Genmark Diagnostics Inc
Q1 2017 Earnings Call Transcript

Published: 3 May 2017

[Operator:]

Welcome to the GenMark Diagnostics 2017 First Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded today Tuesday, May 02, 2017. I’d now like to turn the conference over to Mr. Johnny Ek of GenMark. Please go ahead.

[Johnny Ek:]

Thanks, Bridigit, and thank you all very much for joining us today. Before we begin, I would like to inform you that certain statements made by GenMark during the course of this call may constitute forward-looking statements. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements. For example, statements concerning our 2017 financial guidance, the development, regulatory clearance, commercialization and futures of new products, plans and objectives of management and market trends are all forward-looking statements. We believe these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future results expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in GenMark’s filings with the SEC. GenMark assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. I will now turn the conference call over to Mr. Hany Massarany, President and CEO of GenMark. Hany?

[Hany Massarany:]

Thank you, Johnny, and good afternoon, everyone. I’m joined on the call today by our CFO, Scott Mendel; as well as our Founder and Senior VP of R&D, Dr. Faiz Kayyem. And as usual today we have a few prepared comments, and then we will be happy to respond to any questions that you might have. Our prepared comments will cover the following topics. First, I’ll provide an overview of our performance in the first quarter of 2017, including a general update on the progress of our ePlex program. Then Scott will walk us through our operating results for the quarter. And, finally, Faiz will provide more specific details regarding the ePlex menu both in terms of panel performance and development efforts. So let’s start with a high level review of our performance in the first quarter. Our U.S. and European commercial teams delivered excellent results in Q1. We grew our revenues by 13% compared with the first quarter of 2016. ePlex contributed to Q1 top line, most of the revenue came from our installed base of XT-8 analyzers in the USA. Our ePlex commercialization effects in Q1 remained highly effective and we’re very pleased with the incremental customer commitments that we obtained during the quarter. As you know from our recent press release, we finished the first quarter with over 70 agreements or more than 100 ePlex instruments, many of which we already installed in customer sites. Ramping up ePlex placements and revenues in Europe, as well as driving a successful launch in the USA, will remain significant areas of focus and priority for this year. As you also know from our recent press release, last month we achieved CE Mark for the ePlex Blood Culture ID Fungal Pathogen Panel. The first panel in ePlex sets a solution, which will soon also include the Blood Culture ID gram positive and gram negative panels. We are delighted to have accomplished this important achievement, which demonstrates the capacity of the ePlex system and our underlying technologies across multiple [indiscernible] panels and sample types. We’re excited about our three panel approach to sepsis testing, which will provide the broadest pathogen inclusivity and drug resistance markers of any multiplex molecular solution on the market today and based on multiple internal and external studies. We’re very pleased with the performance of all three Blood Culture ID panels. Furthermore, our regulatory and clinical affairs teams have been working closely and very collaboratively with the FDA in relation to our 510(k) submissions for the ePlex system and RP Panel. We have closed out all of the questions raised by the agency during the review process and we anticipate FDA clearance soon. Since our last update, we’ve made significant progress in relation to ePlex cartridge manufacturing yield. We’ve completed the in-sourcing and transfer of key cartridge subassemblies and we’re very pleased with the high quality of product that we’re shipping to our customers. Furthermore, we remain on track to complete the installation and validation of the additional ePlex cartridge manufacturing line by midyear, which we expect to more than double our production capacity. As we expected 2017 is shaping up to be a pivotal year for our company. Building on our strong Q1 performance, we expect to successfully launch ePlex in the USA and drive its continued adoption and business success in the European and U.S. markets, while of course also continuing to support our FDA business. Accordingly we are reiterating 2017 revenue guidance in the range of $65 million to $70 million with gross margin in the range of 48% to 52%. And with that, I will now hand over the call to Scott Mendel. Scott?

