Chembio Diagnostics Inc (CEMI) 2014 Q2 法說會逐字稿

Greetings and welcome to the Chembio Diagnostics second-quarter 2014 financial results conference call.

(Operator Instructions).

As a reminder this conference is being recorded. It is now my pleasure to introduce your host, John Sperzel, Chief Executive Officer of Chembio. Thank you, Mr. Sperzel, you may begin.

Good morning. Thank you all for participating in today's call. Joining me today is Rich Larkin, our Chief Financial Officer.

Before we begin I would like to caution that comments made during this conference call, today August 7, 2014, will contain forward-looking statements within the meaning of the Securities Act of 1933 concerning the current belief of the Company, which involve a number of assumptions, risks and uncertainties. Actual results could differ from these statements and the Company undertakes no obligation to revise or update any statement made today. I encourage you to review all of the Company's filings with the Security and Exchange Commission concerning these and other matters.

Going into the second quarter we set out a number of important goals spanning our entire business including regulatory, sales and marketing, technology and facilities enhancement, global expansion and collaborative opportunities. I am pleased to report our progress toward achieving each of these objectives during the quarter and I will provide an overview of our recent and anticipated milestones following a review of the second-quarter financial results and balance sheet by Rich. Rich?

Thanks, John. I will briefly go over the second-quarter and six-month 2014 results. Please review our 10-Q filings for more details.

I will first begin with the results of our second quarter. Our total revenues were $7.42 million a 37.6% increase compared with total revenues of $5.39 million in 2013. We had product sales of $7.25 million, a 43.2% increase compared with product sales of $5.06 million in 2013.

Our research and development milestone grants and royalty revenues for the three months ended June 30, 2014, decreased to $167,000 from $332,000 in the prior-year period. Gross margin dollars for the second quarter increased 30.8% to $2.98 million compared with $2.28 million for the prior-year period due primarily to higher product sales.

Our product gross margin dollars for the second quarter increased 44.1% to $2.81 million from $1.95 million in the prior-year period, also primarily as a result of our higher product sales. Our research and development expenses in the second quarter were $1.27 million compared with $1.5 million in the prior-year period.

Selling, general and administrative expenses in the second quarter increased to $1.95 million from $1.16 million in the prior-year period largely due to increased commissions and our investment in sales and marketing personnel and related costs. Our operating loss for the second quarter was $233,000 compared with an operating loss of $380,000 in the prior-year period. Net loss for the second quarter was $146,000, or $0.02 per diluted share compared with a net loss of $241,000, or $0.03 per diluted share for the prior-year period.

Now I will go over our year-to-date results. Total revenues for the six months of 2014 were $13.24 million, up 9.6% compared with total revenues of $12.07 million in the prior-year period. Product sales in the first six months of 2014 were $12.15 million, up 6.8% compared with product sales of $11.37 million in the prior-year period, primarily due to increases in our DPP product sales and our Brazil to FIOCRUZ.

Our research and development milestone grant and royalty revenues for the six months ended June 30, 2014, increased to $1.076 million from $697,000 in the prior-year period. Our gross margin for first six months increased to 5.6% to $5.26 million compared with $4.98 million in the prior-year period. The product gross margin for the first six months decreased 2.5% to $4.17 million from $4.28 million in the prior-year period.

Our R&D expenses in the first six months were $2.47 million compared to $2.55 million in the prior-year period. Selling, general, and administrative expenses in the first six months increased to $3.4 million from $2.32 million in the prior-year period largely due again to commissions, wages and related expenses as well as other expenses.

Our operating loss for the first six months was $616,000 compared with an operating income of $107,000 for the prior-year period. Net loss for the first six months was $371,000, or $0.04 per diluted share compared with a net income of $76,000, or $0.01 per diluted share for the prior-year period.

We had cash and cash equivalents of $6.84 million as of June 30, 2014, compared with $9.65 million as of December 31, 2013. The primary reason for this decrease was due to net cash used in operating activities of $2.54 million for the six months of 2014 and this included an increase in accounts receivable of $831,000. Our working capital decreased by $535,000 during the year from $1.422 million to $13.69 million.

That concludes the financial review. I will now turn the call back over to John.

Thanks, Rich. We are pleased with the second-quarter revenue growth and we are focused on building an infrastructure to support further growth in the future.

Looking ahead, we firmly believe our patented DPP technology will be an important growth driver for the Company. The Chembio DPP HIV assay is FDA approved for use with oral fluid and blood samples.

