Trinity Biotech PLC (TRIB) 2013 Q1 法說會逐字稿

Good day and welcome to the Trinity Biotech first-quarter fiscal year 2013 financial results conference call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity for you to ask questions. (Operator Instructions). Please note this conference is being recorded.

Now I would like to turn over the conference to Mr. Joe Diaz of Lytham Partners.

Thank you, Lori, and thank all of you for joining us today to review the financial results of Trinity Biotech for the first quarter of 2013 which ended on March 31, 2013.

As the conference call operator indicated, my name is Joe Diaz. I am with Lytham Partners. We are the financial relations consultant firm for Trinity Biotech.

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

Before we begin with today's 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 facts are considered to be forward-looking statements and 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 regulations by the United States Food & 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 statements which reflect management's analysis only 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 me turn the call over to Kevin Tansley, Chief Financial Officer, for a review of the results. After we hear from Kevin, Jim Walsh will update us on the development at Fiomi and finally, Ronan O'Caoimh will provide his overview of the quarter.

With that let me turn it over to Kevin. Kevin?

Thank you, Joe. Today I will take you through the results for quarter one 2013. Starting with our revenue performance, total revenues for the quarter were just over $20.3 million. This compares to $20 million in quarter one of 2012, thus representing a growth rate of 1.5%.

As Joe said there, Ronan will provide more detail later in the call as to the makeup of this growth. In a moment I will take you through the rest of the income statement but before doing so, I would like to mention one factor which is new this quarter and that is the medical device excise tax.

The tax which is approximately 2.3% is payable on the majority of our US sales. However, it is not payable on certain products that we acquire in a completed form from third parties and it also does not apply to products that require further processing in the hands of our customers such as Fitzgerald sales.

As you have seen from the press release, we recorded the new tax separately in order to assist from a comparability point of view.

Now to return to the income statement, this quarter's gross margin was 50.9% and whilst this still represents a very strong gross margin, it was lower than the 51.6% we reported in Q1 last year. This lower gross margin is attributable to lower point of care and line sales both of which are higher-margin product lines. It also reflects the higher instrument placements of our new Premier instrument which had 67 placements in the quarter was more than double the number the number of quarters in the equivalent quarter last year.

In terms of our indirect costs, our R&D expenses were very much in line with last year at $855,000 whilst our SG&A expenses actually decreased slightly from $5.2 million to $5 million. This latter decrease is mainly attributable to once off expenses associated with the acquisition of Fiomi incurred in quarter one of last year.

Our operating profit was also broadly in line with quarter one 2012 at $4.1 million and here we are seeing the impact of the lower gross margin which I mentioned earlier offsetting the impact of the revenue growth. The net result of this is that we still achieved an operating margin of 20% in the quarter.

Moving onto our net financial income, this quarter we earned $451,000 which is a decrease of just under $100,000 on the equivalent period last year. This reflects the falling interest rates available in the markets currently.

Our tax charge for the quarter was $174,000 which is an effective rate of 4% and is very attractive from our point of view. Due to the nature of our tax charge, I expect the charge to fluctuate quarter on quarter. Whilst I expect this to continue to have a low effective rate of tax, it can be expected in the future quarters it will be higher on average.

The net result of all that I've spoken of so far is that profits for the period increased by 6% from $4.1 million to $4.3 million; meanwhile EPS grew from $0.194 to $0.20 per ADR over the same period or on a diluted basis from $0.186 to $0.19. The comparisons that I have just given there are before the impact of the medical device tax and again for a comparability purposes.

Finally, earnings before interest, tax, depreciation, amortization and share option expense for the quarter amounted to $5.3 million.

Now I move on to talk about the significant balance sheet movements since the end of December 2012.

Property, plant and equipment increased by over $400,000 and this was made up of additions of $800,000 as offset by a depreciation charge of approximately $400,000. I would like to point out that the additions this quarter included capital equipment acquired from the manufacturing of our new cardiac test. This is a sign that we are beginning to move from the development phase of the projects towards commercialization.

