Trinity Biotech PLC (TRIB) 2013 Q4 法說會逐字稿

Good day, and welcome for the Trinity Biotech fourth-quarter and FY13 financial results conference call.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.

Thank you, Denise, and thanks all of you for joining us today to review the financial results of Trinity Biotech for the fourth quarter and the full year 2013, which ended December 31, 2013.

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 Dr. Jim Walsh, Chief Scientific Director, Business Development Director. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session.

Before we begin 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, 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. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, but not limited to, the results of research and development efforts; the effect of regulation by the United States Food and Drug Administration and other agencies; the impact of competitive products, product development, commercialization, and technological difficulties; and other risks detailed in the Company's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements reflect Management's analysis only as of today. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements.

With that said, let me turn the call over to Kevin Tansley, Chief Financial Officer, for a review of the results. At the conclusion of Kevin's remarks, we'll hear from Dr. Jim Walsh, followed up by Ronan O'Caoimh, on an overall overview for the year. Kevin?

Thanks, Joe.

Today I'll take you through the results for Quarter Four and for the full year of 2013, beginning with our revenues. Total revenues for the quarter were $25.5 million and this compares to $20.8 million in quarter four of 2012 and thus represents an increase of 22.2%. Later in the call, Ronan will provide you with more details as to the make-up of this growth.

Moving on to gross margin, as you will see from our press release, this quarter's gross margin was 50.4%, which was a little lower than 50.6% we reported in quarter four of last year. However, I will say that is very much within the normal fluctuation level for gross margin from quarter to quarter.

Moving on to indirect cost, our R&D expenses increased from $765,000 in quarter four 2012 to $1.035 million for quarter four 2013. Meanwhile, our SG&A expenses have increased in the same period from $5.2 million to $6.5 million.

Both these increases were mainly due to the impact of the Immco acquisition. Just to remind you that this acquisition was made in the middle of 2013, so there was no comparative costs last year. We've also seen some of the impact of cardiac-related sales and marketing costs being incurred in advance of the product launches, which we will have in 2014.

Operating profit for the quarter was $5 million, up almost $700,000 compared to the same quarter last year, representing an increase of 15%. Operating margin this quarter was 19.8%, which is very close to our target operating margin of 20%.

In terms of financial income, this quarter we earned $132,000, which is a decrease of nearly $400,000 in the equivalent period last year. This reflects the fallen interest rates, which are now available in the market, as well as a decrease in the level of funds on deposit. But I also would like to point out that this reduction in interest income represents approximately $0.02 in earnings for the quarter and this is relevant when considering the profit for the quarter. Meanwhile, our tax charge for the quarter was $328,000; this represents an effective rate of 6.4% to slightly slower than the same period last year.

The net result of all that I have spoken of so far is that profits for the period increased from $4.5 million to $4.8 million before the medical device tax. Our EPS for the quarter was $0.217, which represents an increase of -- over the $0.208 achieved in quarter four 2012. However, as I mentioned earlier, this increase in earnings was achieved notwithstanding a decline in interest income equivalent to $0.02, so on a like-for-like basis earnings have increased by over $0.02 this quarter, by $0.13. Meanwhile, earnings before interest, tax, depreciation, amoritization, and share option expense in the quarter amounted to $6.7 million.

Before I move on to the balance sheet, I will make some comments on the full-year results. Annual revenues increased $82.5 million to $91.2 million, which is an increase of 10.6%, and again, Ronan will address this growth later on. Gross margin reduced from 51.2% in 2012 to 50.3% in 2013; this reflects the higher level of instruments shipped during the year and the impact of lower Lyme sales, which have higher margin on average than other products.

Operating profits increased by over $700,000 to $17.9 million, an increase of over 4% for the year, whilst profit before MDET, or the medical device tax, increased by 3% from $17.3 million to $17.8 million. Over the period, EBITDA increased from $21.7 million to $23.5 million, which is an increase of over 8%.

These profit growth rates are lower than we have achieved in the past number of years; however, there are specific reasons as to why this is the case. Firstly, we are now seeing the impact of cardiac pre-launch costs and, obviously, given the products will not start to be launched until 2014, there were no revenues against which to offset such costs in 2013.

Secondly, we are now operating two additional facilities in the UK, which are associated with the blood bank screening acquisition. These facilities are scheduled to close in mid-2014, after which this business line will become significantly more profitable as the manufacturing will be transferred to two other of the Group's facilities of minimal incremental cost.

With regards to the Immco acquisition, the initial integration costs offset much of the probability in the first few months of our ownership; in the months ahead, these costs will disappear and the profits of Immco will increase as the business grows. Finally, we also had the impact of transaction costs for both of these acquisitions, which we mentioned, and these are of the order of $400,000 in the year, which itself is an impact of approximately $0.02 on EPS.

Before moving away from the P&L, I would like to comment on the effective tax rate for the year: 6.8%, this compares favorably to the 10.4% reported in 2012. As I had pointed out before, what you're seeing there is the benefit of having the Company headquartered in Ireland, where the corporate tax rates are considerably lower than in the US.

I'll now move on and talk about the significant balance sheet movements since the end of September. Property, plant, and equipment increased by $0.9 million; this increase was made up of additions of $1.4 million in the quarter, as offset by a depreciation charge of approximately $0.5 million. During the same period, our intangible assets increased by $2.2 million. Additions were approximately $5.9 million, as offset by amoritization of $0.7 million, and the remaining movement was related to the finalization of the acquisition accounting for the recent Immco and blood bank screening acquisitions.

Moving on to inventories, you will see that at $29.7 million, these have increased from $27.4 million in Quarter Three. This increase was mainly due to our new blood bank screening business, where we have built up inventory from a very low base since the acquisition date. This was [nat] steel back orders and to prepare for increased production levels in the months ahead.

