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GenMark Diagnostics Inc (GNMK)
Q1Â 2020 Earnings Call
May 4, 2020, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the GenMark Diagnostics First Quarter Earnings Conference Call. [Operator Instructions] After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions].
I would now like to hand the conference over to your moderator today, Leigh Salvo, Investor Relations. Thank you. Please go ahead, ma'am.
Leigh J. Salvo -- Investor Relations
Thank you, Sodaris, and thank you all very much for joining us today. Before we begin, I would like to inform you that certain statements made by GenMark during the course of this call may constitute forward-looking statements. Any statement about our expectations, beliefs, plans, objectives, assumptions of future events or performance are forward-looking statements. For example, statements concerning our 2020 financial and operational guidance, the development, regulatory clearance, commercialization and features of new product, plans and objectives of management and market trends are all forward-looking statements.
We believe these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future result expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in GenMark's filings with the SEC. GenMark assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events.
In addition, the company will discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release out shortly before this call company's earnings release shortly before this call which contains reconciliation to the non-GAAP financial measures presented to their most comparable GAAP results.
I'd now like to turn the conference call over to Scott Mendel, President and CEO of GenMark. Scott?
Scott Mendel -- Interim President and Chief Executive Officer.
Thank you, Leigh. Good afternoon, everyone. Thank you all for joining us. Our last earnings call was just 60 days ago, but during that short time so much has changed. The COVID-19 pandemic has affected us all in many ways and this global crisis has demonstrated the importance of diagnostics solutions in treating infectious disease.
Our ePlex platform is designed to provide rapid and actionable results to treat critically ill patients. COVID-19 has highlighted the overall importance of molecular diagnostics and the critical role that our ePlex platform plays in fighting infectious disease.
Beyond respiratory testing, bloodstream infections are an important area of focus for our company and will be a key driver of revenue growth over the longer term. Similar to COVID-19, bloodstream infections also require a rapid and actual diagnosis to effectively manage patient care. Each year, approximately 270,000 Americans die as a result of sepsis. And since the mortality rate associated with sepsis increases approximately 8% for every hour of ineffective therapy, our ePlex BCID Panels are positioned to be a key weapon in this battle as well.
During the COVID-19 pandemic, a couple of bright spots have emerged that I would like to highlight. One has been the role that BARDA is playing the fund products designed to improve patient outcomes. Our interactions with our BARDA counterparts have been excellent and we thank them for their help and partnership. In addition, the FDA's emergency use authorization process has been helpful in fast tracking solutions that address COVID-19, and we appreciate the flexibility they've been providing during this critical time.
On our last earnings call, we announced initial RUO shipments of our ePlex COVID-19 test, and we were granted emergency use authorization on March 19. While our departure from our typical approach in addressing infectious diseases with Syndromic, our multiplexed panels, we developed our ePlex COVID-19 test to detect only the SARS-CoV-2 virus. We chose this path to provide a test to our customers as quickly as possible in case this new coronavirus strain rapidly spread around the world. And as we all know, that's exactly what happened with a global pandemic being declared on March 11.
So what we designed as a stopgap measure for our existing respiratory customers has become an important part of the fight against COVID-19. In our earnings pre-announcement, we highlighted that our COVID-19 test was a key driver in 80% of placements in the first quarter. While our installed base grew by 54 analyzers, our commercial teams has placed 109 analyzers on a gross basis. But we repositioned 55 previously placed analyzers to fulfill orders and provide access to COVID-19 testing to as many customers as possible.
It's important to note that we evaluated placement opportunities based upon their potential to drive enduring and recurring revenue streams from our respiratory pathogen and blood culture ID panels, not just COVID-19 testing. About half of the 55 repositioned analyzers would have been addressed throughout the year from customers who had decided not to complete their ePlex implementations. The other half was opportunistically driven by our commercial team and were from customers that had begun the implementation process but were delayed due to shifting priorities or resource constraints including the impact of COVID-19.
