Trinity Biotech PLC (TRIB) 2012 Q4 法說會逐字稿

Good day and welcome to the Trinity Biotech fourth-quarter and 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 to review the financial results of Trinity Biotech for the fourth quarter and the year ended December 31, 2012. As the operator indicated, my name is Joe Diaz; I am with a Lytham Partners. We are the financial relations consulting firm for Trinity Biotech.

With us on the call representing the Company today are Mr. Ronan O'Caoimh, Chief Executive Officer; Mr. Rory Nealon, Chief Operating Officer; Mr. Kevin Tansley, Chief Financial Officer; and Mr. Jim Walsh, Chief Scientific Officer, Business Development Director. 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 statements.

Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts 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 and 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 risk and uncertainty, 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 revision of 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 me turn the call over to Kevin Tansley, Chief Financial Officer of Trinity Biotech. Kevin?

Thanks, Joe. Today I will take you through the results for quarter four and the full year 2012. I will begin with the results for the quarter starting with our revenue performance.

Total revenues for the quarter were just over $20.8 million. This compares to $20 million in quarter four of 2011, representing a growth rate of 4%. As Ronan will provide you with more details on revenues later in the call, I will now move on to gross margins.

This quarter's gross margin was 50.6%, slightly down on the 51.5% we reported in quarter four last year. A lower gross margin is attributable to higher instrument placements, predominately sales of our new Premier instrument, which increased to 65 units this quarter. I have mentioned previously that our gross margin will be impacted due to placements such as these as instrument sales typically have lower gross margins.

Moving on to indirect expenses. Our R&D expenses at $800,000 this quarter were slightly lower than the levels recorded in the equivalent quarter last year. Meanwhile, our SG&A expenses also decreased from $5.3 million to $5.2 million.

In both of these cases expenditure levels have been impacted by exchange rate movements. That is to say that euro weakness has resulted in euro-denominated costs being lower in dollar terms. This is offsetting the negative effects that these exchange rate movements have been having on our revenues.

Our operating profit for the quarter increased from $4.1 million to $4.4 million. This brought the operating margin for the quarter up to 21.1%, and this is the first time the Company has achieved an operating margin of over 21%. We are particularly pleased with this as it has been achieved in the context of lower gross margins.

Moving on to our net financial income. This quarter we earned $506,000, which is a decrease of just over $100,000 on the equivalent period last year. This reflects falling interest rates available in the marketplace.

Moving on to the tax charge for the quarter, this was $426,000 which represents an effective tax rate of 8.7% bringing the average effective rate for the year to 10.4%. From an overall profitability point of view, we have had a very good quarter.

Our quarterly profit after tax has grown to close to $4.5 million and this compares to $4 million last year, or an increase of 11%. Meanwhile, we have grown EPS for the quarter to $0.208, or an increase of 9%. In terms of diluted EPS, we are seeing this grow from $0.184 to $0.198 over the same period.

Finally earnings before interest, tax, depreciation, amortization, and share option expense for the quarter amounted to $5.4 million. Again, I would like to reiterate it has been a very strong quarter from a P&L point of view.

I will make some comments now on the full-year results before I move on to the balance sheets. Annual revenues increased from $77.9 million to $82.5 million, which is an increase of 6%.

As was the case in the quarterly results, both R&D and SG&A expenses were down when compared to last year. In the case of R&D, the fall was from $3.2 million to $3.1 million while SG&A fell from $20.8 million to $20.7 million. Again, we are seeing the impact of exchange rates at play here.

Operating margins for the year as a whole improved from 20.2% to 20.8% and the effective rate of tax, as I mentioned earlier, was 10.4% and this compares to 14.5% in 2011. From a profitability point of view the Company reached new heights. Profit before tax grew from $18.2 million to $19.4 million and profit after tax increased from $15.6 million to $17.3 million, which represents growth of 11%.

EPS growth was similarly strong, growing from $0.732 per share to $0.81. Again, growth of 11%.

Now I will move on and talk about the significant balance sheet movements since the end of September 2012. Property, plant, and equipment increased by almost $300,000. This was made up of additions of $700,000 offset by depreciation charge of $400,000.

During the same period our intangible assets increased by $7.4 million, and this was mainly due to additions of $6.7 million, which was higher than in previous quarters due to increased expenditure on our new cardiac test at our Fiomi subsidiary in Sweden. Total intangible additions have been partially offset by an amortization charge of almost $400,000.

Moving on to inventory, you will see that this has decreased by about $700,000 this quarter, reversing the increase we saw last quarter. I will point out in the past that fluctuations of this magnitude can be considered normal quarter on quarter. Meanwhile, trade and other receivables have reduced by $1.1 million to $14.5 million, and overall our accounts receivable remains in very good position at 55 days.

Finally, in relation to working capital our trade and other payables increased by $1 million to $12.8 million. This was mainly due to timing issues.

Before leaving the balance sheet, I will focus on some of the major movements year on year. Firstly, intangible assets have increased from $45.4 million to $73 million. This is due to the goodwill and other intangibles arising on the Fiomi acquisition, which resulted in an increase of $14 million, and with the remainder being normal additions incurred during the year of $15.1 million, offset by amortization of approximately $1.5 million.

Secondly, you will notice that trade and other receivables fell from $24 million to $14.5 million, which is a decrease of $9.5 million. This is mainly due to the receipt of the second and final tranche of deferred consideration of the $11.25 million from Stago last April. This was slightly offset by an increase in accounts receivable in line with revenue growth.

