Trinity Biotech PLC (TRIB) 2012 Q2 法說會逐字稿

Good day and welcome to the Trinity Biotech second-quarter fiscal year 2012 financial results conference call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Mr. Joe Diaz of Lytham Partners. Please go ahead, sir.

Thank you, Denise, and thank all of you for joining us today to review the financial results of Trinity Biotech for the second quarter of fiscal year 2012 which ended June 30, 2012. As the conference call operator indicated, my name is Joe Diaz, I'm with Lytham Partners. We're the financial relations consulting firm for Trinity Biotech.

With us on the call today representing the Company are Ronan O'Caoimh, Chief Executive Officer; Kevin Tansley, Chief Financial Officer; and Jim Walsh, Chief Scientific Officer. At the conclusion of today's prepared remarks we will open the call for a question-and-answer session.

If anyone participating on today's call does not have a full text copy of the release, you can retrieve it off the Company's website at TrinityBiotech.com or numerous financial websites on the Internet.

Before we begin with prepared remarks we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical fact are considered to be forward-looking statements subject to risks and uncertainties. The Private securities litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements.

The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements.

Investors are cautioned that such forward-looking statements involve risks and uncertainties including, but not limited to -- the results of research and development efforts; the effect of regulation by the United States Food and Drug Administration and other agencies; the impact of competitive products; product development, commercialization and technological difficulties and other risks detailed in the Company's periodic reports filed with the Securities and Exchange Commission.

Participants on this call are cautioned not to place undue reliance on these forward-looking statements which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect -- events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

With that said, let return the call over to Kevin Tansley, Chief Financial Officer of Trinity Biotech, and he will be followed by Ronan O'Caoimh, Chief Executive Officer, to give you some additional background on the quarter. Kevin.

thanks, Joe. Today I'll provide you with an update on the financial results for quarter two 2012. To begin with I will take you through the income statement starting with our revenue performance.

Total revenues for the quarter were $20.8 million, this compares to $19.5 million in quarter two of 2011 and hence represents a growth rate of 7%. This includes growth of 6.1% in Point-of-Care and 7.2% in Clinical Laboratory revenues. Ronan will take you through the makeup of this revenue growth in more detail later on in the call.

I'll move on to gross margin next. This quarter's gross margin was 51.6% which represents an improvement on the 51.4% in the equivalent quarter last year and is also in line with quarter one of this year. It also represents the sixth quarter in a row when we have achieved margins in excess of 51%.

As you will have seen from our press release, we have managed to achieve this level of gross margin despite the significant increase in Premier instrument sales which tend to be lower margin, being compensated then by the impact of higher margin Point-of-Care and Lyme sales.

Moving on to indirect expenses, our R&D expenses of $753,000 for the quarter were just under the $800,000 that was recorded in quarter two 2011. And similarly, our SG&A expense have also remained stable at $5.2 million which incidentally was the same level as in quarter one this year.

Results through the combination of growing our revenues, improving gross margin levels whilst at the same time managing our indirect costs, we were able to deliver strong growth in our operating profits. This quarter we're seeing operating profits increase from $3.9 million to $4.3 million which is an increase of 10.5%.

This also translates into an improvement in operating margin from 20% to 20.6%. We believe that such a strong operating margin will be a key driver for future profitability growth as we continue to grow our revenues in the quarters and years ahead.

Moving on to our net financial income, this quarter we earned $605,000 which is broadly in line with the equivalent period last year thus reflecting our strong cash balances. The tax charge for the quarter was $564,000, which represents an effective tax rate of close to 12%.

The net result of all this is that our profit after taxes increased by over 11% from $3.9 million to $4.3 million. This is reflected in our EPS growth which is also in 11% to $0.20 this quarter. And in terms of diluted EPS, we are seeing similar rates of increase as it has grown from $0.173 to $0.192.

Finally, earnings before interest, tax, depreciation, amortization and share option expense for the quarter amounted to $5.6 million. We'll now move on and talk about the significant balance sheet movement since the end of March, 2012.

Property, plant and equipment increased by $400,000 and this was made up of additions of $750,000, which includes instrument placements, as offset by a depreciation charge of $350,000.

During the same period our intangible assets increased by $2.4 million; this was mainly due to additions of $2.8 million and this is higher than in previous quarters as it includes the first full quarter of investment in our new cardiac assays at our Fiomi subsidiary in Sweden. These additions have been partially offset by an amortization charge of almost $400,000.