During the same period, our intangible assets increased by $3.7 million. This is mainly due to the addition of $4.1 million and this was higher than the previous quarter due to the increased expenditure on the new cardiac test. Total intangible additions have been partly offset by an amortization charge of approximately $400,000.

Moving onto inventories, you will see this has increased by approximately $2.3 million this quarter. As I pointed out in the past, inventory will fluctuate from quarter to quarter and this quarter's increase follows a decrease in quarter four last year.

[Thoughout these] normal fluctuations, we have also increased the level of Premier inventories in conjunction with increased production levels given our expectations for 2013 and an advance of our launch in China. Similarly we have also built up some inventories in advance of the stronger line season which will occur in quarters two and three.

Meanwhile trade and other receivables have increased by $0.8 million to $15.4 million and this increase is attributable to the timing of certain payments which fall due at the start of each year. In terms of our trade receivables, these remain in very good shape at 51 days.

Finally in relation to working capital, our trade and other payables have increased by $1.1 million to just under $13 million and again this is due to timing issues.

Finally I will discuss our cash flows for the quarter. Cash from operations for the quarter was $5.2 million which is slightly higher than last year. However this was offset by working capital movements totaling $2.6 million. As I mentioned earlier, this is mainly due to the increased inventories and the timing of certain annual payments.

Capital expenditure in the quarter increased to $4.9 million versus $2.4 million in quarter one 2012 and this was due to the additional expenditure on our development activities principally the cardiac products. It should be remembered that last year's quarter one figure only included one month of expenditure for these products as we only acquired Fiomi at the end of February. Furthermore, expenditures currently running at a significantly higher level now and we have just come through the design freeze stage and are entering the clinical trials phase of the project.

I will now hand over to Jim.

Thanks, Kevin. I will take a few moments to provide a brief update on progress at Fiomi. As you are no doubt aware, the world-wide market for Point-of-Care cardiac marker testing now stands at approximately $1 billion per annum. This is growing at a rate of 14%. The market is currently served by three significant players namely Roche with the Cobas Cardiac Reader platform; Alere, with the Biosite Triage platform; and Abbott with the i-STAT platform.

Within this market, high sensitivity Troponin is the key marker for our detection of acute myocardial infarction and essential to our market acceptance of any Point-of-Care cardiac platform.

Unfortunately for our competitors the fact is that none of the three competing platforms just mentioned meet the FDA's new guidelines for Troponin testing at the point of care. These guidelines state that to be compliant, Troponin POC products must be capable of producing quantitative results at the 99th percentile of a normal healthy population. In this context the definition of quantitative is the ability to produce results with a co-efficient variation of less than 10% at the 99th percentile of the normal population.

I am delighted to report to you today that we have reached design freeze on the Trinity Biotech high sensitivity Troponin product. I am also delighted to say that in our hands our Troponin product fully meets all aspects of the new FDA guidelines.

Furthermore to our knowledge, the Fiomi high sensitivity Troponin product is the only true Point-of-Care platform to meet these new guidelines to date. This provides Trinity with a unique opportunity to take significant share of this billion-dollar market when our product is approved in Europe later this year and in the USA towards the end of 2014.

Moving onto the clinical trials and regulatory approvals necessary to market our products, let me first address the European approval.

As planned, we have now commenced the European clinical trials necessary to obtain CE Marking for Troponin. In general there are two aspects to this trial. The first phase is to determine the upper (inaudible) limit of a normal population. This trial has commenced and we are currently recruiting 500 plus gender matched normal healthy people between the ages of 25 and 65 on which Troponin levels will be measured on both the Fiomi platform and on a central lab system.

The data from this trial will essentially provide us with a definitive 99 percentile value for our product.

The second part of the European trial will be to initiate the chest pain trial itself. This trial will be run on a combination of bio banks clinically adjudicated samples and on fresh whole blood samples from suspected MI patients.

With regard to the fresh whole blood portion of this trial, Trinity is participating in what is known as the [Fast Test] Trial for the rapid rule out of myocardial infarction in the ER. This trial which has been supervised by some of Europe's key opinion leaders is being run in five sites and should yield significant patient numbers in a reasonably short period of time.