We intend to circle back and reengage with these customers in the future. The results of these actions was that our team plays ePlex analyzers with more than 40 new customers and we finished the first quarter with 581 ePlex analyzers placed at customer sites. Total revenue was $38.7 million an increase of 80% versus the first quarter of 2019. ePlex revenue was $34.3 million, up 119% from prior year period.
Our COVID-19 test drove a modest amount of revenue in the first quarter, representing approximately 5% of overall ePlex revenue. A much more significant driver of a first quarter revenue growth was increased demand for our respiratory pathogen panel. Our customers typically utilize our RP panel first and if negative reflex to our ePlex COVID-19 test. This is what we envisioned when we decided to develop this single-target test. However, as the disease rapidly spread and there was a shortage of COVID-19 tests globally, we saw a higher than expected demand for a COVID-19 test which has continued in the second quarter. Our development teams are now focused on incorporating our COVID-19 assay into our existing 20-target RP panel with expectations for a June launch.
This updated syndromic panel is consistent with our strategy to engage diagnosis of critically ill patients providing as much information as quickly as possible. Once completed, our updated RP panel include five strains of coronavirus as SARS-CoV-2 join the four other strains already on the ePlex RP panel. We previously announced part of funding for up to $749,000 in support of this development work.
Although, the COVID-19 pandemic was a key focus for GenMark and our customers, we still achieved some important success with respect to adoption of our BCID Panels. During the quarter, 13 customers completed their implementations and went live on 25 BCID panels. While not as many as we had originally planned, we are happy with this level of progress considering the impact of COVID-19 on priorities and resources. We have incorporated our current BCID adoption expectations along with increased respiratory and COVID-19 testing volumes in the revenue guidance disclosed today.
In parallel, we are continuing to make progress on our GI Panel development. However, we are prioritizing our production capacity for on-market panels, including COVID-19 and the development work on our updated RP Panel, I previously mentioned. Depending on the duration of the elevated demand for both RP and COVID-19 tests, we could experience some GI development delays with modest impact to our goal of beginning clinical studies by end of the year. I will provide additional updates on future calls.
On our last call, I highlighted three key priorities for 2020 which were; one, strong revenue growth; two, making significant steps toward cash flow positivity through gross margin improvement and operating efficiencies; and three, menu and technology development. In spite of a profoundly different environment that existed in early March, these goals remain intact and we have made significant progress in the first quarter. In fact, the updated guidance ranges that Johnny will cover highlight that we have fast forwarded about a year ahead of our prior expectations across many metrics. Because of the very strong placement and revenue growth, we had accelerated our manufacturing capacity expansion efforts which were originally scheduled for 2021. We'll provide much more information on capacity expansion as appropriate.
Before I hand it over to Johnny I wanted to thank all those involved in fighting this pandemic. First responders, healthcare workers, as well as our employees and our suppliers have worked tirelessly to help those in need.
We are proud to have played a part in this battle. Johnny?
John Frederick Ek -- Chief Financial Officer
Thank you, Scott. As Scott mentioned, our first quarter financial results demonstrate the value of the ePlex system in providing critical solutions to our customers and patients. In the first quarter of 2020, total revenue was $38.7 million, an increase of approximately 80% versus the first quarter of 2019 with ePlex growing by 119% compared to the prior year.
Sales to US customers continue to represent the vast majority of our revenue. The impact of the COVID-19 pandemic drove an increase in the number of total tests run per installed analyzer in the first quarter for both our existing respiratory panel and the newly developed SARS-CoV-2 test, which drove an average annuity per ePlex placement to $214,000, a 29% increase in annuity over the first quarter of 2019.
First quarter gross profit was $16.2 million or a gross margin of 42% of revenue versus $5.9 million or 27% of revenue in the first quarter of 2019, representing an increase in gross profit contribution of $10.3 million or 15 points of gross margin, reflecting steady progress toward our goal of 60% gross margin over the next two to three years.
