Trinity Biotech PLC (TRIB) 2007 Q4 法說會逐字稿

Greetings and welcome to the Trinity Biotech fourth quarter and year-end 2007 earnings conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brendan K. Farrell, CEO for Trinity Biotech. Thank you, Mr. Farrell, you may begin.

Good day everybody and welcome to Trinity Biotech's fourth quarter and year-end conference call. I am joined here today by Rory Nealon, Chief Operating Officer, and by Kevin Tansley, Chief Financial Officer.

Before we get into the call proper I need to inform you that we will be speaking under the provisions of Safe Harbor. By that I mean that we will mention certain forward-looking statements. These statements are neither promises nor guarantees, but are subject to risks and uncertainties. You should not place undue reliance on any such forward-looking statements which are current only as of today.

I would now like to hand you over to Kevin Tansley, Chief Financial Officer, to take you through the results in more detail.

Today I will take you through firstly a review of the income statement, which includes the impact of our recently announced restructuring, [and the fact] we made the key movements in the balance sheet year-on-year.

Starting with our revenue performance, you will note in the press release an analysis of revenues broken down by new public areas of clinical laboratory and point-of-care, and also by geographic location for the full year 2007. Looking at the total revenues you will note that our revenue for 2007 have increased by 21% over 2006. Much of this increase is partially due to the acquisition of bioMerieux in June 2006. However, slipping out the effects of the bioMerieux acquisition, our organic growth for the year has been approximately 13%. The point-of-care division, which was not impacted by the bioMerieux acquisition has shown particularly strong growth of over 60% year-on-year.

Quarter on quarter our revenues have increased from $33.7 million to $35.7 million, which is an increase of 6% in one quarter. Again, this growth has largely arisen in our point-of-care division, where we had a very strong quarter. Sales for our HIV product in the USA and African markets have both shown an impressive growth over quarter three. Meanwhile our clinical laboratory revenues remain broadly in line with the previous quarter.

Rather than get into the detail of the movements by product category and geographic location, I will move on to our gross margin performance. And Brendan will shortly take you through a more detailed analysis of revenue.

Our gross margin for the quarter was 48.3%. This represents a significant improvement over quarter three gross margin of 45.3%, and also over the equivalent period in 2006, when we recorded a gross margin of 46.8%. The improvement in this quarter is in part driven by our increased point-of-care sales, because typically these products command higher margins.

Year-on-year our gross margins for the remainder is approximately 47%. Results that you're happy with in light of the adverse exchange rate movement which we have experienced during 2007. By the way, I should mention the gross margins which I have quoted are excluding the impact of the restructuring and once-off charges.

Moving on to our indirect expenses. Our R&D costs are slightly ahead of the previous quarter, so it is just under 5% on our predictions of the percentage of revenue. Selling, general and administrative expenses have shown an increase quarter on quarter, increasing from $12.1 million to $13.3 million this quarter.

One of the factors driving this increase is increased professional fees associated with the implementation of Sarbanes Oxley. 2007 represents the first full year of implementation of SOX, and consequently the Company has incurred a combination of higher audit charges and other professional fees. Overall for the year our SG&A costs are $49.7 million, which is within the range which we have guided. Again, given the exchange rate pressures during the year, we are pleased with this result.

Regarding our net financial costs, you will notice that our net finance charges are reasonably constant quarter on quarter.

Before going any further down the income statement, I would like to say a word about the impact of the restructuring and goodwill impairments that we announced in December 2007. If you look at the income statement you'll see restructuring and impairment expenses contained within cost of sales amounting to $12.7 million, and a further $27.2 million contained within indirect costs, giving a total charge of $39.9 million. This is in line with the amount that we announced in our press release in early December 2007.

(inaudible) charge follows an inventory write-off of $11.7 million. This consists of $7.5 million in relation to instruments which are being culled, and the remaining $4.2 million, related to culled reagents. And the intangibles assets write-off of $6.7 million is in large part representing product development costs, which had previously been capitalized, which we have now written-off as a result of the projects being terminated, or in some cases suspended. A further $2.4 million relates to redundancy costs and costs arising out of the closure of our Swedish operations.

Finally there is a charge for goodwill impairment of $19.1 million. This arose from our annual impairment review, which we undertake in December each year. One of the key features of this year's review was that the marked capitalization of the Company was less than the net assets of the Company at that time of the review. In such circumstances it was thought appropriate to recognize an impairment. Under accounting rules we are required to apply this impairment to goodwill.

