Trinity Biotech PLC (TRIB) 2008 Q3 法說會逐字稿

Good morning. I will be your conference operator today. At this time, I would like to welcome everyone to the Trinity Biotech third quarter 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS) Thank you, Mr. O'Caoimh, you may begin your conference.

Thank you. Good afternoon, and welcome to Trinity Biotech quarter three conference call. With me today I have Chief Operating Officer Rory Nealon; and Chief Financial Officer, Kevin Tansley. Before starting I'm obliged to point out the provisions of the Safe Harbor code. Specifically, this presentation contains certain forward-looking statements including statements concerning plans and objectives of management, expectations about future financial performance and strength, economic and market conditions (inaudible - highly accented language) about future financial performance and strength. (Inaudible) market positioning and opportunity. These statements are neither promises nor guarantees but are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated including those identified in our most recent report on SEC Form 20-F and other periodic reports and registration statements filed with the SEC.

Should you not place undue reliance on any such forward-looking statements which are current only as of today. You should not expect that these forward-looking statements will be obtained or supplemented as a result of change in currency or otherwise, judging by (inaudible) any obligation to to do so. The agenda for today's call is that Kevin Tansley will take you through the financials. Rory will then discuss (inaudible) projects and then I will update you on sales performance before and opening to question-and-answer session. If I can hand it over to Kevin now.

Thank you, Ronan. Today I will take you through a review of the income statements for quarter three and the key movements in the balance sheet from the end of 2007 to today. Starting with our revenue performance you will note in the press release and analysis of revenues broken down by our key product areas of clinical, laboratory, and point of care, and also with geographic locations for the quarter.

Looking at the total revenues you will note that this quarter's revenues are $35.6 million, this represents a 5.4% increase over quarter three 2007. Within this, there was a 4.3% increase in clinical laboratory revenues to $30.4 million, meanwhile our point of care revenues have also increased during the quarter, growing by over 12% to $5.2 million. This compares to quarter two overall revenues which have fallen marginally from $36.3 million to $35.6 million. Within this there was a fall of 6% in clinical laboratory revenues, meanwhile point of care revenues increased by nearly 30% over the previous quarter. This growth was achieved in the Company's two principal HIV markets of the USA and Africa. USA HIV sales performed particularly strongly growing by 38% in the single quarter, meanwhile non USA HIV sales, principally Africa grew by 27%.

Given the significant currency movements, we have been seeing in recent periods, I am now being frequently asked what the movement in revenues would have been on a constant currency basis, compared to quarter three last year, revenues would have been approximately 3% higher on a constant currency basis. Meanwhile, had the dollar not strengthened this quarter, revenues would have been about 1% lower compared to quarter two this year. Rather than getling into the detail on the movement by product category and geographic location, I will move on to our growth margin performance and Ronan will shortly take you through a more detailed analysis of this quarter revenues.

Our gross margin for the quarter was 44%. This compared to 45% quarter three 2007. Notwithstanding the strengthening of the dollar in the last few weeks the results for the quarter as a whole have still been impacted by foreign exchange. Just to put this in context, the average dollar, euro exchange rate for quarter three this year has been 150 compared to 137 for the same period last year which represents a depreciation of approximately 9%. Having said that, if the dollar remained a current levels we can expect an improvement in margins in future quarters. Another factor impacting margins year on year is product mix as point of care sales tend to generate higher gross margin so far this year, point of care have made up a smaller percentage of revenues than in 2007.

Moving on to our indirect expenses, our R&D expense in that quarter remains at approximately 5% of revenues. Again, our sales selling, general and administrative expenses have come in lower than the comparable periods at $11.8 million versus over $12.1 million in last year. Indeed, our SG&A costs for the last three quarters have been $12 million in quarter one, $11.8 million in quarter two and again $11.8 million this quarter. This compares to an average of $12.4 million per quarter in 2007. As I mentioned in previous calls, this is where you are seeing some of the benefits of the group restructuring that we announced last December. The decrease would have been greater had the currency movements not been against us in the meantime.