Finally, before I hand back over to Ronan, I will discuss our cash flows for the quarter and the year as a whole. First, the quarter.

Cash from operations was $5.9 million, which is the highest figure achieved in any quarter in the year, reflecting the improved operating margins and the strong working capital management. However, we are seeing a small reduction in free cash flows from $2.3 million to $1.7 million. This is due to the additional expenditure in the development of our new cardiac products in Sweden.

Finally, this quarter we spent close to $1.3 million purchasing an additional 100,000 shares at an average price of $12.47. This brings the total number of shares purchased since the beginning of the program to approximately 1.1 million shares at a cost of over $11.4 million.

In terms of our cash flows for the year, we achieved positive cash flows of over $7 million. The other main cash movements were acquisition-related expenditure of $6 million, this was mainly due to the acquisition of Fiomi in quarter one; a dividend payment of $3.2 million, this is higher than the previous year due to a 50% increase in the level of dividend paid; $5.3 million was spent repurchasing shares, the average price for which was $11.68; and these movements were then offset by the $11.25 million of deferred consideration received from Stago.

The net result of all of this is that the cash balance for the year increased by $3.8 million from $71.1 million to just under $75 million. So on an overall basis we had a very good quarter and fiscal 2012. In particular, it was characterized by revenue and earnings growth, improved operating margins, and the continued strengthening of the balance sheet.

All of this was achieved at the same time as exciting developments in our product pipeline which we have been undertaking and which you are about to hear more shortly.

I will now hand over to Ronan. Actually to Jim.

Thank you, Kevin. So if you have a few moments I would like to take a few minutes to give you an update on the progress of our cardiac market development program in Uppsala in Sweden.

Just to remind you, almost exactly one year ago Trinity acquired a Swedish company, Fiomi Diagnostics, for a consideration of $13 million. You will remember Fiomi had developed a high sensitivity, extremely precise, quantitative amino acid platform on which Trinity is now developing a range of high sensitivity cardiac products, namely high sensitivity Troponin I for the detection of acute myocardial infarction and BNP for the detection of heart failure.

Again, by way of reminder, the worldwide market for these two point-of-care cardiac products is approximately $1 billion and growing at 14% per annum. The market is segmented as 45% USA, 27% Europe, 13% Japan, with the rest of the world making up the remaining 15%.

Currently there are only three dominant players in the market, namely Alere with the Biosite triage platform, Roche with the cobas cardiac [reader] platform, and Abbott with the i-STAT platform. I am delighted to report that progress on all fronts of our cardiac product development platform are progressing very well.

Indeed, at this time we are on course to have our high sensitivity Troponin product CE marked and available for sale in Europe in the fourth quarter of this year. This will be quickly followed by CE marking of our BNP heart failure product in Q1 2014. Thus, our complete portfolio of cardiac assets will be available for sale in the $270 million European market in early 2014.

To obtain CE marking, of course, requires significant clinical trial data to be generated. To this end we have recruited five European sites to conduct our chest pain studies. These studies will commence in all five sites mid-April of this here. The data will be used exclusively to support the CE marking from these trials.

Unfortunately, European-generated clinical trial data may not be used to support an FDA submission. Therefore, in relation to preparation for product entry in the United States, we have engaged with one of the foremost US key opinion leaders in the POC cardiology space who will essentially help us to coordinate our US trials.

As you know, we have had multiple conversations with the FDA over the past months to determine the scope of the trials necessary to support the FDA submission. We now expect our US clinical studies on the high sensitivity Troponin asset to commence mid Q3 2013 with submissions to the FDA slated for Q1 2014 and FDA approval potentially available before the end of 2014 but definitely early 2015. BNP will follow approximately one quarter behind the Troponin program.

In summary, therefore, we are extremely pleased with the progress made to date on the development of our high-sensitivity Troponin and BNP products (inaudible). Our products are consistently displaying substantially better sensitivity and precision to their current market-leading platforms. Furthermore, we believe that our Troponin test is the only POC Troponin test capable of meeting the new FDA guidelines.

We believe that on approval these products, whose clinical performance is unrivaled in the point of care cardiac segment, Trinity will have the products necessary to take a significant share of the $1 billion point-of-care cardiac market. And I will be happy to answer any specific questions you have when it comes to the question-and-answer session.

Thank you. Maybe back to Ronan?

Thank you, Jim. I am just going to walk you through now a review of the sales for quarter four and for the year.

Our sales for quarter of four were $20.8 million, up from $20 million, which is an increase of 4%. For the year, our sales were $82.5 million, up from $77.9 million, which is an increase of 6%. However, when you take into account the impact of the weakening euro, our underlying organic growth rate for 2012 was 7.5%.

HIV point of care revenues were $4.9 million for the quarter, up from $3.9 million, which is an increase of 23%. Within these numbers US HIV revenues were actually down 7% compared with the same quarter last year, and this reflects reduced spending by many individual states under HIV programs. This reduction is being experienced also by our principal competitor in this market in the United States.

The situation in Africa is very different where our revenues have increased 30% compared with the same quarter last year. The exceptional quality of our product, which is the only FDA-approved HIV product available in Africa, is leading to a situation where we are the confirmatory HIV test of choice for the NGOs and the countries -- in virtually all of the African countries.

For the year as a whole, our HIV revenues are up from $16.6 million to $19.2 million, which is an increase of 16%, reflecting a decrease in the US of 9% and an increase in Africa in sales of 34%.