Trade and other receivables have increased by $1.1 million to $24.3 million, and this reflects the increase in revenues from quarter three 2013. Trade receivables, which stood at 66 days at the end of quarter three, are broadly in line with that now, standing at 67 days at year-end.

Meanwhile, our trade and other payables, which includes both current and non-current have decreased from $27.6 million to $24.7 million. The reduction this quarter was mainly due to scheduled license fees, including the first tranche of the HIV-2 license fee that we announced last quarter.

Before leaving the balance sheet, I'll focus on some of the main movements year-on-year. Firstly, intangible assets have increased from $73 million to $128.5 million. This, again, is due to the two acquisitions, namely Immco Diagnostics and the blood bank screening business that we purchased during the year. Together, these results had an increase of $38.4 million and the remainder of the increase is made up of normal additions incurred during the year of $19 million, as offset by amoritization of $1.9 million.

Secondly, you will notice that trade and other receivables increased from $14.5 million to $24 million. This is due to the combination of the impact of acquisitions, higher revenues, and slightly slower collections. Meanwhile, inventories increased from $20.7 million to $29.7 million, for the same period; in both cases, the main driver -- again, the main driver has been the inventory acquired on acquisition. I will reiterate that the blood bank screening inventories that we've built up during the last quarter are also a factor here.

Finally, I will discuss our cash flows for the quarter. Cash from operations for the quarter were $3 million. Capital expenditure in the quarter increased to $5 million versus $4.2 million in quarter four 2012. This was due to additional expenditure on the development of our new cardiac products, where expenditure is currently running at a significantly higher level on this project now that we are in the clinical trials phase and are making preparations for full scale production.

The net result is that we have a cash outflow of $2.1 million in the quarter. The other main outflows in the quarter were the payment of license fees totalling $2.4 million. The net result is that, at the end of the year, the Company had cash balances of over $22 million.

I will then hand over to Jim, who will take you through the latest developments with regard to cardiac.

Thank you, Kevin.

As a lot has happened since we spoke in October last, I would like now to take a few moments to update you on the progress on our cardiac market development programs in Sweden. Just to remind you, almost exactly two years ago, Trinity acquired a Swedish company, Fiomi Diagnostics. Fiomi had developed a high-sensitivity, precise, quantitative point-of-care amino acid platform, on which Trinity is now developing a range of high-sensitivity cardiac products, namely high-sensitivity Troponin for the detection of acute MI, BNP for the detection of heart failure, and D-dimer for the detection of pulmonary embolism and deep vein thrombosis, otherwise known as PE and DVT.

Currently, there are only three dominant players in the POC cardiac market, namely, Alere, Roche, and Abbott, none of whose Troponin product meet the new guidelines for MI, which has now been adopted by the FDA. In general, I'm delighted to report that progress on all fronts of our cardiac product development program are progressing well. I will take time now to update you on our recently announced CE mark for the high-sensitivity Troponin products and I will follow up with a fairly detailed description of our plans as they relate to the US FDA approval and the scope and timing of the clinical trials involved.

As you are probably aware, on January 29 last, we announced CE marking of our guideline-compliance point-of-care Troponin product. CE is the regular standard necessary to market a product in Europe. At this stage, it is probably worth taking a few moments to disclose with you what is meant by the term guideline-compliant, as it is our achievement of the guideline-compliance for the Troponin product that fundamentally distinguishes Trinity's product from all of the other POC Troponin products, and which now presents Trinity with enormous commercial opportunity.

In 2007, a task force consisting of the European Society of Cardiology, the American College of Cardiology Foundation, the American Heart Association, and the World Heart Foundation, was convened to define MI and to standardize its diagnosis. Based on the recommendations of this task force, Troponin was identified as the preferred biomarker to identify suspected heart attacks. Furthermore, according to the task force, a heart attack is diagnosed only when Troponin levels in the blood exceed the 99th percentile reference limit of a normal healthy population when accompanied by one other clinical symptom.

Moreover, in order to improve the quality of diagnosis, the task force further stipulated that Troponin products should also demonstrate excellent precision at very low concentrations of Troponin, namely 10% or less variation at the 99th percentile of a normal population. As I've already mentioned, none of the POC diagnostic products currently on the market come close to meeting this guideline. The Trinity Biotech high-sensitivity Troponin product is now the only true point-of-care product on the market meeting those stringent guidelines.

In our CE trial, which was carried out under the supervision of Professor Bertil Lindal, as part of the Swedish fast test trial, our product produced very strong clinical performance data, with a limited detection of 19 picograms Troponin per mil of whole blood and a variation of 10%, at 36 picograms, which corresponds with the 99th percentile of the reference population. In terms of precision, when tested on 80 replicates over 20 days, the product exhibited CVs of 6.8% at 46 picograms and a CV of just 8.2% at 25 picograms, which is, in fact, less than the 99th percentile of the normal population.

Moreover, our product demonstrated a specificity of 98% at time zero, thus making it an exceptional good rule-out test, ensuring that any patient coming up positive on the Trinity test on presentation in the ER can be rapidly moved to the cath lab for the necessary treatment, with an exceptionally lower likelihood of our test producing false positive result. The above results represent excellent performance and fully meet all aspects of the task force guidelines, thus making Trinity's Troponin product the only POC product on the market today, meeting the guidelines.

As quoted by Dr. Frank Peacock, Professor of Emergency Medicine at Baylor, on announcement of our CE mark, he said, the Meritas Troponin product outperforms most historical central lab systems, is on par with some of the highest sensitivity laboratory assets only available in Europe, and does it all at the point-of-care in only 15 minutes. Its availability resolves a long-standing critical need and serves as an inflection point in improving patient care. I believe that Dr. Peacock's statement describes the benefits of our Troponin very well and gives a strong indication as to the clinical benefits of such a product now being available in the ER for the first time.

