UPDATE: May 5, 2022: Quidel reported just over $1 billion in revenue in the first quarter, meeting the high end of its expected preliminary range and setting a record mark for the diagnostics company.

The company, which released preliminary results in early April, reported year-over-year revenue growth of 167%. Its first-quarter performance was driven by COVID-19 revenue, which totaled $836 million, representing growth of 211% over the prior year’s quarter.

CEO Doug Bryant told investors during a Wednesday earnings call that the quarter was “one for the record books,” and CFO Randy Steward said that the record quarter surpassed the previous “high watermark” of $809 million in the fourth quarter of 2020.

After closing Wednesday up by 3.8%, Quidel’s stock price was down over 2% Thursday morning.

The diagnostics company echoed similar comments from other medtechs regarding COVID-19 testing: After a better-than-expected first quarter, demand will likely drop off in the second half.

“Our longer-term expectation is that COVID-19 tests and infections, and related testing demand, will continue to wane as COVID-19 becomes more seasonal, similar to flu demand,” Bryant said. “We currently are not forecasting a significant revenue contribution from our COVID-19 products in the back half of the year.”

When questioned about what a low quarterly mark would look like, the CEO declined to give a specific projection.

William Blair analysts reiterated in a Thursday note that this may be the end of strong COVID-19 product revenue for Quidel.

“As we wrote in our prerelease note, if the first quarter ends up being the last of surging COVID-19 sales (as our modeling suggests), it was quite the quarter to go out on as the company hit the quarterly three-comma club ($1 billion in revenue) for the first and likely last time for quite a while,” the analysts wrote.

Dive Brief:

• Quidel on Thursday announced preliminary first-quarter revenue in the range of $990 million to $1 billion, beating the Street's estimate of $817 million on the back of rising demand for COVID-19 tests.
• Coronavirus-related product revenues in the first quarter are expected to be approximately $836 million, including $657 million in QuickVue COVID-19 antigen test revenue and $138 million in Sofia SARS antigen test revenue. Quidel CEO Doug Bryant in a statement said it was a record quarter in terms of revenue, with the company selling about 113 million QuickVue tests and approximately 12 million Sofia SARS tests. Quidel expects its total revenue for the first quarter will be up 164% to 166% compared to 2021.
• Bryant contends that Quidel is "well-positioned to deliver strong performance" for the year as it targets diagnostic testing markets in the professional, retail and government sectors. However, William Blair analysts in a Friday note said they "model COVID-19 and overall revenue to fall off sharply" for the rest of 2022 and "only call for modest COVID-19 sales in 2023 and beyond (around $200 million and beyond around $100 million per year)."

Dive Insight:

With the omicron variant driving U.S. coronavirus cases to record highs in January, Quidel and diagnostics competitors like Abbott Laboratories took advantage of increased demand for COVID-19 tests, making a fast start to the year. However, some analysts see the early 2022 testing bonanza coming to an end.  

"If this is the last quarter of surging COVID-19 sales (as our modeling suggests), it was quite a quarter to go out on," William Blair analysts wrote, noting that the "roughly $1 billion in revenue this quarter compares to the best quarter prior to the pandemic of $169 million, equating to a roughly 6-times bump."

Quidel's stock price closed up 3% Thursday and was trading above $118 on Friday.

Looking ahead beyond 2022, William Blair analysts said they are focusing on Quidel's $6 billion buyout of Ortho Clinical Diagnostics announced in late December.

"While the story of the last couple of years has been COVID-19, the story of the next couple of years seems very likely to be around the integration of the Ortho Clinical Diagnostics business. We are eager to speak with management about updates on pre-close activities and any changes to the view of the combined entity," the analysts wrote.

Still, Craig-Hallum analysts in a Friday note argued that the delta and omicron variants are proof that COVID-19 "will remain a natural part of our lives and [Quidel's] business." They made the case that Quidel benefited in the first quarter from its U.S. Department of Defense contract and general sales from the omicron surge to start the year, though sales will inevitably come down as omicron began waning in February.

"The company has now shown a clear ability to scale test volumes up and down as demand fluctuates. This will be important for future waves, whenever and however they appear," Craig-Hallum analysts wrote, while sticking to their COVID-19 revenue model "at the ~$25M/month low water mark" with plans to "update the model for Ortho Clinical as the deal nears completion." 

Quidel's rival Abbott has also ridden the COVID-19 waves up and down throughout the pandemic. Last month, Abbott was awarded a $1 billion contract by the U.S. Army to provide rapid antigen tests to the federal government, as part of the Biden administration's efforts to purchase one billion at-home test kits to help meet future testing demand.

RBC equity analyst Shagun Singh in a note last month said DoD increasing their contract with Abbott from $360 million to over $1 billion "is not incorporated into Abbott's COVID testing guidance, since management only includes contracts they have visibility into at the time of issuance."

In late January, Abbott provided full-year guidance that included an initial COVID-19 testing-related sales forecast of $2.5 billion, which the company expects to occur early in the year and will update on a quarterly basis.

"We are currently modeling 2022 COVID testing sales of ~$2.96B, of which $2.48B is generated in 1Q'22. Consensus COVID testing sales currently sits at ~$3.04B in 2022 with $2.25B occurring in 1Q'22," RBC's Singh wrote.

Abbott is scheduled to announce its first-quarter financial results on April 20. Quidel expects to issue full financial results for the first quarter in May.