Opko Health, Inc. Q4 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to the OPKO Health Fourth Quarter 2020 Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference to your speaker today, Yvonne Briggs at LHA Investor Relations. Please go ahead, ma'am.

Thank you, operator, and good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining today's call to discuss OPKO Health's financial results for the fourth quarter of 2020. I'd like to remind you that any statements made during this call by management, other than statements of historical facts, will be considered forward-looking and as such will be subject to risks and uncertainties that could materially affect the Company's expected results. Those forward-looking statements include, without limitation, the various risks described in the Company's SEC filings, including the annual report on Form 10-K for the year ended December 31, 2020, and in subsequently filed SEC reports. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 18, 2021. Except as required by law, OPKO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Before we begin, let me review the format of today's call. Dr. Phillip Frost, Chairman and Chief Executive Officer, will open the call; then Steven Rubin, OPKO's Executive Vice President, will provide a business update and pipeline review; and then Dr. Jon Cohen will discuss BioReference Laboratories; after that, Adam Logal, OPKO's CFO, will review the Company's fourth quarter financial results, and then we'll open the call to questions. Now, I’d like to turn the call over to Dr. Frost.

Good afternoon, and thank you for joining the call today. Today, we're reporting record revenues, earnings and cash from operations for the fourth quarter and full-year 2020. Although every aspect of OPKO Health was touched by COVID-19 during 2020, I'm particularly proud of our hardworking teams at BioReference Laboratories, as they rose to the challenge of scaling up COVID-19 testing services at an unprecedented pace in a fast-moving and highly uncertain environment. We've made significant investments in human resources, adopted innovative new testing models with our retail partners, invested in state-of-the-art technologies and reconfigured our laboratories to expand our testing capacity and deliver timely results. The ability to ramp up capacity while maintaining accurate results and rapid turnaround times reflects the talent and dedication of BRL’s management team and employees. We had record COVID-19 PCR testing volume during the fourth quarter. Although our base business would have substantially recovered during the summer and fall stalled towards the end of the fourth quarter due to the surge in COVID-19 cases across the country. We believe BRL’s base business will largely return to historical levels and beyond as the vaccination rollout continues and fewer new cases are reported. We've seen a significant interest in the capability of BioReference to compete on the national stage by the number and diversity of industries that now seek us to deliver highly complex COVID-19 solutions. And while demand for COVID-19 testing is likely to decline, we believe it will continue into 2022 and beyond. We're encouraged by the new administration's focus on increasing testing availability across the country and our approach to controlling the pandemic by expanding the availability of testing supplies, and enhancing laboratory testing capacity. Despite the pandemic, our pharmaceutical business has made great strides. Our highlight earlier this year was the joint announcement with our partner, Pfizer, that the FDA accepted for filing the Biologics License Application for somatrogon, our long-acting human growth hormone. In addition, an NDA was submitted in Japan for somatrogon, and we're expecting Pfizer to soon make a regulatory submission in Europe. In the U.S., demand for RAYALDEE continues to be impacted by the pandemic-related restrictions and remains below pre-COVID levels. Overseas, our partner, Vifor Fresenius, continues to receive marketing approvals in Europe and is planning a commercial launch later this year. During last year's fourth quarter, we began a Phase 2 trial with RAYALDEE in COVID-19 patients. Our decision to undertake this trial follows numerous independent studies that indicate an inverse correlation between vitamin D levels and COVID-19 risk and severity. This trial is ongoing. We look forward to updating you on results when they become available. I want to thank all OPKO employees who have worked tirelessly over the past year. I am proud of what we've achieved in 2020 and I am optimistic about what we can accomplish in 2021. I'll now turn the call over to Steve Rubin to further discuss our business.