Moving on to our financial costs, these continues to decline due to lower debt balances following our most recent bank repayment of $1.1 million this quarter. Regarding the tax charge this quarters effective rate is just under 15% and hence in line with last quarter. Meanwhile, the effective rate for the year to date is approximately 13%. This quarters rate equates to what we can expect the rate to be in the years ahead though it may fluctuate within individual quarters. Our operating profit for the quarter amounted to $2 million which compared to upped $1.3 million for the quarter three last year. As mentioned in our press release, this represents an increase of 56%.

Meanwhile, for the same period, profit after taxes increased from a break even position last year over $1.3 million this quarter. One other development this quarter that has an impact on our P&L was the Company's decision to change auditors to Grant Thornton, this decision was made solely on commercial grounds and in the context of controlling costs. Given the Company's size it was felt it was not necessary to retain the services of a big four firm and the extra cost that comes with such an organization. Meanwhile, Grant Thornton are the sixth biggest auditing firm in the world and have an excellent reputation and a strong presence in each of the markets in which we operate. Before concluding on our income statement I would like to point out that our EBITDA and share option expense for the quarter was approximately $4.3 million and $12.9 million for the year to date. Assuming a similar run rate this would result in an EBITDA and share option expense of somewhere between 17 million and $18 million for the year as a whole which means the Company is currently only trading at a multiple of just over 2.5 times EBITDA.

Now let's talk about our balance sheet, starting with our property, plant, and equipment, the movement since the beginning of 2008 is largely explained by a combination of additions of $2.8 million offset by depreciation of $3.3 million. Of the additions over 900,000 is made up of instruments placed for customers which can be expected to generate income over the next three to five years. Our goodwill and intangible assets have increased by $3.9 million since the beginning of the year, this is mainly attributable to additions of $6.6 million during the year on development projects, in this context nearly 60% is accounted for by (inaudible), the other major projects are Tri-Stat, and PD-2, and the Lyme and Hansen projects we are currently undertaking. In addition, the Company continues to invest in improved systems and is upgrading to the Fitzgerald website which we believe will quickly repay the investment to higher revenues. The additions are partially offset by the amortization charge for the year-to-date of $2.7 million, which has been recognized in the profit and loss account.

Moving on to inventory next, inventory has fallen by approximately $1.8 million for the year-to-date. This is largely attributable to an inventory reduction program implemented earlier in the year and due to the running down of former bioMerieaux inventory. In the most recent quarter we have seen a small increase in overall inventory levels. We have flagged in our previous calls that the inventory levels would increase in the second half of the year as we made preparations for production of destiny Max. Our trade and other receivables balance comprised trade receivables from customers and prepayments. Since year end we have seen an increase in trades and other receivables and debtor days terms our trade receivables increased from 58 days to 60 days. This increase has in some way been influenced by general economic factors where money flows everywhere have been impacted. It is also worth saying, however, that we remain happy with the quality of our trade receivables book and the level of bad debt remains negligible. In fact given the nature of our customer base, 60 days has not be unusual in our industry and in fact, would be better than average.

Finally, on the balance sheet I would like to address our bank debt, interest bearing bank debt at the end of September stood at $36.4 million compared to $42.1 million at the end of December 2007, a reduction of over $5.7 million. This includes the repayment of $1.1 million of bank debt made this quarter. Interest bearing debt due to be repaid in the next 12 months consists of a loan repayment of $2.1 million due in January 2009 followed by a further loan repayment of $3.2 million due the following July.

Before I finish I would like to discuss our cash flows. Cash balance at the end of September stands at $3.5 million, decrease of $5.2 million since the beginning of the year. The principle movements risen in the first nine months are as follows. Cash generated from operations for the nine months of September were $12.5 million, which after working capital movements amount to almost $8 million. We have invested $6.6 million on developing new products, and a further $2.4 million on purchasing plants and equipment which includes instrument placings of over $900,000.

We made the final payments to bioMerieaux for the purchase of their hemostasis business, and that amounts to $2.8 million and we have also repaid bank borrowings of $5.7 million and net interest of $2.2 million. Offsetting these cash flows was approximately $7 million of equity raised in quarter two. In terms of the cash movement this quarter the main features were cash generation from operations $4.3 million offset by working capital movements of 1.9, expenditure of $2.1 million on developing new products, and a further $1.2 million on plants and equipments. Repayment of debts, leases, and interest of $1.8 million. I would like to point out that these cash movements are brought in line with our expectations and also that based on our internal cash forecasts I am very satisfied that we have generated sufficient funds to meet our debt obligations as they fall due and I would like to reiterate what we have said previously that we will not require any additional equity financing for the foreseeable future. I'll now hand over to Rory.