Moving on to inventory, you'll see that this has increased by over $1.5 million this quarter. It should be noted that this follows on from a $500,000 decrease in quarter one for the net impact for the year-to-date has been an increase of approximately $950,000. This is due to the buildup of inventory in relation to Premier where we've recently increased our monthly production levels to meet increased demand and the buildup of inventory in advance of the peak of the Lyme season.

Meanwhile trade and other receivables have fallen by approximately $10.75 million. This is mainly attributable to the receipt in April of the final tranche of deferred consideration from Stago of $11.25 million. The remaining increase is due to an increase in accounts receivable which are tracking the increase in quarterly revenue.

Finally, in relation to working capital, our trade and other payables have increased by approximately $1.7 million this quarter. However, we are seeing a similar situation to inventory movements as Accounts Payable tends to track inventory movements quarter on quarter. So whilst we're seeing an increase this quarter, this follows a decrease in quarter one where the result of the net impact for the year to date has been a modest increase of just under $200,000.

Before I hand back to Ronan I will discuss or cash flows for the quarter. Our cash balance at the end of quarter was $73.6 million which is an increase of $8.1 million over last quarter. The principal contributory factor underpinning this increase was obviously the receipt of the $11.25 million of deferred consideration from Stago. However, during the quarter we also generated $2.1 million of free cash flows.

In the past we had been generating approximately $1 million in free cash flow per month which equated to $3 million per quarter. However, this has been impacted by the investment required to develop the cardiac assays in Fiomi. But during the quarter we spent approximately $1.1 million on Fiomi thus the pre-Fiomi cash flows for the quarter were $3.2 million and hence ahead of where we had been in the past.

Offsetting these amounts were the payment of $3.2 million in relation to our dividend and share repurchases of 2 million. This quarter we repurchased a total of 175,000 ADRs at an average cost of $11.49 and this brings the total number of shares repurchased since the beginning of the program to approximately 880,000 ADRs at a cost of over $9 million.

On an overall basis following the quarter the Company is in a very strong position. We're continuing to grow our revenues; we've reached a quarterly EPS of $0.20 for the first time which equates to growth of 11% this quarter; our operating margin of over 20% provides an excellent platform for leveraging our future revenue growth; our cash balances are close to $74 million and that's with no bank debt.

We continue to generate very a healthy free cash flows notwithstanding our considerable development pipeline. Meanwhile we've increased our dividend by 50% and we continue to buy back shares in the market. I'll now hand back to Ronan.

Thanks, Kevin. As Kevin has said, our sales for the quarter were $20.8 million, up from $19.4 million in quarter two last year, which is an increase of 7%. And when the impact of the weakening euro is taken into account the underlying organic growth was 8.5%.

Our HIV business grew by 6.1% from $4.1 million to $4.4 million and all of this growth was achieved in Africa where we continue to perform strongly, having experienced a number of contract gains in East Africa.

Our clinical laboratory business grew 7.2% from $15.3 million to $16.4 million. Our core infectious disease business continues to perform well in the United States where our Lyme confirmatory business performed strongly following a mild winter. And the DSX instrument placements were also strong.

Growth in this market is expected to be boosted later this year with the expected FDA approval of our vitamin D test on the DSX instrument. China also performed strongly during the quarter and continues to be a key growth market for us.

Moving on to our diabetes business and the launch of our new Premier instrument, we are really pleased to report that we sold 52 instruments during the quarter, up from 31 instruments at quarter one and 12 instruments in quarter four of last year, which was our first quarter of sales of the instrument.

In Europe sells to Menarini have now gathered real momentum. And sales to Menarini this quarter constitute more than 50% of our 52 instrument placements. We expect this business to continue to grow and it will be significantly boosted in mid 2013 when we launch the ion-exchange version of the Premier instrument as this method of testing is particularly relevant in southern Mediterranean countries.

Moving to the US market, the Premier instrument was approved by the FDA in late December and during quarter one we sold three instruments. We are very pleased to report that during quarter two our sales increased to 15 Premier instruments, we believe that this is a very quick placement rate for a new instrument where normally acceptance of a new system can take a lot of time.

Our strategy for the US is to sell the Premier instrument through a combination of our existing direct sales force and through Fisher HealthCare's extensive distribution network. As previously mentioned, Fischer has a strong presence in hemoglobin and will be exclusively promoting the Premier instrument going forward. They've already an installed base of -- in excess of 1,000 instruments which they will endeavor to swap out over the coming years.

Over the past year we have also actively progressed the registration process for Premier in China. China is also a significant market for us in the hemoglobin area where our ultra and PDQ instruments -- sorry, with our ultra and PDQ instruments and we are currently selling in access of $2 million a year of these products in China.