Thanks, Phil. Good afternoon, everyone, and thank you for joining us. 2020 was an eventful year for OPKO with the onset of the COVID-19 pandemic. BioReference Laboratories demonstrated its ability to be a leading provider of testing services on a national level, not only for COVID-19 PCR testing, but the critical specialty and genetic testing as well. This leading position resulted in record revenue growth and profitability, which Adam will discuss in more detail. As Phil mentioned, earlier this year, we jointly announced with Pfizer that the FDA accepted for review the BLA for somatrogon for once weekly treatment for children with growth hormone deficiency. The target Prescription Drug User Fee Act or PDUFA action date for decision by the FDA is October of this year. Pfizer also submitted an NDA to the Ministry of Health, Labor, and Welfare in Japan for somatrogon. As for Europe, Pfizer remains on schedule with respect to a regulatory submission for marketing approval, and we expect to announce that submission shortly. As this is a global program, Pfizer has also submitted and will continue to submit for marketing approvals in many different countries across the world. Under our agreement with Pfizer, OPKO is eligible to receive up to $275 million upon achievement of certain regulatory and pricing milestones. In addition, upon launch, we're entitled to regional, tiered gross profit sharing for both somatrogon and Pfizer’s Genotropin. Now, I'd like to turn to our commercial pharmaceutical business, starting with RAYALDEE. RAYALDEE numbers for the quarter break down as follows. Total prescriptions for RAYALDEE in Q4 2020, as reported by IQVIA, were approximately 15,000, representing a decrease of approximately 16% compared with Q4 2019 and a 10% decrease compared with Q3 2020. The RAYALDEE sales force continues to contend with the impact of COVID-19 on access to physicians as well as the decline in patient visits to doctors’ offices. New patient starts, however, increased by 1% in Q4 versus Q3. And since the product was launched, nearly 22,700 patients have had RAYALDEE prescribed by approximately 3,400 physicians. Approximately 140 physicians or about 4% of the total number of prescribers were new to RAYALDEE prescribers in Q4. We anticipate that sales of RAYALDEE will rebound as COVID-19 vaccinations become more available and new infections decline. We are pleased to announce that Vifor Fresenius, our partner for RAYALDEE in Europe, has secured marketing approval for RAYALDEE in Spain, Portugal, Italy, and Switzerland, adding to the seven European countries that have previously approved the product, namely the United Kingdom, Germany, Sweden, Norway, Ireland, Denmark, and the Netherlands. Commercial launch is anticipated in 2021, the pricing negotiations are well advanced. Our Phase 2 trial with RAYALDEE as a treatment for patients with mild to moderate COVID-19 is progressing, as we continue enrolling subjects in multiple sites across the U.S. The trial is a randomized, double-blind, placebo-controlled study, and is expected to enroll approximately 160 patients, including many with stage 3 or 4 chronic kidney disease who are at higher risk for developing more severe illness. These outpatients are being randomized in a one-to-one ratio to four weeks of daily treatment with either RAYALDEE or placebo, and then monitored for another two weeks. The dosing regimen is designed to quickly raise and maintain serum 25-hydroxyvitamin D levels within the range of 50 to 100 nanograms per mill in order to induce calcitriol production in macrophages, thereby enabling them to secrete LL-37, a potent antimicrobial protein that can destroy SARS-CoV-2. The primary efficacy endpoints include raising and maintaining serum total 25-hydroxyvitamin D within the range of 50 to 100 nanograms per mill and time to resolution of COVID-19 symptoms. Should the trial findings be positive, we intend to seek Emergency Use Authorization from the FDA for RAYALDEE for this indication. There have been numerous independent studies reporting an inverse correlation between vitamin D status and COVID-19 risk and severity, which, as Phil mentioned, underscores the rationale for the trial.