Thanks, Kevin. I now propose to give you a quick update on the key projects within the group handing over to Ronan who will provide more color on the sales details for the quarter. Specifically, I want to talk about the Destiny Max project and our Tri-Stat project. Starting with the Destiny Max. The Max, as you are aware, is the high throughput instrument for the hemostasis market which will replace our aging MDA platform. You might recall when we restructured our group last December we shared a number of R&D projects thereby allowing our R&D teams to focus in on a smaller number of projects with a view to getting them launched on plan which is not something we have been successful in doing prior to then.

At that time, we talked about launching our Destiny Max in Q4 of this year which is a date we have been sticking to for some time and I am pleased to confirm to you again this is going to happen in accordance with this revised schedule. Currently our target is to get it launched into Europe in late november, the latest in early December. The current status is that we are due to finish trials in two of the three clinical trial sites today and a third site by Friday of next week. So far these trials have gone excellently and all of the data fronts to date have exceeded our own expectations. Specifically we have shown a perfect correlation between the Destiny Max results and the Destiny Plus results for our routine reagents and we are currently crunching the data for our specialty reagent.. Like I said, the trial will be formally finished at the end of next week and it will take us a couple of weeks thereafter to finish crunching the data and completing the paperwork before we launch in Europe.

Before concluding on the Max, it is worth highlighting some of the benefits of the instrument over the competition. Firstly, the instrument is capable of analyzing results both mechanically and optically. No other instrument in this space can do both. Secondly, the software is extremely flexible and user friendly, thereby greatly facilitating the training of live operatives. This in fact has been one area which we have received phenomenal feedback from our customers in the UK who have been trialing the instrument in recent months. Thirdly, the system based on our early experience is extremely robust. It has been designed with this in mind with separate computer systems for both the user interface and to run the actual hardware on the instrument thereby greatly increasing the robustness of the system. And just to give you an idea of how robust the system is we currently have one instrument in the UK which is being used as a demo in advance of the formal launch and it has been to eight customer labs at this point and in fact during the last move our courier physically dropped the instrument from a height, and believe it or not it still works when we plugged in it. We have never heard of anything like that for such a sensitive machine.

When you consider that on average a service of each of these instruments cost us in the region of $2,000, and this machine can have multiple services per annum, anything we can do to improve the robustness of our instrument goes straight to our bottom line. Other benefits of the Destiny Max instrument include a patented approach to cap piercing which minimizes the risks of bubbles or fall-off detections which is a real in our competitor instruments. Also continuous loading while the instrument is working, also the ability to use micro volumes when using the mechanical mode, thereby resulting in significant cost savings for the customer. Also, integrity checking with the blue die concept which you have taken from our NDA platform, and lastly easy automated maintenance procedures. In conclusion on the Max we are on track time wise and it will be delivering everything we ever said it will be and that is very much supported by direct customer feedback in particular from the UK where it is first being trialed.

Moving on to our Tri-Stat platform, this reminds you of the doctor's office instrument for the measurement of hemoglobin A1C as you are probably aware the American Diabetic Association recommends that all diabetics have their A1C measured at least four times per annum. Our instrument is targeted at both the doctor's office market and small commercial labs or small diabetics clinics. Just to remind your our stated distribution strategy for this instrument is through a third party distributor such as a PS&S or Henry Schein type organization. The reason being that Trinity does not have the scale itself to be directly targeting doctor's offices.

At our last conference call in July you will recall that we said that we were improving the product in particular around software and also around the shelf life of the product before submitting for CLIA waiver trials with the FDA. I am happy to report to you today that we have found a way to extend the shelf life without affecting the performance of the product and we are as we speak currently preparing for some research trials in November with a view to commencing the more formal CLIA trials in late December or early January. To give you some idea on the potential profitability of this product, the market price to a distributor from a Trinity is somewhere if the region of $4 per test. Based on these levels of pricing Trinity would be expecting to make margins north of 65% per test. The key benefits of our test includes both ease of use and the absence of a need for refrigeration thereby reducing the time to run each test. Also, most importantly it is an interference free technology which means that our results will be more accurate and that it won't be affected if there are hemoglobin variants present. Ronan.