Moving on to our plans for FDA approval of our Troponin product, following a series of three pre-IDE meetings with the FDA and obtaining the necessary ethics committee approvals, US trials are finally ready to kick off and we will start enrolling patients within the next two weeks. Furthermore, although we are not allowed to use the data, the clinical studies which supported our CE approvals almost exactly mirror the clinical studies necessary for FDA approval. As such, based on results obtained, provide us with great confidence of a successful outcome as we embark upon the more expensive FDA study program.

In general, there are three aspects to the US clinical trials. Namely, a normal population study to determine the upper reference level, or 99th percentile, of a normal population; a chest pain study in the intended use population; and an analytical performance study, which determines such facts as limit of detection, precision, cross-reactivity, interfering substances, stability, et cetera.

Currently, there are five US clinical trial sites, which have agreed to participate in our FDA studies. These are Dr. Apple at the Hennepin County Medical Center in Minneapolis, and Dr. Apple is also our overall trial coordinator; Dr Rao at San Francisco General Hospital; Dr. Shapshak at Medical University South Carolina; Dr. Peacock at Baylor College of Medicine; and Dr. Hollander at University Hospital of Pennsylvania.

As previously mentioned, the US trials are structured almost identically to the European trials, albeit the number of sampling times and patient numbers are significantly increased. Therefore, starting with the easiest component of the US trials and moving on from there, the first part of the trial will consist of an analytical and precision study. This study is very well-defined and once started can be completed within 6 to 8 weeks.

Secondly, there is a normal population trial, which will be carried out at three sites. For this, we intend to recruit a minimum of 700 healthy donors, aged between 27 and 75 years. The group should be ethnically diverse and gender matched. The Troponin levels of this group have been measured in both fresh whole blood and plasma, and the 99th percentile, thus determined, will be used as the cut-off in our acute coronary syndrome trial. This second part of the study, while logistically more difficult, can be run and completed within a two-month time frame.

Finally, the third and by far the most complex component of our FDA study, is the acute coronary syndrome trial. This study, which will be run at five trial sites, will be carried out on a minimum of 1,500 patients presenting in the ER, with symptoms suggestive of ACS. Patients must be older than 21 years of age and must sign a consent form.

From each patient, whole blood and plasma samples will be drawn at the time of presentation, then at 2 to 4 hours, followed by 6 to 9 hours, and finally at 12 to 24 hours. Furthermore, these patients will be followed up at day 30, day 90, and one year post-admission in order to generate a prognostic claim.

It is difficult at this time to determine exactly how long it will take to collect all the ACS data and it's heavily dependent on enrollment rates and also on prevalence, i.e., the proportion of people presenting with chest pain that are actually having a cardiac event. 13% seems to be the universally accepted prevalence number; however, we have seen significant variation in that number.

To be statistically significant, we hope to recruit approximately 200 actual MIs as part of the 1,500 patient cohort. In consultation with the trial sites, we are currently projecting five months to collect this data. As I mentioned before, however, from the data generated during the CE trial, and from data more recently generated on a study on 293 suspected MI patients at Dr. Apple's lab in Minneapolis, we are extremely confident that this product has the necessary clinical performance to gain FDA approval, as it has demonstrated performance -- as the performance characteristic currently meets, and in fact they exceed the FDA's current performance guidelines.

Finally, as mentioned on our last call, product development on our BNP product is progressing well. We have reached design freeze and are currently transferring the product to manufacturing where batches for clinical trial will be manufactured. We expect to commence CE marking trials, both in Europe and USA in mid-April, with a view to having our product CE-marked in the June time frame.

A Pre-IDE meeting has been set up with the FDA -- sorry, will be set up with the FDA as soon as possible to discuss the scope of the US trials. Assuming there are no surprises coming out of that discussion, US trials should get underway in June of this year, with FDA submission expected in September.

Finally, we have recently commenced the development of the third product in our cardiac market panel, namely D-dimer. D-dimer is a marker for the diagnosis of DVT and PE. We are at a very early stage of development of this product and it's difficult at this stage to be able to provide an exact timeline to market. However, I expect we will be in a position to provide a detailed D-dimer timeline on our next conference call.

In summary, therefore, we are very pleased with the progress made to date on the development of our high-sensitivity Troponin and BNP products at Fiomi. A significant milestone has been reached through the CE approval of our guideline-compliant Troponin product, and based on the clinical data obtained in both Europe and the USA, we move forward into US trials with a justified optimism of FDA approval in early 2015.

I conclude now, but will be happy to answer questions later and I would hand it over to Ronan.

Thank you, Jim.

I will review revenues for the quarter and the year and discuss business developments before opening the call to a question-and-answer session.

Our revenues for the quarter were $22.5 million, up from $20.8 million, which is an increase of 22.2%. But when the impact of the Immco and the syphilis blood bank acquisition are eliminated, the actual organic growth rate for the quarter was 6.2%.

Our HIV sales for the quarter were $5.1 million compared with $4.9 million in the prior quarter, an increase of 4.4%. African sales increased 8% for the quarter, and with a very strong performance in Nigeria, we expect continuing strong performance -- strong revenue growth. However, sales were down 4% in the US compared with the prior quarter, and this the reflects reduced spend by individual states on public health programs due to budgetary constraints.

However, during the quarter, we began to benefit from our new HIV-2 claim, which was received during quarter four, as we won new business in hospitals throughout the US. Now that we have the HIV-1/2 product, we are confident of growing this business in double-digit terms year-on-year.

