Chembio Diagnostics Inc (CEMI) 2021 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Chembio's Third Quarter 2021 Earnings Conference Call and Webcast.

(Operator Instructions) It is now my pleasure to turn the floor over to your host, Greg Chodaczek. Sir, the floor is yours.

Thank you, Matt. And before we begin, let me remind you that the company's remarks made during this conference call today, November 4, 2021, may include predictions, estimates or other information that may be considered forward-looking. These forward-looking statements represent Chembio's current judgment for the future. They are, however, subject to numerous assumptions, risks and uncertainties, many of which are beyond Chembio's control, including risks and uncertainties described from time to time in Chembio's SEC filings, including those under Risk Factors and elsewhere in Chembio's filings with the SEC, including quarterly reports on Form 10-Q for the first quarter of 2021. And the current report on Form 8-K filed with the SEC on July 19, 2021. Chembio's results may differ materially from those projected. Chembio undertakes no obligation to publicly revise or update any forward-looking statement made today. I encourage you to review all of the company's filings with the SEC concerning these or other matters. With that, I'd like to turn the call over to Rick Eberly, President and CEO.

Thank you, Greg. Good afternoon, and thank you all for joining us today. On today's call, I will provide an update on our commercial product development, regulatory and operational initiatives. Neil will then go over the third quarter financial results, and I will conclude and open the call up for a Q&A session. To start off, I would like to highlight our strong third quarter performance.

We generated total revenue of $12.1 million, including product revenue of $9.4 million, representing growth of 17.4% and at 11.5%, respectively, compared to the prior year period. We are especially pleased with the product revenue growth, considering in the comparable period, Q3 of 2020, we recognized $2.7 million of deferred product revenue from Brazil from Q2 of 2020. After reflecting the revenue recognition, timing of those shipments, total revenues in Q3 of 2021 increased by $4.5 million or 59.2% compared to the prior year period.

This growth is largely due to our previously outlined strategy to maximize the value of our DPP point-of-care diagnostic platform and professional health care settings. We have focused our resources on initiatives within 2 main categories to drive near-term growth and long-term profitable growth. The first is expanding our product portfolio to address needs in higher-value markets, where premium solutions command higher pricing.

The advanced features and benefits of the DPP platform, including multiplexing and enhanced performance on a broad range of infectious diseases that differentiate it from other point-of-care offerings. The second is to optimize operations to scale efficiently as we grow. Today, I'm going to discuss 3 recent transformative accomplishments that underscore the strategic process and progress and the growth potential for Chembio. These include strengthening the balance sheet, the EUA submission for the DPP Respiratory Panel and the largest purchase order in the company's history.

Starting with the recent financing. To provide capital needed as part of executing our strategy, we have meaningfully strengthened our balance sheet. We raised $38.8 million of net proceeds through an at-the-market equity offering agreement that we entered into in July. This facility has a remaining capacity of approximately $19 million that may be offered at Chembio's discretion, subject to market conditions and business needs.

Now on to our second accomplishment. The regulatory submission of an EUA application to the FDA for our DPP Respiratory Panel. We intend to work collaboratively with the FDA to assist their review. Development of this test is being supported by awards of up to $12.7 million from BARDA. The DPP Respiratory antigen panel test system is designed as simultaneously, discreetly and differentially detect influenza A, influenza B and SARS-COV-2 antigens from a single patient sample, using a simple nasal swab.

We believe the DPP respiratory antigen panel is well positioned as an essential tool for the pandemic response through the respiratory infection season and beyond. While seasonal flu remains low thus far into the respiratory season, the CDC has issued guidance encouraging clinicians to utilize multiplex tests that can detect and differentiate SARS-COV-2 from influenza viruses.

The FDA has laid out a pathway for a diagnostic test manufacturer such as ourselves that do not have a pre-existing 510(k) approved influenza test. Though we have not seen yet any EUA awarded to any such manufacturer, we remain confident in our submission based on the strong clinical data generated evaluating the accuracy of the system. Later in the call, we will provide an update on overall progress related to the BARDA contracts.

