Genmark Diagnostics Inc
Q2 2017 Earnings Call Transcript

Published: 1 Aug 2017

[Operator:]

Welcome to the GenMark Diagnostics 2017 Second 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, August 01, 2017. I’d now like to turn the conference over to Mr. Johnny Ek of GenMark. Please go ahead.

[Johnny Ek:]

Thanks, Christine, 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 features 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 re-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 morning, everyone. I’m joined on the call today by our CFO, Scott Mendel; as well as our Founder and SVP of Research & Development, 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 will provide an overview of our performance in the second 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 performance and menu. So let’s start with our high level review of second quarter results. Our U.S. and European commercial teams delivered solid results in Q2; our sales of $12.4 million were in line with our revenue guidance for the quarter. As was the case in Q1, ePlex contributed to second quarter top line, most of the revenue came from our installed base of XT-8 analyzers in the USA. ePlex commercialization continued to be a significant area of focus and we are very pleased with our progress during the quarter. We finished the second quarter with agreements for more than 115 ePlex instruments of which we have now installed more than 80 in customer sites. Our global funnel of ePlex opportunities continues to strengthen and customer feedback remains very positive confirming the high quality of ePlex results as well as the ease of use of the ePlex platform and choose if user interface and a comprehensive reporting capabilities. As you know from recent company press releases, last month we accomplished a number of important regulatory and market launch goals in relations to our ePlex system. First, we received FDA 510(k) market clearance for the ePlex instrument and the respiratory pathogen panel. We are very excited to bring ePlex to the U.S. market as the only FDA cleared Sample-to-Answer molecular platform that truly integrates the entire diagnostic process from test order entry to reporting actionable results. As already verified by multiple customers, we believe the ePlex will enable laboratories and hospitals in the U.S. to improve patient outcomes, reduce total cost of care and enhance key quality metrics. Second, we achieve CE Mark for the ePlex Blood Culture Identification grand positive and grand negative panels which together with our recently CE Mark Blood Culture Identification fungal panel complete the family of ePlex blood stream infection assays. As you know we designed these panels to offer the broadest pathogen inclusivity and drug resistance markers of any multiplex molecular solution on the market today and as such we believe they will meaningfully improve the management of this critical disease state and provide a new tool to help address the growing public health crisis of antibiotic resistance. Since our last update, we’ve continued to make very good progress in relation to ePlex cartridge manufacturing and we’re very pleased with the high quality of product that we are shipping to our customers. Furthermore, we are in the final stages of implementing the additional line in our new ePlex manufacturing facility which we expect to more than double our cartridge production capacity. As you know, we recently added over $95 million of cash to our balance sheet through a public offering of our common stock as well as additional funding made available under the terms of our existing debt facility. We plan to utilize these funds to ramp up ePlex commercialization as well as invest in future product and manufacturing capacity in the second half of 2017 and beyond. Accordingly, we are reiterating 2017 revenue guidance in the range of $65 million to $70 million. And with that, I will now hand over the call to Scott Mendel. Scott?

[Scott Mendel:]