[Scott Mendel:]

Thank you, Hany, and good afternoon, everyone. We issued our financial results prior to this conference call, and will be filing our Form 10-Q shortly after the call is completed. As Hany mentioned, first quarter 2017 revenue increased 13% to $12.5 million compared to the first quarter of 2016. ePlex contributed to first quarter revenue, however XT-8 accounted for the vast majority of the $12.5 million generated. This means that while we have agreement for more than 100 ePlex analyzers, majority of these analyzers will begin contributing revenue in future quarters. At installations, validations and testing volumes begin to accelerate during Q2, especially after FDA clearance. So while we are pleased with the number of agreement secure to-date the positive financial impact of our commercial success is in front of us and it will talk about in a few minutes, we have already invested in much of the materials and inventory needed to convert these customer agreement into revenue and cash. Before I move onto margin, I’m pleased to report that annuity per XT-8 analyzer in the first quarter was approximately $72,000 up 3% versus prior year. And the average annuity per XT-8 analyzer over the last four quarters remains in the mid $70,000 range. Gross profit for the first quarter of 2017 was $6.2 million, or 49% of revenue versus $6.7 million in the first quarter of 2016, which was 60% of revenue. Gross margin was in line with our expectations and reflect the impact of ePlex overhead costs relative to the current level of ePlex cartridge volume. As discussed on our previous earnings call, we expect to exit 2017 with gross margin in the low to mid 50% range reflecting multiple ePlex panels on market in Europe as well as ePlex RP on market in the U.S. with typical flu season demand. We continue to expect full year 2017 gross margin to be in the 48% to 52% range. Total operating expenses were $19.7 million for the quarter, an increase of $300,000 compared to the first quarter of 2016. Sales and marketing expenses were $4.7 million, up $1 million versus prior year, primarily driven by an increase in employee-related expenses as well as marketing expenses in support of ePlex commercial launch. Research and development expenses were $11 million, a decrease of $1.2 million, reflecting reduced ePlex instrument development expenses partially offset by an increase in cost for developing additional panels. And finally, general and administrative expenses were $4 million in the first quarter, an increase of $590,000 versus the prior year period, primarily driven by employee-related expenses. During the first quarter, we recorded $500,000 of interest expense related to our debt facility. Our net loss per share for the first quarter was $0.30, with weighted average shares outstanding of approximately $46.8 million. Net loss per share in the same quarter of 2016 was also $0.30 per share when weighted shares outstanding were approximately $42.7 million. Moving on to our balance sheet, we ended the quarter with $24.2 million in cash and investment. The amount of cash used during the first quarter reflects several factors that we do not anticipate repeating in Q2. Specifically, working capital used during the quarter was driven by a large increase in our inventory balance and anticipation of FDA clearance ePlex in the U.S. and a growing number of customer agreements. The majority of the $9 million of inventory in our balance sheet is related to ePlex instruments and raw materials for cartridges. In fact, we’ve secured enough instrument inventory to satisfy nearly all the agreements Hany mentioned in his comments. As we begin to accelerate ePlex installations in the U.S., while continuing to expand the installed base in Europe, we will be converting this inventory into revenue and shortly thereafter cash. In addition to the increase in inventory during the first quarter, timing of several large payments to key suppliers or may just prior to the end of the quarter driving our AP balance below typical levels, which we expect will return to more typical levels of AP during Q2. Therefore, we expect the change in working capital to be a source of cash during Q2, as we convert our ePlex inventory into cash and manage inventory and accounts payable balances to more typical levels. And that’s we anticipate Q2 cash used and operating activities to be significantly reduced versus the first quarter results. Finally, we continue to have up to $20 million available under existing debt facility to supplement our existing cash balance. $15 million of this amount becomes available to the company upon FDA clearance of ePlex with an additional $5 million on a revolver. And with that, I’ll turn the call over to Faiz to provide additional details regarding ePlex. Faiz?