Our third highlight from the quarter is the driver of our strong revenue results. In July, we received a $28.3 million purchase order from Bio-Manguinhos for the purchase of our DPP SARS-COV-2 Antigen tests. Bio-Manguinhos is responsible for the development and production of vaccines, diagnostics and biopharmaceuticals, primarily to meet the demands of Brazil's national public health system.

The order is intended to support the urgent needs of the Brazil's Ministry of Health and addressing the COVID-19 pandemic during 2021. Also in July, we received a $4 million purchase order from the partnership for supply chain management, supported by the global fund for the purchase of HIV 1/2 STAT-PAK Assays for shipment to Ethiopia into early '22.

To support orders like this at scale, we have been investing in automating our test manufacturing processes. We could not predict, however, the number or mix of tests for which purchase orders would actually be received. And since receiving the Brazil and Ethiopia orders, we have been in the process of optimizing the use of our automated manufacturing lines and expanding our manual lines to maximize production output.

The number of tests to be delivered pursuant to the Brazil and Ethiopia purchase orders significantly exceeds the capacity of our automated manufacturing lines. limitations of our supply chain, staffing and liquidity are impacting our production capacity. We do not have the time or the resources to increase our automated manufacturing capacity meaningfully during the delivery schedules contemplated by the orders.

We have established internal plans designed to maximize the number of tests we can deliver timely, and we expect to continue to revise those plans as production proceeds and we obtained new information. The number of uncertainties that are related to third parties are outside of our control, including the availability of required personnel, raw materials and other resources.

It has made it difficult for us to reliably estimate the extent to which we will be able to fulfill the Brazil and Ethiopia purchase orders on time and at an acceptable cost. In the third quarter, we recognized 5.4 and $1.2 million in revenue from order shipped under the Brazil and Ethiopia purchase orders, respectively. We expect that labor storages, global supply chain issues and other resource difficulties, limiting the capacity of our automated and manual manufacturing will continue throughout the remainder of the delivery periods under the orders.

We currently anticipate that at least $11.5 million of the purchase order from Bio-Manguinhos will not be fulfilled by December 31, 2021, the end of the shipment schedule under the order. We continue to discuss with Bio-Manguinhos the possibility of our being allowed to fulfill a portion of the order into early 2022. While we are working hard to fill the balance of the Bio-Manguinhos purchase order, we cannot reliably estimate the extent to which we will be able to do so.

If Bio-Manguinhos decides in its discretion to extend the shipping deadline for a portion of the order beyond December 31, we intend to provide that information in an SEC filing. We are certainly doing everything we can to minimize the impact of the continuing market challenges on all of our customers. This demand still represents a significant growth opportunity for the company.

Our primary goal is to provide the value to our customers that led them to choose Chembio in the first place. We are taking steps to ensure we can continue to meet customers' needs by increasing manufacturing capacity and efficiency. While focusing on our global supply chain and manufacturing operations, we are also improving our commercial operations.

We have made changes to increase consistent performance by region across the United States. The upgrades in the team are designed to further enhance our distribution relationships, drive sales growth and place us in a better position to capitalize on the opportunities in front of us.

Now I'll transition to our product pipeline, where we are laying the foundation for opportunities in the U.S. in higher-value markets, not just in COVID-19, but across the infectious disease market. The impressive disease point-of-care rapid testing market is growing and will continue to grow due to a multitude of factors. These include the high prevalence of infectious diseases globally, a growing geriatric population, high demand for rapid test results as they are more broadly integrated into the health care delivery and our advancements in multiplexing on the DPP platform.

Our strategy for evaluating new applications for our products is centered around our deep understanding of the market growth drivers, our customers and patients' needs and analyzing our internally conducted research. With our structured and disciplined approach, broadening our menu of differentiated, high-value products in the U.S. and international markets with higher average selling prices, we can expand our customer base and deepen our existing commercial relationships.