Our Clinical Laboratory business for the quarter increased from $15.95 million to $20.37 million, an increase of 27.3% over the prior quarter. But when the impact of the Immco and blood banking acquisitions are excluded, our organic growth for the quarter was 7%. Revenues at our Life Science business, which is Fitzgerald, were down 4% over the prior quarter, while Infectious Disease revenues increased 4% over the prior quarter and the quarter. That excludes Immco and blood banking, with the US performing satisfactorily and China continuing to perform very strongly.

Three factors will transform our Infectious Disease business: firstly, the Immco Autoimmune acquisition, given its obvious synergies with our infectious disease business; secondly, our syphilis blood banking acquisition; and thirdly, the launch of 10 new point-of-care products around the world. We have now received CE marking on Clostridium difficile, giardia, cryptosporidium, GDH, syphilis, herpes, Legionella Urinary Antigen, dengue, strep pneumonia, and in January, we received CE mark on our H. pylori antigen rapid test. There are many H. pylori antibody tests available around the world, but this is only the second H. pylori antigen rapid test available on the market.

Moving on to Immco, which we acquired at the end of July of last year, the business is performing strongly and we are confident of delivering the 20% growth annually that we spoke about at the time of the acquisition. The US is a blank canvas, with virtually no reagent sales, but with monstrous sales potential, given that over the past three years, the Management have reconfigured and standardized the entire product range and have gained FDA approvals on the full IFA, and immunofluorescence, and a [Lysa] range of products over the past 18 months. Now our sales force are placing the product range onto our existing installed instrument base right across the US, with significant success.

The Immco reference laboratory, which is based in Buffalo, has recently launched a new Sjogren's test, that's dry eye test. This is being marketed through Nicox, which is a specialty ophthalmic company, and the initial sales are extremely promising.

I'll now move on to the blood banking business, which you recall, we announced the acquisition of this business, which is part of the Lab21's business last quarter for $7.5 million. The acquired business generates annual revenues of approximately $4 million, of which $3.5 million is generated from syphilis products and the remainder from malaria products.

When we originally acquired this business, there was virtually no inventory and there were significant back orders. Since the acquisition, we have rapidly reestablished relationships with suppliers of key raw materials and dramatically improved production levels. We have since reduced back orders to negligible levels and have not lost any customers whatever.

We are currently in the process of moving production, as was already said, of these products to our existing facilities in Jamestown, New York, and Ireland. This integration strategy is very much on target and by mid-quarter three of this year, we'll have closed the manufacturing facilities in Newmarket and Cambridge in the UK. This will result in significant operational synergies and efficiencies, which will be fully reflected in our results from quarter four onwards.

I will remind you that the syphilis products that were acquired have a market share of 75% in each of the key blood banking markets of the UK, France, Germany, Netherlands, Switzerland, Austria, and Belgium. Our stated plan on acquisition was to broaden the markets into which these products were sold and, in particularly, to focus on the US market. This project is progressing well and we believe it will meet our stated goal of growing the business by 20% annually.

Moving on to diabetes, our business grew 11% when compared with the prior-year quarter. With shipments of 93 Premier instruments during the quarter, we met our target for the year, with a total of 321 instruments. All of our major markets performed strongly: USA, Mediterranean, Europe, and China.

Very importantly, we recently received Brazilian regulatory approval to sell the Premier instrument. We have invested in a direct selling operation in Brazil, including five sales reps on the ground, and we confidently expect this market to be a significant success with our first sales being achieved during the current quarter. In summary, we are confident of achieving Premier sales of 460 units during 2014.

At this point now, I will hand it back to the operator for a question-and-answer session.

(Operator Instructions)

Our first question will come from Chris Lewis of ROTH Capital Partners. Please go ahead.

Hi, guys. Thanks for taking the questions.

Hi, Chris. How are you?

Good. First question, just is on potential guidance for the year. I know last year you gave a rough outlook for 2013, talked about hitting 10% growth rates on the top and bottom line. Obviously, this year there's some acquisition impact and then you have Fiomi. But I was hoping you can provide any color and perhaps any quantitative guidance for revenues and EPS in 2014?

Chris, it's Kevin here. Just to take that, as you know, our policy is not to give guidance. You're right, we gave maybe very tentative guidance in the past. I'm not really going to quantify it at this point in time. You're right, as there are the impact of acquisition.

Ronan has given very good treatise there, as to the many opportunities that are there in terms of revenue growth. We've got a very good year ahead of us in terms of revenue growth, enough to translate in terms of profitability also. We're going to stick to our policy of not giving formal guidance, if that's all right.

Yes, I understand.

Ronan here. Chris, where you do research and so does Craig-Hallum, CJS, and Sidoti, and maybe people wanted to have a feel for where we are going, they could very usefully look at those analyst reports.

Okay. Understood. Turning to Fiomi, now with the CE mark in place, can you just talk about the types of adoption you expect to see in that market this year and perhaps go into more detail on the commercial strategy, you are planning to take in Europe?

Okay. Well, as you know, we got the CE mark on the Troponin products on January 29, as Kevin said -- or as Jim said, and we're not free to sell the product through Europe. We'll sell the product through our direct sales force in the United Kingdom and we have recruited a sales rep from one of the competitor point-of-care Troponin products to sell the product directly in Sweden, Norway, and Finland, so basically, in Scandinavia, where there's clearly familiarity among the cardiologists there with our product and with our trials. Many of them have been involved in those trials.

Throughout the rest of Europe, we have now completed the appointment of distributors, and in most cases, these are not our existing distributors, but rather companies with experience of cardiac products. We're now organizing -- and very importantly, in conjunction with our distributors, we're organizing evaluations of our product to be conducted by key opinion leader cardiologists in each of the major European countries. Basically, those evaluations by key opinion leaders are just commencing as we speak, in the primary countries of the UK, France, Germany, Italy, and Spain.