I would like to point out that, other than the redundancy costs under certain elements of the Swedish closure costs which amounted to $2.2 million in total, none of the above charges have any cash implications for the Company. Given that we have only announced the restructuring in late 2007, we're not seeing any of the benefits of this restructuring this quarter.

At this place I would like to say a word about the tax charge. You will have noticed that notwithstanding that we made a loss before tax for the year of $32.1 million, we have a tax charge of $3.3 million. To help understand this, I would like to break out the tax charges in three elements. Firstly, there is a regular tax charge for the year. This amounts to approximately $1.1 million. And this is the best number for considering the past tax position of the Company.

The remaining $2.2 million is made up of a tax credit of $1.6 million in relation to tax benefits associated with the restructuring. This in turn is offset by a valuation allowance of $3.8 million against certain deferred tax assets. These deferred tax assets have primarily arisen in relation to tax losses and carryforwards of the Company's U.S. operations.

In the light of the restructuring, which has increased the level of losses being carryforward, it felt prudent to put the valuation allowance against these deferred tax assets, particularly as by virtue of their size there is now greater uncertainty to when exactly these losses will be utilized.

If one excludes the impact of the restructuring and valuation allowances, our effective tax rate for the year is 14%, and in quarter four it is 20%. In both cases the effective rate reflects a blend of tax rates, which depends on which tax jurisdiction profits arise in.

I can appreciate that with the impact of the various once-off items that I have discussed so far, that the income statement that we are presenting today is a little bit confusing than normal. As a result I would like to point out a few key indicators, stripping out the impact of such items.

Operating profits have increased from $1.3 million in quarter three to $2.3 million this quarter, an increase of 77%. Alternatively looked at on an annual basis, there has been an increase in operating profits from $7.7 million to $10.5 million, an increase of over 36%. In terms of profit before tax at $1.5 million, it has more than doubled compared to the $600,000 that was reported in quarter three.

On an annual basis, cost before tax has grown from $6.2 million in 2006 to $7.9 million in 2007. So as one could see, if one excludes the impact of once-off charges there has been a significant profit growth, both year on year and quarter on quarter.

Before concluding on our income statement, I would like to point out that our EBITDA for the quarter is over $4.5 million, and for 2007 as a whole it is close to $20 million (inaudible) once-off items.

Now let's talk about our balance sheet. Starting with our property, plant and equipment, the movement since the beginning of 2007 is largely explained by the combination of additions of $8.4 million. That is offset by depreciation of $3.7 million. The level of additions incurred in 2007 was in large part due to the [checking out] out of our new factory for the transfer of the bioMerieux business. Also included in the capital expenditure are instrument placements. These are instruments that are placed with the customer on operating leases, and hence they are required to remain on our balance sheet of fixed assets.

Our goodwill and intangible assets have moved significantly during 2007. The biggest items contributing to this movement had been the intangible elements of the restructuring and impairment charges recognized in quarter four, which in total amount to $25.8 million. The remaining movement is attributable to additions during the year on development projects, such as Destiny Max and Tri-stat, which partially is offset by the amortization charges for the year of $3.4 million.

Moving on to inventory. In net terms inventory has fallen year on year by $1.2 million. Within this movement, however, there is an increase in inventory provisions associated with restructuring. By year-end the amount of such provisions was $9.5 million. As a result, there has been an underlying increase in inventories of approximately $8.3 million.

The fiscal reason for this increase, as you would have heard on previous calls, has been the bioMerieux transfer from Durham to Trinity's plants in Bray. In order to execute a smooth transition it was necessary to build up inventory levels in advance of this transfer taking place.

Our trade and other receivables balance, comprised of trade receivables from customers and prepayments. Year-on-year we have seen a significant reduction in our overall debtor balances. This is largely due to better collections. Our debtor days have improved throughout 2007. At our year end our debtor days fell to 58 days. This compares very favorably to 76 days at the end of 2006. Again, I would like to point out that this has been due to improved cash collections, which is one of our key areas of focus for 2007.

Another reason for the reduction in our trade and other receivables balance is conversion of prepayments for various capital equipment associated with the new factory into fixed assets. It was (inaudible) of those assets during 2007.

Finally on the balance sheet, our cash balance has reduced from $18.3 million at the end of 2006 to $8.7 million at the end of 2007. This is largely due to a combination of factors such as debt and interest repayments of approximately $10 million, the payment of $3.2 million of deferred consideration to bioMerieux, and an increase in inventory, as I mentioned earlier, of $8.3 million.