Thanks, Rory. And I'd now like to give you some further details on our sales performance during the recent quarter. The request for an EGM and then take you into a question-and-answer session. Starting first with our clin lab division, overall this business has shown a 4.3% increase from the same period last year. Comparing our year-to-date performance with the same period last year, our hemostasis business has decreased by approximately 3%. As you are no doubt aware, this has been caused by the loss of some MDA instruments which is the high throughput analyzer which we acquired from Brean Murray in June 2006. Which is approximately a 15-year-old technology. Due to the delay in the launch of our Destiny Max analyzer, we not been in a position to replace these instruments as they were retired in the field; however, based on what you hear Rory talking about there, we now see these losses reversing with the launch of the Destiny Max next month and are planning to ship between 100 and 120 of these instruments in 2009. That's now $50,000 of reagent fees per annum.

As Rory just mentioned we are excited about the product launch which will help to transform our business and allow us to compete in the high throughput segment of the market. This high throughput segment of the market currently represents about 50% of the total hemostasis market. Further, approximately 1200 of these instruments are replaced each year globally and each of the instruments (inaudible) using in excess of $50,000 per of annum of reagent and consumables. A lot to play for here and clearly as the Destiny Max reputation grows, we'll be in a position to take a bigger market share. Initially, most of the 120 instruments will actually replace MDA next year as the reputation of the instrument grows we see ourselves taking on the competition.

Turning to our infectious disease product line, this business has increased 14% over the same quarter last year or 11% when comparing the year to date performance with the same period last year. This is a very strong performance in any infectious disease business and approximately double the market growth rate. Strong performance in this sector have come from our operations in France and in the US. In particular the US has had a very strong run recently in the strong 8% year on year. Further our line business has grown 17% year on year. Lastly, our clinical chemistry business has increased by 14% year on year. This is a combination of a 9% increase in our esoterics business and an [18%] increase in our Primus business which has occurred since the merging of the Primus and Trinity salesforces in December of last year. In both of these businesses it is an excellent performance given the diagnostic industry average growth rate of 6%.

If we now turn to our point of care business, and specifically our HIV business, overall, this business is up 12.4% on the same quarter last year, as you will recall from the quarter two conference call, our sales in Africa in the first half were 60% down in the first half of 2007. The excellent news is that our sales have recovered in quarter three and are on par with quarter three 2007, aided in part by some strong business into Nigeria which we have recently won. Furthermore, initial indications are that these will continue to grow in Africa into quarter four and in particular we have gained some new business in Milaui. We are increasing our sales reps on the ground by an additional three sales reps and I've actually done that. And I'm confident that the combination of factors will drive ongoing growth of HIV in Africa.

Moving on to the US market, we've continued to display strong performance here with a 4 to 6% growth over quarter three last year and a 34% growth year on year. Discontinued growth in our product is due to the in roads we are making into the market share (inaudible) who has been having significant problems with false (inaudible). Which has resulted in customer switching to the Trinity test. It is also helped by the recent Journal if Clinical (inaudible) as the Trinity (inaudible) test is the most sensitive test in the market.

If you look at our business in summary you will see our co-ag is down 3% with the launch of Destiny Max and we are confident that that will absolutely turn around. Our infectious disease business is doing very well. Our diabetes Primus business is doing very well and our point of care business both in United States and Africa is performing very well in addition.

And moving on, as I am sure you are aware, a press release was issued recently calling for an EGN to remove Rory Nealon and myself and the rest of the Board at Trinity and its replacement with an entirely new Board. We received original correspondence from the requisitioners only on this Monday. The Board will meet shortly to consider the matter and will act properly in accordance with the advice we receive from the Company's lawyers. Over the past two years I have spent over $6 million buying Trinity Biotech shares in the market and in private placement. At prices of an average of $8. As an 8% shareholder in the Company, the fact is that my interest, interest of the shareholders, and of the requisitioners are identical. It has killed me to see the relentless decline of the share price of Trinity over the past year. And apart from general market conditions this has happened for four principle reasons in our opinion. One being delay in the launch of Destiny Max, two, being the delay in the launch of Tri-Stat, three, the drop in African HIV sales and four the decline in the value of the dollar. As I've indicated earlier, and as Roy and Kevin have outlined, the position on all four of these factors has now changed.

