Trinity Biotech PLC (TRIB) 2014 Q1 法說會逐字稿

Good morning and welcome to the Trinity Biotech first-quarter 2014 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, sir.

Thank you, Denise and thank all of you for joining us to review the financial results of Trinity Biotech for the first quarter of fiscal year 2014, which ended March 31, 2014. 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 Dr. 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. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical 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 uncertainty, including, but not limited to, the results of research and development efforts, the effect of regulation by the United States Food and Drug Administration and other agencies, the impact of competitive products, product development commercialization and technological difficulties and other risks detailed in the Company's periodic reports filed with the Securities and Exchange Commission. 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 financial results. After Kevin's remarks, we will hear from Dr. Jim Walsh and finally from Ronan O'Caoimh, CEO, on business developments. Kevin?

Thanks very much, Joe. Today, I will take you through the financial results for quarter one 2014 starting with our revenue performance. Total revenues for the quarter were just over $25 million. This compares to $20.3 million in quarter one 2013 and thus represents an increase of 23.1%. Ronan will provide more details later in the call as to the reasons behind this increase. In a moment, I will take you through the rest of the income statement, but before doing so I want to point out a change in our income statement presentation in relation to the medical device excise tax. This was a new tax last year and in order to aid comparability, we showed this cost separately in the income statement in our 2013 earnings announcements. In 2014, we are reporting the medical device excise tax within cost of sales where the comparator for 2013 has also now been recorded.

Now to move onto the income statement. This quarter's gross margin was 48.6% compared to the 50% we reported in quarter one last year. However, at 50%, this represented the highest gross margin of any quarter last year and the average for 2013 was actually 49.6% and thus is probably a better reference point. The reduction in gross margin from this level this quarter was largely the result of the impact of a significantly higher level of placements of Premier instruments, which, at 101 this quarter, is the highest in a single quarter to date.

Moving next to our indirect costs, our R&D expenses were just over $1 million, which represents an increase on the $855,000 announced in quarter one 2013. Meanwhile, our SG&A expenses have increased in the quarter from $5 million to $6.3 million. Both of these increases were largely due to the impact of the Immco and Blood Bank Screening acquisitions. Another reason is that, prior to the launch of our new cardiac products, the Company has started to put in place a sales and marketing function dedicated to the launch and support of these products. As yet, the cost of this function has not been offset by associated revenues, which will come through in future quarters.

This quarter's operating profit was $4.5 million, an increase of almost 16% compared to the equivalent quarter last year. This equates to an operating margin of 18% in the quarter, which is a bit lower than in previous quarters and is something I will return to later on.

Moving onto our net financial income, this quarter, we earned $23,000 compared to $451,000 in the equivalent period last year. This mainly reflects the reduced level of funds currently on deposit, but also to an extent a fall in interest rates, which are now available in the market. Our tax charge for the quarter was $114,000, which is an effective rate of just under 3% and is obviously a very attractive rate. One of the main contributors has been the availability of significant R&D tax credits in Ireland and to a lesser extent in Canada. Due to the nature of our tax charge, I expect the charge to fluctuate quarter on quarter and whilst I expect us to continue to have a low effective rate of tax, it can expect it to be somewhat higher in future quarters.

The net result of all that I've spoken thus far is that profits for the period increased by 6% from $4.2 million to $4.4 million. Meanwhile, the EPS rose from $0.193 to $0.196 per ADR over the same period. Finally, earnings before interest, tax, depreciation and amortization and share option expense for the quarter amounted to $6 million. This compares to $5.2 million in the equivalent quarter last year, which is an increase of close to 16%.

I would like to now just take a few minutes to address the overall profitability of the Company as there are quite a number of moving parts to consider this period. I have already dealt with how the gross margin has been impacted by the level of instrument sales. We are also experiencing a temporary drag on profitability due to carrying two additional manufacturing plants in the UK associated with the newly acquired Blood Bank Screening business.

As I say, this is a temporary phenomenon as we are in the process of moving production from these two plants to our existing plants in Jamestown, New York and Bray, Ireland. Both of which have the necessary expertise and capacity for this activity. Transfer process will be completed in early quarter three this year and the resultant closure of these plants in the UK will yield significant cost savings going forward.

Also, we are beginning to see some of the costs associated with launching the first of our point-of-care cardiac tests. We have already recruited a number of sales and marketing specialists to deal with these products, as well as some nonpersonnel costs associated with such a product launch, for example, branding costs, marketing literature and additional travel. Obviously given we have just received our CE Mark, these costs have yet to be offset by the revenues, which will be coming in the quarters ahead. Finally, from a comparison perspective, we are also seeing a significant drop in interest income of over $400,000 this quarter, which itself alone equates to approximately $0.02 of earnings. Notwithstanding all of these factors, we did grow profits at the quarter, which I believe augurs very well for the future profitability of the Company as the impact of these factors recedes.