In turn these reductions have been offset by EBITDA of close to $20 million for the year. So that our cash balances have increased since last quarter from $4.1 million to $8.7 million at the end of 2007.

I will now hand over to Rory Nealon, who will take you through a description of our R&D activities.

I propose to bring you all now up to speed on the [power and] key projects within Trinity over the course of the next few minutes. Firstly, I would like to talk about Destiny Max, and I will then move on to the Tri-stat point-of-care Haemoglobin A1c project, then our HIV Incidence Assay, and followed on by our neo-natal haemoglobin variant assay. And finally I would just like to update you on the progress with the bioMerieux integration.

So to start with the Destiny Max, the Max project is the biggest project which Trinity has undertaken to date, the objective being to develop a high throughput instrument of the haemostasis market which would replace firstly the old AMAX 400 instrument we acquired from Sigma back in 2002.

We also are seeking to replace the MDA instruments which we acquired from bioMerieux in 2006. And lastly we want to target the competitor instrument base in the high throughput sector of this market. In this context it is worth noting that the high throughput segment of the market accounts for about 50% of $1 billion reagent and consumable market.

The really good news to report to you today is that we have reached design squeeze stage of the Destiny Max project, and we have done so on schedule and on budget. Design squeeze essentially means that we are happy with the functionality of the instrument, and we're now moving into the verification and to the validation phase.

The next steps during this project include building the first 10 instruments post design squeeze. And they will be built according to the final design, and they themselves will be used in the verification and validation phase. These instruments will be complete by late April and early May. And finally we will move into the verification, our internal testing of the instrument, and then the validation or our external testing in our clinical trials over the summer months.

Just to reiterate again, our goal is to have this ready for launch in October in the international market with a simultaneous submission to the FDA for approval for the U.S. market for launch in early 2009 in the U.S. market. Brendan will shortly take you through the -- and talk about the launch plan and also the potential for this instrument, so I will leave it there.

Moving on to the Tri-stat product, our Tri-stat product, just to remind you, is our point-of-care system for the Haemoglobin A1c market. It is effectively a tool which will be used in the diagnosis and monitoring of diabetes, and will be predominately be used in doctors' offices. This product was developed by our R&D team in Kansas City. And the development was completed late last year. In fact we received, you will recall, a 510-k approval from the FDA, which we announced on the 29th of November. This effectively means the test works, and it can be used in a medical environment, albeit by experienced technicians.

We subsequently submitted the next application to the FDA for CLIA waiver just before year end. And this submission is still being considered by the FDA, who at this point have responded twice to our initial submission with questions in the intervening period. And in fact, all of those questions have been answered, so we're now waiting for the FDA to come back to us again.

Again, I will let Brendan take you through what is a significant market opportunity for us, and what we're doing about potential distribution partners.

To move on to the first out of the four R&D projects I wanted to talk about, this is our HIV Incidence Assay, which we have developed in conjunction with the CDC. The HIV Incidence Assay effectively determines how recently you had been infected with HIV. And it is typically used by agencies such as the CDC themselves to track the spread of the disease.

This test has come out of development on target and on budget in Q1, and is currently with the CDC for testing and approval. The product does not require a regulatory submission, and will be ready for sale once approved by the CDC. I should say just to be clear, the market is not as significant as for the other products I am talking about, but it does give an indication of the strength of the relationship we have with the CDC, and also the fact that products are coming out on time from our refocused R&D function.

The last R&D project I want to talk to you about is our neo-natal haemoglobin variant product, which is possibly something you have not heard us talk about before. It is an extension of our Primus variant product, which we sell to the major reference laboratories in the USA. The neo-natal version of this product has been developed again in our Kansas City facility, which we acquired, just to remind you, back in July 2005. Essentially the product is targeting the 38 labs which test all newborns in the United States for haemoglobin variants. And this product will be launched and on the market in April of this year. And again Brendan will shortly take you through the market potential for the product.

Before concluding on the operations and R&D review part of this call, I would like to briefly talk to you about the progress on the bioMerieux integration. As you may recall, the plan was to transfer the reagents, which we previously manufactured -- which were previously manufactured by bioMerieux in Durham, North Carolina to our facility here in Ireland. And this was to be done over a period of one year from July of last year Q2 of this year. The plan was to do this via the various product families, of which there are seven. To date we have completed three of the key product families. We are midways through the fourth. And we will definitely complete the rest of them during Q2, pretty much on plan.