The CE trials which I say have commenced will run through Q2 and through Q3 of this year and we remain on target of a fully CE Mark product in Q4 of this year.

With regards to the US approval, unfortunately as I mentioned in our last call, European generated data may not be used to support an FDA submission. All data must be generated in the USA on a US patient population.

To help steer us through our clinical trials and to help (inaudible) our FDA application I am delighted to say that Professor Fred Apple, Director of Laboratory Medicine at Hennepin County Medical Center in Minneapolis, has agreed to take on the role of principal investigator to oversee the running of our US trials. Dr. Apple is widely acknowledged as one of the key opinion leaders on cardiac biomarkers and was instrumental in shaping the new guidelines for Troponin testing and measurement for the diagnosis of IM.

We believe that Professor Apple's assistance will be invaluable in steering the Company successfully through the FDA process.

Currently five US trial sites are being recruited. The trials again will consist of a determination of an upper reference level of Troponin in a normal population and of course, a formal adjudicated chest pain study across five geographical locations in the United States.

By the way, we expect this trial to cost somewhere in the region of approximately $4 million. These trials remain on target to commence in Q3 2013 with our FDA submission planned for Q1 2014.

Finally, though we don't seem to talk about it too much on our calls, our BNP product development program is progressing very well. Our product is now demonstrating market-leading performance characteristics. This product shadows Troponin approximately one quarter later.

In summary therefore, we are very pleased with our acquisition of Fiomi. The Fiomi team are working very hard and are dedicated to producing the world's first true Point-of-Care cardiac platform capable of meeting the new FDA guidelines for Troponin.

Our development programs are progressing well and according to plan. Clinical trials are under way and more importantly we have assembled the right team of people to make sure that our trials are carried out in an efficient, cost effective and successful manner. We are on track to have our Troponin product approved for sale in Europe in Q4 of this year and in the USA in Q4 of 2014 thus leaving Trinity poised to take a significant share of this $1 billion market.

And I would be very happy to take questions in the question-and-answer session that comes up later. Thank you.

Thanks, Jim. This is Ronan now and I'm going to just bring you quickly through revenues for the quarter and business developments and after I will open for question-and-answer session.

Our revenue for the quarter were $20.3 million, up from $20 million which is an increase of 1.5%. The principal factors influencing this were 13% lower HIV sales in Africa this quarter, low Lyme sales due to severe winter, and adverse currency impact due to the weak euro.

In Africa, our HIV revenues declined 13% by comparison with quarter one of last year. However, this decrease reflects the fact that sales in quarter one in 2012 were unusually high rather than in fact they poor this quarter. In fact, our African HIV sales this quarter are significantly higher than in order two, quarter three and quarter four and last year.

Given that African HIV sales are funded by NGOs and Western governments, we can see major fluctuations that don't always suit a 13-week reporting cycle. In any event, African revenues continued to perform strongly and we should remember that African revenues increased 34% last year.

Our US sales of HIV have been under pressure during the past year as a result of cutbacks in the public health spend by many states within the United States. However, our US HIV sales have performed well this quarter with an increase of 5%.

Clinical laboratory revenues for the quarter increased from $14.9 million to $15.6 million which represents an increase of 4.4%. However, as I have already outlined, if the impact of very low Lyme confirmatory sales because of the very cold winter are taken into account, then the growth would have been 8%. If adverse currency movements and flat sales at Fitzgerald are taken into account, then the core clinical laboratory business shows 10% growth made up of 13% growth in diabetes and 8% in infectious disease excluding obviously excluding Lyme (inaudible) Lyme confirmatory.

It should be remembered that weak Lyme confirmatory sales in no way reflects a loss of market share as Trinity Biotech holds 97% of the Lyme confirmatory market.

I indicated that our core infectious disease business grew 8% excluding Lyme and this reflects a strong performance in the United States where the addition of new esoteric tests is helping us place more new instruments.

