 million payment to Abbott in April. From a balance sheet perspective, our company is well-positioned for M&A, licensing or other partnership opportunities in support of our longer-term growth objectives. And with that, we conclude our formal comments for today.

Operator, we're now ready to open the call for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question is going to come from the line of Jack Meehan with Barclays.

Jack Meehan -- Barclays -- Analyst

Thank you. Good afternoon. Nice quarter. I wanted to start with a two-parter on flu.

So as you reflect on the recent respiratory season, Doug, I was curious if you had a sense for how market share might have shifted, just what you're seeing. And then for Randy, as you look in the crystal ball, just what are you thinking about pacing into the first quarter?

Doug Bryant -- President and Chief Executive Officer

It's unclear at this point exactly how much share we've gained. We will do some work on it after the quarter closes, and we may have a better answer for you when we do the analyst day, the first week in April, Jack. But as I mentioned, there was a bit of share shift back to QuickVue. And clearly, we've been placing Sofia analyzers as well.

And I won't point to the competitive manufacturers. But specifically, we can name the folks where that share came from. And so I think when the analytics are completed, we'll be able to show more precisely what we think the share gain actually ended up being. But we know -- but we strongly suspect -- we should put it that way, strongly suspect that we've gained share.

What I would say is we're shipping everything we make at this point, and we've not been backwarded. And I can't say the same is true for others. And then Randy on the first quarter.

Randy Steward -- Chief Financial Officer

Yes. On the first quarter, as Doug has mentioned, it's been pretty strong to date. And rather than giving you some guidance on it, I think probably the most astute thing to do is we're having our analyst day on April 8, and we can certainly then give you a lot more insight as to how we -- how the flu revenue was in Q1.

Doug Bryant -- President and Chief Executive Officer

And then perhaps a better idea on revenue guidance for the year.

Jack Meehan -- Barclays -- Analyst

Sounds good. Maybe on triage then, as you just reflect on the year, down 6% for the year on triage specifically. Can you just assess what you think might have been going on between market and competition and then an update on the commercial efforts behind toxicology?

Doug Bryant -- President and Chief Executive Officer

First, we'll just start with what's happening with triage generally. It does depend on geography, of course. But here in the U.S. and in China, what we see is the volume of the triage accounts gets larger and larger and larger to the point where it's no longer practical to do it on a Triage MeterPro analyzer, and those accounts then opt to go to -- with a larger immunoassay analyzer in the main lab.

Often, that's Beckman, and we pick up the volume there. But equally often, it's not. So when you lose an account like that that needs to be offset by the continued sales of people now having volume enough to start the Triage MetroPro. So it's a bit of a churn as we've learned over the last couple of years, and I think we're getting ahead of it.

And I do think that the introduction of the toxicology product is helping reintroduce that. We're certainly seeing the introduction of the TriageTrue high-sensitivity product in Europe as one effective tool. And then to the toxicology piece, what I can say is that we've spent a lot of time, making sure that we're addressing all the accounts that we should. The data that we see in salesforce.com shows that the funnel is building.

I think the reps in the field have a very good understanding of where to go and where they're at in each of the accounts. And more specifically, when I've traveled over the last couple of weeks with salespeople, there's quite a bit of focus on toxicology. And I would say, except in one specific account I visited, there's a lot of answers in Triage Toxicology. And by the way, the account where there wasn't an interest is because their volume was too high, so I think an acceptable response by the customer.

We'd love to do it, but we couldn't do it on your platform. That's where we're at, at this stage, though, Jack. I think the funnel looks good, and we're still forecasting to deliver what we thought at this stage of the year.

Jack Meehan -- Barclays -- Analyst

Sounds good. Last question. Have you baked the cake yet for the Savanna instrument? Or when is that going to take place? And what needs to be finalized before you get there?

Doug Bryant -- President and Chief Executive Officer

Well, as I mentioned in my comments, we're ahead of schedule on the assay development, six of the seven, actually, there's eight now, of the panels that we're working on are done. The seventh is in progress and so is the eighth. So that looks really good. We did finalize cartridge design.

We have one manufacturing line going as fast as it can. At this point, we have plans to build two other manufacturing lines for the cartridges, and the aim there is to have enough cartridges built in order to do the clinical trials. We're in the process of instrument development which will go faster than the other components. But still, there's a lot of work to be done.

And effectively, we'll be integrating all the pieces of that, and we'll have a clinical trial box by the end of the year, and we will be in a clinical trial by the end of the year. So we're still on schedule for that. And let's just see what happens after that. Now of course, a lot to happen between half and year end.