[Faiz Kayyem:]

Thank you, Scott. As you know, we submitted our 510(k) application for the ePlex system and RP Panel to the FDA in December and have been in productive dialogue with the FDA since then. We expect to receive clearance to market to ePlex system and RP Panel very soon and we’re preparing for the U.S. launch accordingly. Meanwhile, we’re pleased with the performance of the RP Panel an external settings in the U.S. and Europe. We’ve seen good concordance with market leading in vitro diagnostics assays and external studies in the U.S. and with laboratory developed tests in Europe. The first of these studies was recently published in a well regarded peer reviewed journal, The Journal of Clinical Microbiology. In that journal, ePlex, RP was compared to a well established assay at two centers in Europe. The authors noted the excellent performance of the RP Panel in comparison to real time PCR assays with 97.4% concordance across 464 pathogens. The author is also highlighted the ease of use, less than two minutes hands on time and benefits of our random access instrument for testing stat samples. Similarly, through posters and presentations in Europe and the U.S., ePlex users continue to provide positive feedback about our unparalleled user experience including simple workflow, ease of use, LIS connectivity, and data analytics capabilities. Also based in part on the manufacturing yield improvements mentioned earlier and on the in sourcing of various subassemblies and processes, we’re pleased to be driving menu expansion beyond RP. As Hany noted earlier, we recently announced the CE Mark for our Fungal Pathogen Panel and introduce this product at the ECCMID Meeting last week. As scientific symposium at the conference one of our alpha sites presented data on the use of the BCID panels, including the Fungal Pathogen Panel on clinical samples. This preliminary data set showed 100% concordance to the standard of care method for the FP Panel with results available more than 24 hours earlier. GenMark’s FP Panel is a unique product in the market as it will offer the broadest organism coverage of any rapid molecular diagnostic. Many of the additional organisms included in our panel are emerging pathogens and are associated with resistance to common frontline antifungals. The fungal panel has a potential for high clinical impact, as fungal pathogens are growing cause of bloodstream infections and typically have a higher mortality rate than bacterial infections. Fungi and yeast can also be difficult and slow to culture using traditional methods making rapid accurate molecular methods even more impactful by getting actionable diagnostics information to the positions faster. With the goal reducing both mortality and cost of care for extremely deadly and costly conditions. Complimenting our BCID Fungal Pathogen Panel, the BCID Gram Positive and Gram Negative panels are on track for CE Mark this quarter, and we’ve been preparing to complete FDA studies and submissions in the second half of this year. These BCID panels includes targets that are difficult to grow and several rule out targets to guard against contamination. In addition, these panels have safeguards against misses in gram staining and the ability to detect mixed co-infections. Our ePlex BCID panels will provide the sensitivity and breadth of coverage required for Blood Culture ID, while at the same time delivering rapid pathogen identification and antibiotic resistance information as well. We believe our offering will be unique in the space and we’re very excited to launch these assay soon. I look forward to updating you on the blood culture family of test and other assays in the future. I will now turn the call back to Hany for additional comments before we open up the call to questions.

[Hany Massarany:]

Thank you very much, Faiz. Q1 was another quarter of strong performance for our company. Our commercial teams delivered excellent results and we expanding sales forces in the USA and Europe, together with growing global funnels of ePlex opportunities, we’re very optimistic about achieving our projected goals for 2017 and beyond. We’re delighted to have recently obtained CE Mark for the ePlex, Blood Culture ID, fungal panel and we continue to make excellent progress with the Gram Positive and Gram Negative panels, which we also expect to launch in Europe during the second quarter. The FDA’s reviews of our recent 510(k) submissions are progressing well and we expect to receive FDA clearance for U.S. launch of the ePlex instrument and RP Panel in the near future. And we’ve made excellent progress with our initiatives to improve capacity and yield and we feel confident that we can fully support growing customer demand as well as our internal menu development programs. We will now open the call to questions. Thanks.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Tycho Peterson with JPMorgan. Your line is open.

[Tejas Shah:]

Hey, guys. This is Tejas Shah on for Tycho. Thanks for taking the question. First of all, can you just give us an update on any shift in the competitive dynamic that you’re seeing from some of your peers in Europe, particularly as the ePlex ramps?