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 to the US following -- excuse me -- I have a bad cold -- following FDA approval and in the case of syphilis and herpes following the receipt of a clear waiver.

By the end of this quarter, we will have received a CE Mark and be selling the following products in Europe and in the UK through our salesforce and throughout the rest of Europe through our distributors. The following products are in enterics, the C. difficile A and B GDH Cryptosporidium Giardia; in sexually transmitted diseases, syphilis and herpes; in respiratory, Legionella Urinary Antigen and strep pneumonia; and our H Pylori Antigen test will be on sale in Europe by year end and on sale in the US by July 2014.

Moving on to diabetes, I mentioned that growth in the quarter was 13% and the launch of our new Premier instruments continues to gather momentum. The big news that we announced today is that we have received Chinese approval. We are really pleased to have achieved this after 2.5 years of hard work.

The Chinese have a huge diabetes problem and their government is determined to tackle this problem and our instrument apart from being the best in class is also uniquely suited to the Chinese market because our test unlike our competitors, avoid interference from abnormal hemoglobins which are present in a big percentage of the Chinese population.

I was present at the formal launch of the product in China last week and we have received orders for the first 20 instruments which will be shipped during this current quarter. We are confident of immediately achieving a placement rate of 100 instruments per year in China.

Menarini continues to perform well in Europe and as I explained on our last conference call, the level of business with Menarini will grow very significantly as soon as our ion exchange version of the Premier comes out of research and development and we are confident of achieving this by July of this year.

We performed well in the United States during the quarter where opinion leaders are progressively endorsing and supporting our instrument. We are continuing to launch the instrument around the world and this quarter we will launch in Eastern Europe, in Scandinavia, in the Philippines and in Malaysia.

In summary, we placed 67 instruments during quarter one and are confident of exceeding the 320 placements during the year that we have outlined.

So thank you very much and at this point in time if I could hand back for a question-and-answer session.

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

Good morning. First, just wanted to touch on the core business. Where are you as it relates to the guidance that you laid out on the last call which was calling for double-digit top and bottom line growth I think exclusive of the device taxes? Is that still your expectation and if so, obviously it assumes a ratcheting up of revenue. So maybe walk us through how that progresses this year?

It is Ronan here. Yes, we are still confident of achieving double-digit revenue, a double-digit EPS growth excluding the [LCD].

And in terms of how it will grow, I don't propose necessary to give you quarter-by- quarter revenues. Is that what you are asking me?

Yes, I mean the run rate obviously needs to tick up and we are just trying to understand if that happens in Q2 gradually or if it is more of a second half of the year phenomenon?

Well, what I would say to you just in general terms without going through all of the numbers which I don't actually have in front of me in any event. But quarter one is traditionally typically our weakest quarter because we don't sell almost any Lyme in the quarter one. And if you think we do $9 million a year of Lyme confirmatory testing, so that means that seasonally this is always traditionally our weakest quarter. So we would expect it to be the lowest quarter.

In addition to that, this has been a particularly weak winter in terms of Lyme. The indications are now that April orders have picked up and I think we have 97% of the market and I think we probably will have a reasonably okay year.

I think another thing that has happened of course is that we just got approved in China and so you are going to see there will 70 instruments going to China this year, you can't work out with that, it is a couple million dollars. You are going to see the launch of our Rapid products in Europe. You are going to see an increase of level of activity by Menarini in quarters three and four as they take the ion exchange instrument, probably more quarter four.

And in addition to that you are going to see a commencement of activity in Brazil in quarter four. So if you take that and you take in combination with that the fact that we had a bit of a timing -- (inaudible) predictability about our African sales and in overall trends are very strong but this quarter they just weren't excellent so you should see that on the back. So in overall terms, I think we are confident of achieving what we did.

I think the important thing to remember is that quarter one is always the slowest quarter saleswise intrisic, because it has virtually no Lyme sales and we do $9 million a year of Lyme confirmatory.

Okay. And then on Premier --

In summary, we are confident of the 10% -- of double-digit in both revenue and earnings.