You may ask why that's necessary. It's necessary, given that the adoption of point-of-care Troponin testing in Europe has been marginal, with testing volumes running at about 10% to 15% of US levels. There is a much bigger awareness in the US of the deficiencies of existing point-of-care Troponin tests, given the FDA activity and the much greater usage levels of Troponin tests.

Realistically in Europe, in addition to converting users from existing point-of-care Troponin tests, we need to convince the cardiologists to move their Troponin testing from the 1.5 hour laboratory environment to our 15-minute test. Clearly, there are no circumstances in which anybody feels like waiting 1.5 hours for an answer to a Troponin test. If one can satisfy the market that the product is good enough, then logically, the market will move to the rapid test. There is no merit in waiting 1.5 hours, only danger.

That's very much what we need to do in Europe is unlike what we need to do in the US, because we believe there, that as soon as a guideline-compliant point-of-care test will become available, that the cardiologists will no longer wish to use a non-guidance-compliant test for good medical reasons. Clearly, also for insurance reasons.

So in summary, the European Troponin opportunity is enormous. There are upwards of $400 million of Troponin tests being performed in Europe on an annual basis. If the point-of-care product, as I already said, is of good enough quality, then testing will move from the laboratory to the emergency room. But we need to temper short-term revenue expectations. They will be excellent, but they will take time.

Great. Thanks for that.

I hope that answers.

Yes, that's great. And then how much is the cardiac US trial going to cost?

Somewhere between $3 million, $3.5 million, we believe.

Okay, great. And then if I could sneak one more in, on the Premier side, can you just provide some more detail on the expectations from Brazil. And then, when does the ion exchange version begin contributing to that new placement number you talked about? Thanks.

Okay. With respect to Brazil, we think it's going to be a significant contributor, but we're just a little bit coy about giving you any numbers on it yet. We just got the approval literally in the last few weeks, and so we have part -- by the way, part just to explain what we're doing and how we got approval so quickly is we're actually manufacturing, or assembling the product down there, both the products and the instruments. We went to all of that trouble to basically jump into Brazil quickly. As we mentioned, we're doing that -- a third party is doing that for us.

In addition to that, we have appointed -- we've set up a direct selling operation. We're very optimistic about what it can do, but let's wait and see what it does and we will, obviously, keep you abreast of that. You're going to see our first sales in a few weeks time and there will be sales there, but in any event, we think it's going to be a very important contributor, but we're a bit coy about giving you numbers.

What number we can give you, is we can say that we did 321 last year in 2013 and we believe we will do 460 this year. We can say that with reasonable confidence. The key contributors to those numbers will clearly be Menarini; US direct sales; Chinese sales, which is equal to about 100 units; Turkey at maybe 30; and of course Brazil.

Then just with respect to your question about ion exchange, the ion exchange instrument has -- we've completed it. It has been undergoing one evaluation after another, by key opinion leaders around Europe. They have gone very well and the products is about to be put into the market. So therefore, soon we'll be firing on all cylinders with Menarini in the sense that we will both have both an boron affinity and an ion exchange instrument available and available in all markets.

Okay. Thanks for the time.

I hope that answers your question, Chris.

The next question will come from Larry Solow of CJS Securities. Please go ahead.

Hi. Good afternoon, guys. Just a few follow-ups on Fiomi first. Anything positive or negative that you learned from the European trials that you've adapted in your US trials?

Larry, there are definitely a few things. The first thing is, we have learned a lot about recruitment here, okay. The speed at which this trial is going to actually come to completion is all about recruitment of ACS patients. And the trial we did in Sweden was quite an academic trial. It was run by a group of academics, and that trial is still running, by the way. That trial will continue on as an academic program until next June or July.

But they took a very academic approach to it and they didn't proactively try and recruit MI patients into the group. And so the trials were probably three months longer than we would have hoped they would have done, okay? Whereas in the US, we have five very, very strong cardiologists who really see the need for such a product. And they will be aggressively, via their cardiology nurses, recruiting patients.

And that's really -- the product is exactly the same product as in Europe -- that is in Europe, as in the USA, but it essentially is all going to be about the speed of recruitment of patients to get this thing through. That's really the main thing we're bringing from across Europe. We now how to do it now. There are just no surprises for us.

Right. And the results are obviously very good. In terms of D-dimer, I realize that the timeline is still a little bit uncertain, but could you just maybe speak to what the market opportunity potentially could be?

Well, first of all, D-dimer is a complex product. There will actually be, believe it or not, three FDA applications associated with D-dimer. The first thing will be for a claim for the detection of D-dimer itself, which is fine and that's what most products have. The second will be an FDA application for PE, pulmonary embolism, which is a separate clinical trial. And the third one will be, which is really where we need to get to, is a claim for an exclusion claim, i.e., to be able to exclude D-dimer from -- as a diagnosis, and that can only be done as a prospective study and then monitoring a patient over a period of maybe about one year post-initial diagnosis.

But the market itself for point-of-care is about $100 billion worldwide. There are very, very few players out there with good point-of-care products. But it's going take a while because it's complicated, as I say, complex clinical trials and it's going to take some time. But optimistically, you would hope to have a product available, at least with the first claim in Europe very early next year. We still haven't had the meeting with the FDA to determine what they need in their US trial, so I would be about bit previous to give you a feel for where -- how long it will take now.

It sounds like you would have to run, at least in the US the D-dimer, the pulmonary embolism, and then the exclusionary claim successively before you got approval, or could you potentially get approval--?