Thank you, Steve, and good afternoon, everyone. I will begin by reviewing our core business, which includes routine clinical testing and particularly testing services in oncology, urology, women's health, and genetic testing. Overall, sample volume in our core business in the fourth quarter of 2020 decreased by 7% compared to the fourth quarter of 2019. We experienced a 4% decline in the fourth quarter compared to the third quarter of this year. In the fourth quarter of last year, our women's health business remained stable compared to the third quarter. Our oncology business saw a 4% growth in the fourth quarter compared to the third quarter, and our 4Kscore increased by 1% in the same timeframe. We anticipate that the core business will continue to be 5% to 10% lower compared to 2019, as many patients remain hesitant to visit their doctors. Furthermore, telemedicine is significantly affecting physician office visits. We expect moderate improvement in trends during the second half of this year. We are pleased with GeneDx's performance, as its volumes have stayed stable compared to pre-COVID levels in the fourth quarter of this year versus the fourth quarter of 2019. GeneDx's fourth-quarter volumes were up 11.6% compared to the third quarter of 2020. Last month, we announced that GeneDx introduced several new genetic tests, including repeat expansion analysis for spinal spinocerebellar ataxia, Friedreich ataxia, and other common hereditary ataxias. With these additions, GeneDx has developed a comprehensive and affordable offering that encompasses most genes related to pediatric-onset and adult-onset ataxias. Additionally, in January, we proudly announced the expansion of our digital home testing service under the Scarlet brand. Scarlet is an integrated digital platform that offers access to on-demand diagnostic services in the home. After consulting with a healthcare provider, a patient receives a link to utilize Scarlet and schedule an in-person visit at their chosen date, time, and location for specimen collection by a qualified healthcare professional, either at home or at the office. Patients receive real-time updates and pertinent information, like guidance on preparation for the visit or tracking the healthcare professional's arrival. Once specimens are collected, they are sent to BioReference for testing, and results are securely accessible online to both the patient and their ordering healthcare provider. We believe Scarlet provides an innovative and highly convenient alternative to traditional patient service centers and represents the first of many initiatives to advance BioReference's digital health strategy focused on patient flexibility and convenience. Now, I’ll discuss COVID testing. Over the past year, we have significantly expanded the company to meet the growing demand for testing. In the last 10 months, our requisition volume increased from 40,000 tests daily to 115,000. Our employee count rose from 4,000 to 8,100, and our clinical staff grew from 120 to 300. We now serve 19 million patients per year, up from 11 million in 2019. Regarding COVID testing, we have conducted more than 12.5 million COVID-19 PCR tests nationwide. In the fourth quarter, we conducted approximately 4.5 million COVID-19 molecular tests, a 24% increase from the 3.5 million tests conducted in the third quarter. We average between 50,000 and 60,000 tests daily, with a capacity exceeding 100,000 PCR tests per day and an average turnaround time of under 48 hours in most instances. BioReference remains dedicated to offering innovative solutions for COVID-19 testing needs across various sectors, including physicians, health systems, long-term care facilities, governments, schools, businesses, sports teams, entertainment venues, transportation, hospitality, and the general public, through our partnerships with Rite Aid and CVS, which now has over 1,500 locations nationwide. We believe that rapid testing employing point-of-care devices will increasingly be crucial in situations requiring timely results. We have validated multiple point-of-care platforms and collaborated with several manufacturers to provide tailored solutions for various industries. We have created proprietary software for several point-of-care devices to ensure timely delivery and reporting of results. To date, we have performed 100,000 rapid tests for various clients, and our point-of-care test volume surged by 260% from the third to the fourth quarter. Last month, we announced COVID-19 testing agreements with players and officials, along with team and league staff for the 2020 and 2021 seasons for the NBA and NHL. We continue to excel in the sports sector, with contracts across the NFL, NBA, and NHL, alongside a rapidly expanding services organization and logistics operation to support these venues nationwide. I want to highlight our partnership with the NFL, where we conducted 1.3 million COVID-19 tests for 5,000 staff, coaches, and players daily over seven months and managed 15,000 logistic routes to facilitate 268 games, culminating in the Super Bowl on February 7th. Testing was just one aspect of the NFL’s extensive safety strategies, which resulted in an infection rate under 1%. I'm also pleased to announce that we now have an agreement to provide COVID-19 testing for all 30 Major League Baseball teams across the country. Currently, BioReference performs COVID-19 testing for all five major U.S. professional sports leagues: football, baseball, basketball, soccer, and hockey. Additionally, BioReference successfully supported the Winter X Games in Aspen and is assisting the U.S. Soccer women's and men's national teams, as well as the NBA G League in Orlando. We provide fan testing for several teams and recently partnered with the Buffalo Bills organization to allow 7,000 fans to attend each of their two playoff games. This program was the first of its kind in the U.S. and required all fans to secure COVID-19 PCR results from BioReference within 72 hours of the game. Our swift response to the pandemic has underscored our position as a leading national laboratory and has led to numerous significant private and government contracts for COVID-19 testing. We are among the largest providers of testing for public school students nationwide, maintaining a preferred relationship for testing students in New York City. We have tested nearly 300,000 students through a program that conducts testing at almost 1,200 schools weekly. Our tailored solutions using both lab-based PCR and point-of-care tests have established us as the leading provider of large-scale COVID screening programs in the country. Now, I’ll hand it over to our CFO, Adam.