I would now like to take you through the revenue numbers in more detail. As you may recall, we now manage our business in two divisions, the clinical lab division, which is headed up by Dr. Robert Passas, and the point-of-care division, which is managed by David Oxley.

As you heard from Kevin, our overall revenues increased from just under $119 million in 2006 to almost $144 million in 2007, representing a 21% increase. When you strip out the impact of the bioMerieux acquisition in June of 2006, it is notable that our organic growth was over 13% year-on-year, which is twice the market growth rate.

If you look at the geographic spread of our revenues, you will note that the greatest increase came in the Asia/Africa region, which had revenues of $31.5 million in 2007, up from $23.5 million in 2006, representing a 34% increase year-on-year.

The European area had the second strongest growth profile with revenues going from $34 million in '06 to $44 million in '07, a 27% increase overall. And the Americas went from just under $61 million of revenue in '06 to $68 million in '07, or a 13% increase.

Looking firstly at our clinical lab business, we can see that revenues grew 15% in '07 over '06. Even allowing for the impact of the bioMerieux acquisition, this represents a very strong performance in 2007. We believe that our clinical lab division is well-positioned for future growth, particularly in the second half of 2008 and beyond, as we see the impact of our Destiny Max haemostasis analyzer or our new neo-natal variant test and our HIV Incidence Assay.

As Rory has already outlined to you, the Destiny Max project is now on time and on budget, and we have gone through the design squeeze phase and we are in validation, verification and subsequently clinical trials.

We expect to launch this product in Europe in the third quarter of this year, with the initial emphasis being placed on the UK market where we have a high population of MBA analyzers, which we acquired from bioMerieux. The Destiny Max analyzer, being a high throughput analyzer, allows us to compete in the upper end of the haemostasis market. The total market opportunity in haemostasis is $1 billion, and the upper segment represents a revenue opportunity of half that, or $500 million. Until now our focus has been almost entirely on the mid to lower end of the haemostasis market, which represents only half of the overall $1 billion market.

Another growth driver for Trinity Biotech in the clinical lab division is our new haemoglobin variance test for neo-natals. All newborns in the United States under federal law have to be tested for haemoglobin variants. There are 4.5 million newborns every year in the United States, and this testing is quite concentrated being done in 38 states laboratories. This represents a market opportunity of approximately $15 million, an opportunity which Trinity Biotech is well-positioned with our new test to take advantage of.

The third growth driver in clinical lab will be the launch of our HIV Incidence Assay, which is an epidemiological tool to determine if a HIV-positive patient has been infected in the previous 160 days. As Rory had said, we don't expect this to be a high-volume assay, but it underscores Trinity's expertise in the field of HIV testing.

Moving now to our point-of-care division, 2007 was a year of spectacular growth for our HIV business. This growth occurred both within and outside the United States. In international markets our HIV Rapid sales grew from $11 million in 2006 to over $18 million in 2007, representing a 65% growth in revenues year-on-year. This is a phenomenal performance, and to put it in context, more than 12 million people were tested for HIV using Trinity Biotech's Uni-Gold HIV product in 2007. This is a ringing endorsement of our product.

Within the U.S. our Rapid HIV business grew from just under $4 million in 2006 to $5.6 million in 2007, an increase of 40%. The FDA approval of our Tri-stat Haemoglobin A1c point-of-care product will provide us with further growth opportunities in our point-of-care division in 2008 and beyond. We expect to receive CLIA waiver of this product in the next few weeks. And we're currently in discussion with three potential marketing partners, one of which is discussing with us worldwide distribution of the product, and the other two are discussing distribution in United States and in Europe, respectively.

In summary, the key growth drivers for Trinity Biotech's business going forward are the CLIA waiver of our Tri-stat Haemoglobin A1c point-of-care device, the launch of our Destiny Max haemostasis analyzer, the launch of our haemoglobin variance test for neo-natals, and the launch of our HIV Incidence Assay. These new product launches, together with our existing highly competitive products, give strong momentum to our business going forward.

I would now like to ask Jerry to take questions from participants. Thank you.

(OPERATOR INSTRUCTIONS). Matt Dolan, Roth Capital.

A couple of questions on the sales line first. Kevin, you mentioned excluding bioMerieux, organic growth was 13%. That is for the whole business, I believe. And if so, can you give us an idea of what clinical lab grew organically excluding bioMerieux?