As we updated last quarter, the FDA agreed to review our CLIA waiver application for the DPP HIV assay based on additional data from studies that were conducted at Chembio. The requested studies were completed on schedule, data was submitted to the FDA during the second quarter as planned and we anticipate a response from the FDA during the third quarter of this year.

Concurrent with this work we achieved an important milestone in the United States during the second quarter by establishing a Chembio sales and marketing organization to serve both end users and distribution partners. While this effort is new and currently focused on Chembio's FDA approved and CLIA waived STATPAK HIV assay, we are on track with our goals and we believe this initiative is important for future growth.

The Company is currently in the process of recruiting and hiring additional sales representatives in anticipation of the potential CLIA waiver for the DPP HIV assay. This CLIA waiver represents a significant milestone as it will allow Chembio to expand the current market for this product to include CLIA waived sites such as physician office lab facilities, clinics and other community healthcare providers.

In addition to our own organic efforts, we see partnering as another important opportunity for growth. During the quarter we began exploring opportunities to apply our DPP technology not only within the infectious disease field but also across a wider spectrum of diseased areas.

While these discussions are early we are thrilled to have the attention of a number of leading organizations all of which share our commitment to improving healthcare through early and accurate diagnostic testing. We look forward to updating you with respect to these discussions as soon as appropriate.

Another area of focus for us is technology and manufacturing. To facilitate future sales growth Chembio made essential investments in technology and the Company's manufacturing infrastructure during the second quarter.

Importantly, we are in the midst of expanding our FDA approved manufacturing facility in Medford, New York, Long Island, to increase our production capacity. We also established a new warehouse and distribution facility which became fully operational during the second quarter.

Outside the US Chembio continues to work with our partners to build successful markets in Latin America and Asia. Our partnerships in Latin America provide important access to growth markets in the region which continue to contribute significantly toward the success of the Company. Our partnership in Asia, specifically with RVR, is expected to be a key contributor for future growth allowing Chembio to expand its commercial presence in the Asia region.

As we reach the midpoint in the year, we are very pleased with our accomplishments. Revenue increased on a quarterly and year-to-date basis compared with prior-year periods.

We successfully launched our US commercial organization and we expanded our production and warehouse capacity. We are optimistically awaiting the FDA response to our CLIA waiver application for the Chembio DPP HIV assay, which if positive, would unlock significant new markets for us.

Our international partners continue to build demand for our products overseas. And lastly, our leadership team is actively evaluating opportunities for new product development and strategic partnerships within and beyond infectious disease. We expect the Company's progress in each of these areas to be important contributors for Chembio's growth in the future.

This concludes our prepared statements for today. I would now like to open the call for any questions.

Thank you. (Operator Instructions). Bill Bonello, Craig-Hallum.

Good morning, guys. Congratulations on what was a great quarter. Just a couple of follow-up questions.

Just a bit on the plans for commercialization with DPP HIV once it is CLIA waived. Can you talk to us about the opportunity here? Is it mostly the opportunity to access the clients who prefer oral collection, or is there a competitive advantage with this product that you anticipate that you would take share on the blood side, too?

Within the oral collection market can you tell us do you know who those clients are? You've got them identified, how quickly can you get out to them post-CLIA waiver?

Bill, thank you for the comments on the quarter, we appreciate that. I will respond to your question, talk to you a little bit about our commercial efforts and then I will talk specifically about the product differentiation that we think DPP offers.

So first, as far as US commercialization is concerned we are on track with our US commercial plan. As you know in June we began marketing and selling our STATPAK HIV assay in the United States with the newly created Chembio sales and marketing team. And our initial focus is on selling and marketing the FDA approved and CLIA waived STATPAK HIV assay to the public health sector.

We were able to reach that public health segment with a relatively small team. Today we have a single director of sales, a director of marketing, two sales representatives and external telemarketing and telesales partner.

I am also pleased to say that the first customer that we obtained through this new team is one of the groups of Planned Parenthood. We are also in the midst of finalizing distribution agreements with a number of US distribution partners for both our STATPAK and our DPP HIV assays to support our sales efforts, which we will announce in due course.

As we expand the commercial effort beyond the public health segment we plan to expand the US commercial effort to a broader market, which we expect to occur in the second half of 2014. So that would include sites -- assuming we get the CLIA waiver, such as physician office laboratories, clinics, etc. And we will scale that salesforce accordingly.