And inevitably, something will pop up that we need to solve, which we don't know about. But I'm pretty confident at this stage that most of the issues that we have in front of us are known.

Jack Meehan -- Barclays -- Analyst

Sounds good. Congrats on the progress.

Doug Bryant -- President and Chief Executive Officer

Thanks, Jack.

Operator

And our next question is going to come from the line of Brian Weinstein with William Blair.

Brian Weinstein -- William Blair and Company -- Analyst

As we think about 2020 -- as you think about 2020, just putting some pieces together here. If -- you did $535 million this year. I think, Doug, you said $10 million from a host of new products. Cardio probably grows, what, mid-single digits.

That's going to add another $15 million or so, plus whatever you're going to get from flu and the other parts of the base. I mean, is there a reason why this shouldn't be well over $560 million next year in terms of revenue?

Doug Bryant -- President and Chief Executive Officer

I would suggest that there's certainly upside to the $550 million. And as we get through the end of this quarter and see where we're at, we'll head into the analyst day, as Randy just mentioned, on April 8, and we'll tell you about what we're working on, of course. But we'll give you a much better idea on where we think we're going to land for the year, and that wouldn't surprise me if it's north of $550 million, yes.

Brian Weinstein -- William Blair and Company -- Analyst

OK. And then I think at the investor conference earlier this year, I think you said the way to think about Q1 flu was similar to Q4, which would be just right around that kind of $50 million. Did we hear that right? I heard what you said to Jack's question, but I think you did comment on it previously. So I just want to go back and, a, did I hear that comment correctly; and b, would that still be -- just directionally the right way to think about it?

Doug Bryant -- President and Chief Executive Officer

Yes. I would say that that's comfortable.

Brian Weinstein -- William Blair and Company -- Analyst

OK. And then a question for you on gross margin. I'm sorry, go ahead.

Doug Bryant -- President and Chief Executive Officer

I'll leave you to interpret what that means. But I'm sorry to be vague, but it looks really good. We're shipping everything we make right now, OK? And as you know, though, when it stops, it stops. So continuing this through the end of the quarter, it could be -- I don't want to use the word extraordinary.

I'll just say it would be a good quarter.

Brian Weinstein -- William Blair and Company -- Analyst

OK. I appreciate that. And then a quick one on gross margin. On gross margin, you talked about -- I think it was overhead absorption was one of the issues that might have held it back, at least that's what I think you said in the press release.

But it would seem that with all the volume you guys are putting through with flu that you guys should have seen potentially better gross margins than what you guys posted. Can you just go back through kind of the pluses and minuses with gross margin and how we should think about in a strong flu quarter, how flu does contribute to gross margin?

Doug Bryant -- President and Chief Executive Officer

Well, flu is a strong contributor to gross margin and the high volumes that we're pushing through the factory right now would suggest that we're going to do fine there. I think the issue that we had before was actually more on the cardio volume that we had assumed that we were going to do. So -- and I know know how to do standard costing, Brian. So effectively, the drag, if you will, is that we had overestimated what we thought we were going to manufacture and ship out of the factory.

Randy Steward -- Chief Financial Officer

The other piece of it, Brian, is there's a little different mix, a little lower margins in the rest-of-the-world products versus what we see in North America. So that had a little bit impact. But as Doug said, Summers Ridge manufacturing was where the overhead absorption was under absorbed. Plus remember, there's also FX impact.

So that had had a negative impact. Full year was approximately just -- I think it was $4.8 million negative FX impact as well.

Doug Bryant -- President and Chief Executive Officer

Of which about $4.6 million was in the first three quarters, Brian.

Randy Steward -- Chief Financial Officer

Yes.

Brian Weinstein -- William Blair and Company -- Analyst

Got it. And last one for me, I promise, is as far as China goes in corona, do you import anything that goes into your manufacturing process or anything else from China that could be affected if those factories are down? So is there any raw materials or anything else that you guys bring here that we should be thinking about?

Doug Bryant -- President and Chief Executive Officer

No, we don't.

Brian Weinstein -- William Blair and Company -- Analyst

Thanks for the clarification.

Operator

Our next question will come from the line of Tycho Peterson, JP Morgan.

Tycho Peterson -- J.P. Morgan -- Analyst

OK. A little bit -- I don't have guidance, but I guess we can wait till April. But just to probe on a couple of things. For cardiac, your comps are notably easier.

So is mid-single digit the right way to think about it in light of the easier comps? And what's the latest on the toxicology panel delay?

Doug Bryant -- President and Chief Executive Officer

Yes. You saw we're right at 5% now. If I want to be conservative, I'd call it 4% to 5%. It's dependent, obviously, on the existing base business, but you've also got toxicology in there, and there's a couple of other things.