Okay. And then Premier in China -- congratulations on the approval there. Can you remind us, it sounds like that was already baked into your Premier guidance. Just walk us through the pricing and reagent expectations, the economics in that country as you have given in other geographies?

The pricing would be just under $20,000 per (inaudible). The reagent project would be similar to what we are doing in Europe. It will giving a gross margin of probably 85%. And in terms of volumes, I think initially the volumes would be more like the rest of the world but we do believe that in the medium to longer term the volumes would be probably bigger in China per instrument than anywhere else because of the indications of the big commitment on the part of government to tackling their diabetes problem.

Their genuine commitment is very obvious to us and I think there is a virtual lab grab going on now between the various (inaudible) operators -- the four of us and the confident expectation that the volumes would be very substantial. Does that --?

On Fiomi, can you tell us how you will disclose the results of the European study so we can get a feel for the performance of the system in the field as it relates to the 99 percentile guidelines? And then any distribution plans or how you plan on attacking the market once approved would be appreciated.

In terms of the clinical trials, as I say, they actually commenced just this week. The first portion of that trial will be to determine that 99th percentile number. We already have a pretty good indication of what our 99th percentile is because we have done sort of a dry run if you like on bank samples, Swedish bank samples. So we know give or take plus or minus a few percent what that number is going to be.

It will depend then how quickly the actual chest pain patients how quickly we enroll the chest pain patients into those five sites but I would suggest that we will have a good indication maybe of -- we certainly have a good indication of our 99 percentile in three months time and certainly in four or five month's time, we will have enough data from the chest pain study to see how we shape up against that so it is that sort of timeframe.

Okay.

But obviously bear in mind we are talking about having a CE Marked product available for sale in Europe before year end and obviously the performance characteristics of the product will be published and all of that so it will be freely available.

So yes, it all depends on how quickly patients come into the ER, not how quickly we can enroll them -- how quickly they come in and how many of those patients and the folks that are actually having real MIs.

We have actually put six months into our time plan. I am pretty confident we have overestimated that. That it should come before that. We are looking at driving internally for a CE Mark products at the early part of the fourth quarter rather than the end part of the fourth quarter, put it that way.

Okay. I will get back in queue. Thanks.

Larry Solow, CJS Securities.

Good afternoon, guys. Just a few quickies. You mentioned Point-of-Care. Was that -- you said that did $6.1 million sales by product line, the segment -- was that $6 million, $6.1 million?

No, $4.76 million for Point-of-Care in the (multiple speakers).

Got you. Okay, I got a wrong number there. Okay, good. In terms of gross margin, I figured we would have a little sequential pressure from -- as you place more of these Premier placements. Actually looks like it went up a little bit. Would you expect it to the start to slip down maybe in the first couple of quarters as you place China for instance and a lot of bigger one-time placements?

You are right, Larry. That is the impact of placing significant amounts of instruments which is obviously a good news story. It does apply pressure on the gross margin itself. There has been an impact this quarter to an extent on sales mix intervenes this quarter a little bit as well because of it is a slightly different quarter over quarter and you can expect from quarter to quarter that things will move around a little bit certain one-off events coming along.

But in essence, it was a normal enough quarter, down on the previous quarter by virtue of increased placements and lower Point-of-Care and Lyme sales. Expect maybe a little lower maybe throughout the year as we gain momentum on the Premier.

Okay. In terms to be tax -- breaking down the taxes, how are you going to do it going forward? I thought it was going to be in cost of goods. I guess you'll break this line item out?

No, I think just from a transparency point of view, it makes it much easier to just place it where we have at the moment from a statutory point of view. We might do it somewhat differently our filings with the SEC etc. but just in terms of comparability, it was much easier there otherwise you would be spending the whole afternoon reading about a press release saying the before medical device tax and after medical device tax. So I think it is a much easier comparison the way it is laid out at the moment. And obviously it doesn't change the results in any way.

Just a couple of just miscellaneous. The tax rate obviously a little lower. You had guided to around a 10% rate for this year. Is that still a ballpark number to use?

