Lucira Health, Inc.
Q1 2022 Earnings Call Transcript

Published: 13 May 2022

[Operator:]

Good afternoon, ladies and gentlemen. And welcome to the Lucira Health First Quarter Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to Louisa Smith from the Gilmartin Group. Please go ahead.

[Louisa Smith:]

Thank you, Alex. And good afternoon, everyone. Earlier today, Lucira Health released financial results for the first quarter ended March 31, 2022. A copy of the press release is available on the company's website. Joining me on today's call are Erik Engelson, President and Chief Executive Officer; and Dan George, Chief Financial Officer. Before we begin, I'd like to remind you that during this conference call, the company will make forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the Risk Factors section in the company's most recently filed annual report on Form 10-K and subsequently filed quarterly report on Form 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development and manufacturing, product potential and the regulatory environment, sales and marketing strategies, capital resources or operating performance. With that, I'll now turn the call over to Erik.

[Erik Engelson:]

Thank you, Louisa. Good afternoon, everyone, and thank you for joining us. Welcome to the first quarter 2022 earnings conference call. Lucira achieved record revenues in the first quarter of 2022 driven by demand for our accurate and easy-to-use molecular COVID-19 tests. We are pleased with our performance and see COVID-19 testing as a proxy for what Lucira will become

[Dan George:]

Thanks, Erik. Please refer to our press release issued earlier today for a summary of our financial results for the first quarter 2022. Net revenue for the first quarter of 2022 was $90.5 million, an approximate 19x increase over the first quarter of 2021. Our net revenue was primarily driven by sales to businesses and to distributors, international sales, direct sales to consumers and health care providers. Gross profit and gross margin for the first quarter of 2022 were $39.9 million and 44%, respectively, compared to a gross loss and negative gross margin for the first quarter of 2021 of close to $900,000 and 19%, respectively. Our increase in gross profit and gross margin was driven primarily by increased sales and operational efficiencies gained through increased manufacturing output and scale. Selling, general and administrative expenses were $13.9 million in the first quarter of 2022 compared to approximately $6.1 million in the same period in 2021. The increase was primarily related to increase in personnel-related costs and third-party services to facilitate commercial activities and public company compliance. R&D expenses were $12.2 million in the first quarter of 2022 compared to $6.3 million in the same period in 2021. New product development, clinical activities and validation and manufacturing activities primarily drove the increase. GAAP net income was $13.1 million for the first quarter of 2022 compared to a GAAP net loss of $13.3 million in the same period in 2021. Non-GAAP net income was approximately $16.7 million in Q1 2022 compared to $13.6 million of non-GAAP net loss in the same period in 2021. The decrease in net loss primarily resulted from increased gross profit. We ended the quarter with $120.6 million in cash compared to cash of $106 million at the end of Q4 2021. The increase in cash was primarily related to the closing of the first tranche of our debt financing agreement of $30 million. Most of our investments in our contracted manufacturing facility in the Dominican Republic have been completed, allowing us now to manufacture at scale. These investments include automation of certain critical manufacturing steps. We are also investing in our lease facility in San Diego County, which will house commercial operations and other functions. We have the cash necessary to fund our long-term business strategy. For 2022 guidance, as Erik previously stated, we are withdrawing our initial 2022 guidance of $450 million in revenue. We are expecting that revenue in the second and third quarters may be down sequentially from Q1. And although we anticipate demand to uptake significantly in Q4, visibility limitations resulted in our decision to remove annual guidance. These estimates reflect our most recent assessment of manufacturing output and commercial demand. I'll now turn the call back over to Alex for Q&A.

[Operator:]

You have your first question coming from the line of Brian Weinstein from William Blair.

[Brian Weinstein:]

I guess we'll start with, I guess, the guidance and the removal there. Obviously, we all knew kind of last quarter, the last time that we spoke, that demand was going to drop off significantly. But you guys talked at that time about -- and I want to make sure I get these numbers right -- a $250 million of committed contracts, and I think $150 million or so of that was binding. And I think that everybody kind of thought that, that was in there, and maybe that still is included in kind of how you're thinking about the business. But I guess I'm just trying to understand really what's changed about the outlook today versus what you had thought before? I mean, again, to repeat myself, I think we all knew that demand was going to drop off pretty precipitously, but you guys seemed pretty confident about that number. So any thoughts on that?

[Erik Engelson:]

So no lack of confidence here, just a lack of visibility throughout the year. We thought it would be prudent to remove the guidance. And no additional comment other than that. As we know more, as we go through the year, we'll share more.

