Chembio Diagnostics Inc (CEMI) 2014 Q4 法說會逐字稿

Greetings and welcome to the Chembio Diagnostics fourth-quarter and year-end 2014 financial results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. John Sperzel, Chief Executive Officer. Thank you Mr. Sperzel, you may now 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'd like to caution that comments made during this conference call today March 5, 2015 will contain forward-looking statements within the meaning of the Securities Act of 1933 concerning the belief of the Company which involves 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 statements made today. I encourage you to review all of the Company's filings with the Securities and Exchange Commission concerning these and other matters.

In 2014 we achieved quarter-four revenues of $7.1 million and year-end revenues of $27.65 million. This marks the third consecutive quarter in which we've had revenues above the $7 million mark and we are thrilled to report that our DPP annual revenue increased by 137% as compared to prior year and accounted for 60% of our 2014 revenue as compared to just 24% in the prior year.

While total revenues for 2014 represent a slight decrease as compared to 2013 this is due primarily to two factors. First as we've discussed in prior calls, Chembio filled a single $5.3 million international STAT-PAK order in 2013 which did not recur in 2014. The final $660,000 shipment of product for that order took place in Q4 2013.

Second we had a decrease in US sales revenue of $2.3 million due to our termination of the STAT-PAK distribution agreement with Alere. Despite the approximately $7.6 million attributed to these two factors, Chembio was able to report only a $1.9 million decline in revenue for the year. While we are not pleased with the lack of growth in the overall business, we're very encouraged by the dramatic growth in DPP product sales.

I'll provide a more detailed overview of our recent and anticipated milestones following a review of the fourth-quarter and full-year financial results by Rich.

Thanks, John. I will briefly go over the fourth-quarter and full-year 2014 results. Please review our 10-K filing for more details.

First I'll begin with the results for the quarter. Our total revenues for the fourth quarter of 2014 of $7.1 million were down 9.7% compared with total revenues of $7.86 million in the prior-year period.

Product sales in the 2014 quarter of $6.55 million were down 7.7% compared with product sales of $7.1 million in the prior-year period. As John discussed, the decrease in product sales for the quarter was primarily due to the final $660,000 shipment in Q4 2013 from a single $5.3 million international STAT-PAK order which did not recur in 2014.

Our research and development milestone, grant and royalty revenues for the three months ended December 31, 2014 decreased to $546,000 from $764,000 in the prior-year period. Our gross margin for the fourth quarter of 2014 decreased 11% to $2.91 million compared with $3.27 million for the prior-year period.

The amount of product gross margin for the fourth quarter of 2014 decreased 5.7% to $2.36 million from $2.5 million in the prior-year period. These declines were primarily due to the lower amount of R&D, milestone, grant and royalty revenues.

Research and development expenses in the fourth quarter of 2014 were $1.39 million compared with $1.69 million in the prior-year period. This decrease is due primarily to reduction in clinical trial expense related to our DPP HIV 1/2 assay CLIA-waiver study.

Selling, general and administrative expenses in the fourth quarter of 2014 increased to $2.19 million from $1.76 million in the prior-year period largely due to increased wages, increased commissions and other expenses related to our expanded commercialization program. Operating loss for the fourth quarter of 2014 was $672,000 compared with an operating loss of $176,000 in the prior-year period. Net loss for the fourth quarter of 2014 was $496,000, or $0.05 per diluted share compared with a net loss of $262,000, or $0.03 per diluted share for the prior-year period.

I'll now go over our full-year 2014 results. Our total revenues for 2014 consisted of product sales of $25.95 million compared with $27.52 million for the prior year.

The decrease in product sales is due primarily to the shipment in 2013 of $5.3 million from the single non-recurred STAT-PAK order as well as the decline in sales in Africa and to Alere as a result of the termination of our STAT-PAK distribution agreement partially offset by increased DPP sales. However, during 2014 the total aggregate end-user sales of our STAT-PAK and SURE CHECK lateral flow products in the US increased over 2013.