Number one Destiny will launch in three or four weeks time and we are confident as we have said already of placing 120 instruments at least next year. I think this will vindicate our purchase of the bioMerieaux business and enable us to grow a huge co-ag business as we move forward to 2009, 2010 and onward. Secondly, as Rory's outlined, Tri-Stat where we've had issues, remember, it was FDA approved a year ago, 10 months, 11 months ago, and it will now launch we think in June of 2009. We are satisfied that the issues that we have had will have been revolved and bear in mind this is a $200 million market worldwide, a point of care market with little competition for our product. We firmly believe that our product is superior to the competition.

And the current issue is that in our African HIV sales we have won big gains in Nigeria and in Malaui and at quarter three and quarter four, sorry, 2008 and quarter one and quarter two, 2009 numbers look very strong. The combination of more larger gains, the additional sales reps in Africa, our gains as we mentioned in Malaui and Nigeria and on top of that, President Bush has increased Pet FIRE funding program all auger extremely well for this business in Africa.

The fourth thing that has been a major negative for us and been the strength of the dollar, and the dollar excuse me, the weakness of the dollar but the dollar has now strengthened in the past month from 1.58 to 1.27 today against the euro and puts (inaudible) is huge for Trinity and it has killed us when it went to 1.58 and we had much benefit as it comes back as Kevin outlined. We have a large euro cost base and not enough euro sales to match. This move of the dollar will result in a big bottom line improvement as we move forward. In addition to these four factors we are critically assessing our need for every dollar that we spend throughout the entire Company. As an example, the change of auditors which we announced today will have an impact of a reduced audit spend of $500,000 this year in 2008. We can expect many cuts as we move forward and the cuts will be significant.

Moving on, Trinity will generate, as Rory and Kevin -- I think as Kevin said, will generate $18 million approximately of EBITDA in 2008 and significantly more than that in 2009. And he pointed out, that we're capitalized at 2.5 times our EBITDA at $45 million which seems ridiculous. I want to categorically state that Trinity is generating and will continue to generate sufficient cash flows to fund its R&D projects, its launch of Destiny Max, its launch of Tri-Stat and to pay interest and principle to its banks. Kevin mentioned it but I am repeating it. I categorically state that we will not issue equity or will not need to issue equity as we move forward.

In summary your Company is a fine business with wonderful potential for 2009 for 2010 and beyond. It is a dedicated management team and a Board who are committed to a successful Trinity and enhanced shareholder value. However what we seek to avoid is the unsightly, and damaging spectacle of a Company infighting with a 10% group of shareholders who want to manage the Company themselves and who want to fire the entire Board which includes the senior management team. There will be many other negative consequences if this were to happen, all at a critical time for the Company when we should be pulling together given that our interests as shareholders are entirely aligned. We will endeavor to engage with the requisitioning of shareholders in a generally constructive manner, will share our plans, address their concerns, take on board their suggestions and hopefully resolve this matter amicably to the benefit of all shareholders. Now for the question-and-answer session.

(OPERATOR INSTRUCTIONS) We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Matt Dolan with Roth Capital Partners.

Good morning.

Morning.

First question, Ronan, on Destiny Max we have heard some initial feedback being quite positive. Maybe you can give us some color from your customer base. It sounds like in the quarter, in the clinical dye business coagulation was the only division that declined and so if you can reconfirm that, but secondly, what are these customers doing? Are you generating a backlog for Max as they continue to wait? Has the delay affected their decision for who to go with, and what should we expect with that launch in terms of that perspective? Are they queued up and ready to go, essentially?