Thank you, Hany and good morning 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. Our second quarter 2017 revenue was $12.4 million in line with expectations, but down 1% compared to the second quarter of 2016 which reflected an unusually late 2015, 2016 flu season. ePlex contributed to second quarter revenue, however XT-8 accounted for the vast majority of the $12.4 million generated during the quarter. As Hany mentioned we finished the quarter with more than 80 ePlex instruments installed at customer sites. This pace sets us up nicely for the upcoming 2017, 218 flu season. With RP now clear in the U.S. as well as Europe, our commercial teams are hard at work adding customers and placements to drive strong revenue growth as the flu season begins later this year. For the second quarter, annuity per XT-8 analyzer was approximately $69,000 down from $77,000 in Q2 of last year which again reflected unusually strong RBT volumes. The average annuity per XT-8 analyzer over the last four quarters remains in the mid-$70,000 range. Second quarter gross profit was $4.9 million, or 40% of revenue versus $7.8 million in the second quarter of 2016, which was 62% of revenue. Our second quarter gross margin reflects the impact of ePlex overhead costs relative to ePlex cartridge volume which was slightly below our expectations since 510(k) clearance was achieved later in the quarter. We continue to expect a stronger 2017 gross margin rate as we exit this year, reflecting multiple ePlex panels on market in Europe as well as ePlex RP on market in the U.S. with typical flu season demand. Gross margin is expected to improve into the mid 40% in the third quarter and step up into the 50% range in the fourth quarter when volumes are expected to be stronger. Our manufacturing teams are driving cost reduction initiatives focussed on manufacturing yield, material costs and overhead costs in order to maximize gross margin. Executing on these initiatives which achieving the expected sales volumes, provides a path to achieving a lower end of our full year gross margin guidance of 48% to 52%. We’ll keep you posted on our progress on future calls. Total operating expenses were $22.2 million for the quarter, an increase of $1.8 million compared to the second quarter of 2016. Sales and marketing expenses were $5.2 million, up $9 million versus prior year, primarily driven by an increase in employee-related expenses. Research and development expenses were $13 million, a decrease of $200,000 reflecting reduced ePlex instrument development expenses partially offset by an increase of cost for developing additional panels. And finally, general and administrative expenses were $4 million in the second quarter, an increase of $100,000 versus the prior year period, primarily driven by employee-related costs. During the second quarter, we recorded $750,000 of interest expense related to our debt facility. Our net loss per share for the second quarter was $0.37, with weighted average shares outstanding of approximately $48.1 million. Net loss per share in the same quarter of 2016 was also $0.30 per share when our weighted shares outstanding were approximately $42.9 million. Moving on to our balance sheet, we ended the quarter with $106.5 million in cash and investments reflecting $81 million of net proceeds from the public offering of our common stock in mid-June and an additional $13.8 million from our debt facility that was drawn down upon FDA clearance. In addition, we continue to focus our efforts on running the business as efficiently as possible. Consistent with our expectations, our change in working capital for the second quarter was positive, driven by a reduction of inventory balances and an increased in accounts payable versus the first quarter of 2017. We will continue to focus on managing our working capital needs while balancing the expected growth in the second half of 2017 and beyond. Capital expenditures have been and will continue to be mainly focused on manufacturing capacity and efficiency. 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 received clearance from the FDA to market our ePlex instrument in the United States. The ePlex instrument features true sample to answer capabilities, fast order to report work flow and scalable random access functionality that optimize performance for the lab. We’re very pleased to be bringing ePlex to the U.S. and receiving positive customer feedback here similar to the feedback from Europe about our unparalled user experience, LIS connectivity, and data analytics and compliance management capabilities. The overall ePlex system is designed for patients with an emphasis on comprehensive panels that drive clinical impact in patient safety. And as you know we also recently received 510(k) clearance from the FDA to market our ePlex respiratory pathogen panel, RP in the U.S. This panel addresses upper respiratory infections targeting more than 20 viruses and bacteria in an easy to use assay for its important clinical indication. We believe our RP panel will drive improved clinical outcomes and will reduce the total cost of care for hospitalized patients. As mentioned before, we’ve seen good concordance in external studies in the U.S. and in Europe. In our FDA clinical studies specifically the ePlex RP panel demonstrated 95.1% concordance with a market leading IBB comparative assay in over 2100 positive samples. This is consistent with peer reviewed published data from Europe that showed 97.4% concordance with the widely used real time PCR LDT. Additionally, we are increasing our clinical research activity with several peer reviewed manuscripts in preparation and eight posters accepted for presentation at four different international meetings in the first half of 2017. We recently awarded a research brands under our anti microbial stewardship research initiative in Europe and are planning several perspective studies to demonstrate the clinical utility of both our RP panel as well as our BCID family of assays in the second half of the year. Speaking of our BCID assays, we are pleased to be driving menu expansion with the achievement of CE mark for BCID gram-positive and BCID gram-negative. With the CE marks we’ve completed the development of our BCID family of assays including the BCID fungal pathogen panel which achieve CE mark in Q1. Our BCID family of tests provides labs with broad coverage of pathogens and resistance markers to address the critical needs of patients suffering from blood stream infections. These BCID panels detect 59 distinct reportable targets and also fully capitalize on the ease of use and work flow benefits of the ePlex system, providing fast, actionable diagnostics information to positions with the goal of reducing both mortality and cost of care for this extremely, deadly and costly condition. Panel highlights include broad coverage for both prevalent and emergent pathogens and drug resistance markers, several rule out or contamination targets that cliniciations describe as being especially actionable in support of de-escalation decisions, our safe guards against areas in gram staining and excellent capabilities with co-infections. We believe our offering is unique in the space and expect excellent performance both in Europe where we have just launched the family of panels and in U.S. clinical studies which we expect to initiate soon. We will update you on this performance in the coming quarters and are on track for FDA submissions for these panels later this year. I look forward to updating you on the Blood Culture family of test and other assays currently in development and will now turn the call back to Hany for additional comments before we open up the call to questions. Hany?