Our commercial and product development efforts are focused on areas where, one, rapid diagnosis is critical to patient outcomes. Two, there is an unmet need related to performance for availability; Three, opportunities for new products arise, whether regionally, demographically or clinically. Developing tests that meet these criteria will create premium solutions for markets that can support higher average selling prices.

In the near term, we anticipate that regulatory approvals for products that we have already developed can meaningfully expand our market opportunity. We'll discuss regulatory and development as 2 components of our pipeline. We hope to receive a clinical laboratory permit amendments for CLIA waiver from the FDA for our DPP HIV-Syphilis system over the coming weeks. This approval will create a much more robust market opportunity for an existing product.

To remind you, the system is a multiplex 15-minute test, which simultaneously detects antibodies to HIV types 1 and 2 and treponema pallidum, the bacteria that cause syphilis using the DPP Micro Reader optical analyzer. The test only requires a tiny 10-microliter sample of finger stick, whole blood, venous whole blood or plasma. It is the first and only rapid test approved by the FDA that multiplexes or detects both diseases from a single sample.

Our system offers health care providers near immediate actionable information to address 2 of the most critical threats posed by syphilis infections, the potentially lethal mother-to-child transmission and the increased risk of contracting HIV. This represents a unique innovation in the sexually transmitted disease or STD testing market, while addressing an important need for patients and their health care providers.

Receipt of a CLIA waiver would open access to 40,000 to 50,000 point-of-care testing sites in the United States. This significantly increases our potential customer base. These sites include point-of care and the state and local public health clinics, which are often the first stop providers for prenatal and STD health services. Our pursuit of the CLIA waiver for the DPP HIV-Syphilis test illustrates how we are targeting higher value markets where the DPP system can both add clinical value and support premium pricing. We plan to service this market through our growing collaborations with our distribution partners.

Now we'll highlight the development work we have done with the support of the Biomedical Advanced Research and Development Authority, BARDA, which is part of the U.S. Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response. In July of 2020, we received an initial award for $628,000 to assist us in our development, submission and receipt of an EUA application for our COVID-19 point-of-care antigen system using DPP technology.

We later received an additional grant of up to $12.7 million from BARDA in December of 2020 to develop and submit an EUA application for a respiratory antigen panel and supported the preparation, submission and approval of FDA 510(k) clearance for the DPP SARS-CoV-2 antigen system. Regarding our pursuit of the 510(k) clearance from the FDA for the DPP SARS-COV-2 antigen test system, we are currently wrapping up the clinical trials and following routine regulatory processes look forward to submitting it to the FDA.

Through September 30, 2021, we have recognized government grant income totaling $8.0 million, which was awarded under the second contract with BARDA for up to $12.7 million. Unless extended by Florida at its sole discretion, all the remaining $2.9 million of awards remaining under the contract as of the filing date of our Form 10-Q will expire unless earned by December 2 of 2021.

The completion of milestones to earn a portion of the remaining awards are outside of our control, and we cannot assure you that we will succeed in earning any or all significant portion of the remaining awards by December 2, 2021. Any such an ability to bear a significant portion of potential grade recipients would adversely affect our business, financial condition, results of operations and prospects.

To leverage our expanded commercial infrastructure, we started distributing the COV-2 Antigen test, rapid test during the third quarter. This test received an EUA for use in laboratories and point-of-care settings. The test requires no insertion for providing results in 20 minutes using samples taken from a nasal swab and can detect proteins from the SARS-COV-2 parts. It is intended to be used both for patients suspected of COVID 19 within 5 days of symptom onset and/or asymptomatic serial testing. We are pleased by the launch and the customer interest in this product. Along with the status COVID-19 flu test that we began distributing in the second quarter, we believe these visual read tests complement our own DPP test and will help us grow our customer base as we complete development and earn regulatory approval for the DPP products. I will now turn the call over to Neil for details on the financials.