I will now move on to talk about the significant balance sheet movements since the end of December, 2013. Property plant and equipment increased by over $800,000. This is made up of additions of $1.4 million offset by a depreciation charge of $600,000. During the same period, our intangible assets increased by $5.3 million. This was mainly due to additions of $5.7 million, which is higher than in previous quarters due to increased expenditure on the new cardiac tests, particularly now that we have entered the clinical trials phase. Total intangible additions have been partially offset by an amortization charge of approximately $400,000 this quarter.

Moving onto inventories, you will see that this has increased by $1.2 million this quarter. As well as normal fluctuations, we have increased the level of Premier inventories in conjunction with increased production levels given our expectations for 2014. We have also increased the level of spare parts that we hold as the number of instruments in the field continues to grow. Similarly, we have built up some inventories in advance of the commencement of the high season for Lyme disease, which occurs in quarter two and quarter three. Meanwhile, trade and other receivables have decreased slightly to $24.1 million. This decrease is due to an improvement in cash collections this quarter partly offset by an increase in prepaid expenses due to the timing of certain payments, which fall near the beginning of the calendar year.

Finally, in relation to working capital, our trade and other payables have decreased by $4.4 million to $15.7 million. Again, this is mainly due to timing issues, but also includes the impact of paying one of the deferred consideration milestone payments to the former shareholders of Fiomi.

Finally, I will discuss our cash flows for the quarter. Cash from operations for the quarter was $0.8 million, which is $1.8 million lower than last year. As I mentioned earlier, this was mainly due to working capital movements, including increased inventories and the timing of certain creditor payments. Total capital expenditure in the quarter increased to $5 million versus $4.9 million in quarter one 2013. As I mentioned earlier, this is due to additional expenditure and the development of our new cardiac products. We have also paid approximately $1.1 million of deferred consideration in relation to the Fiomi acquisition. This amount was paid on the achievement of the CE Marking milestone, which occurred during the quarter. I will now hand over to Jim who will take you through the latest developments with regard to cardiac.

Thank you, Kevin. I will now take a few moments to update you on progress on the cardiac marker development program. However, as it is only a few short weeks since we last spoke and at that time, I provided quite a detailed update, I'll keep my remarks today somewhat shorter. And I'll be happy to take any specific questions you may have in the question-and-answer session at the end of the call.

As a brief reminder, two years ago, Trinity acquired Fiomi Diagnostics. Fiomi had developed a high sensitivity quantitative point-of-care immunoassay platform on which Trinity is now developing a range of cardiac products, namely Troponin I for the detection of acute MI, BNP for the detection of heart failure and D-dimer for the detection of PE and DVT. There were only three dominant players in the POC cardiac market today, namely Alere, Roche and Abbott, none of whose Troponin products meet the new guidelines for MI, which have been adopted by the FDA.

In general, I am happy to report that progress on all fronts of our cardiac programs are progressing nicely. As you are no doubt aware, on January 29 last, we announced CE Marking for our guideline-compliant Troponin product. CE is the regulatory standard necessary to market a product in Europe. As I explained on our last call, it is our achievement in successfully developing a guideline-compliant Troponin product that fundamentally distinguishes Trinity's product from all the other point-of-care products and which now presents Trinity with such an enormous commercial opportunity.

In our CE trial, our product produced very strong clinical performance data with a limit of detection of 19 picograms per ml of whole blood of Troponin and a variation of 10% at 36 picograms per ml, which actually corresponds to the 99th percentile of the reference population. In terms of precision, when tested on 80 replicate samples over 20 days, the product exhibited a CV of just 8.2% at 25 picograms, which is in fact less than the 99th percentile of the normal population.

On top of this, the product demonstrated a specificity of 98% at time zero, thus making it an exceptional rule-in test ensuring that any patient coming up positive on the Trinity test can be rapidly moved to the cath lab with a very small likelihood of our test producing a false positive result.

In summary, the above results represent excellent performance and fully meet all aspects of the new Troponin guidelines thus making Trinity's Troponin product the only POC product on the market today meeting those guidelines. CE is one thing; however, a greater challenge is that of obtaining FDA clearance to market a product in the United States. The United States being by far the largest market opportunity for our Troponin product.

On our last call, I described in great detail the clinical studies required by the FDA to obtain US marketing clearance. These can be summarized as follows -- firstly a normal population study to determine the upper reference level or 99 percentile of a normal population. For this study, it is intended to recruit a minimum of 700 healthy donors. This study will be carried out at three trial sites and should be possible to complete within a two-month period.

Secondly, an analytical performance study, which demonstrates such facts as limit of detection, precision [cluster] activity, interfering substances, stability, etc. Again, this study is very well-defined and should take no more than two months to complete.