[Hany Massarany:]

Thanks, Faiz. Q2 was another quarter of strong performance for our company. Our commercial teams continued to deliver excellent results and with 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 with the recent FDA clearance of the ePlex instrument and RP panel which will significantly expand the addressable market for ePlex and boost our business growth in the U.S. market. We are also excited to have achieved CE mark for the complete family of ePlex Blood Culture identification panels, which we believe will drive continued ePlex adoption and business success in Europe. Last, but certainly not least, we feel confident in the high quality of product that we are shipping to our customers as well as our ability to support the growing demand. We will now open the call to questions.

[Operator:]

Thank you. [Operator Instructions] Our first question is from the line of Doug Schenkel of Cowen. Your line is open.

[Doug Schenkel:]

Hey good morning guys, and thank you for taking the questions. I just – I want to kick off with a question on orders. In your prepared remarks you noted that you have agreements for 115 instruments as of the end of the quarter, which on the surface isn’t a huge increase relative to the 100 instrument orders you had at the end of Q1. You know there is a lot of focus this morning and we're getting calls from investors, emails from investors asking us how we should think about this progress. Clearly, we didn't have FDA approval until very late in the quarter. Our assumption is that once you got the approval you started cranking, but we haven’t heard too much about that from you on this call. Could you provide some color on how things have bared in the U.S. sense, you got FDA clearance. Did you get any benefit from the U.S. in Q2 or folks really waiting for FDA clearance? Really obviously what I'm trying to get at is have you seen a big pickup in demand in orders thus far in Q3? I think that's an important point of emphasis for all us investors and sale side’s who are on board right now?

[Hany Massarany:]

All right. Thank you, Doug. Good question. And yes, the answer is yes of course as you know we did not receive FDA clearance until very late in the quarter. Our commercial organization in the U.S. has been busy prospecting and filling the funnel with opportunities and working with customers to prepare them for FDA clearance. And we've certainly always spend a lot of time installing many systems both in the U.S and in Europe. As I mentioned, we now have more than 80 analyzers or ePlex systems installed in the field. We feel very comfortable, of course, we will report on Q3 performance at the end of the quarter, but we're comfortable with the level of demand, the traction that we're receiving here and seeing in the U.S. market. Europe as you know tends to be a little bit slow in the summer months including July and August especially, so we're not expecting a huge activity in Europe during the summer months, but certainly in the U.S ahead of the flu season we're expecting a lot of activity and we're comfortable with the funnels and opportunities that we’re pursuing at this time.

[Doug Schenkel:]

Okay. Understood. One I guess follow-up to that would be recognizing Scott that I know you pay a lot of attention to where street [ph] models are. Are you comfortable with where the street is in terms of placement assumptions for this year for ePlex?

[Scott Mendel:]

Yes. We’re not uncomfortable at a given where we’re at to-date, 80 installations so far as we ended the second quarter relative to what full-year looks like from a consensus perspective we’re not uncomfortable where everybody’s at.

[Doug Schenkel:]

Okay. And one last one perverting to gross margin, can you provide a little more detail on the drivers to gross margin in the quarter? How did manufacturing scale up impact the quarter and I apologize if I miss this, but do you still expect full-year gross margin in -- I think its 48% to 52% range?