Thanks, Rick. For the 3 months ended September 30, 2021, total revenue was $12.1 million, representing growth of 17.4% compared to the prior year period. Product revenue for the third quarter of 2021 was $9.4 million, an increase of 11.5% compared to the prior year period. Government grant income license and royalty revenues and R&D revenues combined for the 3 months ended September 30, 2021, were $2.7 million, an increase of 44% compared to the prior year period.

Of that dollar amount, $2.4 million was earned by achieving milestones under our $12.7 million program with BARDA, bringing our cumulative government grant income under this program through the third quarter of 2021 to $9.6 million. Our revenues were in compliance with the 12 months rolling minimum total revenue covenant in our credit agreement.

Before moving further down the income statement, I'd like to provide some more context to the revenue comparisons to the third quarter of 2020 that Rick highlighted in his opening comments. Our total revenues during the third quarter of 2020 included $2.7 million that was not previously recognized during the second quarter of 2020 due to the hurdle that required a high degree of confidence that it was probable that a significant reversal in revenue would not have occurred for certain product shipments outside the U.S.

After reflecting the revenue recognition timing for those shipments, during the 3 months ended September 30, 2021, total revenues increased by $4.5 million or 59.2% and product revenue increased by $3.7 million or 64.2% compared to the 3 months ended September 30, 2020. Both government grant income and R&D revenue are related to the timing and cadence of program performance obligations, which do not always occur in a certain period, but we continue to incur certain of the expenses.

Gross product margins during the 3 months ended September 30, 2021, increased by approximately $0.5 million compared to the prior year period. Gross product margin percent was 15.7% in the third quarter of 2021 compared to 11.2% in the third quarter of 2020. Gross product margin in the third quarter of 2021 was favorably impacted by higher average selling prices and higher product sales volume.

Gross product margin in the prior year period was impacted by several factors, including the FDA's replication of the DPP COVID-19 IgM/IgG Systems in June 2020, which precluded planned sales of those systems to customers in the United States as well as operational inefficiencies it triggered, offset by the recognition of the $2.7 million net revenue for product shipments outside the United States that has been deferred from the second quarter of 2020, as I previously described.

R&D costs increased by $1.1 million, primarily associated with clinical and regulatory affairs costs related to pursuing an EUA and 510(k) from the FDA for the DPP SARS-COV-2 antigen test system and the EUA for the DPP Respiratory Panel, each pursuant to awards from BARDA.

Selling, General and Administrative expenses increased by $0.6 million in the third quarter of 2021 compared to the prior year period. The increase in selling, general and administrative expenses principally reflected increased compensation costs related to our expanded U.S. commercial team, commissions and insurance, offset by a decrease in legal fees.

During the third quarter of 2021, we recognized $0.4 million of restructuring costs related to professional fees to support the structuring and execution of the at-the-market equity offering agreement, or ATM, which I will describe further in a moment. Net loss for the 3 months ended September 30, 2021, was $6.4 million or $0.24 per diluted share compared to a net loss of $5.5 million or $0.28 per diluted share in the prior year period.

The net losses reflect asset impairment, restructuring, severance and related costs of $0.4 million or $0.01 per share -- excuse me, $0.01 per share is what I mean, of course, for the third quarter of 2021 compared to a de minimis amount in the prior year period. On the balance sheet, cash and cash equivalents as of September 30, 2021, totaling $36 million.

On July 19, 2021, we entered into an ATM agreement enabling Chembio to offer from time to time at its discretion up to an aggregate of $60 million of shares of common stock. During the third quarter, the company raised $38.8 million of net proceeds through the ATM program. Net working capital as of September 30, 2021, was $49.4 million. I'll now turn the call back to Rick for concluding remarks.

Thank you, Neil. To conclude, we are invigorated by our recent commercial successes and are optimistic that the heightened demand for Chembio's products will further help our presence in the point-of-care rapid diagnostic testing market. The submission of the EUA application for our DPP Respiratory Panel positions us to potentially add to our U.S. portfolio of COVID-19 diagnostics.