Thank you, Jon. The fourth quarter financial results reflect the tremendous effort that Steve and Jon highlighted. As I will cover in more detail shortly, despite all of the challenges, our commercial teams have delivered solid performances across all portions of our business, resulting in operating profit led by BioReference, but also positive operating profit contributions by our RAYALDEE commercial team along with most of our international operating companies. Total revenue for the quarter was $495 million, an increase of more than 120% over 2019’s $224 million. Our diagnostics segment reported revenue from services of $458 million, compared to $178 million for the 2019 period. The increase in net revenue was driven by the execution of our COVID-19 testing strategy, as well as continued sequential improvements in our volumes for our base business, as Jon mentioned. Combining our routine testing business and our COVID testing business, volumes overall increased over 170% compared to historical levels. Overall routine clinical testing, however, remained below historical levels, while genetic testing improved each month, resulting in overall quarterly genetic testing volumes being flat compared to the 2019 period. The diagnostics segment reported operating income of $69.9 million, compared to an operating loss of $45.4 million, an improvement of $115.3 million over the 2019 period. The fourth quarter of 2019 included a noncash impairment charge of $38 million related to our Claros point-of-care development program. Overall, selling, general and administrative research and development expense decreased as a percentage of revenue from 33% down to 18%, reflecting overall operating leverage improvements. Total costs and expenses increased by $164.6 million compared to 2019, including increased costs of revenues of $176 million due to the overall increase in testing. Moving to our pharmaceuticals segment. We reported revenues of $36.7 million for the fourth quarter of 2020, compared to $46.4 million for the 2019 period. Revenue from product sales for the fourth quarter of 2020 decreased slightly to $30.8 million, including $10.1 million of revenue from RAYALDEE, compared to $32 million in the fourth quarter of 2019, which included $12.6 million of revenue from RAYALDEE. The growth rate of RAYALDEE has been negatively impacted by the stay-at-home orders and physician office restrictions, which restrict product sales representatives from making calls and overall reduced patient office visits. However, we saw a sequential improvement in the gross to net price realization. When looking at revenue from the transfer of intellectual property, we reported $5.9 million of revenue for the 2020 period compared to $14.4 million a year ago, reflecting the completion of our somatrogon Phase 3 clinical trial. As a reminder, we had been amortizing our upfront payment from Pfizer over the development period and now have fully amortized that upfront payment. Loss from operations from our pharmaceuticals segment was $9 million for the fourth quarter of 2020, compared to $56.8 million for the 2019 period. The 2019 period included an impairment charge of $53.7 million related to two of our acquired development programs. Overall research and development expense for the fourth quarter of 2020 was $17.5 million, compared to $23 million in 2019, reflecting reduced spending on our somatrogon development program. On a consolidated basis, the fourth quarter of 2020 had an operating profit of $49.3 million, a significant improvement of $162 million over 2019’s operating loss of $112.5 million. Our net income for the fourth quarter of 2020 was $32.3 million, or $0.05 per diluted share, compared to a net loss of $112.4 million or $0.18 per share for the 2019 period. Finally, for the fourth quarter of 2020, we generated $34 million of cash from operations, resulting in a cash balance at December 31st of $72.2 million. We have approximately $150 million available under our lines of credit. The combination of our cash on hand and lines of credit provides us with a strong balance sheet and adequate capital resources heading into 2021. As we look forward into the first quarter of 2021, we see a significant opportunity to continue to generate operating profits and cash flows. Given the uncertainty of the testing demand for 2021, we are limiting our forward-looking guidance to the first quarter and look forward to providing greater insights into the remainder of 2021, as we see how demand for testing evolves. For the first quarter of 2021, we've built the following assumptions into our forecast. We anticipate performing between 4.2 million and 4.8 million COVID-19 PCR point-of-care and antibody tests during the first quarter. As Jon mentioned, we have capacity well in excess of these levels; should demand for testing increase, our revenue could expand beyond our guidance. We assume our base business for both routine clinical and genetic testing will remain at current levels, which overall are in the mid to high single digits behind 2019 levels. We anticipate RAYALDEE sales to remain behind 2019 and the first quarter of 2020 levels until our sales force is able to fully return to the promotional activities, at which time we expect RAYALDEE to return to growth. With that, overall, we expect revenue for the first quarter of 2021 to be between $450 million and $500 million, including revenue from services of $420 million to $475 million, revenue from products of $27 million to $32 million, and other revenue of $3 million to $6 million. We expect costs and expenses to be between $430 million to $460 million, resulting in an operating profit of $20 million to $40 million at various points between the revenue and expense assumptions. Operating profit includes approximately $22 million of non-cash depreciation and amortization expense, as well as an expectation of research and development expense of $20 million to $22 million. With that, I will open up the call for questions.