Yes, I mean obviously we have had a very good quarter this quarter. I think 10% is a more appropriate sort of long-term number and even medium-term number. But the rest of the year I do think it will be that. As I mentioned in my remarks, I think it will fluctuate from quarter to quarter just the way our tax charge is calculated which depends on where sort of profits rise which jurisdiction, the timing, credits we can take, etc. can affect what it is in an individual quarter. 31 weeks for sales is a very short time so it is the same for financial [forecasts] as well so I expect to be more toward the 10% range.

Okay. You mentioned CapEx was $5.1 million. I assume the majority of that was capitalized R&D. Is that number sort of a good run rate to use for this year and then maybe start to come down as we look out into 2014 and beyond?

You are correct first of all, it is mainly the capitalized R&D that is correct although we are seeing some now sort of ramp up in equipment as we gear up for a (inaudible) only production.

In terms of the capitalized R&D, it will remain high this year. There will be a certain amount of variability depending on the timing of the trials and Jim there obviously indicated earlier on that the US trials will cost a significant around $4 million and depending on the timing of that which will go into sort of maybe earlier next year, that will cause some variability on that.

Okay. And then just lastly, and I know you guys have gotten some calls for share buybacks. Any thoughts on that? The stock has been under some recent pressure certainly relative to the market which is actually continuing to go up.

Thoughts about getting the market on a more urgent type pace, are there any limitations and when you can get in?

This is Ronan here. The last time we bought back was in quarter four at an average price of $12.47 and of course since then, the price moved forward and we withdrew from the market. Obviously the price has come back somewhat over the last couple of weeks but obviously during those last number of weeks we have been in a closed period. We would not have been in a position to buy back.

I think now that we have just emerged from the closed period, we monitored the share price very, very closely and will react swiftly to any price weakness.

Okay, great. Thanks so much.

Bill Bonello, Craig-Hallum.

Just a few questions. Can you maybe just elaborate a bit more on the competitive layout in China, what is being done today for A1C testing and who is approved and that sort of thing?

There are really four operators here. There is Bio-Rad; there is Arkray from Japan; there's Tosho; and there's Trinity Biotech. We already have an existing installed base of 114 instruments of which probably 120 are operating. That is our old PDQ instrument.

I would estimate that Bio-Rad is the probably the biggest operator there and I am guessing maybe about 400 instruments at Arkray and so maybe 200 each. So that is the landscape and there is a land grab going on at the moment in the sense that all four are working very hard to get instruments placed. I don't think any would be making an awful lot of money out of the actual instrument placements if you know what I mean.

Arkray recently made a donation of $1 million to the Chinese Diabetes Association. Having said that, the Chairman of it still sat for two dinners with me last week and attended dinners with me so I think they are fairly impartial.

But fundamentally the Chinese government have indicated that they are taking their diabetes situation very seriously. They see A1C testing as a way of both -- really as a means of screening and diagnosing and monitoring and they are big supporters of it.

There is a certain amount of immunoassay within the market. I'm talking about the big instruments, the (inaudible), the architects and the like because the CVs are so wide, they are really not favored by the -- they are not -- they don't formally refuse to allow it but they are basically not favored by the Chinese authorities. So immunoassays less of a threat within the market.

It is really -- it is HPLC market with the ion-exchange operators being Bio-Rad, Tosoh, and Arkray and then Trinity Biotech with boronate affinity. But all of those three competitors have their products approved but they would be previous generation products. We would be the most modern product now approved within the market.

So if I think about the opportunity, it is basically similar to everywhere else in that you now have your boronate affinity product approved, you can take share because of the competitive advantages of that and then maybe layer on top of that the emphasis that the government is putting on testing and diabetes. Is that kind of the way of thinking about why the (multiple speakers)?

What you need to understand though is that there is virtually universal healthcare there and there is reimbursement for A1C testing. So basically I think that is a key piece that reimbursement works very likely in the United States but it is the government who is doing the reimbursing and so that is the key factor.