[Hany Massarany:]

All right. Thanks very much for the question. We continue to see lab developed tests used in Europe and while we’re gaining a lot of traction in the European market in various countries in Europe. We also are aware that customers are looking at alternative commercial products and solutions. Even if the majority of testing in Europe continues to be done using lab developed tests.

[Tejas Shah:]

Got it. And then Hany, are you seeing any dynamic where customers are holding off on purchases a little bit, pending approval of the other two blood panel. And do you expect a little bit of a catch up and orders once that happens post 2Q.

[Hany Massarany:]

Well, as you know we have not yet launched ePlex in the U.S. market. And we expect to be doing that very shortly after we receive FDA clearance. We have significant demands in the U.S. and very for funnels we have customer agreements already in place. And we’ve install a small number of systems in key early adaptor size. But we expect to significantly accelerate commercial activities and installing systems et cetera, post FDA clearance in the U.S. In relation to the Blood Culture ID panels, we haven’t sort of experienced customers waiting or delaying their decisions until they see all three panels available, of course they would like to have all the three panels and based on progress with the other two and the recent launch of the fungal panel customers in Europe are comfortable with the progress we’re making and in a context of their decision making process. And as you know as a result, we now have customer agreements for in excess of 100 ePlex analyzers globally.

[Tejas Shah:]

Got it. And then one final one for me, can you share some color in terms of the conversations you’re having with your U.S. funnel. I know the bulk of the focus for you, you’d said in the past is mainly new customers rather than upgrades from the XT-8. Has that changed at all and perhaps if you can share some color on how those conversations before that will be great.

[Hany Massarany:]

Yes, absolutely. We obviously continue to be very close with our XT-8 customers. And in some cases we expect to upgrade XT-8 placements to ePlex systems. We’re already working with those customers that are interested in doing that. And in some cases we expect that the ePlex and the XT-8 systems will co-exist in a certain number of customers, because of the differences in the menu offered on both systems. Of course, our main focus is on new customers, those customers who are not able to use the XT-8 system, because they don’t have the molecular especially sample prep capabilities. And we’re making very good progress in that segment as well.

[Tejas Shah:]

Got it, thanks so much.

[Hany Massarany:]

Thank you.

[Operator:]

Our next question comes from the line of Brian Weinstein with William Blair. Your line is open.

[Brian Weinstein:]

Hey guys, how are you. Thanks for taking the question. Starting with manufacturing, it was a good update, and I appreciate that. I just want to confirm, are you guys confident that you will be able to meet all demand and have sufficient cartridges for the U.S. respiratory launch also considering that you’re going to be doing clinical trials on Blood Culture ID. I just want to just got that down. Thanks.

[Hany Massarany:]

Yes. Thanks, Brian. And yes, we do. We had to very confident. We have made significant progress actually since the last update. And as Scott mentioned in fact we are building inventory in advance of FDA clearance, so that we’re prepared for the launch. We’re being very careful in terms of obviously marketing ePlex in the U.S. before we receive FDA clearance, but we feel confident that we’ll have the products, the instruments and cartridges required to support a very successful launch in the U.S. We are very happy with the quality of the cartridges the products that we’re producing, including and Faiz is sitting right across from me smiling because his assay development teams are receiving all of the cartridges that they require to drive menu expansion, especially as you know with Blood Culture ID panels, which we’re expecting to achieve CE Mark this quarter for both the gram-positive and gram-negative panels.

[Brian Weinstein:]

Its always good when Faiz is smiling. So I’m happy about that. And as far as the way that we’re thinking about modelling here, when do you think instruments need to be placed and validated in your view for the respiratory season in order to have them included in terms of being able to contribute to the season this year in terms of our models.