We are optimistic that Premier will be registered in the Chinese market by year end as the market in China has significant gross growth prospects as there are an estimated 90 million diabetics in China.

With respect to Premier, in conclusion, we are making really good progress with our launch in Europe, in the USA also and elsewhere and are really gathering momentum. The products have been very well received and we will continue to roll out the products in other markets in the coming quarters.

In total we anticipate selling at least 200 Premier instruments in 2012 which will drive the 25% organic growth in our diabetes business this year. We expect that this growth will be greatly increased in 2013 with the addition of sales in China and Brazil and after the launch of the ION exchange version of the Premier instrument principally in Europe but also in the United States.

Moving on to our Point-of-Care research and development projects in our San Diego facility. We submitted a new Cryptosporidium Point-of-Care Lateral Flow test for 510(k) approval to the FDA during the quarter.

This was preceded, you may remember, by a Guardia product being submitted three months ago and will be followed by our new C. difficile, Clostridium difficile test which will be submitted to the FDA within the next three months. The (inaudible) of this is that we can expect to have launched a full enteric panel in the US market by the end of this year.

By way of update, you will remember that five months ago Trinity Biotech announced the acquisition of the Swedish company Fiomi Diagnostics for a consideration of $13 million. Fiomi has developed an instrument-based Point-of-Care immunoassay platform on which we have [planned the] development of a complete range of high sensitivity cardiac marker assays.

In this regard I am pleased to report that good progress has been made to date. The team at Fiomi has now been expanded from an initial group of seven people at the moment we acquired the business to now just under 20 people, 19 in fact. The vast majority of new hires are assay development scientists. Development work is progressing well on both our high sensitivity Troponin I and BNP assays and initial results indicate the performance of both assays to be superior to the current market leading assays.

As you will understand, significant development work still remains to be done. The results, however, are very encouraging and we expect to have the Troponin I assay CE marked and available for sale and Europe towards the end of 2013 followed by an FDA approval in 2014. The BNP assay we expect to follow approximately one quarter later in both Europe and subsequently the USA.

With regard to the planning of the US regulatory process, a pre-IDE meeting was held with the FDA in early May. The meeting was very useful, we discussed in great detail the FDA's clinical trial requirements for a high sensitivity Troponin I assay.

The FDA gave clear guidance and it is now proposed that we will request a further pre-IDE meeting with the FDA in late August or early September at which time, based on their initial advice, we will present a detailed draft of our proposed clinical trial protocol.

We feel that it is very important that we have the full agreement of the FDA with regard to our clinical protocols in advance of commencement of clinical trials so as to avoid confusion or delay when we make our submission for approval at the end of 2013.

In summary, we're very pleased with the Fiomi team and technology and look forward to taking a significant share of the $1 billion Point-of-Care cardiac market in 2013 -- 2014, excuse me, and onwards. I will now and back to the moderator for a question-and-answer session.

(Operator Instructions). Matt Dolan, ROTH Capital Partners.

This is Chris Lewis on the line for Matt; thanks for taking the questions. First question is just on your revenue guidance for this year. It seems like you'll have to have a nice pick-up in the back half of the year to reach the $86 million level. Was this expected -- was this second half up-tick expected when you issued your original guidance? I guess any commentary around how you believe you're tracking towards that level would be helpful.

Hi, Chris, this is Ronan. Yes, I think we're moving along more [authentically] as expected and we'll still be very comfortable on meeting the guidance. For example, we're building traction with our Premier instruments as an example. And so the sales for there will increase. So I think we've got quarter one was $20 million and this is $20.8 million. So basically we have two other quarters that should add -- I think will add up to $86 million, and we feel reasonably comfortable on that.

I guess with the revenue expected to ramp in the second half of the year your EPS at $0.20 this quarter, if we annualize that I'd say your guidance level is $0.80. So I guess is it reasonable to expect a possible EPS increased sequentially as the revenues increase in the back half of the year implying maybe a conservative EPS number?

Chris, Kevin here. Yes, I mean as Ronan said, the revenue figures are going to continue to grow quarter on quarter for the rest of the year and obviously EPS will follow that. So already this year, six months in we're at $0.394, so the $0.80 looks very doable. So yes, we're very comfortable with our $0.80. It is our official guidance, but I do expect us to at least meet that.

Okay, that's helpful, thanks. Next question just on Premier -- a nice placement number this quarter and it seems like you guys are continuing to gain some traction. Can you talk a little bit more just about the nature of the placements perhaps between Menarini and Fisher, how those are tracking towards your expectations and your guidance level for the 200 placements this year?