That is helpful. Will you just clarify the comments you made on the African HIV sales, not on -- I understand last quarter being strong and the lumpiness but you made some comments about sort of the pace being higher than -- I think you said than Q2, Q3, and Q4 of last year and I wasn't sure if you were talking about that pace being the quarter that we are in now or that these sales in Q1 were higher than those quarters just --?

Just to clarify what I'm saying is that quarter one 2012 was a particularly big quarter. It just was very, very strong. Quarter two -- but what I'm saying is that quarter two of 2012, quarter three of 2012 and quarter four of 2012, the actual sales into Africa were lower than quarter one of 2013.

What I am really trying to say is that quarter one of 2013 was actually quite a good quarter in Africa that the overall increase in business I think was a 34% --was it 34% last year so I am saying Africa is doing very well. And just because we are down 13% on the comp of the quarter last year doesn't mean we had a bad quarter. It just means we actually had a very, very good quarter. It was just the other quarter was out in left field.

Got it. I just wanted to clarify what (multiple speakers)

I am just looking at the numbers here. The bottom line is that my sales in quarter one of 2013 in Africa were $100,000 more than quarter four, $200,000 more than quarter three, $600,000 more than quarter two. $500,000 less than quarter one just because we had a wild quarter last year in quarter one.

Got it. Then just on the Troponin side, a question for Jim. Is there anything -- you had fairly positive comments to make about Troponin when you reported the fourth quarter and I think at that time you were suggesting that you were getting good results off the bench. I guess I'm trying to understand if there's any sort of data or information since that point of time that's sort of incremental to what you were seeing when you talked to us back at that time?

Sure, Bill, what I would say in Q4 when I spoke to you, we had data indicating that the platform did seem to possess the ability to produce high sensitivity and very tight reproducibility. As well as what has happened since is we actually have taken the product to completion. We had a platform that was in I suppose moving through the trued-up process of product development. There were many sort of like tweaks that had to be made to it and many sort of -- but in terms of the instrument and in terms of the disposable to get it to what we would call design freeze.

Like it is all very fine to maybe once or twice in a lab get some good results but it is a hell of a lot different to be able to do that every day day in, day out independent of what operator is actually running the test. And what we had built into the technology we were showing good results last December and we are still showing probably quite substantially better results now.

But what we have done in the meantime is made the product robust. It is reproducible, it can be run time and time again by multiple different operators skilled or unskilled and you can still get the same high quality results. That has been the type of work that has taken place over the last sort of four to five months from the time that we had it working very well to now having it working very well every time we run it and that is the only difference.

Okay, that makes sense. Just when I think about that, I mean obviously there is still a big leap in going from the bench to what may or may not work in clinical trials. But I assume that relative to where you were when you talked to us last this gives you increased confidence that you have a product that is going to hold up well in the clinical trial front?

Totally, totally, Bill. We have run many hundreds of samples internally at this stage. Some banks, some fresh. We prepare ourselves most of the time to sort to (inaudible) stratus instrument which is the actual instrument that runs in the hospital right beside our facility in Uppsala.

So you can never tell what is going to happen in a clinical trial. But all indications would be that we (inaudible). It will be out of left field if we encounter something that sort of tracks the performance of the product when they put out in the market. But you never know until you put it out and it runs several thousand fresh samples and see what happens but all indications are if I was a betting man I would say we are there.

Sure. Okay, great. Thank you very much.

Jeffrey Warshauer, Sidoti & Co.

Can you provide the geographic breakdown of the 67 placements of Premier in the quarter?

More or less without having them in front of me just from memory you would have let me see -- in Europe, you would have probably about 30%, 35% maybe. In the United States, you would have 25% and then the rest would be around the rest of the world. I know that is not wonderfully accurate information but broadly speaking that would be it.

And then in the US the breakout between direct and through your distributor and have you made any headway there?

That would be like maybe 100% through our direct.

And what can you do to help spur growth through distribution or --?

Jeffrey, we are working on that but we are not happy with it but basically a couple of our instruments so far have been through our own efforts. Having said that, the availability of lists and that have been useful but we are not really getting the engagement from a partner that we would like and we are working on it. They are just a bit more passive than we wish.