Hi, everyone. Congrats on all the progress and the updates today, and thanks for taking my questions. First question is just checking to see if you can provide perspective into pricing and reimbursement pressure with COVID-19 testing saturation and increased competition. I guess, how should we think about reimbursement for the PCR testing going forward?

Jon?

I don’t know, Adam, you want to or you want me to go into the point-of-care?

Yes. So, we continue to see kind of mid-level, mid-60s, overall reimbursement for PCR. I think our view is that it’s going to continue to be stable during the first quarter despite some of the changes that have been enacted under Medicare. I think our overall pricing and reimbursement should remain at those levels.

Got it. Okay. And then, also wondering how you think about conversion of COVID-19 testing costs and personnel back to what the new base business will be as COVID-19 testing demand retreats over time. How are you guys thinking about that?

I think it's important to distinguish between the long-term PCR testing and the rapid point-of-care testing. There continues to be significant interest and ongoing contractual relationships across various industries that wish to maintain testing, whether through lab-based PCR, point-of-care, or rapid testing. I cannot predict when this will change, but there are currently no plans to reduce the workforce related to COVID, given the strong demand we are witnessing for point-of-care rapid testing across multiple industries.

Got it. Okay, that’s helpful. And then, last question is on RAYALDEE. So, you talked a little bit about the Stage 5 CKD study and that you're going through the data. Can you just talk a little bit more about why you plan on reporting as far as the number of patients and some of the data measures that you plan on reporting as well?

Hey, Maury. This is Charlie Bishop. Yes, the study that we just completed is an early Phase 2 study, it's Phase 2a. It involves a total of 44 subjects. So, we'll be reporting on a 3:1 randomization active to placebo. And the design of the study was basically to look at three things. One is RAYALDEE tolerated well by dialysis patients. And we used the maximum dose that we thought would be required in order to successfully treat secondary hyperparathyroidism. The data showed that there's absolutely no change in the safety parameters at all, even at the highest dose that we chose. Secondly, the goal of the study was to see if RAYALDEE could, in fact, be activated in patients who don't have functional kidneys, and the medical literature teaches extensively that activation of RAYALDEE is required in the kidney. And we have found contrary to the medical literature that RAYALDEE is activated readily without functional kidneys. And lastly, the study was designed, of course, to see if we could lower PTH. And what we found with this study is that in many patients we could lower PTH very nicely. In other patients, we can't. And this is part of the drug development process. It's up to us now to figure out why it is that some patients do respond and why others do not. And this will go into our patient selection criteria for the follow-on study, the Phase 2b study. I hope that answers your question.