The gross margin expansion has been driven by strong manufacturing yields and record production volumes to support our first quarter sales. We expect the ongoing initiatives related to direct material reduction and manufacturing process improvements over the next several quarters to provide continued gross margin progress.
Total operating expenses were $21.2 million for the quarter, representing an increase of $4.4 million compared to the first quarter of 2019. However, included in the first quarter expenses were $4.6 million in one-time charges related to certain organizational changes made in January, including the departure of the former CEO. Excluding these nonrecurring expenses, we approached operating breakeven in the first quarter with an operating loss of approximately $400,000.
Our net loss per share for the first quarter of 2020 was $0.12, representing an improvement of $0.09 from the first quarter of 2019. After excluding the nonrecurring charges that I mentioned previously, non-GAAP net loss per share in the first quarter of 2020 was $0.04 or an improvement of $0.17 per share from 2019.
Moving to the balance sheet, we ended the quarter with $47.1 million in cash and investments. We used approximately $7.6 million of cash in operations during the first quarter, due mainly to a net increase in accounts receivable of approximately $9 million resulting from the timing of sales during the quarter.
The use of cash and working capital was partially offset by cash inflows from financing activities through the sale of $2.2 million worth of shares under our ATM. Additionally, we achieved the revenue milestones under our existing credit facility which has extended the interest-only period on our $70 million term loan until March of 2022.
Turning to 2020 expectations, we previously announced an increase to our full year revenue guidance to $112 million to $122 million. We are further increasing the revenue guidance to a range between $120 million and $130 million. This update is based on greater visibility that we now have into how the second quarter is shaping up including the volume of COVID-19 and RP testing coupled with the expected volumes that we anticipate will come from the ePlex systems placed so far in 2020.
We expect these revenues to be partially offset by the impact of revised timing of system go-lives as a result of external and internal resource constraints due to COVID-19. We are also increasing our annual ePlex placement guidance to 175 to 200 analyzers and maintaining our average annuity per analyzer of $130,000 to $135,000.
Additionally, we are increasing our full-year 2020 gross margin guidance to be in the 38% to 40% range, while operating expenses are expected to remain unchanged at approximately $65 million to $70 million for the year. As a result of the increases in revenue and gross margin guidance, we now expect operating cash usage for 2020 to be between $5 million and $10 million. Our first quarter and expected full-year results demonstrate a rapid acceleration on our path to operating cash flow positivity.
This concludes our prepared remarks. So at this time, Scott and I would like to open the call for your questions.
Questions and Answers:
Operator
Your first question comes from the line of Doug Schenkel with Cowen.
Doug Schenkel -- Cowen and Company -- Analyst
Hey. Good afternoon, guys, and thanks again for all you're doing to move things along and playing a role in helping diagnostics in the crisis. My first question is just regarding some recent positive developments over the past several days for the use of respiratory syndromic panels, specifically on the reimbursement and ordering side. These include CMS issuing an interim policy that seemingly allows any healthcare professional to order tests that simultaneously assay flu and COVID-19 and then also organizations such as AMP and CAP advocating for Medicare national coverage decisions for respiratory panel tests.
What's your view on these developments? And what steps are you taking to meet demand for broader in and outpatient use heading into the fall? And in answering that question, I don't want to limit you. I'd like to hear any color you're willing to provide. But specifically, I'd love it if you were willing to address whether or not you see a path to be able to produce more than 100,000 tests per month.
Scott Mendel -- Interim President and Chief Executive Officer.
Sure. Thanks, Doug. As far as reimbursement goes in the developments along the reimbursement front, to-date, reimbursement has not been in any conversations that we've been having. It's really been around our ability to supply tests and to supply as many tests as possible to deal with the pandemic.