Sure, Chris, we indicated that we did 15 in the United States and we'd expect to equal that or beat that in the coming quarters. And Menarini have indicated to us, and I think I've shared this with you in the past, that they don't want us talking about their sales on a quarterly basis in actual terms. So I went about as far as I could when I said that they were greater than 50% of 52.

So you can see then that they were at least -- we can work that out, they were at least 26 or more and then the USA was 15, that's 41 out of 52. I think we did from recollection one in Columbia and two in Peru, one in Bolivia, I think two in Turkey, whatever. And we're now about to launch in Southeast Asia. Over the next couple of months we are launching -- we're going for approvals in Brazil, which we don't expect until next year -- we don't expect China until the end of the year.

But based on what we're launching for the rest of the year, based on the expected uptick in what Menarini would take -- uptake and what will happen in the United States at Fisher, most of the sales we achieved this quarter were our own. I think Fisher (inaudible) we'll increase in the United States. So, in overall terms we'd be comfortable with our 200 projection.

Okay, great. Okay. And then just turning to the Point-of-Care side, specifically HIV market. Can you just comment on how OraSure's recent FDA approval for their over-the-counter HIV test impacts the HIV markets and your market share and market opportunity there?

Sure. Yes, we anticipated that we might have a question or two on this issue, so I might just take a couple of minutes to deal with it and preempt maybe any other questions that may arise. So to deal specifically with your question, Chris, whether the recent FDA approval of OraSure's OTC test adversely impact our existing HIV sales, right. So just let me give a really very categoric, very simplistic answer. The answer is absolutely no, we don't believe it will have any impact whatsoever.

Interesting I think OraSure made a similar point with respect to their own professional sales -- and sales into the public health market. We think in terms of our HIV sales in Africa clearly there will be no impact. I mean Africa is a $1 to $1.50 market with no [basic] -- pharmacies don't really inter very much into it. So that's a non-issue.

With respect to the United States, we sell our -- our HIV business is comprised of two areas. About 40% of our sales are into hospitals. The hospital market which includes finger stick injuries and labor delivery testing, testing which naturally resides in a hospital environment. I think the level of migration to the OTC market there would be absolutely zero, we see no implication there whatsoever for that business.

The rest of our business, 60% of our business in the United States is into the public health market, rated public health programs and into sexually transmitted disease clinics. If you bear in mind that the incidence of HIV is largely associated with urban poverty, particularly low income groups. Consequently most tests carried out in the USA are under public health programs in less well-off urban areas and in such cases the patient receives a test free of charge.

Typically they couldn't afford to pay for a test. So I think it's very unlikely that the recipients of these tests will migrate into a pharmacy and pay $30 or $40 for a test. We simply don't see that happening. And we don't see as a consequence of this approval that CDC or the public health programs in individual states will kind of reduce their funding.

So we see this really as an entirely new market that will help to contain the spread of HIV and to identify those people who are positive and therefore enable them to watch their habits. So a very positive development, but not one that will in any way whatsoever even in terms of minute dollars impact what we're doing. So I think I couldn't be more categoric than that.

Well, let me kind of go beyond your question for a moment if I could and go beyond this. If we ask ourselves the question, then how big will this OTC market be? The honest answer is that we simply don't know. And I'm not going to waste time on this call kind of conjecturing and talking about whether people are going to be embarrassed going to a lady in a pharmacy and all those pros and cons. I'm sure everybody has considered them.

But just to mention we announced five years ago that we would not pursue an OTC approval because we believe the markets wouldn't be very significant, that was our view at the time. But we said at the time if we were proven wrong that we would reconsider. But the reality is that we simply don't know.

There was also a doubt at that time as to whether the FDA would ever approve such a test. And so given that doubt and given the doubt about the size of the market and the very significant costs involved which we would estimate the cost of the trials which are somewhere in the $5 million to $7 million area, we decided at that time to sit on the sidelines.

But circumstances have now changed and we're going to watch how this market develops with great interest. Just to go back and look at where we stand, there are three FDA approved products in the United States at this time. I think you know who they are including OraSure. And in March 2006 the FDA presented to the blood product advisory committee there acquirements with respect to any potential approval of an OTC HIV test.

What they said at the time was, and which remains in place now, the prerequisite would be that the product in question would have obtained FDA, PMA, full PMA approval for use in the professional markets, and clearly Trinity meets that requirement. We spent many millions of dollars getting that approval.

And the second prerequisite was that the product be CLIA-Waived and clearly we have, so it's basically -- it would be similar to use. And clearly we have achieved that goal so we have an FDA approved PMA product which is CLIA-Waived. So we meet that requirement.