You can get approval sequentially. You can get approval for diagnosis of DVT first of all. At the same time -- not too far away from that, because you can actually couple the trials together. So you do your PE and DVT trial together and then what you would actually do is monitor the patients that were in your DVT trial for a period of up to 12 months post the original diagnosis, and then you start to see a prognostic -- what actually happened to that patient and is your test sufficiently specific enough to be able to use the word exclude DVT when the person comes in and gets the results from your test on day zero.

Got it. And then I realize this it's a little early, but in terms of other opportunities outside cardiac, I don't know if you guys have begun to look at that, but just hypothetically or potential other areas?

Absolutely. The beauty of the Fiomi platform, we've actually started with -- believe it or not, with the hardest to assay. Troponin, by far, is the hardest to assay, and then of course, when you Troponin, you have BNP and you have to have D-dimer.

The next, believe it or not, one of the bigger assays in the ER -- it would be an ER panel we would like to put together. One of the problem -- a much simpler assay, but a very significant market is the test, believe it or not, for blood pregnancy testing, blood HCG, which is a pregnancy test marker. In the ER, when a lady arrives in the ER, in whatever trauma has affected her, the first thing they need to do is determine, before they do too much manipulation or certainly run x-rays or stuff like that, is to determine if that lady is pregnant. Urine pregnancy tests don't work in that situation, and if fact, are not sensitive enough. So pregnancy is one of the next products on our list.

We -- there's obviously, in the ER again, there is a number of markers for things like kidney failure or kidney damage or liver failure or liver damage. And of course, the holy grail would be a test for sepsis in general in the hospitals, but also in ER. So yes, we have a program. We know very well what we would like to do next, but there's only so much bandwidth we have.

Got you. Then real quick, just switching gears just to Premier, obviously you have pretty aggressive expectations for growth and placement in 2014. It sounds like qualitatively, you're getting more and more approvals. Does this 460 number, do you see that continuing to grow out as you go to 2015 and beyond?

Larry, Ronan here. I suppose what we think is we think that we have the potential to go about 600 instruments a year, which we believe constitutes just over 30% of worldwide placements. That's about where we could see ourselves going. And to answer the question -- when would we get there, the answer is probably 2015.

Got you. And just in terms of the reagent, or the royalty utilization, has that been running near your expectation of $10,000 per year and how has the ramp been? I know you said the ramp has been a little bit slower than originally expected? In terms of ramp of utilization once the machine is placed?

Yes, the instrument placements have been probably quicker than we had (multiple speakers)--

The placement itself, but how about once it's placed? Are the machines--?

There is -- in particular in the Chinese market, because some distributors use -- there's probably a 6- to 7-month gap between the time to leaves Kansas City and actually ends up actually operating in the hospitals. That's what -- that's a little bit disappointing. And that means given that we only got Chinese registration approval last June, it actually means that we don't have that many instruments actually working at this moment of time.

Right.

Despite the fact that we're placing 25 instruments a quarter; but that's a one-off disadvantage. To come back to your question about individual instrument usage, yes, $10,000, $11,000 is about where it's at. And we are hoping that as Chinese usage increases, because remember, reimbursement is being adopted progressively more so around China, we're hoping that number will creep up.

Got you. Okay. Great. Thanks very much.

Our next question will come from Bill Bonello of Craig-Hallum Capital Group. Please go ahead.

Hey, great. Thanks for taking my questions.

Jim, just a question on the trial. You described three components. Do those have to happen consecutively or do they all start concurrently?

No, what we'll do -- they all have to end with the same time, Bill. That's the only thing. But what we'll actually do is we're going to start the ACS trial immediately, because that's the longest one. That's, as I said, five months, maybe six months to get all the data together.

That's what we're actually activating right now. As I say, we'll be recruiting patients of that trial within two weeks of now, okay. As soon as we get that up and running, to be pretty quick, for the normals, it's actually relatively easy to, to collect normals and we're talking about maybe running health fair drives and that stuff very close to the clinical trial sites.

You're looking at three sites having to collect, say, 250 samples per site. That can be done -- the samples can be collected, if we're lucky, within three or four days, and certainly a week. And then we run them. And they are actually run by ourselves actually. Well, they are run by the trial site coordinators. But -- and then the banked plasma from those samples will be taken and stored in Fred Apple's facility in Hennepin County.

Then the actual precision studies are really again -- are very defined. It's a matter of running multiple samples a number of times at multiple sites. That will go on -- that will take this some time during the middle of the trial. In order of a roll out. Number one, we start the ACS, because that's the longest one. Number two, then, once that's up and running, and we're pretty happy that it's going according to plan, after one month, after a month or so, we'll then roll out the normal study. And then probably about three months into the whole program when we catch our breaths from the monitoring of all of those thing, we'll then do the precision study. But they all need to come together at the same time as the results from the ACS study.

Okay, and will it be, like in Europe, where you are sure to have insight into what the 99th percentile ended up being and whether you were able to detect at a 10% CV? In other words, is that part not blinded? And will we hear something about that ahead of getting the final results on the chest pain study?

Bill, unfortunately, it won't. The fact of the matter is, we will run our 99th percentile study, and yes, I'm sure we will know what our 99th percentile is and that will be a number. Let's just assume it's the same number as in Europe. So, we'll have that number. But that number is actually meaningless, because not until the complete 1,500 samples have been collected across all three trial sites will the samples be adjudicated by the two/three cardiologists.

And it's only at that point we can actually, if you like, put in the 99th percentile number into our sensitivity calculation or calculator and determine the actual overall sensitivity of the test. So, unfortunately in this case, whereas we had a nice academic trial running in Europe, where we had -- they reported back to us, every couple of months, in this instance, we will be running blind until the very end because actually, we won't know the diagnosis, the actual true diagnosis from our test until the very end, because we can't -- the samples are blinded until the very end, until we plug in our 99th percentile number in there.