That would be about 9%. Including bioMerieux year-on-year.

Okay, in the quarter.

In the quarter our clinical lab was reasonably flat, so it was (inaudible).

Great. Secondly, it looks like HIV in Africa obviously did very well in the quarter. Were there any large orders booked in the December period? And how should we look at that business from a growth standpoint entering 2008?

Brendan here. We really had a spectacular year in 2007 in African HIV testing. Up from $11 million to $18 million is an enormous increase, and one which we had not predicted would happen. I think we are somewhat cautious about our expectations for 2008 based on having had such an enormous year in 2007. But I should mention as always visibility of what comes out of Africa in terms of orders for HIV is always very, very difficult. Nonetheless, we maintain a strongly upbeat view of that business in Africa.

In terms of volume should we think about at least being able to sustain your current level of units or revenue? And just it sounds like the growth is -- what is the X factor there?

I think our view is that we just don't have current visibility on it, but I think to be sensible about it and to be conservative, we should look at it being a little bit less than it was in 2007.

Then in terms of the clinical diagnostic side, in particular the U.S., and we look at the restructuring, first of all, just qualitatively was there any impact on the clinical lab business or the restructuring in Q4? And maybe give us a timing of the sales force integration into these two channels. When should not be complete where we can start to see some productivity in the numbers here early in '08?

The restructuring and the reorganization as such is complete in the physical sense. Territories have been filled. Everybody knows their role within those territories. We have divided the U.S. into four regions. Obviously there is a necessity to cross train people who have been specialists in the past and who are now becoming generalists and are expected to speak about clinical chemistry, haemostasis and infectious disease. That training commenced in January. And I suppose it is an ongoing process. It is a process that you are never totally finished with.

But I have to say, we're very, very happy with productivity from the sales force in terms of the leads being generated. And I think it emphasizes that it was the correct decision for us to make.

Would you say there was an impact of the restructuring in Q4 just again qualitatively?

No, no. Not at all. Really, the restructuring was announced in Q4, but it really didn't take effect until Q1. It hasn't taken effect until this quarter.

With that said, any commentary on why the clinical lab business might have been flat in Q4 year-over-year?

Nothing particularly obvious in there. It is just normal lumpiness in the business, I guess.

On Tri-stat in terms of the questions from the FDA, can you just give us a sense of -- a characterization of these questions? Were they fairly expected and straightforward? Do you have the same level of confidence you had the last time we spoke in December?

They are routine questions that you get from the FDA. We are obviously frustrated to a certain extent that we haven't managed to get the CLIA waiver on it yet, but the FDA approval is there. That CE Mark for Europe is coming through as well. We perhaps haven't talked about that very much in the past, but the market outside the U.S. for Tri-stat is probably larger than it is inside the U.S.

So the CE Mark is coming through in a few weeks, and that is every bit as important to us as the CLIA waiver is. So there is nothing -- there is no issue there. There is no major issues, just a question of getting the information to the agency and getting the agency comfortable with that information.

That helpful. You had mentioned the partnerships. Any chance we could get an idea of what you think the timing might be on that? Is that something that is weeks away or months or --?

It is weeks away. We would like to be ready at the time that we get the CLIA waiver, more or less around that time. People already looking at draft contracts.

Finally, and I will jump off. On this neo-natal opportunity in the state labs, do you have a presence there in the state laboratories today? And is there a possibility that this could be a new opportunity to bring in other products once you get the neonates established?

I wouldn't say we have a great presence in the state labs, but we do have a presence, yes. And yes it would be an opportunity to bring through other products. But I think the neo-natal opportunity in itself is a very exciting one, and one that we weren't really in a position to capitalize on until we modified the assay itself and made it suitable for the neo-natal market.

But what we like about it is it is a very clear-cut market. There are 4.5 million newborns a year, they all have to be tested. It is mandatory that they be tested. The testing is concentrated in 38 labs, so we obviously know where they are and we are obviously in dialogue with those labs. The competitive profile is pretty low in this area as well.

What is the ASP on the test?

Just to give you feel, off the 38 labs, 11 of them do about $1 million a year worth.

And you asked what the ASP on the test was? Is that what you said?

Yes.

Is about three dollars a test. Somewhere around there. I believe.

Mark Healy, Davy.