And on that basis then if you were to meet those two prerequisites the FDA said that you could go forward and basically conduct various trials which were completion of a device, interpretation study and observe self test study and then a non-observed study. The first one I think was 2,000 individuals, the second one was 2,000 -- and if 2,000 observed then unobserved 2000, and the last one was 5000.

But in summary, I'll make it really simple, it was going to take about two years and it was maybe more -- it was going to cost somewhere between $5 million and $7 million. So a lot of money. In addition to the above criteria the FDA said that you'd have to -- the manufacturer would have to run a 24/7 call center for consumers to access the call center if they needed to.

So as well as from (inaudible) point of view, if it looks at the sufficient market traction we'd say that we're uniquely positioned to commence trials with a view to launching our blood-based OTC products, which would have wonderful sensitivity and that we could do that we were probably within a two to two and a half year time frame. So basically what we're going to do is we're going to watch very carefully and see basically if the size of the market warrants that investment.

In summary, if you were to look at the situation you'd see that OraSure has a saliva-based test, it uses a swab and it's 92% sensitive. We have a blood-based test which uses a spring loaded lancet to get one drop of blood from the finger and it's 99.9% sensitive.

I suppose the problem with the OraSure saliva test -- and by the way, I welcome the test -- is that it's only 92% sensitive. So the test will tell eight out of 10 -- I'm sorry, will tell eight out of 100 positives that they don't have HIV, but in fact they do suffer from HIV.

Meanwhile the Trinity test, which uses one drop of blood, is 99.99% sensitive. Basically it never tells the HIV positive that they don't have HIV. The disadvantage of the HIV test is that it uses spring loaded lancets to get one drop of blood from the finger and you feel a jab of pain compared with rubbing a swab around your mouth for the OraSure test.

If you go to a pharmacy to buy an HIV test would you settle for a 92% correct answer with saliva or a jab of pain on your finger like every diabetic does every day of their life for a 99.99% correct answer? I think those are broadly the issues if we were to enter the market.

If the market ends up being substantial and we do enter it, clearly we'll have to get the message across relating to the increased accuracy of the test. I would imagine that the FDA would certainly welcome that greater accuracy. But those are the actions issues anyway that arise but clearly we're very well positioned -- uniquely positioned to enter the market if the market transpires to be of decent size that would merit that investment. I hope I haven't been too long on that answer.

Okay, thanks for taking the questions, guys.

(Operator Instructions). Mike Jolin, Heartland.

Congrats on the quarter, Ronan and Kevin, and your placements of the Premier, increase in the dividend and share buyback. We appreciate that. Ronan, the point of care market historically has been fairly lumpy and you mentioned some new contracts in Africa. Could you just give some color on what you expect for the rest of the year or should we expect this type of quarterly run rate or do you expect it to ramp in the back half?

I expect it to round up somewhat. But having said that, Mike, it's always lumpy. I mean you'll notice that for example this quarter wasn't as big as last quarter. It just sometimes comes down to the timing of shipments. Having said that, (inaudible) that quarter three will be quite a bit higher than quarter two.

But in overall terms the reality is that we won a significant contract in a couple of Eastern African countries and that our overall annual run rate is going to be up on the order of $2 million, $2.5 million, $3 million.

And could you just give us any update on the Fiomi business in that just remind us of what your view is on the potential there? I know it's a little ways out, but just if you could remind us what your view is of the potential of that business.

Hi, Mike, Jim Walsh here, I'll try that question for you. The Fiomi business was quite frankly -- we see enormous opportunity for it. If you remember, the cardiac market as it stands today is about a $900 million market, it's growing at about 15% per annum and I'm just counting the Point-of-Care market in those numbers.

There are really only three players, there's Abbott, Roche and Alere. And the market is generally segmented, about -- a little under 50% in the USA, 27% or 28% in Europe and the rest of the world makes up the remainder. The current set of products that are in the market are pretty old, okay, the Alere product is a product that they bought when they acquired Biosite, it's probably seven or eight years old. The Roche product is of a similar vintage.

I'm particularly talking here about Troponin I, but those two products in particular which account for a significant portion of the market are quite old and are just not meeting the current requirements of -- the clinical requirements in the market. The best product that we see in the market at the moment is the Abbott i-STAT, it has a better sensitivity than either of the other two.

And the nice thing is that the initial work we have done at Fiomi has actually shown us very clearly that even after this [moment] we have only had Fiomi five months now; we have a test running that is substantially better than the Abbott product, okay, it's more sensitive. So you know, it's going to take either of us quite a bit of road to run here yet.