Yes. That's very helpful. And maybe last follow-up is just if the COVID-19 RAYALDEE results could be reported at the same time, or can you provide any more granularity on a time, when we might see data from both these studies?

Well, I wish my crystal ball were really great because I can't tell you how the pandemic is going to go. But as long as infection rates stay high, we expect that enrollment will be good. You should keep in mind that we’ve designed the ongoing COVID-19 study, not to take all comers. It is a study in outpatients. But most patients have very few symptoms or asymptomatic, and they are not suitable for study to see if an agent, like RAYALDEE, can shorten the time to resolution of symptoms. We have to select the patients who have significant symptoms, even though they're not hospitalized, so that we can see the effect of the drug. So, this requires a subset of the total population that's infected with SARS-CoV-2.

Got it. That's very helpful. Okay. Thank you for taking my questions.

And our next question will come from line of Devin Geiman from Guggenheim Partners. You may begin.

Hi, this is Devin filling in for Dana Flanders. Thank you for taking my questions and congratulations on the quarter. I appreciate the guidance provided for the first quarter. I have a question regarding margin progression throughout 2021. I understand there are various factors at play, including a potential margin benefit from an improved base business and higher volumes, which might be countered by a decrease in COVID testing volumes as the vaccine rollout continues. Can you explain these different factors for us? Do you anticipate that one will outweigh the other? Additionally, I understand that Medicare reimbursement cuts under PAMA are not occurring this year. Do you believe this will positively impact margins, or do you still foresee significant pressure from commercial payers in 2021? Thank you.

Thanks, Devin. I'll try to address them, and Jon can also add his insights. The margin changes you observed in the third and fourth quarter are fairly conservative. As COVID testing volumes continue to transition into point-of-care settings, I believe they will remain strong. Our PCR margins are expected to remain robust as well. The base business is operating at about 90% to 95% of historical levels, and the cost structure supports this. The variable costs related to our COVID testing will primarily influence margin changes, closely linked to revenue items. Regarding the Medicare changes under PAMA, we do not anticipate any significant changes to overall reimbursement in 2021. The delay of PAMA into 2022 is already incorporated into the first-quarter numbers I provided.

Yes, I think that's accurate. I don't anticipate much further discussion on PAMA until at least 2022. As you may know, there is an ongoing appeal regarding how PAMA was priced, which ACLA has won. Therefore, there's a lot of uncertainty surrounding the future direction of PAMA right now.

Okay. Great. Thank you very much.

And our next question comes from line of Edward Tenthoff from Piper Sandler. You may begin.

Great. Thank you. And good evening everyone. I want to echo our thanks for all of your hard and important work in terms of all of the testing that's being done. I had one quick question. I just want to make sure I heard this right, Adam. Did you say that the $38.7 million Claros write-down. When was that recognized?

That was last year, last December.

And then, looking at somatrogon, can you tell us a little bit about what prep work is being done, both on the regulatory side, do you anticipate that there would be a panel, and then, also over at Pfizer with respect to commercial readiness? Thank you very much.

We don't expect a panel, Ed. The work is, we're responding and Pfizer is responding on a real-time basis to various inquiries. There are inspections going on, some including down here in Miami. So, that's pretty ordinary course at this point as we go through the process.

And our next question comes from the line of Yale Jen from Laidlaw and Company. You may begin.

The first question I have is that in terms of your guidance 4.2 million to 4.8 million PCR tests in the first quarter. Do you guys have any thoughts in terms of the trends for the serological test for 2021, especially with more people getting vaccinated?

Jon, do you want to manage…?

Are you talking about the serology test for antibodies? Is that the question?

Yes.