Certainly, positive reimbursement rates would be a help and we welcome that and I think it reflects the fact that we need to bring as much technology, as much diagnostic solutions to market as possible and starting to demonstrate that there's a broader understanding of the value of our diagnostic solutions whether it's inpatient or outpatient testing. So I treat that as a positive. I view that as a positive, Doug. I'm sure similar to what you think.
From a capacity perspective, whether we are supporting -- supplying inpatient or outpatient, it is a key focus. So it's very interesting to note that like I've said in my prepared remarks, within really a month time frame, we've jumped quite a bit ahead into levels of ePlex consumable sales that were really projected for 2021 time frame.
So we've already secured a facility that -- an additional facility, and we are ordering equipment to build another two lines. That typically takes somewhere in the nine-month time frame, but we've been able to accelerate some of the longer lead time items, and we feel that we'll be able to have additional capacity on line, meaning producing ePlex consumables toward the end of this year.
Between here and the end of the year, Doug, we are focused on process improvements that should generate another 20% or so of additional production capacity across our existing line. So that's process improvement, value stream mapping, just some tweaks here and there that our manufacturing teams are implementing which we believe will yield approximately a 20% or so improvement on our capacity between here and getting another line up and running.
Doug Schenkel -- Cowen and Company -- Analyst
Okay. That's super helpful. And maybe building off of that, I mean, we estimate ePlex consumable gross margin increased into the high-30s in the first quarter, up from the low-20s in Q4. Are we in the right neighborhood? And if so, if you're already in the high-30s, did you think about increasing guidance for the year to more than 38% to 40%, and is it possible you actually exit the year above 40% ePlex consumable gross margin?
I ask this as a follow up because I wonder if part of the reason you didn't get more aggressive is exactly what you just described, just some of the inherent error bars around what happens when you add new lines.
Scott Mendel -- Interim President and Chief Executive Officer.
I'll handle it and Johnny can jump in if I miss anything. Our math was probably in the mid 30% range from an ePlex perspective, ePlex consumable perspective. As far as how we progress through the rest of the year and our guidance, we married our guidance up with our best estimates of revenue and the mix of that revenue, Doug.
So one of the things to think about is as we move into the second quarter and we're seeing the flu season drop off, the mix is shifting slightly within ePlex toward the COVID stand-alone test only which is a slightly lower price point. There's a little bit of margin headwind that we are feeling and factoring in, in Q2. And then, as far as the rest of the year we try the marriott to the best of our abilities to how we think the mix will change throughout the summer months and then back into the back half of the year. And we'll continue to monitor that as regressed.
I would say it's less impacted by the additional capacity as that comes on the back half of the year, we of course would have to absorb that overhead. With that overhead, the additional overhead costs are amortized over quite a long period of time as far as the machinery lies and/or the facility term. So that's probably less of an impact and it's more of us just trying to estimate and calculate the mix of revenue through the upcoming quarters correctly.
As far as our exit rate, you're exactly right. We had communicated, we wanted to exit 2020 at a 40% gross margin on ePlex. And yes we've made significant progress here in the first quarter and that sets us up nicely to achieve that. If not, the ability to update that as we move through the year again.
Doug Schenkel -- Cowen and Company -- Analyst
Okay. Super helpful. One last one just building off of my original question and some of those observations that I noted. As we look ahead and start to think about the next normal, have you heard anything that would suggest some of the recent ordering and reimbursement changes that are being put in place could have some durability or is it just too early to have those discussions given how rapidly things are evolving?
Scott Mendel -- Interim President and Chief Executive Officer.
It's probably a bit early. But what we do know, it's critical for us to have enduring revenue streams or two things. Number one, it's to get the SARS-CoV-2 virus included on our syndromic panel. That is our strategy. That's our investment thesis and that's what we think is really important to address the upcoming flu season. There's been a lot of discussion around the upcoming flu season going to probably be a little bit more elevated than typical and definitely we'll need to incorporate this new strain of coronavirus.
So, that's been our approach to trying to figure out what the "new normal" is. Regardless of what level volumes, we know that it's imperative that we have this new strain on our syndromic panel so that we can address the most critically ill patients.