Clinical laboratory revenues for the quarter were broadly flat at $16 million. We had strong Premier instrument sales, which I will speak about later, but we were hurt by a weaker euro and particularly by lower Lyme confirmatory revenues due to an early end to the 2012 Lyme season as a consequence of the cold weather conditions. Absent these two factors, our clinical laboratory revenues for the quarter increased 5%.

Our core infectious disease business performed very well during the quarter, particularly in the US if I exclude Lyme. We received FDA approval in January for our vitamin D test to run on our DSX instrument, and we believe the launch of this product will reinvigorate the entire line and facilitate more DSX instrument placements.

The approval by the Chinese authorities of our Epstein-Barr virus autoimmune and Legionella urinary antigen products is expected during quarter two of this year and should enable further growth in China. We are coming towards the end of a long approval process for both our infectious disease products and also our premier diabetes product in Brazil, and we expect sales to commence in early quarter three. And we expect these sales to ramp up really quickly.

As a result of our research and development program in San Diego, we now have a broad product range coming to market. First in Europe, where the approval process takes less time, and subsequently the products will be progressively rolled out in the US following FDA approval. And in the case syphilis and herpes, following the receipt of the CLIA waiver.

By the end of April of this year we will have received a CE Mark and, therefore, be selling the product -- selling the following products in Europe. In the UK through our own sales force and throughout the rest of Europe through our distributors. The products are firstly, [Anterix] being C. difficile A and B, GDH, which is glutamate dehydrogenase, and cryptosporidium, Giardia, and then for sexually transmitted diseases syphilis and herpes, and in the respiratory area Legionella urinary antigen and strep pneumonia. And, finally, our H. pylori antigen test will be on sale in Europe by the year-end and on sale in the USA by July of 2014.

Moving on to diabetes, the launch of our Premier instrument continues to gather momentum. During quarter one of 2012 we placed 31 instruments, in quarter two we placed 52, quarter three we placed 54, and now in quarter four we placed 65 Premier instruments giving a total for 2012 of 202 instruments. For 2013 we are confident of exceeding 320 instruments.

Shipments of instruments to Menarini in Europe in quarter four were a record high. However, as we have explained in the past, we are developing in our Kansas City facility an ion-exchange version of the Premier instrument for sale by Menarini in Southern European Mediterranean countries. This R&D project will be completed in July of this year.

The Menarini business has very significant upside potential as soon as we complete this ion-exchange version of the Premier instrument. The level of placements with Menarini will virtually double in quarter four of 2013 when we launch the ion-exchange instrument, because at the moment our instrument is unsuitable for southern Italy, southern Spain, and all of Greece and Portugal, which are Menarini's strongest markets. This arises because of the presence of a hemoglobin variant called A2 in many people in Mediterranean countries.

We had a very strong quarter in the United States where opinion leaders are progressively endorsing and supporting our instrument and we achieved record placement. China will be a key market for us in the future. We have an installed base of 120 of our old instrument in China and our distributor in China is very strong.

After two years of hard work, we believe that our Premier instrument will receive Chinese approval during this month, so in the next three weeks. We are confident that we can place 100 instruments per year in the Chinese market.

Meanwhile, Brazil will also be a big market for us and we anticipate approval following a monstrous amount of effort to achieve it in quarter three of this year. We believe that we will place 50 instruments per year in Brazil.

Last quarter we launched in the Andean region in South America and in Taiwan following receipt of approvals and placed nine instruments in these markets. This quarter we are launching in the Middle East. Next quarter we launch in Eastern Europe, Korea, Indonesia, Malaysia, and the Philippines.

In summary, our product is the best available in the market and this is reflected in 200 instrument placements in 2012, projection of 320 instrument placements in 2013, and we believe 500 placements in 2014.

So at this point if I could hand back to the operator for our question-and-answer session.

(Operator Instructions) Jeffrey Warshauer, Sidoti & Company.

Thanks for taking my questions. Just real quickly, if you could provide maybe a little color on utilization of Premier instruments that were installed in previous quarters.

Jeff, I will take that. It is Ronan. I mean typically I think from moment of our recording a sale to installation, on average, I think would be probably two months. I think it might be slightly longer in the case of Menarini where they are distributing across many European countries.

In the case of the United States, where we are selling direct, it is instantaneous. And in other countries I would say -- so an average of six weeks, I think.

So the number of tests that you have been seeing coming from these instruments are about on par with your expectations?

Probably slightly above. I think, certainly in the case of Menarini, the volumes per year per instrument are running quite significantly ahead of what we had expected. I think this probably reflects basically just the increased adoption of HPLC as a method of testing.

Okay, that is great. Thanks. So regarding your upward revision to what you think you can place in terms of Premier instruments over the next two years, is a large portion of that relative to your increased confidence in Brazil and China or is it elsewhere?

As I said, we expect Chinese approval in the next few weeks. In fact, we are actually already booked to launch the product towards the end of April in China. We are launching in both Beijing and Shanghai. We are making a donation of an instrument in each territory to the local reference laboratories. So that is the degree of confidence that we have, albeit it is not certainty, relating to the approval in China.

In terms of what we would achieve then, we are confident of a run rate of 100 instruments annually as soon as we get approval because there is a pent-up demand there. We have not been supplying our old instrument into the market over the past nine months.

Then in Brazil, again, it is a very onerous and lengthy and difficult approval and it includes assembly. Effectively, it requires assembly of instruments in Brazil and we have arranged for all of that. And in Brazil we are confident that it is a market that hasn't adopted in any way the big instruments. It is an HPLC market and we are confident they will be achieving 50 annually.