We are already beginning to see the results of our recent investments in our infrastructure and remain well positioned to drive long-term growth on our path to profitability. We have talked a lot today about our COVID-19 opportunities. In addition, we are actively developing new products aligned with the strategies I have described to expand our presence in our target markets outside of COVID-19.

I look forward to sharing more with you in the future as we make progress in these activities. Before we conclude, as you may have heard, our CFO, Neil Goldman, has accepted a CFO position at another company. I want to thank Neil for his efforts and all his many contributions to the advancement of Chembio over the past years. We wish him luck in his next chapter. With that, operator, please open up the call for questions. Thank you.

Your first question is coming from Bruce Jackson from The Benchmark Company.

I was hoping I could ask a few more questions about the Bio-Manguinhos order. So you filled $5.4 million in the quarter. Some of that could drift into next year. If you do some math, it means that you could potentially fill maybe $11 million of that order in Q4. Does that sound right, best case scenario?

Bruce, it's Neil. So we've laid out the different figures as we're able to share them and consistent with the company's approach of not providing guidance, I can't get into confirming the math that you're trying to do. But we have tried to provide some context to give people a way of thinking about this very important program for the company.

I think the other factor, Bruce, thanks for the question, Bruce. This is Rick. We're in the process of continuing to increase our production capacity. As we've talked about, that is both a complement of our automated lines as well as our manual loans. And due to the quick turnaround time in the delivery of the Bio-Manguinhos order, our really only option is to expand the manual production lines because our automated volumes are fully operated.

So as we talked about, it's a really, really tough labor market as most companies in the United States are facing. We see it in the news every day. The global supply chain issues are also a major obstacle in terms of scaling production. But I would say our global operations team has done an incredible job juggling the challenges with the global supply chain.

In certain instances, Bruce, they've had to substitute other components from other suppliers when they couldn't source certain components. So they've done an incredible job. And -- but that remains an uncertainty. But our team is dedicated and working extremely hard to ensure we can continue to scale production in the month of November and December and into early next year. So obviously, trying to forecast what those numbers are in Q4 and Q1 is really related to the uncertainties.

And I would say the labor market is probably the #1 issue, Bruce. As you would imagine, in Long Island, the labor market is extremely tight. We have put in programs. I mean every program, you can imagine to attract manual production labor, including multiple job fairs, including looking at premium rate changes for manufacturing staff.

We put performance rewards in place to retain our people. So the labor market, I would say, is the #1 obstacle that we're dealing with, but we're doing everything we could possibly do to continue to hire people, add manual production lines. And as we execute on that, hopefully, we can deliver as much as we can in Q4 and hopefully some into Q1 of next year.

Yes. And Bruce, it's Neil again. Just to provide a little bit more color on the volumes is I'll remind you and everyone that both of those orders from Bio-Manguinhos well as from the partnership for supply chain management, supported by the global fund for STAT-PAK came in, in the back half of July. And while as we've said on earlier calls this year that we did have some inventory ready for the Brazil or the Bio-Manguinhos order ready to go in anticipation of that order. Certainly, it was by no means a significant amount relative to the size of that order, which meant while we did get that out of the gate quickly, which the customer very much appreciated. It then takes some time to crank up the engine and get going as it relates to material supply chain as well as labor and the other issues that Rick talked about. And hopefully, that gives you some additional ways to think about our go-forward approaches related to that business and optimizing the manufacturing.

That's great. And if I could, just a quick follow-up on the HIV 1/2 STAT-PAK quarter, you fulfilled some of that in Q3. Does that have any time line sensitivity to it? And how do you see that that were being filled over the next several quarters?

Yes. Bruce, what we said today and also in our prior conference calls, is that the STAT-PAK for the global fund to supply Ethiopia is into the first quarter of next year. So that's what the time line is on that.

Your next question is coming from Kyle Bauser from Colliers Securities.

Great. Thanks for the update and all the best in your next role, Neil. Maybe following up on Bruce's question regarding the STAT-PAK order into Ethiopia. So given the supply chain issues, it sounds like, if anything, it's more of a staffing issue? Is there a risk that, that order could not be fulfilled by end of Q1? Or do you feel pretty comfortable with it? Just kind of give a sense for modeling.