And again, as far as reimbursement goes and whatnot, I think that just -- it depends on how we want to approach it, but for right now, we're staying focused on the inpatient segment. There are other technologies and solutions that are more positioned toward point of care and outpatients versus ePlex.
Doug Schenkel -- Cowen and Company -- Analyst
Okay. It makes sense. Thanks again.
Scott Mendel -- Interim President and Chief Executive Officer.
Thank you.
Operator
Your next question comes from the line of Brian Weinstein with William Blair.
Brian Weinstein -- William Blair -- Analyst
Hey, guys. Good afternoon. Thanks for taking the questions. First, can you talk a little bit about ePlex placements that were sold versus actually just placed in? Within that, can you discuss where they're being placed and what type of institutions you're seeing and what that means for potentially longer-term utilization of the system?
Scott Mendel -- Interim President and Chief Executive Officer.
Sure. So from a placement perspective, important to remind everyone that about 80% of the placements were driven by interest in COVID-19. But that's now how we determine what opportunities we prioritize. We did prioritize them based upon the ability to generate revenue beyond COVID-19 testing, whether that be respiratory, panel testing or a bloodstream infection or a combination of both which was actually most common.
For the placements that we did in the first quarter, it actually was very much tilted toward capital. So we sold somewhere around 80% of the placements in the first quarter which is quite a bit higher than what historical norms have been. We've historically sold somewhere in the 20% to 30% of instrument placements.
As far as the type of customers, very much typical to what we've done in prior quarters across all different sizes of hospitals, usually in a 200-bed hospital and above. And we did do some additional business with existing customers, especially some of our customers in the New York area and along the West Coast as well as they were particularly impacted by the COVID-19 pandemic.
Brian Weinstein -- William Blair -- Analyst
Okay. And then how are you positioning just kind of in the market given the higher price point that you guys have versus others for a COVID-19-only product? I mean, when -- is this being used more with labs that really don't have other options but ePlex, or how is it being prioritized or utilized when there are labs that might have additional testing options that have a lower price point?
Scott Mendel -- Interim President and Chief Executive Officer.
Yeah. Brian, that's changed over time. So at the beginning, because we were one of the very first on the market, it was certainly used. Any time that we could supply tests to our customers, they would utilize it. And that's evolved as we move into the April time frame and then certainly more recently, you're seeing additional supply of single-target test, our low-plex tests come on to the market and so that's changed some of the priorities or some of the ways that our customers are utilizing our testing, and we factor that appropriately into our guidance.
As I said in my prepared remarks, in spite of there being additional supply, there's not enough right there and wants to be -- there needs to be a lot more testing capacity than currently exists, even though it is on the rise. And so, we have still been selling quite a bit of our COVID-19 test in spite of the fact that it is priced slightly higher than other solutions.
Brian Weinstein -- William Blair -- Analyst
And there's been no pricing change on that, your pricing is still what was discussed previously?
Scott Mendel -- Interim President and Chief Executive Officer.
Correct. There's been no pricing change.
Brian Weinstein -- William Blair -- Analyst
Okay. Then the last one for me, can you talk about the NP versus the standard six-bay and how the placements were with respect to that? And I'm curious, are there any plans for the three-bay NP system or maybe even a single-bay system to be able to get even closer to the patient to help with things like doing pre-surgical checks back to office?
I know you answered Doug's question by saying there were other products that might well be better suited for more point of care and I'm not necessarily talking about true point of care but getting closer to patient. Would the NP be able to solve some of that or are there any plans for that?
Scott Mendel -- Interim President and Chief Executive Officer.
Yeah. So, the NP is typically utilized outside the US where the tends to be smaller testing volumes and then also inside the US, where maybe they are small-bed sized hospitals, etc. No major change in ratio of towers, mix of towers NP versus a six-bay tower, Brian and certainly, it didn't skew our results in any fashion.