R&D milestone, grant and royalty revenues for 2014 were $1.696 million compared with $2.034 million for the prior year. Gross margin for the year 2014 was $10.81 million compared with $12.3 million for the prior year due primarily to the non-recurrence of the STAT-PAK order described earlier and also to product mix. Product gross margin for the year 2014 was $9.12 million compared with $10.27 million for the prior year; also again due primarily to the non-recurrence of the STAT-PAK order, product mix and of course the decline in sales to Alere.

Research and development expenses for the year 2014 were $4.75 million compared with $5.83 million for the prior year. This decrease is due primarily to a reduction in clinical trial expenses related to our DPP HIV 1/2 assay CLIA-waiver study.

Selling, general and administrative expenses for the year 2014 were $7.35 million compared with $5.46 million for the prior year largely due to increased wages, increased commissions and other expenses related to our expanded commercialization program. Operating loss for the year 2014 was $1.550 million compared with operating income of $1.005 million for the prior year. Our net loss for the year 2014 was $1.137 million, or $0.12 per diluted share compared with net income of $531,000, or $0.06 per diluted share for the prior year.

The Company had cash and cash equivalents of $4.61 million as of December 31, 2014 compared with $9.65 million as of December 31, 2013. The decrease was primarily due to net cash used in investing activities to fund deposits on and purchase of fixed assets of $1.45 million as well as net cash used in operating activities of $3.82 million which included an increase in accounts receivable of $3.77 million, an increase in inventories of $0.45 million and an increase in accounts payable of $0.64 million. Our working capital decreased by $1.85 million during the year from $14.22 million to $12.37 million.

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

Thanks, Rich. I'd like to take this opportunity to talk about where we have been and where we're headed.

Chembio is a company with deep roots in point-of-care HIV testing. Why is that important?

One reason is that the performance requirements for HIV testing, that is sensitivity and specificity, are incredibly high, well above 99%. So we understand what it takes to succeed in an environment with very high standards.

Another reason is that the regulatory hurdles for HIV testing are significant requiring PMA approval and CLIA-waiver, for example, in the United States market and we have a strong track record in achieving such important regulatory approvals. In fact we have three FDA PMA approved and CLIA-waived HIV assays, more than any other firm world. This understanding and expertise has enabled us to bring multiple HIV products to market in the United States and abroad which are highly respected tools used broadly in the battle against HIV.

Looking ahead, we will combine this expertise with our innovative DPP technology to create a global point-of-care diagnostics business that extends beyond HIV and infectious disease testing. Our DPP technology has unique multiplexing capability combined with enhanced performance characteristics which we intend to leverage across multiple applications. To achieve this goal we began implementing a strategy in 2014 that impacts the entire Chembio business including commercial operations, manufacturing operations, product development, research collaborations and regulatory affairs.

In 2014 our strategy began to pay dividends and I'd like to cover some of the important milestones we achieved during the year. Our first step took place in June of 2014 when we made an important strategic decision to terminate our existing US HIV STAT-PAK distribution agreement and established the first ever Chembio US sales and marketing team.

In October 2014 we achieved a significant milestone when the FDA granted a CLIA-waiver for our lead product, the point-of-care DPP HIV 1/2 assay for use with oral fluid or blood samples. This CLIA-waiver allowed us to market the DPP HIV assay to the broad healthcare community in the United States.

To support our direct sales and marketing initiative and to ensure a successful launch of this product, we established agreements with a number of premier distribution partners, for example McKesson/PSS, Fisher Healthcare, Henry Schein whom we just added as a partner in February and Medline for distribution of both DPP HIV and HIV STAT-PAK assays in the United States. Looking ahead to 2015 we expect to further expand our commercial team and distribution partnerships in order to build on the sales momentum we created in 2014.

Another important achievement during 2014 was our strong performance in Latin America where we saw significant uptake of our DPP HIV, our DPP Syphilis and our combination DPP HIV-Syphilis assays. Thanks to the support of our long-term commercial partners in Brazil and Mexico we had considerable sales growth in Latin America with sales in Brazil increasing nearly 90% as compared to prior year. It is important to note that interest in our DPP HIV-Syphilis assay has been significant from healthcare agencies around the world leading us to believe that this product will continue to represent a great growth opportunity in Latin America and globally.