Talking a little bit about the DPP product and I presume your question is how will we compete against the determined brand of Alere or the OraQuick brand of OraSure. We believe the DPP technology will have sustainable differentiation in the market versus our key competitors and these will translate into customer benefit.

Why? DPP assay offers excellent sensitivity and specificity. The DPP assay can be used both with blood and oral fluid specimens.

The DPP assay requires a very small blood sample in those situations, 10 microliters, competitive product, one of them requires 50 microliters. We know that is important to customers.

And the DPP assay is easy to use and has a unique sample collection system. So all of those features we believe with proper marketing and sales effort will translate into customer benefit.

As far as the customers who they are, where they are, that's an ongoing effort. We are a little over a month into our US commercial effort. We are identifying the customers in the public health sector and we will follow the same track when we expand beyond that sector.

Great. That's very helpful.

And then if I could, just a question on the actual results. I know in your business revenues can be a bit, for lack of a better word, lumpy.

And can you just let us know were there any big orders that were recognized in the quarter that make the quarter a bit of anomaly on the high side? Were there any orders that you might have expected that got pushed back? How do we think about Q2 relative to the future?

We did not experience any lumpiness positive or negative in the second quarter.

Perfect. Thank you very much.

Joe Munda, Sidoti.

Good morning John and Rich. John, a lot of my questions were already asked but I wanted to focus on your comments for opportunities for new product development and strategic partnerships beyond infectious disease.

Can you give us a little bit more color there? Not saying specifically who you are looking to partner with but can you give us an example of where or what type of market you are looking at, or the opportunity that may be underlying there?

So it would be a bit premature because the discussions were early. We only wish to communicative that these preliminary discussions have been initiated and we are excited about the collaborative prospects ahead. We will certainly update you as those take shape.

What we're seeing is that the DPP technology has a lot of versatility. We know of its versatility for infectious disease because that is part of our core competency.

What we are seeing in interest -- I will call it some inbound interest and some outbound deliberate efforts on our part -- is that the technology because of its ability to multiplex, I.E. give multiple result from a single drop of blood, has application across a variety of platforms and in a variety of sectors outside of infectious disease. That's what we are exploring and as I said these preliminary discussions are quite positive.

Okay, that's very helpful. From a housekeeping issue, you talked about expansion of the warehouse -- I'm sorry, moving into a new warehouse, expansion of capacity.

I am just wondering what type of capital is going to be needed? Are we going to see an uptick in CapEx going forward throughout the rest of the year here, or is the spend already done as far as the expansion efforts?

So I will explain a little bit about what we did and I will just ask Rich if he wants to comment on the CapEx requirements. So as discussed in the prepared remarks, we put a number of wheels in motion which we hope will contribute to sustained growth. To support that growth our facilities and production technologies need to be state-of-the-art.

So to that end we are in the process of expanding and upgrading the FDA approved manufacturing site here in Medford, NY. Phase I, which involved establishing a new warehouse and distribution center in Holbrook, New York is about eight miles from our Medford facility. We opened and now have a fully operational warehouse and distribution center that is approximately 21,000 square feet.

Phase II involves expanding and upgrading the Medford, NY facility by approximately 11,000 square feet. It is on track for completion during the third quarter.

We have already secured the additional space here in Medford. So, Rich, would you like to comment on the CapEx requirements?

I really wouldn't want to get into any specific numbers. But as John indicated we are in the process of outfitting the additional space to fit our needs so there will be some capital expenditures to do that.

Basically, we are just realigning our facility to become much more efficient. And so most of the equipment that we have would be utilized in the new space but we are always interested in, or always looking at, ways to improve our efficiencies and our throughput. So again, there will be in the future I am sure some additional CapEx expenditures in regard to improving our capacity and throughput and efficiencies.

Okay. Rich, would it be safe to assume to annualize that $517,000, or do you think it will be somewhere in the neighborhood of a little bit higher than that?

I think that you are looking at probably a little bit higher.

Okay. And then I guess my last question is, John, you talked about expansion of the salesforce and the marketing effort here based on the response from the FDA on the third quarter. As far as the ramp up in SG&A expenses, what can we expect?

How many reps do you think it will take you guys to really go out and get and really push this thing out let's say in the third and fourth quarter here? What kind of increase in that line item are we going to see?

So I think we are about one month to two months into our US commercial effort and we are still learning this, Joe. We will come back to you in the third quarter with a better sense of what that scale requirement is and what that ramp up looks like.