Okay. Thanks very much.

Thanks, Jeff.

Matt Dolan, ROTH Capital.

Good morning or good afternoon over there. First question is on guidance.

I know last year you gave us a rough outlook for 2012 and you have talked about trying to hit a 10% growth rate. It sounds like Premier is going well, so any color you can give us on 2013? Are you going to provide some type of quantitative guidance?

Matt, Ronan here. We did $82.5 million revenue this year and the guidance we are giving is that we are saying that we are confident of achieving 10% organic growth. So I think that will get you to $90.75 million.

And I think in terms of earnings per share, what we are saying is that again double-digit growth. We did $0.81; that would get you kind of to $0.88, get you just touching $0.90.

But remember we have to take into account President Obama's medical device tax which is 2.3%, which is going to cost us $1 million, or net of tax $800,000, which is $0.04. So, therefore, what we are guiding is north of $90.75 million, which is double-digit revenue growth, and $0.86 or more, which is double-digit EPS growth. If we exclude the Obama tax.

If you exclude it, right? So you said $0.86 adjusting for the medical device tax, or the Obama tax, and that is a basic earnings per share number or earnings per (inaudible)?

Just put a very simple way, what I am saying is we are confident of achieving double digit both revenue and EPS growth.

Okay, fair enough. Then on the Fiomi topic, can you explain a little more the scope of the studies that are needed to get approval in the US? I think you went through the European strategy.

And then maybe move the ball a little bit further down the line in that topic and tell us what you think you need from a commercial perspective. Will the regulatory studies be enough to see some swift adoption upon launch, or will there be some commercial-oriented studies that you think you will need to undergo?

Matt, hi; Jim here. Essentially the clinical studies for FDA will be -- it is almost two halves. The first section of clinical studies that needs to be done is to determine the Troponin level in a normal population on your particular product.

And that will consist of recruiting approximately 1,000, between about 850 and 1,000, normals which will have to be run on our product. It is easier said than done, and most of our negotiation with the FDA has been to determine what is say a normal person.

Those normals have to be spread across all socioeconomic groups, ethnicity, age, sex, etc., so that is the first study. There is about, call it, a cohort of 1,000 people -- roughly 50/50 male/female -- across all those broad sections. What you need to determine is the Troponin level that is prevalent in those normal people, i.e., normal people who are not having heart attacks.

That sets, if you like, the cut-off level, for want of a better word. Then when you have that determined you need to do chest pain studies. These would be normal walk-in people into regular ERs with chest pain. Essentially guidance there is that, particularly for Troponin, the normal routine of comparing yourself to a predicate device for a standard 510(k) would be the norm.

In this case, because the predicate devises, in the FDA's opinion and indeed most cardiologists' opinions, are not sufficiently sensitive and their CVs are too broad. Essentially, what you have to do is you compare yourself to the clinical outcome of the patients that you test versus the opinion of three independent cardiologists. So it is a very difficult trial to perform and that is really it.

We have engaged with, I think, the number one cardiologists in the United States. I won't mention his name right now because we are signing, hopefully, final contracts next week. He will guide us. He was instrumental in developing the FDA guidelines.

He is going to help us select three trial sites across the United States. We would hope that study would take about six months, Matt. That is roughly what we are estimating.

Okay, so that sounds pretty extensive. That data, I presume, would be sufficient to see a swift launch. Is that fair?

Absolutely, but apart from that I think the fact that we will need to engage with one or two more of the key opinion leaders. But the data is wonderful and it certainly will be compelling.

But, of course, what you actually really need is some of the key cardiologists singing the praises of the product and sort of recommending its use. Of course, we will be doing that over the course of the next six months as well so that we will have some white papers, etc., etc., from the key opinion leaders to support the very lofty claims that the FDA are making us commit to.

Sure, okay. Last one for Kevin. Just a few clarifying points on the quarter. What was the Premier contribution to revenue? And then can you walk through some of the constant currency metrics for the quarter that you typically provide in terms of growth?

Yes. Constant currency for the year as a whole, as we said, the impact was approximately 1.5%, which was that $1.2 million. Premier, the total Premier for the quarter was approximately $1.5 million. That would include sales of the instruments themselves and reagents, bringing us about $4 million for the year as a whole.

Okay. Then just last one, I am sorry. The economics of Premier in China and Brazil; are they the same as what we were estimating in Europe and the US? Thanks, again.

Ronan here. The economics of Premier in China and Brazil would be -- the profit margins wouldn't be as high as in the United States, but they would be similar to what we achieved in Europe.

Thank you.

Larry Solow, CJS Securities.

Good afternoon. Just a few follow-ups for you guys. On the Premier, just in terms of country by country and not looking for any exact numbers, but you mentioned China you think you could do 100 per year. This year, obviously, it's starting a little bit later in the year. Do you think with pent-up demand are you targeting close to 100 in placements this year alone, or is that more of an annualized number beginning in 2014?

Larry, Ronan here. I just might say to everybody else just to mention who you are. This is Larry Solow, who is the healthcare research analyst with CJS Securities from New York and CJS initiated coverage on Trinity.

I think their report came out in December of 2012, so just two months ago. So it is a very comprehensive 20-page report with a buy recommendation and a price target of $21, so just to say that we appreciate it.

I appreciate that plug, thanks.

I see somebody else who is going to ask a question in a moment and I'm going to mention him as well. But anyway just to answer your question, Larry, to say that in China what I am really saying is I think we can do a run rate of 25 units a quarter. So it just depends when we get the approval.