But we're very bullish that we can get a product CE marked towards the latter end of 2013 and that we'll get an FDA submission in -- at least at the end of 2014 or very early 2014, but probably -- it's probably going to be more a 90-day 510(k) because a difficult 510(k) because it's a difficult 510(k), it's a difficult trial.

But if you look at it and by then the market is only a $1 billion market. You only need two real products to compete, you need a Troponin I and you need a BNP, we have both, we're working on both. And we will have by far the most sensitive system in the market. So how successful we are will depend on how we sell and who we partner with, if we partner with anybody. But the potential is quite -- it can be a transformational opportunity.

Mike, Ronan here again. Just one thing to mention. What the FDA really want here is they want a more sensitive test. And they want it -- what's happening at this time is that people are presenting in actions emergency and are being sent home after a day, after running seven or eight tests and being told that they haven't had a cardiac event when in every reality they have had. And sometimes with fatal consequences subsequently.

So what the FDA needs and what they want is they want a more sensitive test, a test that can pick up Troponin I reliably, reproducibly at lower levels. And we think that's what we have.

Great, thanks again and congrats on the good quarter. Thanks.

Laura McGuigan, B. Riley.

I just wanted to drill down for a second if I could on the Premier placements specifically in the US. I believe you said there was 15. Did you say that all 15 of those came from the Fisher side? And if so, are we to assume that those were replacements versus new sales?

Laura, Ronan here. No, in fact I'm sorry, maybe I wasn't very clear. I was actually saying the reverse. I was saying that virtually all of the sales were placed actually by the Trinity Biotech direct sales force with a modest enough input from Fisher. Although we're hoping that will change in time and that it will be a more even balance between the two. But just in terms of this quarter in fact it was almost entirely Trinity Biotech personnel that made the sales as both -- yes.

Thanks for the clarification. And then is it fair to assume that the margin contribution is around 10% to 15% on the total -- the 52 total placements? And would it be possible for you to give me a breakout of what the reagent revenue contribution was in the quarter?

Maybe Kevin can handle that question a little bit better than I can. But let me just say that the margin on US instruments is an awful lot more than 15% to 20%. The margin then on European and Turkish instruments and Chinese when they materialize will probably be more like 10% or 15%, but the US would be like maybe more like 30%.

In terms of reagents, I mean the amount of reagent that will be sold on those new placements in this particular quarter would be meaningless almost, it will be very modest. It takes time -- it takes time for that to build clearly. Kevin, do you want to answer that?

Yes, I mean I would concur with that. And obviously, Laura, the reagents that are coming through, and we have seen a certain amount coming through and what we're talking about is sort of mid- to low-single-digit, $100,000, about $300,000 to $400,000 of reagents maybe so far and there is a little bit of stocking up in certain places which contributes to that. But those margins are considerably higher than the instrument revenues have been attracting to date.

I was just trying to get a sense for how -- kind of how many quarters out the reagent revenue starts to kick in from the placements of the previous quarter, so that's helpful. And then just a question on the Point-of-Care side, with respect to the C. diff test that I believe you said will be submitted to the FDA in the next few months.

Can you kind of explain to me the dynamics of that market? I know that the majority of the testing for C. diff is still done at the point of care, although there is a move on the molecular side. What are the advantages of the Point-of-Care testing that would keep that dynamic in place?

I would imagine there's some -- there's a cost advantage and perhaps a time advantage as well. But could you speak to why those dynamics will continue and the market will still be as large as it is now? That would be helpful.

Ronan here. Laura, we would estimate the market in the United States to be about $50 million and with probably 55% Meridian and 45% Alere who distributed a [tech lab] product, that would be our estimate. Clearly there's been a complete migration obviously from laboratory testing to Point-of-Care testing over the past four or five years. But now there's a new migration towards molecular and you've seen, for example, Meridian launch their molecular product -- whatever, and you have others in that market as well.

But in terms of volume of tests -- I'm sorry, in terms of volumes of tests, the lion's share of tests are still actually being run on lateral flow. And we believe that that will continue to be the case for many years to come. And I mean clearly the advantage of a (inaudible) is that it's more accurate, but of course there's also a very big cost factor involved as well.

So our belief is that although you'll have the migration of a big dollar migration to molecular, the migration in terms of the percentage of the number of the entire actual numbers of tests run will be significant but not overwhelming and that there are many years of lateral flow Point-of-Care testing for C. difficile to go.

And it is our intention to market -- to use our contacts there. We have many, many customers in the [march] already and also to use pricing as a means of taking market share. We hope to be able to do that from probably about the 1st of January.

Okay. And then just one last more general question. You've given the ongoing consent surrounding the European economy and the intense focus that investors are putting on that. Can you kind of speak to how you see that affecting your business going forward if you do at all and in what areas?