On the operational front Chembio made significant investments in 2014 which we expect to contribute to our success in 2015 and beyond. In May 2014 we established a Chembio warehouse and distribution center in Holbrook, New York and made improvements to our manufacturing facility in Medford. Our partnership with RVR in Malaysia continues to progress according to key milestones and we expect to begin production of commercial product in Malaysia this year.

During 2014 we made the decision to streamline our internal product development pipeline to focus on four key projects, all based on our patented DPP platform technology, projects that we believe are most likely to result in high-value assays that will address important customer needs. These programs include a multiplex DPP assay that detects both HIV and Syphilis-specific antibodies. This is our top development priority and we anticipate initiating clinical trials this year.

A DPP multiplex assay for detection of HIV by detecting p24 antigen as well as antibodies, a DPP assay for hepatitis C and improvements to our DPP oral fluid detection technology. We believe these programs will create the next generation of Chembio branded products and fuel growth globally.

Another key element of our strategy is to leverage our DPP technology through partners. During the last six months we entered into a number of important research collaborations based on our patented DPP technology to develop diagnostics for some of the most serious diseases and global health issues. These partnerships involve the development of DPP test for certain febrile illnesses, for example malaria, dengue fever and Ebola, traumatic brain injury including sports-related concussion, flu immuno status and a specific form of cancer.

We are proud to be working alongside some of the world's leading and most influential health organizations in these endeavors including the Centers for Disease Control and Prevention and the Bill & Melinda Gates Foundation. In each of these collaborations our objective is to develop new and valuable products that will be commercialized via Chembio's sales teams, commercial partners and distributors.

We're happy to report that in 2014 and early 2015 we received a number of key regulatory approvals that will further facilitate our plan for growth. In October the FDA granted a CLIA-waiver for our lead product, the point-of-care DPP HIV assay, for use with oral fluid and blood samples.

The HIV STAT-PAK assay received CE mark in March 2014 and we've updated our filing for CE marking to reflect a new trade name of STAT-VIEW HIV assay, formerly SURE-CHECK for sale in the European market. The CE marking for DPP HIV assay is expected in 2015.

In February of this year the DPP HIV-Syphilis assay was granted approval from the Brazilian ANVISA, Brazil's equivalent to the US Food and Drug Administration. Recently we've submitted the DPP HIV-Syphilis assay for evaluation by both the Center for Disease Control and Prevention acting on behalf of the US Agency of International Development and the World Health Organization which has accepted this product to be evaluated for prequalification in its global procurement scheme.

In line with our strategic plan we believe 2015 will mark a number of significant events for the Company including further development of the newly formed US sales team, the ex-US commercial expansion of the DPP HIV-Syphilis assay, the pursuit of a DPP HIV-Syphilis assay for the US market and progress on key product development and research initiatives that will strengthen DPP as a branded platform technology. We're optimistic that this strategy we implemented in 2014 will strengthen our base business in point-of-care infectious disease testing, create new opportunities to leverage our patented DPP technology, advance our key development programs and commercial partnerships and establish the foundation for a successful 2015 and beyond.

This concludes our prepared remarks for today. I'd like to now open the call for any questions.

(Operator Instructions) Bill Bonello, Craig-Hallum.

Good morning, guys. Congratulations on all the stuff you achieved this year. So a couple of questions.

First of all on the DPP HIV-Syphilis, I'm wondering if you can tell us a little bit more about how it's being used in Brazil or how you expect it to be used in Brazil. In other words will it just simply replace rapid HIV testing and anybody who would have gotten a rapid HIV test instead will get an HIV-Syphilis test? Is it for some subset of that population and then expanding on that as you think about the CDC and WHO evaluations, maybe how they might be thinking about utilizing the test in Africa and other places.

Well, good morning, Bill. Thank you for the question and thank you for the comments about the 2014 performance and progress so far.

In terms of what we know about the usage of our DPP HIV-Syphilis so far it has predominantly been used for two specific areas. One is mother to child prevention of both HIV and syphilis, that has been a big initiative for expecting mothers in Mexico. So that's one of the primary areas where we see value and where our customers see value for the test.