As far as addressing surgical centers or other areas that would require a lower throughput instrument. That's certainly one of the reasons we came up with the configuration for six-bay and so that's how we can serve both low-end, lower volume hospitals but also other opportunities. Right now we are not clear waved and we don't have any immediate plans to do that although we do think our workflow could facilitate achieving a clear waiver which would potentially allow us to go into those types of opportunities more rapidly. But again, our primary focus is continue to build our own menu and sticking to the inpatient setting for the for the near term.
Brian Weinstein -- William Blair -- Analyst
Okay. Thank you.
Operator
Your next question comes from the line of Max Masucci with Canaccord Genuity.
Max Masucci -- Canaccord Genuity -- Analyst
Hi. Thanks for taking the questions and thanks for all of your efforts in fighting the pandemic. So I just wanted to confirm from the prepared remarks that you expect to have the next gen RP panel with SARS-CoV-2 target added by June. And then would the addition of the single target cast onto the next gen RP panel. Will that free up an extra you know say 5% 10% or 15% of the manufacturing that's currently dedicated to the single target test?
Scott Mendel -- Interim President and Chief Executive Officer.
Good question. So the -- you are correct, target is to have the RP version 2 panel which includes SARS-CoV-2 on market in June and we are pleased with the progress the teams have been making to make that happen. And as far as how much capacity that will potentially free up, it depends how quickly customers are utilizing that single target task. We want to move to RPV II. Our assumption is many will want to do that, but we need the time that with their needs as well. We want to make sure we continue to satisfy their demand. And if that means that they can't move over right away, we can take that in consideration obviously.
But if it goes according to probably our estimates, it's probably in that 10% to 20% free up of capacity with a -- estimating how many would move over to the RP version 2 and therefore free up line space because you're not billing two separate tasks. So probably that's about right, 10% to 20%.
Max Masucci -- Canaccord Genuity -- Analyst
Great. All right. So maybe another bigger picture question. So I guess how is the company's competitive positioning and specifically ePlex's value proposition change versus other multiplex infectious disease competitors under the current environment? And what's different on the other side of the pandemic? And if you could just touch on some of the competitive dynamics that will determine the sustainability of the elevated utilization you've been seeing in RP in the near term, that would be great.
Scott Mendel -- Interim President and Chief Executive Officer.
Sure. So from a multiplex molecular standpoint, the competitive landscape really hasn't changed all that much other than I believe it showcased molecular diagnostics as a total and, I think, created additional awareness on the importance of managing infectious disease through having very strong diagnostic solutions in place as opposed to waiting for a pandemic to happen.
So I think those are all positives for the general molecular diagnostics industry. And then for multiplex molecular, I think it also has benefited from the increased awareness. As far as the enduring revenue streams and how we have positioned our company for future growth, I think the most important thing that the COVID-19 has done for the company is, it's really allowed us to very rapidly expand our footprint.
So, as I've mentioned, we secured 40 brand new customers to GenMark within one quarter. I've talked about the number of placements as well. And that really helps the progression against our business model because we're a recurring revenue stream business. So, getting those placements out there and then to your question getting them utilized not just on respiratory but on BCID helps drive that annuity stream. And those two things combined are very valuable for us as a company.
And so, that's the real importance of COVID-19 creating the awareness, number one, for the general industry, but number two, allowing us to very rapidly increase our footprint that drives recurring revenue streams in the future.
Max Masucci -- Canaccord Genuity -- Analyst
Great. I will leave it there and congrats on the current appointment.
Scott Mendel -- Interim President and Chief Executive Officer.
Thank you.
Operator
[Operator Instructions] Your next question comes from the line of Mike Matson with Needham & Company.
Mike Matson -- Needham & Company -- Analyst
Hi, thanks. So, I just want to start the guidance for annuities. So, why isn't that higher just given how strong your annuity was in the first quarter given the trends that you're seeing from the pandemic here?