[Scott Mendel:]

Yes. Good question, Doug. So, the quarter played out as expected. As you know over the last year plus we’ve built quite of a bit infrastructure to support ePlex launch and given the level of volume that we had in Q2 is not unexpected to that gross margins would be impacted, and that’s why they landed in that 40% range. It really is a function of volume. In addition what I said in my prepared remarks was the manufacturing team have several initiatives they’re working on that is in addition to just the volume increasing and that is material cost production and yield which drives labor efficiency overall. We do think with those initiatives and executing those initiatives that we’ll be able to get toward the low end of the previously provided guidance of 48% to 52%, but again, we’ve got to execute on those initiatives and we have to see the volume that we expect as we exit this year to be able to achieve that lower end of that guidance range.

[Doug Schenkel:]

Okay. I will get back in the queue. Thank you.

[Operator:]

Thank you. Our next question is from Tycho Peterson of JPMorgan. Your line is open.

[Unidentified Analyst:]

Hey, guys. It’s a Steve [Indiscernible] on for Tycho. Thanks for taking my questions. Maybe to start with a follow-up on Doug’s question on the U.S. launch, can you give me additional color on the customer funnel to-date? Are they primarily LDT users or they had existing automated systems that are looking to replace or augment with ePlex?

[Hany Massarany:]

It’s a mix. We are obviously with ePlex. We’re expanding our focus in the U.S. beyond the large molecular labs in big hospitals and reference lab segments. So we’re pursuing opportunities in the sort of 200-bed size hospital and above, and many of those sites do not have a molecular sample-to-answer system at this time. In fact the majority don’t. Some of them have competitive systems. And then of course in the bigger labs they are either already doing molecular testing or multiplex testing with commercial products XT-8 or other competitive products, or and LDTs. And so there's a good mix of all of those types of customers that we’re working with.

[Unidentified Analyst:]

Got it. And recognizing it’s very early, are you able to give us any sense of what kinds of systems in the U.S. you expected to replace as a capital versus reagent rental and how this compared to your experience in Europe to-date?

[Hany Massarany:]

So far where the majority of this systems have been capital we’re expecting – obviously this is our preference is to get the capital when it’s available. If it’s available we will continue to pursue capital. However, we also have a number of different programs to enable customers to bring in an ePlex even if they don't have the capital right now or not at all. So we can provide either reagent rental type programs or third-party lease option and that's sort of what we’re pursuing right now.

[Unidentified Analyst:]

Got it. And then lastly more of a longer-term question. You mentioned BCID have been pretty aggressive about pushing for antibiotics stewardship program and hospitals that participating Medicare. Is it something that can help drive ePlex placements in your view once you get the blood culture panels on to the U.S. market?

[Hany Massarany:]

Yes, absolutely. I mean, this is a very important focus for us and other suppliers as well. Of course, and we believe that with the ePlex panels that we discussed on the call and Faiz described that will be able to make a very important impact in this area, so absolutely.

[Unidentified Analyst:]

Got it. That’s all from me. Thanks guys.

[Hany Massarany:]

Thank you.

[Operator:]

Thank you. Our next question is from Nicholas Jansen of Raymond James. Your line is open.

[Nicholas Jansen:]

Hey, guys. Thanks for taking the questions. Two from me. First on just in terms of the ePlex placement trajectory. Are we seeing any sort of switching XT-8 customers in your funnel or how do we think about the dynamics between those two separate customers? Are XT-8 existing customers adding in ePlex to their modules, just want to get a better sense of the mix on your existing versus new?

[Hany Massarany:]

Yes. There are, Nick, there are some ePlex placements that have already gone into existing XT-8 customer site. Obviously with RP being the only panel that we have FDA clearance for that when that happens we’re replacing for displacing if you like the respiratory viral panel from XT-8 on to the ePlex. When that happens we’ll get a premium price obviously for the sample-to-answer for the ePlex product compared to XT-8. So there have been some customers that have wanted to sort of upgrade from XT-8 to ePlex, but most of our focus and the agreements that we’ve signed are with non-XT-8 customers, so obviously our focus is to expand our installed base and go to new addresses with the ePlex as opposed to cannibalize our existing XT-8 business even if in doing so we also command the premium for ePlex.

[Nicholas Jansen:]

Great. Thanks. And then just maybe one for Scott in terms of the P&L, R&D kind of short up a couple of million sequentially in 2Q, perhaps that to do with the trials ongoing in Europe, I just want to kind of get your thoughts on the expense buckets in the back half of the year as we think about commercial organization building but perhaps R&D moderating?