PLGF could be helpful, yes. And what we do in troponin in Europe is another factor. So there's a few variables there, but I would say we're comfortably in the 4% to 5% range.

Tycho Peterson -- J.P. Morgan -- Analyst

OK. But on the toxicology, you talked about having to retrain the commercial team. So what's just the latest on where you are in the toxicology rollout?

Doug Bryant -- President and Chief Executive Officer

Yes. Let me clarify because I've had to do this a couple of times now. The main driver to the mess was the FDA delay in approving the product. We had assumed that we would have approval early in second quarter, and we had rolled out to the sales team in the sales meeting that was around that time.

So I don't think it was so much a retraining of the sales force as it was a resource allocation issue. Because in Q3, our sales people spend a lot of time working with customers to make sure that we retain our flu business, and we also like to place more Sofia as you might imagine. So I would say it was more of a resource allocation than a training issue. But having said that, all that is behind us.

Our guys are out there actively addressing every single opportunity that's out there. And I believe I just heard a little while ago that we expect very shortly to have contacted virtually every customer that's a possibility here in the next quarter or so. So I think we're in good shape. The funnel looks good.

We track calls. We track progress. We track opportunities. We try to assess things under what we call 30-, 60-, 90-day forecast.

And as I look at it, I think -- and I judge what people are telling me, I think we're in pretty good shape to hit the numbers that we suggested.

Tycho Peterson -- J.P. Morgan -- Analyst

And then can you talk a little more on the molecular acceleration you just saw of 21% versus 6% last quarter? Can you just maybe talk to drivers and sustainability there?

Doug Bryant -- President and Chief Executive Officer

Well, yes, remember, we make a Solana influenza assay. We make a PCR assay under the brand Lyra. Those certainly were healthy in the quarter, those products. And honestly, strep is also a big contributor.

Our share and our molecular shape is quite good, and so we've done pretty well there as well. So the other products that we have out there are certainly helped by good respiratory season, and we did get some traction with C. diff and HSV/VZV, as Randy also mentioned. So I think the Solana business looks pretty solid right now.

The other thing that was a factor for us that I thought may have impaired our growth, particularly in the larger accounts, is the front end of the whole process was a little bit too laborious for some people. And so we've recently completed the development of what I would call a front-end engineering solution that should be helpful, and we're rolling that out now. So I don't think we're done growing with Solana. We've got about 1,100-or-so instruments out there, and I suspect that we'll continue to grow that throughout this year, assisted by some improvements to the ease with which our customers can actually run the assay.

So -- but to your point, fourth quarter, 21% looks big, but there's a lot of respiratory in there.

Tycho Peterson -- J.P. Morgan -- Analyst

And then on lyme, can you talk -- you talked at the time of the launch about getting into new POC customers. Can you talk to the degree to which that's opened up new doors and then also your confidence in locking down the clinical study design before the season hits in the fall?

Doug Bryant -- President and Chief Executive Officer

For -- are you talking about -- for troponin?

Tycho Peterson -- J.P. Morgan -- Analyst

No. Sorry, no. I'm talking about lyme, yes.

Doug Bryant -- President and Chief Executive Officer

Lyme exclusively. So Lyme right now for us is a market growth concept. The whole idea of getting physicians, some of whom don't even test it all for anything, to begin testing customers, particularly in the Upper Midwest and the Northeast. So we have a number of marketing programs, PR, word of mouth, symposia, all sorts of things that we're working on to create both awareness by physicians and awareness by people who could be tested.

So it's still early phase, but I would say that we're expecting a reasonably significant uptick, a couple of million dollars or so, more in line this year than we were before. And we're also expecting some collateral benefit on flu RSV and strep as a result. And what was the last question, Tycho, with regard to clinicals?

Tycho Peterson -- J.P. Morgan -- Analyst

The clinical study, yes. You're doing a clinical study for lyme, right, before the season in the fall?

Doug Bryant -- President and Chief Executive Officer

Yes, yes. So we are doing a tier two, and we're in discussions right now with the FDA on what that study looks like. Because we could mimic what's done currently, which is the Western Blot, and certainly, we could launch a product that had all the proteins that are done by Western Blot, Sofia test strip. And so we could mimic the tier two product.

What we've decided to do instead of something novel, we'll talk more about it at the analyst day and why we think that that's a better result. But we actually think that rather than continuing with this testing process, which is willfully inadequate, we think we've come up with something clever that's actually going to be better. And we're presenting that to the FDA here shortly. So if you don't mind, I'll just hit the pause button on that question and say that we'll provide a lot more detail on that on April 8.