[Hany Massarany:]

Thank you. Yes, it’s a good question. And we mentioned before Brian, that our experience with ePlex so far leads us to believe that actually the time required to install, validate and train on ePlex is significantly shorter than what we’re at custom to with the XT-8 system, because of the obvious sort of automation and integration of all the steps from extracting the sample all the way to reporting results. So we feel good that we have a number of months between now and the beginning of the 2017, 2018 flu season in the Northern Hemisphere and we feel confident that that gives us enough time to install and bring up to speed. The customers that will be ready to utilize ePlex routinely in the flu season.

[Brian Weinstein:]

Okay, great. And last one for me I believe you guys talked about in R&D numbers somewhere in the mid-30s this year coming out of Q1 you put up R&D of just over a 11s, so obviously turning above that. Is that just timing of stuff or is there an expectation that maybe if that that R&D could be a little bit higher than what you guys originally anticipated for the year? Thank you.

[Scott Mendel:]

Yes. I’ll take that one. R&D did went a little bit higher in the first quarter, but we don’t expect the rest of the year to run at the same level. We don’t expect it to be out of line with what our original expectations were so. The overage that happened in first quarter will carry through, but it won’t continue on at that level for the next three quarters.

[Brian Weinstein:]

Okay, thanks, guys.

[Scott Mendel:]

Yes.

[Operator:]

Our next question is from the line of Doug Schenkel with Cowen and Company. Your line is open.

[Doug Schenkel:]

All right. Good afternoon, guys, and thank you for taking my questions. My first one to real basic one, you indicated you’ve closed out all the questions raised by the agency during its review process. To be clear to this mean the review process is formally over. Is that your understanding at the time?

[Faiz Kayyem:]

The review process is not over the – as this is Faiz, hi, Doug.

[Doug Schenkel:]

Hi, Faiz.

[Faiz Kayyem:]

As is typical on these situations as you to met your analytical studies, in your clinical study, there are questions, there are requests, free to reformat your data to answer some of the questions. And all of those substitutive questions that were initially raised by the agency have been closed out. And at this time the agency is reviewing the package and we expect FDA clearance soon.

[Doug Schenkel:]

Okay, okay. That – sorry, I mean okay.

[Hany Massarany:]

It’s me Hany, Doug. Until we see clearance from FDA, we can’t say that the review process is formally over, but we’re not being asked by FDA to do any additional work. At this stage we’ve closed out the questions that were honest and that’s why we believe that we’re close to receiving FDA clearance.

[Doug Schenkel:]

Okay. Start of the – so detailed on that, I just wanted to be clear on it exactly what that meant, so that’s really helpful. And actually I guess maybe one more related to that. Scott you noted that there was a change in working capital, which obviously effective cash burn and yes, that’s spike to a level which we shouldn’t expect in subsequent quarters. And you noted part of that was a function of some other things you were dealing with the FDA. Was that all expected or was there anything during the quarter that caused have to do a little bit more work than expected with the FDA?

[Scott Mendel:]

Yes. So really wasn’t to do with our expectations from FDA as much as the instruments that we had on ordered towards in the last year delivered in the first quarter and we actually paid those invoices as well. Now as you know from the end of last year, we had a little bit of delay on submission, et cetera. So that’s that actually what caused inventory balanced to be up on relative to when we actually got clearance, which is going to be hopefully in the not too distant future. So it just had to do with timing and it was something that was set an emotion last fall.

[Doug Schenkel:]

Okay. Got it, that’s helpful. And then attributing over to Europe has achieving first Blood Culture, CE Mark on in Europe had any impact on ePlex demands may be too early, but to the extent, you’ve seen anything in the channel, could you just provide any color there? Thank you.

[Scott Mendel:]

Yes. There’s a lot of interest in Blood Culture ID or sepsis testing in Europe in general. And we were asked when we launched the fungal panel, why didn’t you wait by some people? Why didn’t you wait until you have all three? And we could have definitely done that, but based on input from customers and their level of interest in fungal infections especially given how severe they can be and how expensive the therapy is especially in Europe. We decided that it was appropriate to launch in Europe, launch the fungal panel in Europe, even if we expect to follow soon with the other two panels. So there is definitely a lot of interest in Europe, but also I think it’s fair to say that European customers are interested in all three panels not just the fungal panel.