Scott Mendel -- Interim President and Chief Executive Officer.
Yeah. Thanks. So, really to think about that annuity is kind of the outcome of the increased revenue guidance and the placement and the guidance that annuity changes quarter-over-quarter. We had a strong annuity in Q1. Naturally, we see that annuity come down in Q3 and really just averaging across that year. We think that annuity is reasonable, the guidance that we have given the revenue and placement.
Mike Matson -- Needham & Company -- Analyst
Okay. And then when you launched the new panel that will have launch the new panel that will have the COVID test buil in in the respiratory panel, are you going to continue to sell the old panel and what will your pricing strategy be? Will you maybe sell both but then have a higher price for the COVID -- the panel that includes COVID-19 test?
Scott Mendel -- Interim President and Chief Executive Officer.
Hi, Mike. It's Scott. I'll answer that one. So from a transition perspective, we'll work very closely with our customers and make sure we are understanding what their needs and requirements are. Ideally for -- if it was all up to us, we would rather move everybody over to RPV2 as quickly as possible.
It goes back to that question earlier on frees up capacity for us. It makes it a bit easier for us to address the demand levels that we're seeing. So, well, our preference is to move everybody over, but we'll certainly work very closely with our customers to make sure we're addressing their needs.
As far as pricing goes, really good question. Certainly, the RPV2 panel delivers more value because it adds the coronavirus strain to the existing panel and therefore labs don't have to run separate panels, especially as you get into flu season and you're going to want to test for all the other types of respiratory illnesses as well as SARS-CoV-2.
It does eliminate costs from hospitals from running two different tests. And therefore since it's delivering higher value and essentially eliminating costs, it should be at or above our current pricing levels from our perspective. So, we haven't announced pricing yet, but our position would be, it should be at or above current pricing levels.
Mike Matson -- Needham & Company -- Analyst
Okay. Great. That's all I have. Thank you.
Scott Mendel -- Interim President and Chief Executive Officer.
Thanks, Mike.
Operator
Your last question comes from the line of Tycho Peterson with JP Morgan.
Casey -- JP Morgan. -- Analyst
Hi, guys. This is Casey [Phonetic] on for Tycho. Congrats on the quarter. Most of my questions have already been answered, but maybe just one last one here. Can you provide some color on what exactly the reimbursement level is for the COVID-19 assay under the DRG code? And then, maybe if you can talk a little bit about the reimbursement landscape for the RP Panel now versus when the SARS-CoV-2 bio target is added if that would change at all. Thanks.
Scott Mendel -- Interim President and Chief Executive Officer.
Sure. So, from a reimbursement rate perspective, the reimbursement for the COVID-19 tests is $51 currently, and that's on an outpatient basis. As far as DRG, it's covered underneath the entire DRG, so it's not a specific necessarily reimbursement rate. So, I just want to make sure we're clear on that. The $51 is for outpatient. And so, that's what the current reimbursement rates are. And again, we'll have to see how it all plays out as far as RP2 and if they make any other suggestions for reimbursement adjustments.
Casey -- JP Morgan. -- Analyst
Okay. Thank you.
Operator
There are no other questions. I would now like to turn the call back to Scott Mendel, CEO.
Scott Mendel -- Interim President and Chief Executive Officer.
Well, thank you all for joining us this afternoon and thanks for your continued support. We look forward to updating you on our progress in the near future. Have a good day.
Operator
[Operator Closing Remarks]
Duration: 37 minutes
Call participants:
Leigh J. Salvo -- Investor Relations
Scott Mendel -- Interim President and Chief Executive Officer.
John Frederick Ek -- Chief Financial Officer
Doug Schenkel -- Cowen and Company -- Analyst
Brian Weinstein -- William Blair -- Analyst
Max Masucci -- Canaccord Genuity -- Analyst
Mike Matson -- Needham & Company -- Analyst
Casey -- JP Morgan. -- Analyst