Yes, Kyle, this is Rick. Certainly, our internal plans are to produce that product and ship it in the first quarter of next year. So that's our internal plan. We will adjust that as we increase our capacity, increase our manual production lines throughout the next 2 months. So we're very committed to do everything we can to supply the Global Fund and Ethiopia product because they've been a long-time customer of Chembio. Global Fund is an incredible organization. It's been very supportive of Chembio. So we're doing everything we can to balance our capacity to both fulfill the Bio-Manguinhos order as well as the Global Fund order for HIV STAT-PAK.

Yes. The only other thing that I'll add, Kyle, and thanks again for your comments is that, as Rick said in the prepared remarks, these kinds of issues are things that many companies are encountering. You can't pick up the newspaper today without reading about global supply chain issues about the availability of people in the workforce on a national basis, not to mention here on Long Island and New York. So what that can translate to when as we or any company works with its customers, is customers, suppliers and manufacturers were all this together. And so it's a collaborative approach to manage. And certainly, that's the way we're approaching it. And that's how we characterize it in the press release that we put out today as well.

No, understood and agreed -- Maybe on the third-party antigen panel, you're selling ballpark, what sort of sales has this generated for Chembio, or maybe asked another way, unit volumes? Just kind of curious, how material, the sales of this product is then. And I just have a follow-up on that as well.

Kyle, we haven't broken out revenue by product. We've broken it out by region. And so I think I could speak to it qualitatively. We were really excited about this product because it is very, very simple is visual read requires no instrumentation. The U.S. sales team and our distribution partners, we're extremely excited to bring this product on.

We have a very, very good manufacturer of this product that we partnered with in distributing their products. So they're very committed to keeping up with us in terms of the demand that we're seeing. But I think the launch of this product has had a very, very good time in that a lot of antigen testing was reemerging for a lot of the programs we read about every day in terms of ongoing serial testing, testing of children in school, returning to school and so forth.

So certainly, we're seeing a good healthy demand. We also have engaged not all, but many of our distribution partners in this product as well. So we're seeing good distribution interest, and we're seeing a really, really good collaborative selling relationship between our direct sales force in the United States and our distributors. So we anticipate that interest and demand to continue to grow as we have more months into the product launch.

Got it. I appreciate that. And then just lastly, so once you get EUA for your own antigen panel, will this be complementary to the third-party product? Or will it replace it? And then with the FDA still so backed up, it seems like would you say the chances or likelihood of getting 510(k) clearance for some of these tests is greater than getting EUA as we hope to make it through COVID. I'm just kind of trying to get a sense of how the FDA is prioritizing COVID applications right now.

Yes, Kyle, I'll take the first question first, and that is the DPP Respiratory Antigen Panel, that is run on our micro reader. So it provides an objective test result for the operator. And so we believe the DPP product will be very complementary to the products we're currently distributing the status COVID-19 flu product. Why? Because not all customers want to rely on a visual reinterpretation of important test results like COVID and FLU A/B.

So we believe the respiratory panel run on our Micro Reader 2 in the United States, has great clinical value and provides another solution. So we think it's very complementary. And our plan is to continue to move forward with a portfolio of COVID-19 tests and respiratory panel tests as we move through the respiratory season.

In terms of the FDA question, Kyle, the 510(k) submission, I'll get into that first with BARDA. Our contract runs through December 2. So we talked a lot about that in the prepared remarks. So we are on track to submit the 510(k) to the FDA by that expiration date of our BARDA contract. There's always things can happen, but that's what we're aiming for. It's shooting for and hoping to realize.

Once it's submitted to the FDA, then it's really up to the FDA in terms of how are they going to prioritize that in relation to EUA submissions. And so -- The -- I don't think the FDA has come out with any guidance to the industry relative to how they're going to handle 510(k)s and balance that with the number of EUA companies that have products in the market. So I think it's a TBD, Kyle, to see how the FDA is going to evaluate 510(k) versus EUAs as we move into the future.