[Doug Schenkel:]

Okay, understood. And one very last one. I appreciate all the detail on manufacturing yield improvements. Can you confirm that you still have plans to rollout a third manufacturing line. I think the plan was to do that around year end or by year end. Is that still your plan?

[Scott Mendel:]

Yes, absolutely. So we are expecting to invest and commence the implementation and validation even if the two lines that we spoke about it will more than be – more than satisfy the demand for 2017, but we want to get in front of it obviously before 2018. So the third line which will be more automated and will drive more significant capacity may not be required until 2018, but we certainly are going to be doing a lot of that work to get it up and going starting in 2017.

[Doug Schenkel:]

Okay, thanks again.

[Scott Mendel:]

You’re welcome. Thank you.

[Operator:]

Our next question comes from the line of Mark Massaro with Canaccord Genuity. Your line is open.

[Mark Massaro:]

Hey guys, thanks for taking the questions and congrats on the progress. My first question – yes, my first question is on, you had 15 agreements in the quarter and everything’s trending nicely. I was wondering if that 15 number, I can be viewed as a proxy with which we should be thinking about quarterly progression and to what extent do you think that 15 number could be better upon FDA clearance?

[Scott Mendel:]

Well. Thank you for the question, Mark. And as we commented before, the numbers are still too few and it’s a little bit too early to start sort of guiding and projecting the sort of expected quarterly number of placement. But we certainly expect a lot more than 15 a quarter, and especially with the imminent FDA clearance. So as we achieve FDA clearance in the U.S. and as we continue to expand many of CE Marks panels in Europe with introduction of Gram Positive and Gram Negative panels this quarter. We certainly expect to see more demand. We’ve also – if you remember we’re also expanding our commercial organizations globally every quarter. So we – all of this activity we lead to more opportunities and more placement over time. And in due course, I think we will have enough of a trend to be able to project and numbers and guide to placement numbers in the future.

[Mark Massaro:]

Great. And this might be a question for Faiz. But, as we think about all of the benefits of ePlex side, did you guys have called out simple workflow, ease of use, data analytics. To me, the fact that you can cover I believe it’s over 70 pathogens, when you combined Gram Positive, Negative and fungal. To me that is a clinical benefit that I think and resonate well across Europe and the United States. Just wondering if you could put that in context as far as how you would rank order the pathogen coverage relative to some of the other benefits of ePlex?

[Faiz Kayyem:]

I think with Blood Culture. Thank you for the question. With Blood Culture is a clear benefit. By adopting the gram stain driven approach that we’ve adopted by the data we have and some published data, it looks like our panel selection will have a breadth of coverage that should generate over 95% sensitivity for bloodstream infections. That clearly exceeds the other molecular assays and it’s quite competitive with mass spec and even traditional culture and has a tremendous time to result advantage. It’s hard to segregate Mark really, where there time to result or breadth of coverage are most key, this is a community that we really want to serve with a no compromise solution allow them to deliver the best answer also at a very rapid rate. So soon after about Blood Culture bottle rings positive within about an hour and a half we expect that they’ll have answers to this tremendously broad panel as you described it. So to segregate those two but we think that that combined with the true sample to answer nature of the system and coming in workflow and the LIS connectivity all combine to really provide a potentially game changing solution for the Blood Culture ID and bloodstream infection community.

[Mark Massaro:]

Great, and maybe just as the follow on to Brian’s question. Assuming that FDA clearance is happening soon or imminently soon, installations and validations when you bake both of those and together, and anticipation of ePlex contributing to the flu season in the U.S. Is it fair to say that you think that install and validation can occur in roughly two quarters or less.

[Hany Massarany:]

Yes. Especially the all less part, so we even with XT-8 Mark we expect – our experience sort of is more in the timeframe of about a quarter, it takes about a quarter to bring up an XT-8 to install and do the validations and training and so on and so forth. And with ePlex we expected to be shorter.