[Scott Mendel:]

Yes. Actually that’s a really good way to think about the back half of the year. I would like to take a quick moment to explain on Q2. Definitely what you said, Nick, that the R&D team consumed a large amount of consumables to achieve CE mark and can get ready for clinical trials et cetera, finish your development activities, as well as I mentioned we had a higher cost for cartridge because of lower overall volumes, in other words the overhead wasn't absorbed as efficiently as we hope. And R&D purchases those consumables at a higher cost when we're producing them on a higher cost. So that also help push them a bit higher than even we’d expected in the second quarter. So, as we move in the back half of the year they become more efficient and they also enjoy the manufacturing efficiencies that that I mentioned before as cartridge comes down.

[Nicholas Jansen:]

Thanks guys. I’ll hop back in queue.

[Operator:]

Thank you. Our next question is from Brian Weinstein of William Blair. Your line is open.

[Brian Weinstein:]

Hi, guys. Thanks for taking my questions. First, can you talk about – just remind us about what pricing looks like for the respiratory panel and for ePlex in the U.S. with the list prices for both and pricing holding up as you expected?

[Scott Mendel:]

Yes. Thanks, Brian. So our list price is $157 per cartridge for the RP, that’s for test for the RP Panel and $150,000 for the ePlex analyzer or instrument with one analyzer, so that's capacity of six days on a single tower analyzer. And then the price of the analyzer, the list price goes up depending on the configuration with up to four towers, so those prices have not changed. As I mentioned earlier, most of the placements have been or agreements have been for capital acquisition so far, and the price on average is sort of consistent with what we expect. So we have said that would be obviously more importantly for the panel that would be up in this sort of about 120 plus and we’re achieving that.

[Brian Weinstein:]

Okay. And then, can you talk about what’s going on with Palmetto and give us little update on what you're hearing there. How impactful to the business would this be if the Palmetto recommendation was expanded to other peers in the U.S? Any comments on the letter that were sent from ASM, and other organizations to Palmetto discussing the respiratory panel?

[Hany Massarany:]

Well, we’re all waiting right now. So as you know there has been a very well coordinated response from industry led by ASM, but also multiple other societies CIT and others that have responded all sort of -- it was a joint response or a joint letter from all of these other, all of these societies and others, as well as suppliers including us. And we all pointed out to Palmetto that critically ill patients maybe denied access to a very important panel and technology based on their draft documents, so that’s all under consideration at the moment. Keep in mind of course, Brian, that at least for now this only applies to Medicare and to our patients and this is sort of the minority of the testing that performed at least based on our own products in the field with XT-8 and what we’re expecting with ePlex. However of course if it expands and if this is sort of adopted by other payers and if it becomes law and then there would be an impact. But for now we’re working with Palmetto and we’re waiting to see how they respond to our input as well as industry input.

[Brian Weinstein:]

Great. And then last one from me. Can you confirm that you guys will be or you’ll not anticipate being capacity constraints into the season? In other words, you expect that you will be able to place ePlex’s to meet the number of replacements – to meet the number of agreements that you have in place, in other words you will not be having to delay any kind of installations due to concerns on capacity for the cartridges?

[Hany Massarany:]

Absolutely, I can confirm that. So both on the platform side as well as the test cartridge, we are very confident that we can meet the demands both externally, but also internally in support of all of our assay development teams that are working to expand the menu.

[Brian Weinstein:]

Okay, great. We’ll see you guys later today. Thanks.

[Hany Massarany:]

Yes, thanks.

[Operator:]

Thank you. Our next question is from Mike Matson of Needham & Company. Your line is open.

[Mike Matson:]

Hi. Thanks for taking my questions. I guess at least with the current menu in the U.S. and Europe, what sort of annuity per analyzer expecting with ePlex. And I know you probably can give us specific number, but do you expected to be similar to the XT-8, higher to the XT-8 or lower than the XT-8?

[Scott Mendel:]

Hi, Mike. It’s Scott. Yes. We do it’s the higher than XT-8 as I mentioned in my prepared remarks. XT-8 is been running in that mid $70,000 range for some time per analyzer per year. And just given the price premium that you have on sample-to-answer capabilities of the ePlex we expect that ePlex should be $100,000 in north as menu expand.