Yes, we have the capacity to conduct several hundreds of thousands of antibody tests if necessary. Currently, we are running two different quantitative platforms for antibody testing, moving away from the initial qualitative assay. The issue of who will undergo antibody testing post-vaccine relates to documenting the effectiveness of the vaccine, which varies depending on which vaccine someone received, or confirming whether one has had the disease. There's a lot of discussion happening around this topic, but it's difficult to predict how much serology testing will take place. I believe that some of it will be connected to travel requirements more than other industries. This means being able to confirm whether someone has been vaccinated, had the disease, or has sufficient antibodies for international travel. I think that might be the most significant role for serology testing in the near future, but that's just a speculation.

One more question on the COVID-19 RAYALDEE studies. You mentioned there's only selective patient that is relevant. Could you give us some sense of what portion of the COVID patient, hospitalized patients would be more suitable for treatment by RAYALDEE?

What we're using for primary efficacy endpoint in the ongoing study is a patient-reported outcome tool that's been validated for viral infections, and we require patients to have a score on that tool that's above a certain level in order to get into the study. And what that does is, it enables the time course of the disease to be fairly long in quite a few patients, and long enough, even in those patients who resolve quickly that we can hopefully differentiate active versus placebo treatment. So, I'm very pleased with the way that we're able to enroll patients into the study. We see a spread in time to resolution of symptoms ranging from 2 days to more than 42. That's exactly what we wanted to see. So, patients fill out this tool every day and we can monitor how their symptoms improve over time. Now, it's our expectation, based on what we're seeing from screening and also from what we see in the literature that somewhere around the range of 20%, maybe a little higher percentage of the patients would have severe enough symptoms that they would want to treat to try to accelerate resolution at the symptoms. It's possible in time that we can develop this drug to treat hospitalized patients, but we don't yet have plans to do that. I hope I answered your question.

Yes. That is very helpful. And again, congrats on the great quarter.

Thank you. Our next question will come from line of Yi Chen from HCW. You may begin.

Hi. Thank you for taking my question. My question is, recently the World Health Organization has released guidance to laboratories, stating that they should reduce their cycle count in PCR tests, which could lead to the lower number of new COVID-19 cases detected. So, what's your opinion on that and what's your current practice?

Yes, we operate at least four different platforms from various manufacturers. In particular, there are two platforms where, if requested, we can provide cycle time values. We are not in a position to set the standards for how these should be reported regarding the platform manufacturers' approvals or emergency use authorizations. If a platform provides cycle time values and a physician or client requests that information, we will share it with them. However, we do not make decisions on how cycle time values are reported; that is determined by the vendors.

Okay. Thank you.

Thank you. And our next question will come from line of Mike Petusky from Barrington Research. You may begin.

Thank you. Good evening, guys. Thank you. So, Adam, I may have not quite caught it. But your guidance on RAYALDEE for Q1 is just, it wasn't simply below Q1 '20. That was essentially the guidance…

That's right, Mike. So, included in the total number, but I didn't break it out exactly.

Okay. Great. I have a longer-term question that I know is constantly evolving as we learn more. Looking ahead to COVID-19 PCR tests and serology tests, do you think that, three years from now, this will still be a significant part of BRL's revenue? I suspect it will be much reduced, but will it still matter, or will vaccinations become so regular for people that it won't hold much importance in three, four, or five years? Thanks.

That's a significant question. No one really knows how things will develop over the next one to two years. We all hope it will pass. Currently, most variants are managed by existing vaccinations, although the situation may change with new data. If a different variant emerges, it could require new treatments or tests, but we haven't encountered that yet. Honestly, I don't think anyone has a definitive answer right now. We also need to consider whether vaccinations will be a one-time event or if they will become routine like the flu shot, which people get every fall. Predicting three years into the future is quite challenging. There are a lot of uncertainties, and it's simply too early to make any firm predictions.

Fair enough. Thanks, guys. I appreciate it.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Dr. Frost for any closing remarks.

Thank you all for your participation and good questions. Stay well, and we look forward to meeting with you again to report the first quarter results. Good night.