Just three questions really. The first two are in terms of outlook really for the coming year. And would you have any indication of the gross margin target for the year coming? And secondly on that front, and the same thing for tax rate, would you care to give us an indication of the tax rate for the coming year? And then finally an indication possibly of inventories for '08?

That was addressed to Kevin, was it, that question?

Yes. Kevin would be great.

I will take those, and I will take those in reverse if I can. In terms of inventories, you will have seen in the current call and through recent calls, our inventories during 2007 have increased specifically in relation to the bioMerieux transfer. In that regard I believe we have peaked. We will see some downward movement in that regard going forward in 2008. There will be a slight upward movement against that as we come into production of Destiny Max towards the end of year, once that product gets launched.

In terms of tax rate, as you are aware, that typically is a part of where our profits arise, and it will be a blended rate depending on where exactly those profits arise, i.e., in Ireland is at lower tax rate than in other jurisdictions, which is to say Germany, France. So as I typically mentioned before, 15 to 18% is typically speaking the sort of effective tax rates what we would expect to see.

In terms of our gross margin going forward for 2008, I would anticipate that we would be in the mid-40s.

Okay.

Maybe 45, 46%.

Thanks. Just finally, I know you're not breaking out the clinical laboratory divisions, but would you have any indication of the like for like growth in the coagulation division specifically for Q4?

Specifically for Q4, it was pretty flat I would say. I think what we have been saying to the market is, pending the arrival of Destiny Max, we don't expect to see high growth in our haemostasis business in 2008. We think we're going to see a modest growth of a few percentage points in 2008 until we get traction with the Destiny Max towards the end of the year.

(OPERATOR INSTRUCTIONS). [Mark Lipton], Lipton (inaudible).

I've got a few questions. The Sarbanes-Oxley costs, are those now basically a fixed cost that will be replicated year-on-year, or were they higher in 2007 because they were being implemented?

I would anticipate that, as most companies experience, there will be a higher charge in year 1 because of the first time implementation, that certain elements of those costs will continue year-on-year, as we are required to do our own internal testing, and as our auditors are required to give their attestation on it. We anticipate a certain reduction for us, it will be certainly a cost feature going forward.

In December when you talked about the restructuring, the indication was that you thought that would result in about a $5 million saving. And you had about a $2 million exchange rate offset to deal with as well. What are those numbers now that you've almost through with the restructuring? Does it like the same numbers or are they different numbers, or where are you on that?

This is Brendan here. I think, I believe what we said on the December call was that the saving on payroll would be approximately $5 million, but depending on where the dollar went versus the euro, the bulk of that might actually get eaten up because of adverse exchange rates. And I think, given where the dollar is today, it would be a brave person that would predict any improvement in that situation over the coming quarters. So effectively, if you like, the saving has tended to offset the adverse variance on the dollar to date. And depending on where the dollar goes, that might get worse, that might get better.

And with respect to bioMerieux, you got more integration to do. Do you see that significantly increasing your gross in 2008?

Significantly increasing which?

As the integration continues is that going to affect the topline -- how will that affect the topline?

We don't see it affecting the topline at all, just to be clear. The integration is literally moving where the product is made from Durham to Ireland. So we don't see that affecting the topline.

We are also doing a rationalization where we're culling, you might recall, the 184 haemostasis reagents to 78. Again, we don't see that really affecting the topline, because what is happening is more of a substitution effect. Where we might have had say four products doing the same thing before, we only have one or two doing it now. We don't see it affecting the topline.

In terms of the impact on the gross margin, which might be your next question. I will anticipate it, if you don't mind. The reality is that we have -- there's a lot of cost going into doing integration. And the reality is that has held back our gross margin that went back to Q3 to some extent in Q4, Q1, and to a lesser extent in Q2. So once we have this integration process complete, at least there is room for some upsides in the gross margin. That obviously depends on the currency and where that does in the meantime. They are two different things altogether.

I have a recollection, and it could be an error, that when it was acquired it was -- that vision of bioMerieux was grossing $40 million a year. And that is a recollection I have. Obviously you're not getting that benefit.

It is very hard to compare both, because bioMerieux would have sold through 33 direct selling entities around the world. We are selling through four, so to the extent we go to the other 29 countries, we have to give some of the revenue away to the distributors. It is very hard to compare like with like.

And I guess the final question is, with all this production down the line, down the stream, Destiny Max, end of the year, so forth and so on, HIV test in Africa. While it was really great 2007, you don't know that it will be that good this year. What do guys see going forward for us shareholders on the earnings per share?