Yes, okay. That makes sense. And then just two questions for Kevin, what -- how should we think about operating margin in 2014 with some of the duplicative expenses carrying through for a bit of the year and continued investment in cardiac, and then maybe how we should think about it longer term?

Okay. There's probably about three answers to that question. At the moment we're roughly in and around the 20%, which is where we've been for quite a while. I see us continuing around that area, for the first half of next year. We will get an initial boost then from the closure of our blood bank screening facilities, which will help probability and operating margin consequently. So you can start seeing it rising then.

Then in the long term, you should further improvements will come out of the Fiomi, the cardiac business. We'll say that the European markets in the near-term, as we're only approved in the European markets, where the revenues will only be a fraction of what the US ones are, that there will be a bit of a drag there in terms of the sales and marketing costs associated with that and the lower volumes of production, et cetera.

So initially in and around where we are at the moment, bit of an improvement towards the end of the year, but an underlying trend whereby Fiomi will definitely result in an improve, albeit not in 2014 and may not even be in the initial part of 2015. It's really when the US kicks in is when that will happen.

Okay, but we should start to see then, it sounds like at least margin holding steady, so operating income gross more in line with where revenue growth is?

Yes, I would have thought so. Yes. The simple answer to that is yes, is it will happen. We are going to be in around the 20% going forward for the initial quarters ahead.

Okay, and then, and then just thoughts on the tax rate for 2014?

As you see, we had a very good tax rate recorded in 2013, and as I pointed out in the remarks earlier, that was to a large extent, due to the fact that Irish tax rates here are considerably lower than in the US, the 12.5% being the headline corporation tax rate. On top of that, there is a benefit in relation to R&D tax credits, which we do benefit from.

Both of those factors will continue in the year ahead and beyond. The Irish tax rate has been confirmed with the Irish government, which will maintain at 12.5% for the years ahead. So I still say, as a target rate, I would say low double-digits and it could be improving upon that. Could even be 10%, slightly lower.

Okay. Thank you very much.

Bill, could I just come back with one comment on your original question on just the blinding of the US trials?

Yes.

I mentioned it during the prepared remarks, but just to say, obviously to help -- because this is going to take six months minimum and it's blinded until the very end, to help us all sleep better at night, we obviously need to know that the outcome is go doing be positive. To that end, to make sure the results obtainable in the US, are going to be equivalent, or perhaps even better than in Europe, we have had over the last couple of months, we have had Dr. Apple run a clinical trial on 293 patients within the hospital.

This was not for the FDA. It was purely to give us a good feeling of where the US clinical trials were going to go. And out of that 293-patient clinical trial, which is still running, by the way, we'll run it a bit longer, we are getting slightly, well, certainly equivalent, and perhaps even slightly better data than we were getting in Europe. So we actually are -- we have the confidence that moving into this thing, that we are going to come out the right side of the FDA in the end.

And will that -- two things on that. One, will you release that data when it's completed?

It's going to be published where we have -- Dr. Apple is writing an abstract to have it published at AACC, and I'll have to get you a date as to when that might be published. But within the next number of months, next few months.

Okay, and then the second piece, is that just defining a normal population? Or does that actually have the chest pain component, too?

These are 293 chest pains.

Okay.

There while be no trouble with the normal population. Blood is blood. But, no, these are 293 chest pains and the data is pretty decent.

Okay, but you had to have a cut-off level that you chose, right, to do that?

Yes. We used the European cut-off level and they were fully reviewed by three cardiologists, as just like the FDA trial. So it's pretty decent data.

Yes. That was excellent. Thank you.

(Operator Instructions)

The next question will come from Jim Sidoti of Sidoti & Company. Please go ahead.

Good afternoon. Can you hear me?

Yes, Jim, go ahead.

Great, great. A couple questions on the acquired revenue. It sounds like between Immco and Lab21, it was about a little over $3 million in revenue from those two acquisitions, is that right?

Yes, of that order. Absolutely, yes. As Ronan has pointed out, 6.2% of the organic growth within quarter four -- so, yes, if you back calculate that, it would be the figure you've mentioned there.

Okay. Is that split more towards the Immco side, or can you give us a little color on it?

Yes, very much towards the Immco side. Immco is obviously very much -- first of all, a larger entity to begin with and very much up and running in terms of how its business has been progressing. The blood bank screening business we acquired, is in particular circumstances -- there were back orders at the time. We're getting up and running in terms of normal production levels on that, and are beginning to meet demand on that. So it's coming from a different place. So, yes, very much weighs towards the Immco side.

When do you expect the blood bank business to get back to normal?

We would expect throughout quarter one and be fully, fully back to normal by quarter two.

Okay, all right. And then just a final question on the share count, it seems to be ticking up as a function of the price going up. Any plans to do any buybacks going forward?

Jim, Ronan here. I don't think so. Not with current bank balances, I don't think that would be -- make sense really.

Okay. Well, I would assume by 2015, as the cardiac business picks up and the trial costs go down, you'll take another look at that, then.

Yes, absolutely. Obviously, we will always be looking at it, but I don't think it's our current intention. I wouldn't want to mislead on you that. With $22 million in the bank at this moment in time, it's probably -- it wouldn't make sense.

Sure. All right. Thank you.

The next question will come from Ross Taylor of Somerset Capital. Please go ahead.

Thank you. Most my questions have been answered, but quickly, can you give us an update on the point-of-care syphilis test? You were looking for a waiver on that one, which basically would, from what I understand, would significantly increase the value of that test?

Ross, Ronan here. Yes, we continue to answer the FDA queries, we continue to basically cooperate with them. I'm hoping at this stage that, when I think about the extent of the questions, the extent of the queries, the extent of the expense that we're incurring, that they aren't -- that they have a willingness in principle to grant us a clear waiver. The best way I could just answer your question is to say, I simply don't know, but on balance, we think we have a 51% chance of getting a clear waiver from them.