It is somewhat dependent on the DPP HIV CLIA waiver. It is also dependent on finding high quality people, which we have found already. If we find them ahead of getting the DPP HIV CLIA waiver we may hire those folks in advance to accelerate our efforts on the product that we are currently marketing and selling in the US, which is the STATPAK HIV product.

Okay. That's it for me. Thank you.

Paul Nouri, Noble Equity Fund.

Good morning. Can you give us updates on your lab tests and RVR efforts and then how your sales effort is going to change once those are in play?

So I am prepared to talk a little bit about RVR. Lab test we didn't intend to go into any detail on because that is still in a sort of nascent stage.

With respect to RVR, we are pursuing opportunities to commercialize our products in Asia, which of course is a growth region. We believe the partnership with RVR represents a significant opportunity for the Company for the following reasons.

RVR will manufacture our products in Malaysia, which has a completely different cost structure. We are talking overhead and labor cost structure. And we will receive royalties on sales in the regions that RVR will take commercial responsibility for.

RVR's manufacturing capability is key as it allows us to compete against lower price points in Asia. RVR is also dedicated to become a quality producer with the goal of achieving regulatory approval for manufacturing, which could allow further expansion in the future. And RVR has the backing of leading universities and government agencies, which we believe give them credibility as they build their reach.

RVR is also on track with all of the major milestones that we have set going into this partnership. I will be in Malaysia in two weeks to personally see the progress that the Company is making and further support this partnership.

Okay.

(multiple speakers) on our progress with lab tests in the next quarter.

Okay, great. And then in the updated presentation it mentions international registration for your HIV-Syph product and some initial orders there. Is there anything beyond Mexico, or is that the primary market for it right now?

Latin America is the primary market for it today. And we are very encouraged by the progress.

Okay. And I guess kind of a broader question, I guess Alere's lateral flow patent will be going off-patent in the next year or so. Do you think that will change the competitive dynamic at all in the point-of-care market?

So when you say competitive dynamic do you mean with respect to new entrants in the US?

Right.

As you know, to market and sell a product in the United States in the HIV sector requires a PMA, which is a quite costly barrier to entry. So there is a barrier that will keep a lot of people out from a cost standpoint.

The second is that the quality requirements to achieve revelatory status in the United States are extremely high and that is also a significant barrier. So while the patents expire we don't expect a floodgates open in terms of new entrants in the US market.

Okay, great. And then final question, I guess gross margins over time expected to go up a little bit with taking some of the Alere business in-house. Is that going to be offset over the next couple of quarters with the manufacturing expansion that is for the time being unabsorbed?

Obviously there are some additional costs in relationship to the expansion. It will mean additional costs to our cost of goods sold but the sales to the US direct in the short term will obviously be ramping up.

So yes, I guess to answer your question, it will be somewhat offset. But I don't expect it to be a major issue.

All right. Thanks.

Brian Marckx, Zacks Investment Research.

Hi, guys nice quarter. Rich, what was the total US lateral flow sales in the quarter?

I believe that we had indicated in our MD&A for the quarter -- just give me one moment to get it -- that we had -- what we had a decrease of approximately $143,000, I guess I did not let you know what that number was.

Is $1.5 million close?

Just give me one moment. $1.5 million would be approximately correct.

Okay, great. And then on FIOCRUZ sales in the quarter, which were relatively huge. Can you give any more background detail on why the big jump?

We are making a concerted effort to build a business in Latin America. We have a strong partnership with FIOCRUZ.

We continue to bring new technology to the region and FIOCRUZ continues to provide great channel access for it. So it is a deliberate effort to build the business in Latin America through a strong partner and multiple technologies.

Okay. I think earlier guidance on previous earnings calls was that you thought you could do approximately the same level of DPP FIOCRUZ sales in 2014 as in 2013 and through the first half of 2014 you are just about at that level. So should we expect that there will continue to be meaningful sales to FIOCRUZ?

I think as John had indicated earlier, we did not really see any lumpiness in the second quarter.

Okay. How about the tech transfer agreements on the various FIOCRUZ products? Can you tell us if all of those minimum quotas have been met for all the products?

In some cases they have, in other cases they have not and some of those tech transfers are complete and some of them are also not. Like any customer continuing to bring new technology to a customer is an important part of future success and we are very focused on that.

Okay. That's all I had. Thanks, guys.

Larry Haimovitch, HMTC.

Good morning, gentlemen. Congrats on a very nice quarter.