I mean if you look at the makeup of Trinity Biotech it's -- the level of its European sales are relatively modest. Just to make that point. The other point I would make is that despite all the difficulty we have in Europe, typically healthcare spend tends to survive a lot of the cuts.

So we're not really seeing -- we're not feeling the European recession in terms of the performance of our European distributors or indeed in the performance of our direct operation in the UK. What we are seeing obviously is that the currency clearly we are feeling the impact of that and I suppose in terms of our revenues it serves to make our revenues smaller.

And given that we've got a match now effectively between dollar and euro costs we don't get the P&L benefit that we previously would have done. So ironically it's the currency that's hitting us at this stage rather than the economy, you know.

Yes, yes. Okay, thanks for taking my questions. Congratulations, guys.

Jeffrey Warshauer, Sidoti & Company.

Just a couple questions just to maybe elaborate a little more on the European market. Can you provide a little more color, if possible, to where you're seeing Premier being placed in terms of what countries and maybe what countries offer the most opportunity there?

Sure, Jeffrey. Our agreement with Menarini covers I think 30 European countries. It's just about all of the European countries are members of the euro plus a few more. Sorry, members of the European Union, so it's 30 countries.

And where the biggest countries in Menarini typically are strongest in Italy because they're an Italian company. And Italy, it's sort of a Mediterranean country, so their strongest operations really are Italy and Spain. Having said that, they're still very, very strong in France, Germany and the UK. They're really a pan European company.

They have 40% of the Haemoglobin A1c market in Europe -- HbA1c market, 40% of it, so they're market leaders there. They bring supplies for many years by (inaudible) whose product they distribute, both reagents and instrument. And they have signed exclusively with us and intend to basically hold onto every instrument that they currently have and to transition them into a Trinity Biotech instrument over the course of the next number of years.

So I think we're lucky to have a really, really strong partner in Menarini. By background I think they turn over about $4 billion, they're primarily a pharmaceutical company. They're strong right across Europe and they're also strong in Eastern Europe. They may be our means to be successful also in Russia. So anyway, we think a very strong partner.

Do you think labs in the most effective countries would put off purchasing instruments?

Yes, sometimes (inaudible) instead of running sort of four or five years, might run it for seven. Having said that, if it's reagent rental the hospital will typically probably want a new instrument at the end of the expired period.

Do you have any idea of the percentage of reagent rentals versus repurchases?

Are you talking about -- I'm not sure what you're talking about. Are you talking about just across the whole of Europe in general (multiple speakers)?

Yes, just in general.

If I had to guess I'd say 90%.

Primarily rentals?

Yes, it's a rental -- it's like the states, it's a rental market really, it's a reagent rental market. So the point is -- the point is if a hospital, for example, if a hospital spends $5,000 a year -- $5,000 a month on a standing order and they sign a five-year rental agreement, on month 61 they want a shiny new instrument, there's no way they're going to tolerate the old instrument and still pay the $5,000. So I think that tends to drive the replacement cycle.

Do you think that Menarini will reach the minimum purchase requirements here in terms of (multiple speakers)?

Yes, I think so. I think if you -- and I think that they could beat them. I mean the other thing I mentioned in the call -- in the prepared segment are that we have to develop an ion-exchange instrument which is very relative to the Southern European market. And I think at the moment which that launches, which is probably 1st of July of next year, I think that the kind of (inaudible) numbers would be greatly exceeded.

And the -- switching years just quickly into China and Premier there. Do you think that's more of a market suited for Premier or ultra in terms of high volume?

Premier. Also remember that Premier can do the volumes that ultra does anyway. But I think that, yes, you're going to see Premier as our primary -- it's going to be our primary effort in China.

Okay, great. And just lastly, in terms of collections in Europe, have you seen anything of that gives you cause to worry about that issue?

No, actually fortunately as a company we have a very good history of collection rates right throughout our history; it tends to be reflective of the quality nature of our customer base. I'm happy to say that we've seen no deterioration. And so (inaudible) of our revenues has not been impacted by the current economic situation in Europe, collections have not been either.

Great, thanks, guys. That's it for now.

Walter Schenker, MAZ Partners.

Two different unrelated questions -- realizing it varies dramatically by placement. In the second year, I made that up randomly, a Premier instrument placements might generate what sort of reagent sales?

As to the country -- it depends on -- in the United States probably do $25,000 and in Europe, because of the fact that we're not financing the instrument, etc., it would probably do about $8,000. I'm sorry, euros -- $10,000.