Your next question is coming from Per Ostlund from Craig-Hallum.

I want to follow up on the Bio-Manguinhos situation with the large order and the potential extension of the $11.5 million -- kind of $11.5 plus million that you would hope to eventually capture. So setting aside the desire to capture that down the road, is the near-term challenge in fulfilling the order having any impact on your relationship with Bio-Manguinhos. This is obviously a longtime partner. You have partnered with them across your portfolio. And so I'm sort of curious if there is an impact here at all on the relationship? Or if it's a situation where simply supply chain challenges are so broad, so well understood that it's not really -- it's not the kind of thing that's putting you in the penalty box as it pertains to them.

Yes, Per, that's a great question. And quite frankly, we were very concerned about that. I think the bottom line is that this -- the supply chain issues, the labor shortages -- most companies in life sciences and diagnostics are experiencing this as they try and ramp capacity. So we're -- you're right, Bio-Manguinhos has been a very long-term, highly valued customer.

And so we have done everything, including sending our commercial operations head. I mean, our Global Operations Vice President and as well as our Chief Technology Officer to Brazil to sit across the table from Bio-Manguinhos and explain the issues, the supply chain issues, the labor shortages to them face to fix because we value them as a customer, and we value the transparency with our customers to let them know what we're experiencing.

And they're sharing with us what they're experiencing. So we're doing everything we can in these discussions to try to extend into early part of next year, given these challenges. And so I think our relationship is strong. And I think at this point, we've done everything we can to ensure we maintain that customer relationship because, as you said, they've been a great customer of ours for a very long time.

Yes. Per, it's Neil. I'll add on just one other thing, maybe less for you who are very familiar with the history and the relationship but for others on the call who may be less so. And that is our products in Brazil that Bio-Manguinhos cells are registered through them on a regulatory basis. If you go to Bio-Manguinhos website and if you make your way through the Portuguese, you'll see something that says TR DPP, which stands for Test Rapino, DPP. So it's Chembio DPP branded for Bio-Manguinhos. The theme of that is that they view us not strictly as a part of the supplier but as a partner. And that's the way the relationship has been throughout its history, and we believe that's how they are continuing to approach it with us. Those things are things you don't take for granted. And as Rick said at the beginning of his reply, we certainly do not. And I think they respect the way that we lean into that relationship, and we'll continue to working closely with them to do everything we can.

Sure. No, that makes sense. And thanks for adding that, Neil. I think that's a very, very good point. I guess following up to my own follow-up, if I may. I think when we spoke on the second quarter call, there was certainly the discussion of really having been in a position to kind of plan ahead for an order of this size. I mean this order is on its own is the fourth biggest year in Chembio's revenue history, I think at $28 million. Considering you had the time to plan, is it -- are the supply chain input labor shortages are those sorts of things did they crop up acutely worse than anticipated? Was there -- do you see -- I guess, do you see it as a -- was there any flaw in the planning phase of it? Or is it more that factors that you probably had considered simply just were in order of magnitude more difficult once things got going.

Yes. Per, I'm going to start with just a quick context, and I'll hand it over to Rick to pick up from there. And that is that while -- yes, you're right, it's the order is the fourth largest year in the company's history. I appreciate you doing the analysis to share that statistic with us. But what was not known as we went through the year in preparation for this order, and I think the preparation was done very, very well.

What was uncertain, was completely uncertainty as we all lived through the last -- through the first part of this year, was when -- was 2 things. When was the order income and importantly, and this is what I wanted to highlight before I hand it over to Rick, through what time period would Bio-Manguinhos and their customer, the Brazilian Ministry of Health want the products delivered. That was an unknown.