Tycho Peterson -- J.P. Morgan -- Analyst

Last one on M&A. Just curious, odds of getting a deal done first half of the year or so. How do you -- how would you characterize the funnel?

Doug Bryant -- President and Chief Executive Officer

Well, as Randy pointed out, we're certainly in good shape to do one. And we've been looking at a number of targets, and some of them are interesting, and I'm hopeful that we can announce something reasonably soon. But I can't speak to the timing, of course.

Operator

Our next question is going to come from the line of Bill Quirk, Piper Sandler.

Bill Quirk -- Piper Sandler -- Analyst

Great. Thanks, everybody. So first question for me, Doug. Just thinking about the Sofia pipeline here for 2020, obviously, fairly full.

Can you just remind us about how we should think about the pacing of the filings or the approvals for those over the course of '20?

Doug Bryant -- President and Chief Executive Officer

Sure. The first one likely to be submitted would be the C. diff assay for toxin AB and GH. And then as I mentioned before, we've got a number of other assays that we have in development as well.

So in the third quarter, I expect that we would be closer to submission with Campylobacter, Shiga toxin, H. pylori, lactoferrin and a parasite panel. So those are the ones we're working on. We expect them all to be submitted this year, but all of them are pretty much a back half with C.

diff potentially being early third quarter.

Bill Quirk -- Piper Sandler -- Analyst

OK, got it. Sorry, go ahead.

Doug Bryant -- President and Chief Executive Officer

I'm looking at Randy, asking if I missed one. Sometimes -- I'm getting to the age where I start to forget stuff.

Randy Steward -- Chief Financial Officer

Respiratory viral panel.

Doug Bryant -- President and Chief Executive Officer

Oh, yes. But we don't know that. Yes, we may be closer to being able to start the trial for the four-member respiratory panel, which, just to remind you, that's flu A, B, RSV and human metapneumo. I think what we may do is file a 510(k) or start a (510)k clinical trial and then move later to the CLIA waiver, just so that we can start the trial and get data.

So we can actually depend on this as we might be able to get started here reasonably soon on that, and then as we go into the next winter, start the CLIA waiver trial. So that's the other one that -- on Sofia that I was forgetting that Randy just reminded me.

Bill Quirk -- Piper Sandler -- Analyst

OK. No, got it. I appreciate it. And it sounds like Randy is going for a high bonus this year.

Separately --

Randy Steward -- Chief Financial Officer

Thank you. Bill.

Bill Quirk -- Piper Sandler -- Analyst

You're welcome, Randy. Separately just thinking about the Lyra cost synergies, you hit your targets. How should we be thinking about anything additional on a go-forward basis?

Doug Bryant -- President and Chief Executive Officer

Well, you should definitely think that there is more, and we still think there's work to do in the Summers Ridge facility to improve yields. And I don't know that we have a really solid idea, but a couple of million, maybe more, Bill. I'm just -- that's a swag at this point. There's a lot more to be done, we believe, and we've got consultants working with us right now to see if we can get more done.

But it's sort of in that range of possibility, I would guess.

Operator

[Operator instructions] And our next question is going to come from the line of Alex Nowak, Craig-Hallum Capital.

Alex Nowak -- Craig-Hallum Capital Group LP -- Analyst

Doug, can you just provide some more details around the concept of project sniffles here, if that cannibalizes any of the existing business? And which market does the smaller, cheaper Sofia box opening up to?

Doug Bryant -- President and Chief Executive Officer

So question number one, Alex, was will sniffles cannibalize some business. And I would suggest, sure, it would. At the same time, by the time we've launched many of our boxes would have fallen off their three-year depreciation schedule, so it's not really relevant necessarily. And in fact, swapping out now with sniffles at a significantly reduced cost will be fine.

I think the biggest opportunity would be the great ability to democratize testing and to put these analyzers just about anywhere you want, even in physicians today who have a Sofia in the central part of their office practice. Imagine that you could have a little sniffles instrument on each of the exam rooms, which would dramatically reduce the overall turnaround time. Right now, the assays are short, but you still have to take swab and move it to where the Sofia is. So if you could eliminate all that time, the transport time to set up and all that by simply just doing the test while the patient is sitting on the funny paper that would be now dramatically better.

And then also, the same would be true in urgent care centers. You can imagine putting these in each one of the exam rooms there versus going to a centralized lab, so -- or on the floors in hospitals, etc. So when you get the cost down that low, I think there's just almost no end to where we could do it. And then certainly, we're counting on markets like China and others where volumes are significantly higher.

And I think this is a perfect product for expanding beyond the traditional places where we have gone in the past.