The other in certain subpopulations, for example the MSM community, there is a pretty high co-infection rate between HIV and syphilis. And so we expect the product to replace standard HIV-only testing and use a combination test like our DPP HIV-Syphilis test.

Okay. And do you think similarly is there the potential -- do we see those kinds of co-infection rates in Africa and some of the other markets where there are significant HIV infection rates or is that less common in some of those markets?

You know, we're looking at that right now, Bill. So it's probably a little early to answer that. Right now we're focused on the Latin American market and building on the success we've had in Mexico; moving into Brazil we are focused on establishing a similar product for the US market and getting into clinical trials.

We will look at the African market. But we haven't looked at it that detailed yet.

Okay. And then on that in terms of the US and clinical trials, can you give us a little bit of color on what all is involved, maybe a little bit about the nature that those trials how they would be formulated, how long they might take to complete?

Are we thinking this is a 2016 FDA submission? Just give us some sense of timing around that.

Well, as you probably know before we go into clinical trial there is dialogue that occurs with the FDA between the organization. So we are in discussion with the Food and Drug Administration on what those trials need to look like and that will help us determine how long they will take. The important part is making sure that we have a clear understanding of what's required.

We focus on syphilis and we try not to touch the performance of the HIV assay where we already have a PMA approval and a CLIA-waiver. That will help us to simplify the trial and hopefully that will help us to keep it on a short timeline.

Beyond that it's a little bit early for guidance on how long it will take. What we will do is update in future earnings calls when we achieve key milestones like entering clinical trials, etc.

Okay. And then just anything you can say, and this is my last question I promise, anything you can say about the timeline on the other three key products?

It would be too early to say. So I would not want to do that at the moment.

Okay, thanks.

Brian Marckx, Zacks Investment Research.

Good morning, guys, and congratulations on the quarter and all the product pipeline progress. A couple on the Q4 numbers.

It looks like US lateral flow sales were up pretty considerably in Q4 from Q3. Is any of that stocking order related from the distributors or is it pretty much fundamental demand related?

We're pretty much just demand related.

Okay.

I mean, you're assuming that our lateral flow sales are up compared to 2013 --

Rich, I'm comparing it to the prior quarter so Q3 and I'm just fleshing out the numbers in the 10-K and it looks like it's up from about 1.2 to 1.6. Is that fairly accurate?

So, Brian, this is John. I think that you know we had a strategic change in the midst of 2014 where we terminated the STAT-PAK distribution agreement with Alere. And in prior earnings calls what we have said is that the distribution channel in a way needed to be flushed with respect to STAT-PAK.

So we didn't anticipate getting many orders from the new distributors that we signed or certainly from Alere our primary previous distribution partner in the back half of 2014. And that is effectively what occurred. What's really the important indicator is what's happened at the end-user level and what kind of demand have we seen from end-users for both of the lateral flow products and of course certainly DPP as well throughout 2014.

So what we reported on a full-year basis is that the end-user demand, that is sales from our distribution partner and sales that we had to end-users and sales that they had to end-users was actually up slightly year over year. That's a really important indicator of the continued demand for our lateral flow products at the end-user level in the US.

Certainly as we said in the past that the mix of product between those lateral flow tests and given the change that we made with our former distribution partner was a little bit different i.e. a little bit more SURE-CHECK sales, a little bit less STAT-PAK sales. It probably wouldn't be too valuable to look at it on a quarter-to-quarter basis given the major change that we made throughout the middle of the year.

Okay, that's fair. And one on R&D.

R&D jumped from Q3 to Q4 as well. Is that related to the additional grant activity that was in Q4?

Yes, as we may have mentioned in earlier calls we've separated the R in the D. And so we've hired some additional staff to handle the additional grants that we were getting.

Okay. Relative to the traumatic brain injury test, can you, John, can you talk about potential timelines for development of the tests? And can you disclose what the biomarker is for the test?

You probably won't like either answer, Brian. It's early on the timeline because we are in feasibility at the moment. The biomarker is not disclosed.

It is a patented biomarker. Of course we are marrying it with our patented DPP technology. We think that there is intellectual property fences that can be built around the combination of those two.

So we're in the midst of that right now. Once we get a line of sight on the feasibility and our progress we can give you an update in a future call but it's still pretty early.