I mentioned that we basically bought our tickets to Shanghai, and so we really expect to get about 2.5 quarters out of this year which would be 67.5 units. So of that magnitude, but we are certainly confident of a run rate of 100.

Just to remind you, China has a very significant diabetes problem. It has got 90 million diabetics. The Chinese regulatory authorities are very conscious of it. They are very big supporters of HPLC as opposed to the looser CVs associated with the big immunoassay instruments, and we believe that this is going to be a very big growth market.

Got you. Then, for Brazil, I guess you are sort of expecting a Q3 approval, is that what you said?

Yes, Larry, Q3 we are confident of that.

That is sort of 50 placements per year. Can that run rate -- is that sort of like a $10 million, $15 million per quarter type run rate or is that a little more (inaudible)?

I think, again, it will be a placement potential of about 12 to 13 per quarter which adds up to 50 a year. And you would get four or five years of that, after which you have taken a very big market share.

Just in Menarini, I know the ion-exchange is expected to come out midyear. Just to clarify did you actually you expect it to double on a sequential basis by Q4?

No, well -- I think that (multiple speakers) would just about double. Because, bear in mind, Menarini are strongest in Italy -- they are an Italian company -- so strongest in Italy and in Spain, Portugal, and Greece. Really at the moment, because the presence of this variant A2, our (inaudible) is only suitable for up to somewhere between 50% and 60% of the hospital placements.

So we are just barred, in effect, from taking on the entire market. We are confident of completing our ion-exchange development program, instrument development program by the end of June. We are really confident of that.

But just based on what happened last time with the boronate affinity instrument, I think by the time that they finished their packaging and their whatever else and their own checks and studies and checks and balances I think it is going to be realistically start of quarter four before we start any serious placement of that new instrument in those markets.

Just to confirm, you said for 2014 you expect to -- your target is now closing in on 500 placements, was that correct?

That is right, yes.

So that is sort of an up -- I think you guys have been targeting more in the mid-400s, so I guess that is a bit of a higher number, at least that you have spoken publicly, right?

As an example, I mentioned, for example, there is only so many resources we have to launch this product right across the world in terms of -- because remember there is regulatory factors in each individual country. So, for example, in Turkey we basically placed 28 instruments last year.

So that just kind of will give you an impression of the kind of potential that you have when you start talking Russia, India, Indonesia, Philippines, Malaysia, Korea. So there is monstrous potential here.

Just a couple of quickies. Your outlook for gross margin, I guess I assume that the device tax will be going in your cost of goods sold. Is that right?

Current working assumption is that it will end up there. We are awaiting, I suppose, a consensus of opinion from the accounting firms and presenters in relation to this. And obviously we will track that. That is assuming there is consensus on it.

I have heard various other locations where it could appear on the P&L, including the other operating expense line and also maybe SG&A. So at the moment my working assumption is it will be in the cost of sales.

It seems like it is about 100 bps pretax, no matter where it is on [a base] relative to revenue or $1 million pretax. Maybe it's slightly more than 100 bps on the revenue, as a percentage of revenue.

Just the gross profit outside of -- independent of where that tax goes. Do you expect it -- I know with the new placements and all you had a slight impact in Q4. But as you look out into 2013 where do you see gross margin, excluding the tax?

If you exclude the tax I see us still being sort in the realm of somewhere between 50 and 51. We are still seeing very high volumes of Premieres going out and at an increasing rate. So once you've got that sort of percentage of placements versus an installed base going out, you are going to have a slight drag on the gross margin.

So still very strong gross margin from our point of view, but just lower than we would have been in the past without it. But we are happy to have the impact on it, because essentially it is a very good news story.

Then just last question, did you give the capital expenditure number for the year? What total capital expenses were? I guess a large portion of that is obviously the capitalized research. And what it was to 2012 and what your expectations are for 2013? Thanks.

The total expenditure for PP&E for the year as a whole would have been approximately $2.7 million for that. As I did mention the intangible number, which was around $15 million, just slightly above $15 million. I see us in 2013 doing similar levels.

A lot of them be impacted by the timing of the trials in relation to (inaudible) is the largest single item that we are going to have, particularly the FDA trials. So the question is to what extent they fall pre or post year-end. So similar number in relation to that.

Great, thanks so much.

Bill Bonello, Craig-Hallum.

Thanks for taking my question. A few things here. First of all, I want to clarify what you said about expectations for 2013 just to make sure I am crystal clear. I think what you are saying is you believe you can grow 10%-plus EPS excluding the impact of the medical device tax, so actually the reported growth might be less than 10%. Am I correct about that?

That is correct, Bill. Yes.

Okay. Then the FX again, you answered what it was for the year, but what was the impact on the quarter?

The impact from the quarter would have been about a couple hundred thousand for the quarter, for quarter four. I will tell you, by the way, that that impacts revenue and caused revenue to fall by a couple hundred thousand. That is made up as you go down throughout the P&L and causes our direct expenditure and, to an extent, our cost of sales to be lower. So it is essentially a wash through the P&L.

Bill, I just mention that -- just to introduce Bill Bonello of Craig-Hallum in Minneapolis. Just to say that I know that you just initiated coverage of us, literally, about two hours ago. I have the report in my hand, 14 pages, very extensive report.

We are delighted that you have done it. I see that you have a buy target of $24 on us. Just to mention, have we put that up on the website yet? It has just gone up on the website and I'm sure it is available anyway.