Alex Nowak -- Craig-Hallum Capital Group LP -- Analyst

Really appreciate that. That's very helpful. And then I don't have perfect math here. But if I scale away flu in the immunoassay business, I see the non-flu assay declining about mid-single digits over 2019.

So the growth in that business used to be pretty consistent, but I'm just curious what's driving the declines there recently.

Doug Bryant -- President and Chief Executive Officer

Go ahead and answer, Randy.

Randy Steward -- Chief Financial Officer

Yes, Alex, while we're -- the biggest assay that we're seeing a decline is in our hCG product. We continue to see it being commoditized. Private labels probably has a largest share now in that market in the U.S., and so that's where you're seeing a decline that offsets some of the growth in our strep, RSV and flu business.

Doug Bryant -- President and Chief Executive Officer

Yes. It truly is a generic market. Whether it's in the professional segment or it's in over the counter and in the grocery stores, you see generic products versus the branded versions. And so that's just a -- it's a commodity, as you point out.

So unfortunately, we've been in that market for a long time, and we've seen it where we had pretty high volumes, and it's just sort of slowly gone away.

Alex Nowak -- Craig-Hallum Capital Group LP -- Analyst

I mean, how much revenue is left there? I mean, should we expect declines for -- enough material declines we're going to see on the revenue line next year, 2020?

Randy Steward -- Chief Financial Officer

Yes, yes. I think you'd continue to see, I don't know, mid- to high single-digit decline. But we're probably only doing 7 million to 8 million tests a year now where it used to be double that about five years ago.

Alex Nowak -- Craig-Hallum Capital Group LP -- Analyst

OK. That's helpful. Just kind of modeling this out. And then I know you had to adjust the protocol here for the strep 98 tests, so I'm just curious what is the current time line there.

You didn't mention it as one of the three products in the prepared remarks. And just remind us where -- what is the share -- what is your share in that market. And then what sort of price premium should you be able to demand for a confirmatory product there?

Doug Bryant -- President and Chief Executive Officer

Sure. First, we're manufacturing on the immunoassay side now 17 million -- 16 million, 17 million. Randy said 16 million.

Randy Steward -- Chief Financial Officer

Yes.

Doug Bryant -- President and Chief Executive Officer

Yes. I'm the CEO, I'd say 17 million. He's the CFO, he says 16 million, so 16 million, 17 million tests is what we manufacture today. The price point, unfortunately, is such that our gross margins are well under 50%.

So it's -- you certainly wouldn't want to jump into the business at this point on that side. Strep 98, on the other hand, if we're successful, enables somebody in a very short -- a physician in a very short period of time to not have to reflect a negative result. And frankly, most of the results are negative. 80%, 85% of the strep tests are in a physician's office going to be negative, so there's a lot of value there.

We do have two ideas in mind, and we're going to have to work through that here as we move closer to launch. One is with sniffles. Is it a compelling enough package together that I should just launch into the market with the existing reimbursement rate and then just price it modestly higher than it is today? I don't know whether that's a couple of dollars higher or what it is but certainly well below the reimbursement rate. And there's a trade-off there.

One is I get a lot more volume, but I'm going to forego some of the margin that I would have gained if I priced it like a true confirmatory test. The other option, of course, is to go and expect low volume but don't allow reimbursement. In other words, don't crosswalk at this product over to the current immunoassay code. And if we did that, we could potentially have pricing that was significantly higher, closer to where our own molecular tests are priced, so in other words, in the teens.

And if that were the case, obviously the gross margin would be high, but the volumes would be low because we would be doing outcome studies in order to justify it with payers why we needed a reimbursement that was significantly higher than what we have today. So those are the two options that we're exploring. We're doing the investigation on that. We'll probably, again, provide more analysis when we talk about our overall portfolio and strategy during the analyst day here in April.

Where are we at in terms of product development? The product, of course, performs great. We're working through the clinical trial at this stage. We'll continue to run samples. I think we still have a little bit of runway before the end of this respiratory season.

We'll see what we have. We have to have for the FDA a set number of positive samples. And of course, we need to demonstrate the sensitivity and the specificity that would be required to call this confirmatory assay. So that's where we're at.

Operator

And at this time, we do not have any further questions. And I would like to turn the call over to Mr. Doug Bryant for closing comments.

Doug Bryant -- President and Chief Executive Officer

Sure. Well, thanks, everyone, for your support and of course your interest in Quidel. We did have a great year, and we're in terrific shape to achieve our growth objectives over the next few years. Placeholder, we'd send out on analyst day, April 8, encourage you to participate, if you can.

And thanks again, everybody, for being on the call.

Operator

[Operator signoff]

Duration: 51 minutes