Just to confirm that all segments of our business are up this quarter with the single exception of coagulation. We signalled to everybody that in fact, until this time that Destiny Max was launched that we were going to be suffering MDA launches and weren't going to be in a position to have a big instrument to put in there. And to point out that over the past two months, Destiny Max has been -- a number of Destiny Max' have been traveling from laboratory to laboratory throughout the United Kingdom for evaluations and the response has been, has been really, really strong and in every instance of positive response we have numerous orders and in every instance we have an order. Bear in mind, each time this will be basically going to a lab that currently has an MDA. In each case, basically, the Destiny Max orders in place and come the end of November we will be starting to commence at the placement in those instruments. We hope to place 40 instruments during 2008 and 2009 excuse me in the UK market. We are having similar experience in the USA, it is just a number of weeks behind. So I am, the kind of thing is that the Destiny Max is a world beater, it is everything that we had hoped for and beyond. It took everything that the competitors do but it is just better and more modern impressive instrument. Basically everything you would hope from it and more is the quotation coming back from the laboratory that it has been placed in.

Okay. Great.

Does that answer your question?

Yes, I think so. With respect to I guess a broader question here. Over the past few weeks even since the close of the September-quarter, the global economy question has continued to change even by the day. So, with respect to capital equipment purchases and customer ability to adopt new systems, what have you seen out there, how do you expect that to affect the clinical diagnostic business broadly speaking? And does that slow down, maybe the roll out of Destiny Max?

No. We see no evidence of that whatsoever, Matt. Put it in context, the instrument costs $50,000, and -- we have not seen that, absolutely no, no impact.

Okay. In terms of Tri-Stat, good detail there, in terms of your distributor, if you are looking for a mid year, mid '09 product launch, when would distributor discussions be finalized where we could see an announcement?

In and around the time of the launch.

Our next question comes from the line of [Kellian Murphy] with Good Body.

Good morning, gentlemen. How are you?

Morning.

Just a quickly on Destiny Max, you've got all these customers in the UK, how many of them are there?

In the UK at the moment?

That are finance the product like would it be safe to say that everyone who has an MDA products is trying at Destiny Max?

Not quite, but about 100 MDAs in the market. It would probably rotate all of those over two and a half year period.

Okay. And how many customers have been trying it out, about half of them?

No, no, no. 15.

Okay. 15. And then, just on the costs you mentioned you have changed your auditors, what other kind of plans do you have for costs?

We are looking at every dollar we spend whether it be people or third party we are looking at everything generally, (inaudible).

Okay. Okay. Great. Thanks very much.

(OPERATOR INSTRUCTIONS) Our next question comes from the line of [Mark Lipton] with Lipton and Lipton Penn.

Good morning.

Morning, Mark.

I have got two unrelated questions. The first is when did you say the that the Tri-Stat, the new clinical trials are expected to be concluded?

It is a two-step process, Mark, it is Rory here, sorry. The first is some external research trials just to prove to ourselves, sorry about that interference there. Just to prove to ourselves that it is working the way we believe it is from our own trials in-house and that will be conducted probably in November and completed probably in November. And the second is the actual CLIA trials. I said late December, early January, probably just depends on the Christmas period but in and around that time we are planning to start the CLIA trials.

When do you expect them completed?

CLIA trials actually only take about four weeks.

Okay. So the first quarter of next year, the CLIA trials should be done?

Yes, probably too much detail here now, Mark, but essentially a CLIA trial requires 360 patients to be tested in three, if not four locations. So it's not a particularly onerous trial, hence the four weeks, you might imagine you could do it quicker but it is just the need to get patients at both ends of the spectrum so you can cover the full range of results. That's what takes a little bit longer than you might expect, hence the four weeks.

My other question relates to the direction of the Company. And for a couple of years we have heard that $250 million was the goal, the gross goal because of efficiencies of economy and that we had to get to 250. We were going to be there at such and such a time and now we are not there, we are not going that way, we are not, that's not the goal. That's not what the top priority is, and I don't disagree with where you are going, but what happened with the analysis that 250 was the efficiencies of economy and apparently it appears that the Company can do quite well at maybe 200 million or 190?

Ronan answering that. I mean I concede that certainly it was a goal for us to achieve 250, but it wasn't so much necessarily goal in itself. Our goal will always be to achieve shareholder value. I think just if you look at the components of Trinity as it stands, the point of care, with the co-ag, the infectious disease, and chemistry, and four businesses all with significant growth potential prospects and I think we can actually achieve, we can achieve growth, we position the Company now where we can achieve growth significantly without acquisition as to the position we are in and to also leverage of our point of care license et cetera in the developing products in that area. So, we don't need to depend on growth to acquisition. Clearly given where our share price is at the moment where the markets are, and it isn't an option in any event but the reality is that the profile of the business has changed and we have components now that can actually deliver huge organic growth and that is where we are refocused. So to answer your question bluntly, we will have refocused away from setting a target and in terms of revenue. Having said that, clearly when you run for example say US R&D direct selling operations, and there are great advantages to scale. But -- basically we have the components to grow the business organically now and if anything we are most excited about our co-ag business where potential is virtually limitless.