Okay. And second question, on Fiomi, you've now been there five months, you've ramped up the people, two unrelated questions. One, I know when you first acquired it you thought when you get to market this should be or could be -- a lot of vagaries between here and there, or uncertainties -- a 60% gross margin product, you have no reason to believe any differently now?

There is no reason to believe any different now. The market price give or take for a BNP assay at the moment is in the order of $25 to $27, even was as high as $40 in some cases. The cost of goods -- forgetting the instrument because the instrument is neither here nor there, it costs about $2,000 or less for an instrument for them. The cost of goods on a test is going to be the order of maybe $3.50 or -- tops $3.50 or $4, something like that. So there's a lot of daylight between the cost and the selling price.

And secondly, in regard to now that you've ramped the people, [you've got the same] comments, what are the major things that need to be done beyond the FDA clinical trial in development to get this product through the European CE mark?

The European CE mark is quite a bit less cumbersome, put it that way okay. First of all, it's a self CE mark so you don't need -- well, the prerequisite is of course your company needs to have ISO 14485 quantity process running in their facilities, which we have. And actually the fact is in Fiomi they don't have but are putting that system in place. But that's a quality system and we do that day in, day out as our bread-and-butter work is to do that sort of work.

The next, we would then have to run some clinical trials in Europe. We're very lucky in that where the facility is based we're based in Uppsala in Sweden and the hospital in Uppsala is within 200 yards of our facility and there's an exceptional cardiology unit there headed up by Professor Bertil Lindahl who is one of the gurus, one of the key opinion leaders in cardiology.

And we have already an agreement in place with Dr. Lindahl to conduct our clinical trials there. So we're -- but it's not nearly as cumbersome or as big a deal for a CE mark then it is for an FDA approval.

Okay and in the FDA discussions, are they going to want to see a comparative result versus the existing or they have a baseline for existing and therefore you'll show your specificity and that should do it?

No. This is a particularly strange type of 510(k). The regular 510(k) consists of proving equivalence through a predicate in the market. The unfortunate thing is the FDA have taken the view -- or the fortunate thing perhaps is the FDA have taken a few that the predicates currently in the market are just not good enough.

So proving equivalence to a bad product doesn't mean that you're approvable. So they've taken that -- they had put out some guidelines back in 2010 which essentially said that your product must be -- and this is going to get quite technical now, but the product must be quantitative at the 99 percentile of the normal population.

And in layman terms what that really means -- you'll have to run a clinical trial that will probably be in the order of maybe 1,000 plus normal -- and define what normal is with normal people, okay, people not having cardiac issues. You determine the troponin level that's in the blood of those 1,000 people.

And at the 99 percentile of that normal population your product must be quantitative. And that's the goal essentially and that's the clinical trials we'll be running to prove to the FDA. So what you're really proving yourself equivalent to is the clinical outcome of the patient rather than the actual predicate device on the market.

And I gather from the way you've described it, probably none of the three -- and truly two out of the current three would never pass that trial today?

That would be my understanding, yes.

Actually it would be all three would fail to do it, Walter.

Okay.

So just in summary then, clearly by the way we feel that we can meet that hurdle, we're satisfied that we can do so. So what's involved here really is reach -- and I'm talking mostly about Troponin I because the other projects are at an earlier stage -- is we have to get design freeze on the product, we then have to do internal trials.

We have to do instrument optimization, because the instrument itself isn't finalized. We have to do a transfer into manufacturing and then we have to do our external trials. Broadly that's where we're at in terms of bringing Troponin I, which is a key product, to the market.

Okay, thanks a lot.

David Walters, Monarch Bay Associates.

We're market makers in a ton of different stocks including yours and we've noticed that the short position in your Company has now grown to over 300,000 shares. And we also understand that the reason this short position has been increasing, it's attributable to your accounting treatment of Rayville. Could you take a moment and address your recent accounting strategy towards Rayville?

I'm not sure where you are coming from. But it strikes me as an obstructive type of question, not very well meaning. And I think I know who it comes from, it probably comes from a B shareholder who threatened something here.

By the way, 300 -- short position 300,000 shares is 1.5% of the Company and, let's be honest, it's not enough to allow for a short position. So I don't know how well meaning that point is. With respect to Rayville, i don't know what you're asking; I don't think there's anything unusual at all about it. So I think possibly that you are not a very well-intentioned questioner.

And showing no additional questions in the queue, I would like to turn the conference back over to Mr. Ronan O'Caoimh for any closing remarks. Please go ahead, sir.

Thank you. If that gentleman, Mr. Walters, wants to contact the Company he's very well can do so. I have no idea what he's talking about. So thank you very much, everybody, for that and look forward to talking to you next quarter. Bye-bye.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.