Could you -- I don't know if you did this already, I may have missed it. Did you provide the breakdown of international versus domestic revenues and their respective growth rates year-over-year?

We did not do that in the prepared remarks.

Okay, I wonder if you could give us -- and destroying to understand, John, whether international was the key to the quarter being strong, or domestic or just both areas were strong performers?

I can point you to footnote 2F, which is our geographic information. And in there you can see that South America this year was for the quarter was $4 million versus $1.5 million last year.

Okay.

North America was roughly $2.8 million versus $2.5 million.

So both areas were strong? Why was South America so strong? A couple of other people have asked questions about lumpiness, whether there was a big big order but you have said no, so just across the board strength throughout that region?

Correct.

Yes.

Okay. And the second question, in light of the fact that you did burn some cash in the first half and you have talked about CapEx scaling up, it makes me wonder about whether there is any anxiety on your side about cash and whether you are going to need to potentially raise some money?

As I mentioned in my remarks, while cash went down significantly our working capital went down by only $0.5 million. So no concerns.

So do you think you will burn more cash in the second half and into next year?

Again, I don't like to give any kind of guidance on that.

Okay, fair enough. Thank you. See you next week, John.

Jan Wald, Benchmark.

Hi, everyone. Good quarter. I jumped on the call late so I apologize if you have gone over this in detail.

But any update on the CLIA waiver and I guess more importantly, since you are thinking it's like to happen, what happens after you get the waiver? How quickly can you jump into the market after you hear?

So Jan, hi, and thank you for the comments. We did give a brief update on CLIA waiver but I am happy to go into a little bit more detail.

As we announced last quarter the FDA agreed to review our CLIA waiver application for the DPP HIV assay based on additional data from studies that we would conduct at Chembio. That was a positive change because in February we had announced that we had to go back out and do a clinical.

So we had some positive steps in taking a scientific review with the FDA in earlier this year. So we are pleased about that.

The studies that the FDA requested be completed at Chembio were completed on schedule during the second quarter. We submitted the data as planned during the second quarter and we anticipate getting a response from the FDA during the third quarter.

So while no outcome can be guaranteed, we are optimistically awaiting the FDA response to the CLIA waiver application, which is now complete. If this is positive it is going to unlock significant opportunity namely the US CLIA waived oral fluid HIV testing market.

So with respect to our readiness, we are ready today. And what I said before about scaling up the US sales team, we are actively recruiting and we will hire when we find qualified candidates in preparation of CLIA waiver.

And if I understand you correctly, the FDA response you are looking for would be yes or no? It would be approved or not? Is that fair?

Well, we are looking for a yes. We are looking for (multiple speakers).

Of course, but that's what you expect in the third quarter?

Absolutely.

Okay, second question is, people have asked about the SG&A line. On the R&D front, it looks like you are going to be doing, or potentially doing, more R&D with partners, or not. If you do it with partners, are these things paid for in-house, or do you think you are going to be paid for it by the partners you have or a combination of both?

Great question. And I think when we think about R&D it may sound a little bit simple but we really need to think about the terms research and development as a bit separate terms and that's what we do in the diagnostics business.

So research initiatives are primarily funded within Chembio by grants and external partners. We are actively, as I said, seeking partnerships in the area of infectious disease and particularly in the areas outside of infectious disease. We are also actively seeking grants, so those tend to fund the R side of what we do in terms of R&D.

And as I said, we are in discussions with diagnostic companies. We are interested in the patented DPP technology for use in fields beyond infectious disease.

Development initiatives generally would be funded by Chembio and we are focused on four very specific development projects within the Company that I will share with you. One is the DPP HIV-Syphilis combination assay; two is the DPP HIV antigen antibody assay; three is a DPP HCV assay; and four, enhancements to our DBP HIV oral fluid assay. So while these may have been loosely discussed in prior communications, these are four projects that are internal that we are absolutely unwaveringly focused on.

Okay. And I apologize but I missed the third one. Would you mind repeating it?

Sure. I'm not sure what you had as third but I will just repeat them again. DPP HIV-Syphilis combination assay, which by the way, we sell quite successfully in Latin America today; two, DPP HIV antigen antibody assay, so-called fourth generation for some; three, DPP HCV assay; and four, DPP HIV oral fluid enhancements. So you can see that these projects are all based on our patented DPP technology, which we are big believers in.

Right. And I guess in terms of working with the partners, these tend to be long-term type of affairs I would imagine? And so just so in the way we think about it we should think of these as multiyear type projects going forward before you are able to commercialize them?