If you ask me how I worked that one out, I really couldn't answer you with any way that would satisfy you. But on balance, that's what we think. What I can say is that if we do get the clear waiver, that the product would be a significant success for us. If you bear in mind that the public health -- that the HIV rapid market in the USA is $58 million, $60 million and that probably $45 million of that is public health and the rest is needle-stick injuries in hospitals, then there's no reason logically why a syphilis test wouldn't replicate the size of the HIV test in the public health labs, which would be about $45 million.

It has that kind of potential. Bear in mind, there is no other product. At this time, we are the only syphilis-approved product. We have a 510(k) approval. We ordered the K waiver. The problem is that hospitals when they run a syphilis test have no really reason to run a rapid one. They are quite happy to run blood. And therefore, a syphilis approval without a clear waiver is really of very little value. Our current syphilis sales are running at maybe a couple hundred thousand dollars a year.

So in summary, it has monstrous potential. There's nobody else around basically who submitted anything on us. We've invested very heavily in it and we just simply don't know where they, obviously, are going with this one. They seem to have an innate reluctance to actually grant clear waivers. They don't really like allowing non -- they don't really in principle like the concept of people testing for disease outside of the hospital and doctor's office. And so they have that innate bias.

But at the same time, on balance, given everything we've gone through over the past two years, we think we wouldn't be still doing this if we didn't think we had a real fighting chance. Possibly an inadequate answer, but I've given you a very honest answer.

I appreciate it. So basically, it's a coin flip on what could be a $30 million to $45 million market, with economics similar to that which you see on the HIV test?

Yes, in principle, the market ought to be of a similar size and the difference would be that in HIV, there are three participants, in syphilis there would only be one.

Right, okay.

And our sales reps would be endeavoring to sell the syphilis product into the very same customer that's already selling the HIV product, which is the public health lab. So we have equal ground into those labs.

So if we see this approval, we can basically be looking at, 12 months out, a run rate of equivalent to what the overall market for HIV is, right?

That would be -- no, I wouldn't want to -- I'm not going say that after 12 months we'll be doing $40 million. But certainly it could be a $10 million, $15 million product very quickly.

Okay.

I don't want to build excessive expectation here, but certainly in the context of Trinity Biotech, it can be a Blockbuster. It certainly has a $10 million, $15 million immediate potential.

Okay. Second question. Since you don't want to seem to buy stock, and you and I have had this debate for a long time -- we won't have it here -- what do you want to do with the $22 million in cash, particularly given that, as you look at the model for your Business, 2015, 2016 should be massive free cash flow generation years?

Ross, we look at that as we move forward, but certainly we have a wonderful cash generation opportunity. But right at this moment in time, given the extent of our plans, we're best sitting on our cash.

Okay. Lastly, how many times a month does Roche call you?

(Laughter) I couldn't really answer that on this call. But I wouldn't want to -- again, I wouldn't want to build expectations by suggesting that they call us an awful lot. If you don't mind -- I think that's a tongue-in-cheek question, Ross. I hope it is (laughter).

Only slightly, because to me, quite honestly, it looks to me like you guys have what appears to be the only product that possibly works. I just had a family member literally spend three days in the hospital because they made the mistake of having what a doctor thought might have been a heart attack on a Friday night, instead of being intelligent and having it on a day when the experts were actually in the hospital. Because the test that was run was ineffective and could not give them a comfort to send this person home.

Obviously, in the US, there's a potential -- there's a huge market. Roche is actually not selling a product in the US point-of-care market right now, correct?

Correct, yes.

And so it seems to me that at some point one of these three players, because it's basically a global market, one of the three, it makes sense would attempt to jump the line and capture this product. I know you've, in the past, talked about whether you would license this technology to -- or this testing to someone, but it would seem it would make more sense to see if someone actually was willing to take the whole thing. Why am I wrong in that logic?

Well, I don't know that you are. You may possibly be right. I simply don't know. What we need to do is we need to move forward, bring the product to the market, and it's a wonderful product and then what will be will be. Ross, I don't see what else we can really -- that's the right thing for us to do.

No, I would agree with you. I just think that there's a chance that somewhere between here and there, that someone attempts to, given that science is science, that someone attempts to get on the front side of that line.

Yes, I suppose, yes.

Okay. Thank you, Ronan.

Thanks, Ross. Nice talking to you.

We've had a breakdown -- so I don't know if anybody else wants to ask a question. It is 12 minutes past 5. So if there is one more questions, we would take one more. We can't see the list, operator. Is there anybody else asking questions?

One moment, please. We'll poll for questions. Okay. We do have a question from Bill Nasgovitz of Heartland Funds. Please go ahead.

Ronan, hello to you. I'm sorry I missed most of the call here because of a conflict, but I just wanted to congratulate you and your team. My gosh, what a wonderful picture you've painted for shareholders, and what a joy to have you back at Trinity. My gosh, I'm thinking back to the dire days of single-digits when things looked pretty tough.

Thanks, Bill. You're making me blush. Thank you very much, indeed. Thank you. But it's all of us, obviously. It's a very big team effort here, you know.

Yes, well, congratulations.

Thanks for that. Thanks, Bill. See you soon. Thank you.

Yes, bye-bye.

Thank you. Maybe, operator, could you close the call? I would close the call at this stage, because we started a little bit late. Apologies for that. Thank you, to everybody for your support and your interest and we'll talk to you, actually, it's not so long, about the middle of April, so it's only about five weeks away. We'll be talking to you with our first-quarter results. Look forward to that. Bye, and thank you.

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