[Brian Weinstein:]

Were my numbers right about the committed and the binding thoughts? Are those numbers still accurate in terms of what you have from different contracts that are available?

[Erik Engelson:]

So we have close relationships with all of our customers. They're excited about the product. They're excited about the new product. But we're just not going to comment at this point now that we've removed guidance on those levels of detail.

[Brian Weinstein:]

Okay. And then are you hearing anything from the U.S. government? And are you working with the government in any way as they try and ensure that people who are involved in COVID testing and manufacturing are able to continue to fund capacity expansions and anything else that's needed? Are you working with the government in any way on any kind of funding or any purchases there?

[Erik Engelson:]

We do interact with the government, but we have nothing to report along those lines. Those discussions that you referred to do go on and we're party to those.

[Brian Weinstein:]

Okay. And then on the combo test, obviously, your expectation is that you'll have EUA ahead of the season. How are you thinking about, I guess, the capacity that you have? It sounds like you're fully scaled down in the Dominican Republic. What is that capacity capability right now? And how will you think about manufacturing products? Will you just basically be shifting almost entirely to the combo product ahead of the season? Or will there still be some thoughts about COVID only?

[Erik Engelson:]

So we had talked about getting to 1 million units per month by the end of the second half of this year. We're well in advance of that. We achieved that in Q1. And we're in the process of transitioning production. We'll continue the ability to produce the COVID product. But we're transitioning to the combo product, which we're very excited about. And by the way, our customers are extremely excited about it as well. It's exactly what they've been asking for. If you're going to test, there's no reason to test for only 1 virus when they present with similar symptoms. So we're extremely excited about the combo product.

[Brian Weinstein:]

Got it. And then last one for me is OUS. I think you had talked about that potentially being about 30% of revenue. I recognize you're not commenting on revenue in aggregate, but should we be thinking about a split that's, call it, 70-30 for whatever it is that we're going to put in our models, U.S., OUS? And along those lines, I think you mentioned something about the Southern Hemisphere. And I guess I didn't appreciate that you had opportunities in the Southern Hemisphere. So if you can tell me anything that you guys are doing down there, that would be great as well.

[Erik Engelson:]

So we have a strategy, a growth strategy, for the business of expanding globally. That includes the Southern Hemisphere. And we'll provide more color on that as we expand. And I'll turn it over to Dan to answer the first part of your question.

[Dan George:]

Yes. Brian, I think your assumptions around the split are accurate, about 70-30.

[Operator:]

Your next question comes from the line of Rahul Rakhit from LifeSci Capital.

[Rahul Rakhit:]

Just following up with the previous questions. If I'm understanding it, the CE Mark for the combo test, I guess how does that kind of affect your expectations for orders in the EU specifically? And if we are thinking about some kind of a 70-30 split or some other split, do you expect there would be a little bit of a tailwind, with the combo test now being available in the second half of the year?

[Erik Engelson:]

So we're very excited about the combo test. Customers are as well. I think a CE Mark this early is an achievement that we're very proud of. And we do expect that as we get into flu season in the Northern Hemisphere, and as we see COVID continue to cycle, that there will be uptake in Europe as well.

[Rahul Rakhit:]

Got it. And I was wondering if you could just kind of give us any kind of color on some of the pipeline programs that you're working on. Where are you guys kind of focusing the majority of your attention? Are there any milestones that we should be aware of?

[Erik Engelson:]

I would suggest focusing for now in our discussion on the COVID and flu combo test. We're very excited about this because our customers are so excited. But other products in the pipeline, in addition to the digital platform in which we're investing, include other respiratory and STI products. When the company was in its early days, nearly 10 years ago, it had developed chlamydia and gonorrhea assays. Those assays continue development at the background, and we'll bring them forward and productize those as well as other respiratory as time comes on here. And as we do so, we'll share the specifics.

[Operator:]

That ends our question-and-answer session. I'll turn the call back over to Erik Engelson, for closing remarks.

[Erik Engelson:]

Thank you, Alex. Thank you all for your time this afternoon and for your interest in Lucira Health. The future at Lucira is exciting as we expand our decentralized test portfolio and global commercial reach. While COVID-19 testing accelerated our transformation into a commercial company, the upcoming launch of the COVID-19 and flu combo product, which provides a differential diagnosis with a single swab, is what customers are asking for, and it demonstrates the versatility of our platform. Our entire team looks forward to our future achievements. We are confident we are executing well. We have the right team. And we are looking forward to the future. Thank you, and have a great evening.

[Operator:]

Ladies and gentlemen, that concludes this conference call. Thank you all for participating. You may now disconnect.