Understood, thank you.

Declan Morrissey, Davy Research.

Just a quick question on a capital allocation. I know you discussed your buyback policy earlier. Just your potential M&A pipeline, any particular technology you think would complement your existing portfolio or any products that would complement your portfolio in diagnostics? Just give us some color around that?

At this time, we are not really looking for acquisitions, we have plenty happening and we have plenty of organic growth. We are developing a whole range of Rapid Point-of-Care tests. Jim has talked about what we are doing in cardiac and we have a new platform then in Fiomi that can be utilized for many disease conditions.

So we continue to develop esoteric products for our infectious disease area and of course, we are developing the new iteration of the ion exchange Premier instrument in diabetes. So I think we have plenty to be doing and we are very confident of building a very impressive organic growth momentum.

And so really we are not looking for anything at this time. I don't believe there is any obviously gap technologically in terms of something that we really badly need. We had looked at going down the Point-of-Care molecular route and we still have kind of an interest in that area. We watch it but I think what we are doing in cardiac is so much more exciting that we have been happy enough to just put that to one side and maybe possibly even leave it to one side.

So Declan, the answer to your question is we are not looking for acquisitions and that we feel that we are busy enough as it is. We really don't want to kind of disperse our efforts and dilute them.

Thank you, Ronan.

Could I suggest to the operator maybe that we would just have one last caller, one last question. It is nearly five o'clock.

Larry Solow, CJS Securities.

Two quickies. I well combine them in one. Just on the Premier. First of all, on China I think you had guided toward 50 placements this year. But it looks like you said 70. I know 20 are up front but is there any difference between the 50 and the 70 that is in your presentation?

I think what is happening is that we launched the product last week in China and we basically came home with an order for 20 instruments that have to be delivered as soon as possible, literally within the next week -- by the end of this quarter.

And then being consistent with what I said that I thought we could have a run rate of 100 a year. I think then we would have hoped to do 25 in quarter three and 25 in quarter four which all adds up to 70 this year which is higher than we had originally expected. That is where it comes from as well I didn't quite expect to have firm orders so quickly.

Okay, so that is certainly a positive. Just on Thermo Fisher, does your guidance -- your targets or whatever -- are you assuming that these guys don't really help too much at least in the near-term in placements in the US? Obviously they are helping a little bit but at the end of the day who places it -- it has been all you. Is that what you are assuming at least in the near term?

And is there any way you can tighten the grips on them or is there a reason why they might not be as focused on it and -- on the options or call you can add would be great. Thanks.

Look we have a relationship with Thermo Fisher on various products. I don't want to come on the phone and beat them up.

Absolutely.

You understand. In terms of where we are I think that we will meet our targets for 2013 for the United States because as well as we would have taken a cautious approach given that they haven't placed a lot of instruments for us last quarter. And so in terms of how we are going to handle this, we are continually talking to them -- the old adage you can bring a horse to the water but it is hard to make him drink.

Thermo Fisher basically are to some extent are a little bit like Sigma, like they are kind of a (inaudible) company. They operate on smaller margins and they are not a full-service distributor who takes 45% and who sweat us if you know what I mean. They take a smaller margin like in the high teens and so you don't get as much engagement.

Their reps have many, many products to sell. So it is not always -- what tends to happen is you might get very effective engagement by certain reps in certain parts of the country and then almost none in other parts.

And then Central Management can be very committed but it doesn't always go all the way down the line. So we have to deal with those issues but in any event, I think going forward the chances are that most of the headway we make in the United States will be through our own sales reps.

Great, okay. Thanks so much.

That concludes the Q&A session today. I will now turn the call back over to Ronan O'Caoimh for closing comments.

Thank you so much and thank you to everybody for your interest and your attention and look forward to talking to you in three months time for quarter two. Goodbye, good afternoon.

Ladies and gentlemen, the conference has now concluded and you may disconnect your lines. Thank you for participating and have a pleasant day.