Dive Brief:

• Quidel on Wednesday lowered 2021 guidance from $2.9 billion to roughly $2.5 billion, as the company has had to adjust for the "drop off" in COVID-19 testing demand in the first quarter.   
• CEO Doug Bryant delivered the bad news at the virtual Barclays Global Healthcare Conference, reporting that test demand has plunged between 30% and 40% in February and March compared to the fourth quarter. Quidel’s stock price dropped by 17% in response in Wednesday trading.
• Quidel expects first-quarter revenue of at least $450 million. William Blair's previous model for the first quarter was $720 million. The analysts called the company's guidance for the first quarter and full-year "underwhelming" and warned investors of the realization that "the use-case for point of care, rapid antigen tests is changing at warp speed."       

Dive Insight:

Quidel has been riding the COVID-19 testing wave since the start of the pandemic. The point-of-care diagnostics manufacturer sold $678.7 million of its coronavirus kits in the fourth quarter, up 81% sequentially and 432% year on year driven by antigen tests, and built up a "modest inventory" of tests for the first time.

What a difference a couple of months make. 

"We didn’t see the continued level of demand for the symptomatic testing that we had in the fourth quarter,” Bryant said during the Barclays event. “Fewer people are getting tested as a consequence of having symptoms.”

That symptomatic distinction for coronavirus tests is an important and negative development for Quidel, according to William Blair analysts, who noted that a "bigger disconnect" for them is that there seems to be a lot more inventory in the channel than what the company's management discussed in February during its fourth-quarter earnings call.

"Gone are the days when there is sufficient demand in the traditional, symptomatic testing channel that will consume all of Quidel's growing test supply. Here are the days when the company will need to pivot to find new channels and customers who use the tests to confirm the negative status of otherwise healthy individuals, as opposed to confirming the positive status of sick individuals," William Blair analysts wrote.

The problem is that while some competitors such as Abbott Laboratories and BD have the ability to "offset slowing demand for symptomatic testing domestically" with international opportunities or U.S. government contracts regardless of demand, Quidel has "chosen to be levered to U.S. testing dynamics in the professional segment, which we had suspected was holding up better than what it is," according to the analysts.

Craig-Hallum analyst Alex Nowak wrote in a Thursday note that the decline in COVID-19 testing demand amid coronavirus case reductions is not a big a surprise.

"What is more surprising is management’s tone change on Q1 from just a month ago at earnings, where the company stated that it could not exactly identify which channel (professional or alternate) tests will go, but all capacity would be absorbed," Nowak wrote.

Though Quidel expects first-quarter revenue of at least $450 million, Bryant called that a conservative assumption, adding that figure is the “low end of the range” but would not give a high-end estimate.  

“It’s not forecastable so I just don’t want to disappoint and so, therefore, I’m giving a number that I believe is achievable based on what we’ve done so far,” Bryant added. “We really do have a feeling for what’s happened in the first quarter and what the testing landscape looks like.”    

At the same time, Bryant said Quidel does expect “significant demand” for COVID-19 tests beginning in the second quarter as the company continues work on an at-home, over-the-counter antigen test that analysts see as the first step in the emergence of a consumer-focused diagnostic business.   

“For the year, $2.5 billion, it's still a big number. Still a lot has to happen and we have to succeed both in the marketplace and in manufacturing,” Bryant added. “We do assume OTC clearance for QuickVue SARS at home and I have a great deal of confidence that we will get there."

FDA earlier this month granted emergency use authorization to Quidel’s QuickVue At-Home COVID-19 Test. The product makes lateral flow technology used by healthcare professionals available to the public, albeit initially only on a prescription basis.

Craig-Hallum's Nowak observed that QuickVue At-Home COVID-19 Test is "receiving very strong demand despite the Rx label and the OTC label may only help from a logistics perspective, not necessarily fulfilling demand."