Okay. One last one. It's on the Ebola test.

I'm sure you're aware that Corgenix received FDA emergency use for their rapid Ebola test recently and they had I think 92% sensitivity, 85% specificity. Is that in your opinion do you think that that's going to be a benchmark that World Health Organization or FDA will use relative to qualification or use under emergency use for your test?

Well, I would say that first of all I don't think that those performance characteristics are acceptable in the market. An 85% specificity means that you could potentially have false positives. That would be unacceptable in the market.

Having said that that product did get WHO certification so that's a line in the sand if you will and we're optimistic about our ability to get past that line. We are making very good progress. We as you know announced a research collaboration agreement with the CDC to develop both an Ebola and a febrile illness multiplex assay.

The febrile illness assay is a malaria Ebola test, and I'm sure that we all watch the news. We see what's happening with respect to Ebola. There continue to be flareups in certain countries.

Ebola diagnostic testing has two primary utilities. One is for diagnosis in the midst of an outbreak. The other is for surveillance on an ongoing basis.

We believe and the CDC agrees that a surveillance tool which is added to a very large common denominator point-of-care test for malaria will have excellent utility in the market and so we are on track to provide that product to CDC this quarter to bring into fields for testing in West Africa.

Okay, great. That's great news. Thanks, guys.

Larry Haimovitch. HMTC.

Good morning John and congrats on all the progress this year.

Thank you, Larry. Good morning.

So on the Alere -- the termination of the Alere agreement which was I believe in June 1, correct?

June 3.

June 3. Okay. So that occasioned a decline in sales of $2.3 million.

Was that most of that in Q3 or Q4? Can you give us -- I'm trying to get a sense about how much it impacted Q4 revenue.

Roughly it was around $500,000 less.

In Q4?

Q4.

Okay. So the bulk was in Q3 then?

Correct.

And are the inventories completely run down now to where you're starting to ship and recognize revenues with the new distributors, John?

We recognized some revenue at the end of Q4, the very end of Q4. We believe from what we see in the market and what we hear through our partner that there is a little bit of inventory left but not much at the end of the year.

Okay, great. My next question relates to DPP sales. I don't know if you disclosed the percentage of total revenue that is now DPP.

I know that you've had tremendous progress in DPP in the last several quarters. Have you broken that out at all as far as how much DPP sales are of the total?

So on an overall basis, Larry, we said that DPP represented 60% of our total revenue in 2014 as compared to 24% in the prior year.

Actually, that was in the press release. Sorry, I realize that now. John, is the performance of DPP as expected in your mind better than expected or maybe you would have hoped it would have even be better?

We think that this is terrific to have 137% growth year on year and to have product that in 2013 represented 24% of your total revenue and at the end of 2014 represented 60%, we are very pleased with that progress. We are very pleased with that growth and we're very optimistic about the future potential with DPP whether it's for HIV testing for blood or oral fluid, whether it's for HIV-Syphilis combination testing, whether it's for a Syphilis-only test like we have in Brazil or whether it's for some of these other development initiatives we have it's a real strong endorsement for a patented technology that we have and we're really happy about it.

And should we expect that for 2015 DPP as a percentage of revenue would be even higher than 60% of last year?

That's a fair expectation. Now keep in mind -- we continue to focus on selling and marketing three products.

We have three terrific HIV products in STAT-PAK, in SURE-CHECK and in DPP. And they also have different customer needs so that's not to say that we're going to abandon the STAT-PAK and the SURE-CHECK products whether we sell them directly or through partners. They continue to represent an important part of our business.

So as the Company evolves, John, DPP becomes really the whole key to the story. I mean you're going to maybe have 70% or 80% of your revenue this year from DPP. That's the real driver here, isn't it?

I wouldn't confirm the 70% or 80% but it's absolutely the driver.

Okay, great, John. Thank you very much.

Stephen Dunn, LifeTech Capital.

Good morning, guys. Thanks for taking my questions.

I guess for the benefit of the previous caller the sales breakouts and the sales mix breakouts and dollars are on page 25 of the 10-K. So that should answer everything the previous caller wanted there.