[Mike Matson:]

Okay. Thanks. And then of the 80 something ePlex units that are currently installed, can you give us any idea how much – how many of those are U.S. versus Europe?

[Hany Massarany:]

There’s a good mix between U.S. and Europe. I would say that the majority are in Europe since we only just received FDA clearance late in the quarter, and we’re not reporting obviously placements by country or Europe versus U.S., but the majority are in Europe.

[Mike Matson:]

Okay, thanks. And then, Scott, the share count going forward, I know what it was in the quarter, but just good the timing they’re offering and everything, where do you expect the share count to settle out?

[Scott Mendel:]

Yes. Nothing major happening obviously between here in the future, just typical evergreen in the spring time, 3% evergreen that would be only that would impact share count from where we end right now going forward.

[Mike Matson:]

But I guess if you were at I think $48 million roughly as an average, is that -- are you’re at 48 million as of today or is that number is slightly higher because of the…?

[Scott Mendel:]

No. It’s slightly higher because that’s the average for the whole quarter, I think when you factor in the recent rates we’re in the low 50s, like 53 million to 54 million shares.

[Mike Matson:]

All right. So that’s what we should use in our model from here.

[Scott Mendel:]

Yes.

[Mike Matson:]

Okay. All right. Thank you.

[Operator:]

Thank you. Our next question is from Mark Massaro of Canaccord Genuity. Your line is open.

[Mark Massaro:]

Hey, guys. Thank you for the questions. When we think about the full-year guidance of 65 million to 70 million, it likely imply to step up in Q3 and certainly a step up in Q4. Hany, given your commentary that you people tend to slowdown in Europe and even in the U.S. we see some evidence of a slowdown, even last year revenue decline in Q3 from Q2. Can you just speak your comfort level on Q3 revenues accelerating from Q2 level?

[Scott Mendel:]

Mark, it’s Scott. I’ll actually start and Hany can add anything he wants after I finish. But we do expect a slight step up in Q3 versus Q2, but obviously installations have just begun and it’s not flu season. Fourth quarter will definitely be a much stronger quarter for the company given flu season and multiple panels on market in Europe and then obviously the U.S. RP Panel on market. So, I do think those will be a bit small in Q3, but a much larger step up in Q4 relative to flu season.

[Mark Massaro:]

Got it. That’s helpful. And as we think about your customer mix unfolding in the U.S. or maybe if you could start in Europe on ePlex, if you could speak to the number of customers that are hospital systems versus reference labs and assuming you add content beyond RP in the U.S., can you speak to your outlook on how many of these systems will be configured, whether two towers, three towers and just maybe provide a little more color on the mix that you're expecting on ePLex in the U.S.?

[Hany Massarany:]

Yes. Mark, most of the placements have been and for some time will continue to be in hospital labs, certainly we have a lot of reference lab prospects as well and we are working with many reference labs, but most of the placements as you can imagine initially will be in the hospital segment and as far as a number of analyzers per customer we expect that overtime we’ll see expansion of the menu that will be averaging two per customer. It’s a little bit too early right now based on the few placements that we have made to sort of quote on an average, but overtime we believe that it will be sort of around, it will stabilize around two per customer.

[Mark Massaro:]

Great. And my last one, certainly I appreciate the commentary on the less price on RP panel. Would it be possible to comment on the less prices of the gram positive panels in Europe.

[Hany Massarany:]

The pricing again in Europe for the three gram – the two gram stains and the fungal panel are in the list price is up in the sort of 150 range. And it’s a little bit early again to report on the sort of average selling price at this stage given that we just received sort of or achieved CE mark late in the quarter with the gram positive and negative panels.

[Mark Massaro:]

Understand. Thank you very much.

[Hany Massarany:]

Thank you.

[Operator:]

Thank you. That concludes our Q&A session for today. I’d like to turn the call back over to management for any further remarks. Hany Massarany All right. Well look on behalf of our board and employees, I want to take this opportunity to thank everyone once again for your ongoing support and we look forward to reporting our progress in the future. Thank you very much and have a good day. Bye, bye.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program and you may all disconnect. Everyone have a great day.