So they may take on different shapes and forms. They are early in discussions. Most likely what we will see is a feasibility project that is paid for by the partner to demonstrate what we believe would be the versatility of the DPP assay and then we would enter into a technology agreement.

Those can take many different shapes. They can be internal project that are funded by others where we become the manufacturer, we simply supply the product. They can be tech transfers like we have done in Latin America.

So they can take on a light of different shapes and forms. What we are encouraged by is the interest in the DPP technology outside of fields that we are focused on.

Okay. And one last question, you mentioned with respect to RVR that they are working on a manufacturing processes and I imagine they are trying to make them GMP-type practices? Do you see them manufacturing primarily for Asia, or are you thinking that they're going to be able to manufacture for other geographies outside of Asia?

Great question, Jan. So first of all, as I mentioned earlier, I will be in Malaysia in the next couple of weeks, so I will see firsthand the progress that we are making.

We have had great interaction since I joined the Company with RVR. They have been here a couple of times and they are making progress on all of the milestones on schedule, which is great news. We are really optimistic about that.

Initially, the project is focused on the DPP technology and it is focused on manufacturing for that region. Depending on how it progresses and the requirements, there is the possibility to expand that relationship.

Okay, that's it. Thank you very much. Again, good quarter.

Bill Bonello, Craig-Hallum.

Hey, guys. Thanks for taking my follow-up. Just one more question on DPP as a platform technology.

When we think about this, do you think about the opportunity, the most significant opportunity going forward being that, hey, this can be a more sensitive technology to sort of supplant lateral flow in places where lateral flow is already used? Or do you think the more compelling piece is that it enables development of tests that essentially can't be done effectively with lateral flow today?

I would say, Bill, that it is both. We believe both of those are important aspects in what the DPP technology allows.

Okay. Thank you.

Paul Nouri.

Can you go into a little bit what you need to do with the HIV-Syph assay before you submit an application to the FDA?

Sure. The DPP HIV-Syphilis assay has been well adopted outside the US market, as we said. And Company has realized significant sales revenue for the product.

As diagnosis of syphilis varies by country it is not unusual to have different assay procedures for diagnostic products to fit into certain diagnostic algorithms. We are making progress in this area for the US diagnosis algorithms and we are committed to having this product developed for the US market. We will continue to update key milestones as we go forward and as appropriate but we do still have more work to do.

And are there any other products that you think it would be worthwhile to pursue for oral use?

So there are other projects that will fall into the R side of what we do, whether they are grant funded or whether they are funded by external diagnostic partnerships. Within the Company we are going to stay very focused on those four projects that I referenced earlier.

I think as we all know when we set priorities we have to be diligent and rigorous about staying focused on them. And what we say no to is just as important as what we say yes to, so I will say internally we are going to stay very focused on those four. On the R side we are exploring options to develop, through partnerships, products that we believe will fit within our circle of expertise in infectious disease point of care.

All right. Thank you.

Joe Munda, Sidoti.

Yes, John, thanks for taking the follow-up. Real quick, I wanted to know how much, if any, did the World Cup play into the revenues down in Brazil?

Did you see any uptick in ordering patterns because of it? I know you are forecasting some stable growth there.

I'm just trying to get a sense of if the World Cup had any impact in FIOCRUZ's ordering? Thank you.

We did not see any connection to it. Our Chief Science and Technology Officer was with our partner in Brazil during the World Cup and the only comment he made was it was very difficult to get around.

I'm sure. Okay. Thank you.

Miles Jennings, private investor.

Good morning. Over the last few years there is been some work between the CDC and Chembio regarding multiplex influenza testing.

I think in some of the cases there are eight different tests performed with the same -- on the same set. I know this is probably a longer-term project, but since you completed your research for them, and I suppose they are considering the next step, could you comment on the status of that influenza multiplex test unit?

So Miles, not prepared to talk about the influenza test and work that we are doing on the research side of our business. But I will say you hit the nail on the head in terms of why there is so much interest in the DPP technology.

That versatility of multiplexing, for getting multiple results from a single drop of blood or signal specimen, is exactly why so many companies and partners are interested in the DPP technology. So we are exploring all of those. What we determine as the priorities and we focus on on the R side of our business are still to be determined.

Thanks, John.

Thank you. There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

So I would just like to thank all of you for participating in today's Q2 earnings call and look forward to updating you in the future as we go forward. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.