[Mark Massaro:]

Great. Thanks and good progress.

[Hany Massarany:]

Thank you

[Scott Mendel:]

Thank you

[Operator:]

Our next question is from the line of Ethan Potasnick with Needham & Company. Your line is open.

[Ethan Potasnick:]

Hi guys, thanks for taking the call. This is Ethan Potasnick filling in for Mike Matson. So I just wanted to know, if your European customers are new to multiplex testing or are you guys supplementing or replacing Biofire systems. And then separately I was wondering, if you could tell us what the installed base of XT-8 systems is that?

[Hany Massarany:]

All right, so thanks for the question. European customers and European labs in general, of course, it differs country by country sometimes. But generally speaking they are not new to multiplex molecular testing. But typically as I mentioned earlier, they perform these tests utilizing lab developed tests or LDTs. So they maybe new to commercially available fully automated sample to answer solutions and systems, but they’re certainly not typically new to multiplex molecular testing. And so there’s a tremendous opportunity in Europe, because most of the testing is done with LDT rather than commercially available systems.

[Ethan Potasnick:]

Okay great and then…

[Hany Massarany:]

In terms of – I beg your pardon.

[Ethan Potasnick:]

No.

[Hany Massarany:]

Sorry, okay. In terms of XT-8, our installed base is only in the U.S., so just a reminder that we never launched XT-8 outside of the U.S. market. And it’s in the mid 600 so 650 or so is the number of XT-8 systems in end user labs in the U.S.

[Ethan Potasnick:]

Okay, great. Thank you guys very much.

[Hany Massarany:]

Thank you.

[Operator:]

Our next question is from Andrew Cooper with Raymond James. Your line is open.

[Andrew Cooper:]

Hi, guys thanks for the question. Just wanted to ask kind of how you’re thinking about the magnitude, once you do have FDA approval of the instrument installation number with just respiratory prior to Blood Culture coming to the U.S. Just kind of how you think that’s going to ramp post flu season and once you have those additional tests as well.

[Hany Massarany:]

Well, we haven’t actually guided to the number of ePlex placements that we expect to install in 2017. As I mentioned earlier of course with the clearance of the RP panel and ePlex system in the U.S. ahead of flu season we expect to install a lot of systems in the U.S. this year, but we haven’t really guided to that number yet.

[Andrew Cooper:]

I guess I just meant if you could give any color on, if you see one being – how you see the Blood Culture ID driving the momentum of placements, especially as you’re going out of the flu season. But that’s helpful either way, appreciate it.

[Hany Massarany:]

You mean – so the Blood Culture ID panels, we don’t expect will be launched in the U.S. this year. We expect to or we plan to complete all FDA studies and submit all three panels to FDA this year. But in the U.S. Blood Culture ID will be more of a 2018 issue not 2017. However, of course Blood Culture ID is very important in Europe as I mentioned earlier, and we expect to be ramping up placement in Europe with the launch of fungal and then soon to follow will be the Gram Positive and Negative panel. So for the balance of this year, we expect to be driving placements in Europe based on RP, as well as Blood Culture ID. Certainly with the flu season, a lot of the placement and ePlex revenues will come later in the year in the fourth quarter of the year with the flu season depending on the severity, but with the flu season hitting both in the U.S. and in Europe.

[Andrew Cooper:]

Great, thanks.

[Hany Massarany:]

Thank you.

[Operator:]

Thank you. And I’m not showing any further questions. I’ll now turn the call back over to Hany for closing remarks.

[Hany Massarany:]

Thank you very much, and thank everyone for great questions. So on behalf of our board and employees, I want to take this opportunity to say thanks. And to let you know that were looking forward to exciting times over the next few quarters and updating you and reporting on our progress obviously on a quarterly basis on future calls. Thanks very much and have a terrific afternoon. Bye, bye.

[Operator:]

Ladies and gentlemen, this does conclude the program. You may now disconnect