I guess being new to the recent story for the Company I've got a believe a good handle on the products in the development pipeline. But what I don't feel I have a handle on is what would the investors expect to see during 2015 on the revenue line, John?

I mean you had $27.6 million for 2014 which was a transition year. What would I expect, would I expect a higher number, I mean what is the guidance for the revenues for 2015 if you can give it?

So we have not given guidance for revenue or any other matter in that case. But I think if you want to read between the lines what I said about the performance for 2014 is that we were not happy about the lack of growth from year on year. That should give you an indication of what our expectations are.

Okay. So I guess it sounds like if I could put words in your mouth that the sales growth in 2015 will be almost entirely of existing marketed products and it sounds like most of the products that the tests that are under development would not hit the market until 2016. Would that be a fair characterization?

There is at least one exception to that and that is with respect to a DPP Ebola or a DPP febrile illness assay (technical difficulty) assay for malaria and DPP we expect to put that in the hands of the CDC this quarter for clinical trials. As you know to get a product into the market in a non-US territory probably does not require FDA approval and certainly wouldn't require a CLIA-waiver and so the clinical trial process and the regulatory approval process may be very different.

As we referenced earlier the WHO provided precertification for other Ebola diagnostic tests. That test also has emergency use authorization from the Food and Drug Administration and for our Ebola and febrile illness assay we are talking to both of those organizations on the same matters. So it's entirely possible that we could see those in 2015.

Okay, but for the most part would you agree that most of the new products would come on the market in the 2016 time frame? Is that a fair statement?

I wouldn't say that. I mean, there is another example of the dengue fever assay, we have experience making dengue on a test program that we did with the CDC in 2013 and we are working to develop a DPP dengue fever assay.

As you probably know there are hundreds of millions of dengue fever cases every year. That is a disease that's endemic in Latin America and Asia, again that doesn't require Food and Drug Administration approval, doesn't require a CLIA-waiver. And so the time to market on a DPP dengue fever assay could also be shorter than what you have prescribed.

Okay, that's good. I'll sharpen the pencil on the details of line. One last question and I will jump back in the queue.

The accounts receivable is up significantly from 2013. Is that an artifact from switching distributors or what happened with the accounts receivable with days outstanding?

So Rich can take that.

Primarily it's due to our partner, our relationship in Brazil. They are the largest part of that receivable but we've always collected from them 100% so there's no concern.

Okay, well thanks for taking my questions. Sorry if they were a little bit more basic but I've got to start somewhere. Thanks guys.

Raymond Myers, Alere Financial Partners.

Thanks for taking the questions. John, can you describe the size of the direct salesforce currently? How much is supporting -- it's kind of a three-part question.

Sorry. How much is the direct salesforce contributing currently and how much support do anticipate from the expanded direct salesforce next year?

Okay, so you asked about the size of the salesforce, their contribution and what was the third part?

How much additional support do you expect next year from what I anticipate is an expanded direct salesforce.

Okay. So first of all the salesforce size we have five direct sales reps today. I said that we would have six by now and we are working on that six resource.

We also have a Director of Marketing and a Director of Sales. They report into a Vice President of Sales Marketing and Business Development.

So today that's our commercial team. That's the team that we've built in 2014 and we roll into 2015 with.

We also signed a number of distributors because we're focused on two primary market segments today, the public health sites of which there are several thousand. They tend to buy direct from the manufacturers when it comes to HIV tests, so we are working very diligently to call on those all of those public health sites.

We are also calling on hospitals in integrated delivery networks. They traditionally buy through our distribution partners like McKesson/PSS, Fisher Healthcare, Henry Schein, Medline, etc.

So that's the way we get the extended reach to cover those sites. We expect the contribution to continue to escalate on a month-to-month, year-to-year basis and as I said in the past this is the team that we have decided to start with.

It's in a cost structure that makes sense given what our initiatives are. We have achieved a geographic sales model.

We're happy with that and we are focused on now execution. So while we may add additional distributors as we go forward, that's not our primary objective.

Our primary objective is to execute the sales and marketing plan with the team that we've built and the partners that we've established. It's all going according to plan and we're quite happy with it.

Okay, sounds good. Thanks.