The comment that Q4 really beat Q3 sort of took me aback because Q3 was really very dismal in terms of the earnings. So I would've hoped you would have beat Q3, but it was -- Q4 of course was much less than Q1 or Q2.

Maybe I'll cover the first part of the question and maybe Brendan will cover the second part about the future. But in terms of just four R&D products I touch on there, three of them are literally weeks away from launch. So I wouldn't agree that it is the back end of the year.

Tri-stat is literally hopefully weeks away in terms of CLAI waiver. The neo-natal product, we will probably be shipping the first instrument the back end of this month, early next month. And the HIV Incidence Assay is in with the CDC for approval.

So I do take the point that R&D projects had taken too long in the past, but there are three of them coming to the fore very, very quickly. And Destiny Max, albeit six months away, seven months away, it is still at the same date, which is the end of September, first of October as it has been for some time now.

So in terms of your point I would agree with you in the past about R&D projects taking longer than expected, but I would say they're coming to a head very quickly as we speak.

I just went to add -- this is Brendan here -- I just wanted to add to that that we deliberately culled some R&D products to improve our focus, and that was partly the restructuring we did in December. That has proven to be a very astute decision, because as Rory has pointed out, we're bringing the project to fruition now both on time and on budget. And we are very bullish about the products that are coming through in 2008.

The Destiny Max, for example, will not have a significant impact on 2008,. but it certainly will have a major impact in '09 and '10, and going beyond that in the future, particularly as we are addressing a segment of the market that we don't currently address. So we are very bullish and very buoyant about our future.

And the Tri-stat market is what?

The Tri-stat market -- worldwide market is $250 million for point-of-care Haemoglobin A1c, of which approximately $100 million of that is in the United States. Hence my earlier comment about the importance of CE Marking outside the U.S. being every bit as important as CLIA waiver inside the U.S.

Can you see in Q3 and Q4 we should see some good results from Tri-stat? Are you expecting results from Tri-stat by three and four?

Absolutely. Yes, I am. I expect we will have our partnerships in place and I expect that they will be up and running. I expect (inaudible).

The announcements to look out for in that regard in the coming weeks and months would be, first of all, CLIA waiver. That will get press released whenever it happens. And then after that announcement as to who will be distributing the product through. And it could be a combination of one global entity or two regional entities.

I guess the final question I have is are there any acquisitions that are -- anything more than general [front office] at this point?

No, absolutely no acquisitions on the table at this point, and no thought of acquisitions at this point. We are absolutely focused on running the existing business better and getting our R&D projects out and getting products to the market and making our revenues.

I applaud that. Thank you very much. Thank you for putting up with me.

No, that is our pleasure. Our pleasure. Thank you.

Matt Dolan, Roth Capital.

Just a follow-up on that conversation. You have given us an idea here of about 60% of your top line growth expectations for the year. First of all, I'm assuming that doesn't include, obviously, Tri-stat or any of these other new possibilities. Those would be upside. But for the rest of the 40%, since we're looking at somewhat flat on the point-of-care potentially in terms of HIV, low single digits on haemostasis, can you give us an overall growth idea here for revenue in '08?

And then the second part of the question is what does that mean for earnings, as your savings gets bounced up by currency and growth being either flat to up slightly, should we expect that to remain flat, until we obviously start accounting for some of these new opportunities?

That is very difficult to give you an answer. And as you know, we don't give guidance going forward. A lot will depend on what happens in international HIV, which as I indicated in my comments, is very, very unpredictable and very difficult to get firm forecasts from our customers in that arena. Mainly because most of our customers are agencies, which are buying products when funds become available, and the predictability of the availability of those funds is very difficult. So a lot centers around what happens in our international HIV. That is the unpredictable one.

As I said earlier, we're taking a very conservative approach and saying that it will probably be less than it was in 2007, which by the way is not surprising given what a stellar year 2007 was for HIV testing. We have indicated that haemostasis will be relatively flat. You are certainly going to see an increase in clinical chemistry that is in the low double digits. You'll soon increase in infectious disease that is in the low -- the high single digit area.

So when you add all of that together, you will get an answer that I don't know exactly what it is because it clearly depends at HIV. I'm sorry I can't be more precise than that, but I simply can't.

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

Thank you very much everybody. We would like now to close off the call. We thank you for participating and look forward to our next call. Thank you very much.

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