So Craig-Hallum just initiated buy recommendations on Trinity Biotech, so appreciate that greatly and all the work that you have been doing over the past couple of weeks in preparing the report.

Thanks, that is very nice of you. Jim, I wanted to ask just a question; can you give us a little more color on how on the Fiomi side on how the test is comparing on the bench compared to both maybe the point-of-care devices that are out there and maybe the lab-based instruments that are out there? Some sense of where you are catching patients with elevated Troponins compared to those devices.

Sure, no problem. Bill, simply, the market leaders -- as you know, the market is essentially -- the point-of-care market is made up of i-STAT, Roche, and the triage product from Alere. There is a couple of sort of real numbers that we compare ourselves against each other with.

The first one is the limited of detection of each of our platforms. The limit of detection is essentially the smallest amount of this particular protein that each of our platforms can actually see in a human blood sample. Consequently, the lower your limit of detection the more sensitive your assay is and potentially the more people in the early stages of a cardiac issue can be detected.

So just to give you a flavor, the Fiomi limit of detection is 8 picograms per mil. That is a very, very tiny amount. If I compare that to, for instance, triage, they would have a limit of detection of 50 picograms. i-STAT have 20 picograms and Roche have 50 picograms. So compared to triage we are better than 10 times better or close to 10 times better.

By the way, those numbers are not numbers I made up. They are actually from those manufacturers' package inserts. But a more important number apart from limit of detection is the limit of quantification.

That is a measure of how sensitive your test is but also how precise your test is, i.e., if you were to run the same sample from the same patients 10 times, theoretically you should get the same answer every time. But of course all tests you just don't. All tests have varying CVs.

So on our test our limits of quantification, which is set by the FDA as meaning a limit of quantification at a 10% CV. So you are only allowed a 10% CV, not more than that. So on our test at the moment we are achieving a number of about 13 picograms.

The triage product actually cannot quote a limit of quantification at a 10% CV because, quite frankly, it never reaches a 10% CV at any point. i-STAT are quoting a number of 100 picograms. So if you take i-STAT as the market leader in Troponin right now or the best products, i-STAT are at 100; we are at 30 picograms.

Roche, again, cannot quote a limit of quantification because, again, they never reach -- they can never achieve a 10% CV.

So I suppose what does all that mean? It essentially means that the Trinity product, the FDA guidelines suggest that your product needs to be quantitative at the 99% out of a normal population. We have determined, in a Swedish trial of 200 Swedish people, that are 99% is approximately 30 picograms. So on the face of it our limit of quantification of 30 picograms meets the FDA guidelines.

However, I would caution that it would be premature of me to make a categorical statement that we reach that at all times, because there are many other factors that still need to be built into our products. Including we need to scale up the manufacturing process; we need to run a much larger cohort of patient samples to be really statistically sound in that result.

We also need to have the product rule in third-party hands, because most of our tests to date have been run in-house. And, of course, we are well trained and our operators know how to use the product. It is a different kettle of fish when you go out into the real world and you have third-party users using it.

But on the face of it our product has the ability to reach the FDA guidelines. It is very close to that. And they upshot of all that will be that we will detect cardiac events earlier than our competitors.

Okay. Just because I know that those limits of quantification that you're talking about that the actual numbers can be impacted, certainly, by the way the instruments are calibrated.

If you were looking head to head -- I think maybe you have done this, but if you could tell me. If you were looking head to head at the same specimen, say, using your instrument and using an Abbott instrument, are you finding that you are able to quantify specimen Troponin in samples where Abbott you just don't get a result?

Just Ronan coming in here for a moment. The issue is is if you have, say, 10 people going into a hospital at seven o'clock in the morning, all 10 men having thought that they have had a heart attack, what happens is they all 10 get tested with a rapid Troponin test. One guy has had a heart attack. He is rushed off and stents put in and whatever else. The other nine hang about the hospital all day long and they get another three Troponin tests.

Now what is happening basically is that we are picking up basically people who have had a heart attack and the other three aren't. That is why the FDA are so freaked out about this whole thing. People are getting sent home who have had a heart attack under the impression that they haven't had a heart attack and then with subsequent possibly disastrous consequences.

So that is what it is. It is basically human beings are being sent home under the impression that they haven't had a heart attack when they have, because the existing rapid tests basically aren't detecting Troponin at a low enough level.

Excellent. Okay, that is what I was trying to sort of figure out. Then are there any milestones along the way where we will kind of know how things are going? Or are we going to sort of not have information until we get to the end of the clinical trial process?

Well, I think actually there is going to be one very, very big milestone that you are going to see and I think you're going to see it very quickly. And that is I believe that we are going to get -- we believe -- we are confident that we are going to get CE Marked to enable us to freely sell this product in Europe before year-end. And I think that will be for all to see.

Then when that happens would we expect that there could maybe be clinical publications that go along with that?

Absolutely. These are big, independently run trials. Remember, those trials are about to start within seven weeks of today. Bill, we have five trial sites selected and each of them will be run by an opinion leader in the whole cardiology area.

The fact of the matter is as soon as this trial is over and the product is CE Marked those five opinion leaders will adopt the product, because at the moment they don't have a product good enough for their needs. And they will happily publish.

Excellent. Then the last question, just any -- or what is your latest thinking in terms of pursuing a diagnosis indication on the A1c side of things?

Hi, Bill; it's Rory here. It is something, believe it or not, I signed off on the submission today to the FDA, the presubmission, so that should be going in today or tomorrow to the FDA.