So when you take that much size of volume and squeeze it through what turned out to be at least initially and hopefully limited to, initially, if we're able to work things out with them to extend the period as we suggested, not certain yet that that's going to happen, but we're working on it. That obviously affects what you can turn out in a certain period of time, no matter what you do ahead of time to prepare. And that's just simple math. And with -- and I don't mean to be glib with the answer, but rather just to describe the practical realities of what was known versus what was not known in preparation for. And with that, I'll hand it over to Rick.

Yes. I could think Neil summed it up very well. I would just add to it that our internal plan for this once we receive the award and realized how large it was in a very short amount of time. Our plan shifted to adding incremental manual production lines. And the obvious thing about that is it's dependent upon rehiring people.

So we've had a very aggressive hiring plan. We've had some success with hiring. We continue to hire in order to expand our manual production lines. So the plan was contingent upon largely hiring incremental production staff to manually produce the product and supplement that with the maximum amount we could get off of our automated lines, which we are operating at that maximum capacity where we're at today.

So we had a good plan, and I don't think the plan was slow. I think the real disappointing factor is just not being able to hire at the level that we had planned for. And as I said earlier, we have tried everything that we think is possible to bring in production staff -- And our HR team has been doing a great job. And we continue to hire.

And so I think that's -- the plan was good. We didn't anticipate the short labor shortages that we're experiencing. And I think that's what we did not anticipate in terms of what everybody else is experiencing, we're competing with very large companies like Amazon and Walmart and Target for people. And I think that's the biggest issue.

Yes. And just clarify one thing around what I teed up with, Per, is that when the order came in, we -- in the days, as we were finalizing the details of the order with the Bio-Manguinhos once we knew that they were ready to go before we finalized it and then properly announced it as recent, we had a plan to deliver on that. It had a meaningful ramp, but one that at the time our team was confident in and with specifically laid out and how to achieve it. And as with anything, sometimes will ultimately turns out reality continues to evolve and the market dynamics of labor continue to evolve. And those changes we just try to deal with as we move forward, and we're continuing to do that with the customer.

That's reasonable. Well -- And Neil, just to be clear, I didn't think your answer before was glib. I think it was perfectly -- I think it was perfectly fair and actually kind of led into another question that I had kind of had, which was related to automated capacity. And this has been something that gets discussed and asked on calls. It's come up for several years now. And I guess I was a little surprised in the sense that the automated capacity almost sounds like it's being overwhelmed already, but I think is it fair to think that simply because of the bolus of the order, the size of this particular order, it's not like you're not giving the luxury of producing product over the course of a 12-month period, you're trying to do this sizable order over the course of several months instead of 12. And then if you have that situation exacerbated by labor shortages, it just makes it that much more taxing, -- Is that fair?

Yes, Per, that's fair. And I think you hit the nail on the head relative to the bolos, the size of the order as well as the time frame.

And product mix, obviously factoring into that, too.

Sure. No, absolutely. Okay. One last one for me, I promise. You mentioned the CLIA waiver situation with HIV Syphilis. I think everybody on this call would love to see that eventually granted. You did mention potentially getting that in the next several weeks. Never want to put the FDA on the spot, and I don't expect you to do it now, but is calling for that in the next several weeks, is that more or less a function of just there's not a lot of back and forth at this point? You've kind of submitted what there is to submit and they've sort of reviewed what they're -- what's been submitted, and it's just a typical holding pattern at this point.

Yes, Per, this is Rick. And the reason we said it in the coming weeks is -- and we can't talk about the specifics of the interaction with the FDA. But as you know, we have been pretty public with when we submitted the CLIA waiver and the amount of high and it's been at the FDA. And so we've been in interaction with the FDA on this CLIA waiver. And this is our current thinking around what's likely to happen with the CLIA waiver. So I think that's sort of communicating our confidence that we're getting very, very close. And hopefully, we'll have some news to announce over the coming weeks.

All right and Neil, congratulations and best of luck in your next role.

Thank you, Per. I appreciate it.

Thank you. There are no further questions in the queue.

Okay. Thank you, Matt, for moderating the call today. I want to wish everybody a great week, and have a good evening. Thank you.

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.