I am pleased to hear that and I am real excited about the direction the Company is taking at this point. Thank you.

(OPERATOR INSTRUCTIONS) Our next question is a follow-up from the line of Matt Dolan with Roth Capital Partners.

Hi guys. Couple of follow-ups, first, with respect to the point of care business going into next year with Pet FIRE, a quote in the press release saying an exponential potential increase over the next few years can you hone in on a possible range of growth rates for next year? I know '08 in Africa, year-over-year it was a little bit slower than traditionally. So how should we look at point of care growth going forward into 2009?

I think we are just reluctant to put a number on it at the moment. I mean you know the history of the numbers, basically 2007 was huge, particularly the first two quarter, 2008, but quarters three and four between 2007-quarter one, 2008 were disappointing. We are beginning to come out of that now but we're just reluctant to put -- of all of the segments of our business, the piece that's most difficult to get visibility in terms of where the sales are going is actually that component. You ask me that question but any other element of the business I think we could answer with confidence, but this one just reluctant to put our head on the block on it, but what I will say is we are getting a lot of evidence, a lot of time, resources, with extra people in there. We've had big wins in Nigeria, we had lost a couple of large ones and we got one back as we mentioned in Malaui. But all the dynamics are right there, and big spend, big huge and US spend in terms of fighting and the problem and we are in number two position really, there's really only two credible products. I don't mean that as disrespecting to the others, but there really is basically only Determine, which is the old Abbott and Inverness product and ourselves. So the more expensed, the more it will come to us and we'll find our corner with Inverness as well. We are very optimistic. I am reluctant to give you an actual answer. We think for example quarter four that we would be back up around 4.5 million in Africa for example. You see that significantly more where we had but beyond that just a bit reluctant to go further.

Fair enough. Second question, Ronan, is more general but you have talked about the need to control costs. I know you put a restructuring in place end of last year. How should we look at that strategy going forward in terms of operating margin with you now back at the helm, what changes could we see on that front and if you want to take it to a broader level, what are some of the strategies that you think need to be changed or implemented here as you go into next year?

I am only back for a very short period of time. As I said we are doing a root and branch review of ll our costs, and so not really in a position to say what we will do. I'm not saying there's much potential, I think there's reasonable potential. And beyond that, I mean I think we have outlined our strategy, really across the four segments, coagulation hemostasis, we have outlined where it is at, and I mean basically everything hangs (inaudible) we have an excellent instruments but basically the big value l is in the Destiny Max and then small instruments are the satellites. Our infectious disease business is both in the sense we don't talk about but if you notice we have got 40% growth. It is a very fine business and HbA1c still prime, this business is doing very, very well. You have got the Tri-Stat element to it. The point of care business is doing very well in Africa doing really, really well in the United States. You can see the growth we are getting in the United States. In addition to that we are one of the few companies that have a license for point of care for lateral flow and we are leveraging that, we're developing new point of care products that you are going to see. We are going to have some brothers and sisters for Tri-Stat and HIV. And that primarily is going forward. We are getting a big boost on the dollar and along the way, and we are going to mind our costs very, very carefully, and we just run a mean efficient organization and build it. We are basically hungry and we're looking at business development opportunities throughout our existing operations. So we're looking more at organic. It's all about organic.

Okay. Thanks, guys.

Our next question comes from the line of Steve Stewart with (inaudible).

Kevin, a question for you, on the second quarter conference call you thought that you would end the year with I think you said 6.5 million to $7 million in cash. I see we are down to $3.5 million. What's the new number for the end of the year now.

It is difficult to say exactly but I would say in the region of about 5 million.

There are no further questions at this time.

All right. And in that case, we would like to thank everybody for your support and your attention and talk to you soon again. Thanks. Good-bye.

This concludes today's conference call. You may now disconnect.