It is a little bit of an unknown. Just for those of you who aren't aware of this, there was a meeting in Washington, I think it was last October, at which the various industry members attended. Namely the HPOC members and also the immunoassay suppliers to the industry. All, of course, were looking for a diagnosis claim.

And for those who aren't aware of it, no instrument on the market today has a claim for diagnosis from the FDA. Everybody has a claim for monitoring A1c levels. The practicalities and the reality is that doctors are submitting, getting results, and using it for diagnosis purposes, but nobody actually has a claim. So everybody sees obtaining a claim as something that would significantly help them from a marketing perspective.

So where we are at? The FDA has basically said that to get a diagnosis claim you have to have CVs south of 2%. We are close to 1%. We are splitting it in our submission, but it is an unknown in terms of how the FDA will react and what it is that they actually want us to do before we start actual trials.

Great, excellent. Thank you very much.

Ross Taylor, Somerset Capital.

Gentlemen, I want to get into the economics of the Troponin product. There is a lot of talk about how valuable this would be to the Company. Have you guys given thought to what kind of operating margins one would be looking at, what cost of sales would we be looking at, kind of what the bottom-line impact would be?

Then additionally, I noticed, Ronan, in your recent hand out at presentations you have added a line saying that -- you state that you expect to obtain a significant share of the market. Now that is a $1 billion market and I would like to know what your definition of significant is. Is it 10%, 20%, 30%?

Hi, Ross. Just to deal with the issue of margin for any moment. I mean we can manufacture product for about $2 or less and the current market -- the market is about $15 for Troponin, maybe $25 for BNP. So you are talking big margins there.

In terms of what market share we could take, there is a number of factors you have to bear in mind. One is, of course, that we don't know who else is doing what. But what I will say to you is this; we believe strongly that the cardiologists will very, very quickly adopt this product when it is given such monstrously superior performance compared with the three current incumbents. And there are really only three.

I mean Jim has quoted basically numbers which just simply means that people are being sent home under the impression that they haven't had a cardiac event when they have had one, but often disastrous consequences. It is as simple as that. The FDA are, if I can use the vernacular, freaked out about this. That is why you have had recalls of product and competitor prices collapsing 20%. That is why the guidelines have been changed.

The gauntlet has been thrown down to the industry and we believe that we are at the forefront basically and probably the only people who can go anywhere close to meeting the guidelines. And let me clarify that. We are satisfied that we do meet the guidelines.

So (inaudible) that is why I think that we can take a very big market share. I am a little bit shy about quoting numbers that may seem almost foolish, but I do believe that the industry will adopt this product very quickly.

I don't think we have any issues relating to the number of products we have or the menu. We have the BNP and we have the Troponin. CK-MBs and myoglobins don't matter because the only reason anybody was buying them was just to make up for Troponin deficiencies. If your Troponin is accurate you don't need to mess around with CK-MB or myoglobin.

And also, basically the instrument is a very cheap instrument. It is virtually a giveaway instrument, and so I think one can take very nice market share very, very quickly.

So when I run the numbers kind of looking at this market, it is not hard. I figured that every 10% share of market is worth something in the neighborhood of $12 to $14 a share to Trinity and Trinity shareholders. That is just for Troponin.

BNP, the economics look like they are probably even better than they are for Troponin.

Yes and no. I mean you and I have sat in your office and we worked those numbers -- you worked those numbers and I didn't disagree -- I agreed with them.

BNP is slightly different, just to make the point. Our BNP is excellent, but it doesn't stand head and shoulders above the competitor BNPs. That is the subtle difference. Our BNP is every bit as good as the competitors, but our Troponin is just in a different class to our competitors Troponins.

Okay. Well, it seems like it is basically potentially a company-changing situation where effectively $17 a share, $16, now $17 a share stock price, we are talking about every 10% market share possibly being worth what the stock is trading at today. So it does seem like it has the potential to change the Company, which gets me to another question which is you are in Europe by the end of this year.

Roche is a European company, quite large. Alere the same. Why do these large guys let you take share? Why doesn't one of them just step in and, quite honestly, give you a bear hug bid?

They may well do. I assume that they will be the first to buy the products when it gets approved towards the end of the year. I mean at this moment in time they wouldn't necessarily know how great it is or otherwise, but I mean that is very possible it happens.

Then also wanted to ask you about syphilis. How big and -- where do you stand on the waiver in syphilis and how big could that market be if you get that waiver?

Just to remind you, there is no rapid approved -- sorry, we are the only FDA approved syphilis in the market but to sell it in any volume you need a CLIA waiver. So we are working on a CLIA waiver. They are hard to get; we haven't got it yet.

If we do get it, I think the market would be worth comfortably $10 million in its second year. We would be in a position where we would sell it with our CLIA-waived HIV product into the public health laboratories, so we are selling to the same customer.

I think the CDC are very enthusiastic about having a rapid syphilis product available in the market for obvious reasons, and I think it would do very well. The hurdle is really CLIA.

Would the economics on that product be similar or better than the AIDS product?

Identical.

Identical. Okay.

In the sense that I think we would be selling it at somewhere between $8 and $10 and the cost of manufacturing is identical. About the same.

Okay. Then, quickly, how are reagent sales for Premier going versus expectations and what are you -- looking forward when we are modeling this, what should we be looking at kind of on an annual reagent sales per machine?

I think I -- was it Matt Dolan or somebody kind of touched off that earlier. I think that we had expected about 10,000 tests per instrument per year. Certainly, in the case of Menarini it is working out at significantly higher than that. I think it has the potential to work a lot higher than that in China.