Then you mentioned on the call that you were adding more applications for DPP outside of infectious disease. Partially that's exciting but it's also a little surprising considering that Chembio has more applications in infectious disease I think than I've ever seen it in many years. So with an R&D pipeline that is already quite full are you hinting that there will be even more in the future?

I think that is fair to say that, Ray. It's a good characterization.

So we have a good way to think about this is that we have we've hired a new Vice President of Product Development, Paul Lambotte. He's a PhD, he has 30 years of experience in the development of lateral flow technologies. He has been a terrific addition to our team at the beginning of this year and his team and he are focused on the four DPP product development initiatives that we've talked about in the past.

The DPP HIV-Syphilis combo assay for the US, the antibody antigen HIV assay on DPP, the DPP HCV assay and then improvements to our DPP oral collection technology. So Paul and his team are focused on those four key projects.

The research projects that we've talked about, the malaria partnership with the Gates Foundation, the dengue fever assay which is with an undisclosed partner which by the way is a multiplex dengue fever assay for all four types of dengue 1, 2, 3, and 4, that is unique. A research collaboration with the CDC for a DPP Ebola and DPP multiplex assay for malaria and Ebola. So those first three are in the infectious disease area.

We also have the CDC follow-on agreement for the flu immuno status project on DPP. And that's the development multiplex assay to detect antibody response against different types of flu, seasonal and pandemic. The places where we've already stepped out of infectious disease are the DPP assay for a specific type of cancer which as you know was with an undisclosed partner and the DPP assay for traumatic brain injury which is with Perseus, so there's two examples where we've stepped out of infectious disease.

We're in discussions with a number of other partners and we believe that there is more application to use DPP. It may be simply on a partnering licensing basis and we're happy to have those types of partnerships.

What I can say about all of these research programs that I've described, the malaria, the dengue, the Ebola, the febrile illness, the flu immuno status, the cancer and the brain injury is with the exception of a small investment that we made to get exclusive rights to Ebola antibodies, all of those programs are paid for by our partners. And we're very happy about that and we think that there is much more opportunity to do more of that work.

Okay, thank you. And then my last question is about the HIV-Syphilis testing internationally. You characterized in the past that you thought you had very good traction with that test in Mexico last year and now you've just recently gotten approval for Brazil which is a major customer of yours for other tests.

That would seem to imply that there might be a nice uptick of that test in Brazil. Is that fair to assume?

So we're very happy by the way about the success that we had in Mexico which attributed for several million dollars of sales in the first year of launch of our HIV-Syphilis assay. So we are really happy about that.

And we're also very happy about the speed in which we received the ANVISA approval in Brazil. I was in Brazil a couple of weeks ago to talk to our partners about the launch of that test and we are forming that launch plan as we speak and we're as I said very optimistic about the potential.

We already very successfully sell a DPP HIV assay in Brazil and a DPP Syphilis assay. So the promise of mother to child prevention of both HIV and Syphilis using our combo assay looks very bright.

Does that potentially come with stocking orders? Or is it just a replacement for HIV and maybe with a slightly higher margin?

So it's a little bit early to tell but generally the product is bought for a specific program. By the government.

Great. Thank you very much.

(Operator Instructions) Gentlemen, it doesn't appear that we have any -- Matthew Campbell, Laridae Capital.

Yes, good work this first year at the helm, John. I just wanted to see if you expected cash to increase as you collect those receivables from Brazil? And if you could comment if you guys could just comment on your cash balance at this point.

Well, thank you, Matt for the comments on the performance of our. I will let Rich answer your question on cash.

As you can see from our numbers if we had put the roughly $3.7 million, almost $3.8 million in receivables into our cash balance we would have been over $8 million, so certainly that's what's expected. Our cash lost from our P&L for the year was only about $326,000. So on a P&L basis there is not a huge amount of cash drain.

Great. Thank you for the clarification. And keep up the great work.

Thank you, Matt.

Now we have no further questions in queue and I'd like to turn the conference back over to Mr. Sperzel for any closing remarks.

Well I just like to say thank you to all of you again for your participation and continued support of Chembio Diagnostics. We look forward to updating you again next quarter. Have a great day.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.