Dorian LeBlanc: Yes, certainly. So I think we would look at the full year as having great contribution from the non-COVID products in the growth and similar to the question that Matt just asked. I think we also have a tremendous opportunity in the second half of the year with the flu COVID multiplex. We do have a very differentiated product, a single sample test result very rapidly for Flu A will be COVID that fits well in the pharmacy segment, fits well in the physician office segment, in any place where performance is really valued by the customers given the sensitivity of the platform. So the back half of the year converting what historically was our COVID business into more complete respiratory testing business gives us a lot of momentum with the installed base that we have, all in the right place to capture that opportunity in the U.S., to a lesser degree in Europe and then also a growing business in Japan for respiratory as well, which is, obviously, the second largest respiratory testing market.
So if you think about the cadence of revenues for the year, the core non-COVID business we will continue to grow throughout the year and then we have a good opportunity in the second half of the year on the respiratory, leveraging the installed base and the differentiation of the multiplex product. On the second piece, on the cash burn, that concentrating the respiratory revenues in that fourth quarter will have a very strong cash impact on the company. Those are a high margin, high value sales in high value countries when you look at the U.S. and Japan. So that will be a key portion to driving towards operating cash breakeven in the fourth quarter. And we are concentrating on managing the cost base to achieve that outcome.
Unidentified Participant: Great. And then can I just ask another one on the point of care TB test. You guys had previously talked about finalizing the test strip design and manufacture. I was just wondering how that process is growing, as well as any preclinical studies you had?
Ron Zwanziger: Those have gone very well. We’ve got a fair number of results coming in. And I think we’re on track to seek registration later this year and to get it into some of the programs for the various organizations that help sponsor TB sales, particularly in Africa. And we’re being aided significantly by the Gates Foundation in this process.
Unidentified Participant: Great. Thanks for taking my questions.
Operator: And one moment for our next question. And our next question will come from Mark Massaro of BTIG. Your line is open.
Mark Massaro: Hey, guys. Good morning. Thank you for taking the questions. Maybe first one is for you, Dorian. I think — I believe adjusted gross margins came in at 25% for 2022, recognizing that your Q1 guidance was significantly below consensus? I guess, how should we think about your ability to hold gross margins at that level? Or is it right that we might expect perhaps a temporary pause until revenues pick back up?
Dorian LeBlanc: Yes. No, that is right. You should think of it as a temporary decline in margin until revenues pick back up. We do still have a fixed cost base. As we highlighted in the script, we do have over $3 million of depreciation expense alone running through for the installed manufacturing equipment and we have the facilities expense as well. So there is a fixed cost element here. So at $20 million a quarter, it will be hard for us to have significant positive gross margin. But the benefit of our manufacturing structure is that $40 million a quarter, that delta essentially flows right to the bottom line of $75 million a quarter, that delta almost entirely flows to the bottom line just because the direct materials costs are so small on the disposable.
The other element, I’ll remind you, Mark, is that, we are still expensing any instruments that we install without having reagent rental agreements in place versus I know some of our peers are capitalizing those and spreading that expense over three or more years. So we are — as we place 1,500 instruments in a quarter, we are taking $4.5 million plus hit directly to the P&L as a periodic cost. And as we transition into more of the non COVID broader menu where we’re able to do reagent rental deals, some of the tenders that we spoke about before where we have multi period commitments, we will start changing that business model and therefore changing the accounting for that. But that’ll still be a burden I think in the first quarter for us.
Mark Massaro: Okay. That’s helpful. And congrats on driving 20% of your revenue from non COVID in the quarter. Maybe — I know it’s been asked a couple of times, but would love to just get maybe a little more specificity with respect to — I think, Ron, you mentioned COVID Ultra. Is that to be submitted in Q2, 2023? And then the COVID — I understand COVID is now going to be, I think, a standalone 510K. And then can you talk about the timing of COVID Flu A/B? I guess the reason why we’re asking the questions is just to try to fine tune our modeling with respect to 2023 and 2024 revenue pacing coming from the United States.
Ron Zwanziger: Yes, I know, entirely understood. That’s why we explained that we’re busy collecting and are not quite there, but closing in on finalizing the number of tests we need for the 510K we only have about 20% of the numbers left to collect. And then we’ll submit the 510L for the COVID Ultra. We’re not planning on submitting for the 12 minute test. We’re only going for the 510K on the five minute version because it’s so differentiating and customers, as you heard from, the conversion in Europe over to it has been quite fast. So we’re only doing that one. And then on the 510K we will then — we’re getting samples extremely difficult. We’ll get some samples from the southern hemisphere, but then we’ll have to get some additional samples in the U.S..
But from a modeling standpoint, that’s why we explained about the ITAP program where we’re expecting to finalize that and we expect to get the EUA on that to make sure that we have a smooth transition on the — for the COVID Flu A, Flu B for the next respiratory season. And I should also add, and this probably won’t surprise you that we’ve had tremendous customer response in the U.S. since your question was focused on U.S. But we’ve also had tremendous customer response on Flu A, Flu B in Europe, which, as Dorian commented, doesn’t tend to be a particularly strong market for Flu, but in fact quite a number of locations including the UK and elsewhere have actually bought a significant amount of COVID Flu A, Flu B the same product that we’re taking in through the ICAP program.
Mark Massaro: Okay. That’s great. I know that you have some good support from the Gates Foundation. I think on your Q3 call, Ron, you talked about partnership discussions. Would just love any sense or any update with respect to commercial partnerships or perhaps entities that could potentially provide non-dilutive financing, anything on the partnership side would be really helpful.
Ron Zwanziger: There is really no update on that other than to say that we’re continuing, we’re very active working with the select group. And we think it’s a fairly good probability, we’ll get something done, but we’ll update you when — obviously, when something is done.
Mark Massaro: All right. Thanks very much.