So I would say, just in general terms, the numbers are coming out higher than we had expected.

Okay, so that is significant. Lastly, I can't let a call go -- actually you have $3.50 a share in cash. You, literally, have a situation where if you are able to -- one last thing with the Troponin testing approach that is actually a platform. That is not just Troponin and BNP. But if those are successful with the FDA we can expect additional products to be rolled out using that protocol or that technology?

This is a platform that is suitable for infectious disease and allergy (inaudible) potential. We have actually just kind of chosen the most difficult test of all to start with.

Is it one where we would expect to see substantial improvements in sensitivity for anything making use of this approach?

Yes, it would but having said that just a word of caution. An HIV tests, for example, is so accurate already that there is really no need or room for further accuracy. The same would apply maybe to the syphilis case tests. But if you were talking about a Chlamydia test, for example, yes, that would be the case.

Chlamydia or TSH or some of the cancer assays where they really are fighting for sensitivity, the platform has a huge application.

Okay. So basically what this is is once we get this approved for Troponin and for BNP it really opens up a vast additional market for you guys.

Absolutely. Remember that up to now we have been working in kind of the pregnancy test type of technology. We can just tell you yes or no. Now we have got greater, much better sensitivity, much better precision, but also we have got a machine to read. We can actually tell you the level; we can quantify. It is just entirely useful.

Of course, Ross, one huge attribute is that it can multiplex. From one sample now you can obtain maybe four or five results, whereas on our current platform one test, one result. So that opens up the possibility of panel assays, like maybe tests for pediatric testing or whatever.

And what it really also seems like is these are markets -- in aggregate these are billions of dollars of markets that right now you don't address or you address segments of them through your lateral flow testing. And so there is some -- I would think we are really talking about a huge potential upside, kind of game-changing opportunity if we are able to get this thing through the FDA.

There is absolutely no doubt that this Troponin approval from the FDA will be transformational for Trinity.

Okay. At the same time it looks like your core business continues to roll on very well. Right now are you losing money in Brazil?

Yes, because we are not selling anything whatsoever, but that is going to change very quickly.

Okay, great. Well, congratulations, it looks like things are really rolling out well. Thank you very much.

Walter Schenker, MAZ Partners.

(inaudible) [broke my earphones] and I am very surprised Ross didn't bring it up. But before I say anything, I would just like to thank Jim Walsh. My bear made it home safely.

I am glad to hear that, Walter.

Everything is going well. We clearly have growth sort of well established from the Premier instrument reagents -- it is a long-winded question -- and then we had Fiomi, which looks outstanding.

The only thing I want to complain about Ronan, and I am complaining about it seriously and loudly, is the buyback is moving very slowly. It almost looks like you stopped as the stock price appreciated. The number of shares are not declining. I realize we issued some to Fiomi.

It seems to me that buying 100,000 shares a quarter is not getting us much in the way of movement and we have nothing better to do with our cash than buy our stocks. If you listen to this call on replay, Ronan, I'm sure you will be all excited about the prospects of the Company. Why aren't we buying more stock?

I think -- we pay a dividend, we have been doing a certain amount of buyback, but given I think the recent move in the price we have just stood back from the market. That in no way means that we think the price won't go any further. Of course, we do.

I mean just today Craig-Hallum is coming out with a $24 target. CJS came out last month with $21. But at the same time we are there to buy more aggressively in the event of any weakness. I mean, just in general terms, we have discussed this in the past and I have discussed it with Ross and many shareholders have different opinions, but we have the view that for Trinity Biotech to maintain a reasonably strong balance sheet is probably a sensible thing for it to do, Walter.

And, furthermore, just to say that this is a matter that is discussed by the Board and determined by the Board and activated by me and the management team. So it is not entirely our decision, or indeed it is not our decision.

Well, we all agree on the call, because it is straight math, that on some $0.80 of earnings the return on buying back stock is 5%, which is the earnings return. I realize you get somewhat higher returns on cash in Ireland, and those are after-tax returns. It still is non-dilutive to buy back stock at current prices.

And I guess I will pursue this offline, but I wanted to make the case online. Thank you, Ronan.

Thanks very much. I just see Paul Nouri has been waiting for a long time to ask a question. Could we just maybe make that the last question? Because I think we are actually setting a record; we have been an hour and five minutes on the line. Maybe we close it at that point?

Paul Nouri, Noble Equity Fund.

You talked about it a little bit, the increase in goodwill. Can you nail down a little bit how much of the increase is associated with costs going into research and development related to Fiomi and what that number is going to look like next year?

Yes, I think you are talking there about the movements in our intangibles we had. Increase in goodwill and other intangibles on the date of acquisition of approximately $14 million. We had then approximately $15 million of other movements occurring during the year of which Fiomi was approximately between $6 million and $7 million.

Next year I think the number will be somewhat similar. It will vary somewhat depending to what exact stage we are at in relation to clinical trials. The biggest single element of next year will be the FDA trials, which will be upwards of $3 million, and just exactly where we are in that cycle will determine how much it will be next year. So it will be of similar order next year.

Around the $6 million, $7 million number?

Yes.

Okay, thanks.

Thank you very much. I think at this stage we are out of questions and so maybe we will close the call. We just wanted to thank everybody for your interest and your support.

We look forward to speaking to you I think in about six weeks to six-and-a-half weeks' time when we will have our quarter one conference call. So till then thank you very much and good afternoon.

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