Finally and by far the longest and most challenging is the chest pain study in the intended use population. This study, which we run at all trial sites, will be carried out on a minimum of 1500 patients presenting in the ER with symptoms suggestive of ACS. When we last spoke, I told you of five US clinic trials I had agreed to participate in are FDA studies, namely Hennepin County Medical Center in Minneapolis, San Francisco General Hospital, Medical University of South Carolina, Baylor College of Medicine and a hospital at the University of Pennsylvania. Since then, we have recruited a fixed site, Dr. Christiansen at the University of Maryland. This site is currently undergoing the IRB process and should be ready to go live within the next four weeks or so.

During April, with the exception of the most recent site in Maryland, site initiation and training visits have taken place at all clinical trial sites. To date, we have commenced enrolling chest pain patients at two sites, namely Hennepin County and the Medical University of South Carolina. The remaining sites are planned to go live over the coming two to three weeks as soon as nursing staff recruitment is completed at those sites.

It is difficult for me at this time to determine exactly how long it will take to collect all the chest pain data as it is heavily dependent on the enrollment rates and also on prevalence, i.e., what portion of the people presenting with chest pain are actually having a cardiac event. 13% seems to be the universally accepted prevalence number. However, we have seen significant variation in that number and to be statistically significant, we hope to recruit approximately 200 actual MIs as part of the 1500 patient cohort.

Over the next month or so as the enrollment process settles down and recruitment and prevalence rates become apparent, we should be able to provide some more accurate and detailed timelines on the chest pain study. However, based on what we know to date, we estimate approximately five to six months or thereabouts to complete this study.

Meanwhile, even though our product is CE approved, most reasonable distributors require as part of their launch process the product to be tested and endorsed by local key opinion leaders. Therefore, currently, our Troponin product is undergoing evaluation or getting ready to go under evaluation at local trial sites in countries such as Germany, Austria, Switzerland, Italy, Spain, UK, France, Netherlands, Scandinavia and South Africa and indeed many more. Moreover, we have also commenced a registration process for Chinese approval. This, however, will take as much as two years to complete.

A question that I've been asked by a number of shareholders recently relates to how confident we are of our Troponin product actually gaining FDA approval. And while I obviously can give no guarantees, I believe that we have done everything possible to make sure that our trials are sufficiently powered and that the product is performing to the necessary specifications. Two pieces of work in particular, however, provide us with great confidence that our Troponin product will gain FDA approval. Firstly, our CE marking trials, which were completed only three months ago, are almost a mirror image albeit on a smaller scale to the required US trials. The data obtained from our CE trials, which was excellent, if repeated in the US patient population would fully meet the new performance guidelines now adopted by the FDA.

Secondly and perhaps more relevant is that over the past few months our product has been the subject of a clinical evaluation by Dr. Apple in Minneapolis. This study was specifically designed to evaluate the diagnostic accuracy of our Troponin product. In this study, Dr. Apple evaluated our product's performance on 293 patients presenting with symptoms suggestive of MI at the emergency department in Hennepin County Medical Center. Note this population of 293 patients represents almost 20% of the total 1500 patient chest pain trial requested by the FDA and so should be quite indicative as what we can expect to achieve in our FDA trials.

In the trial, Dr. Apple measured the Troponin levels of each patient at time zero and then at six hours on the Trinity Biotech Troponin product. Then all patients were adjudicated for MI predicated on the current definition of myocardial infarction, i.e., the new FDA guidelines. The Abbott architect Troponin assay was the central lab system used routinely in this hospital.

The results of this trial, which again meet the new guideline specification, were in fact better than those we observed in our CE trials in Europe and lead Dr. Apple to conclude that a Trinity Biotech Troponin assay is good for both ruling in and ruling out MI in the emergency room setting. This data will be published at the American Association of Clinical Chemistry meeting in Chicago in July and certainly provides me with confidence that our product stands an excellent chance of meeting the now very stringent FDA performance thresholds.

Moving on then to our other products. Product development on our BNP product is progressing very well. We have reached design three stage and the product has been transferred to manufacturing where batches for clinical trial are currently being manufactured. We expect to commence CE trials in both Europe and the USA in the coming weeks with a view to having a product CE Marked by the end of June. A pre-IDE meeting has been sought with the FDA to discuss the scope of the US trials and assuming there are no surprises coming out of that discussion, US trials should get underway in June of this year with the FDA submission expected later in the year.

Finally, development of the third product in our cardiac panel, namely D-dimer, is now well underway. D-dimer is a marker for the diagnosis of DVT and pulmonary embolism. We have made the necessary selection of antibodies and controls for this product and we will soon be in a position to move it from the feasibility stage to the development phase. I am reluctant to give a definitive launch date as yet, but I can certainly report that excellent progress is being made and product development is progressing well.

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. In the quarter, a significant milestone has been reached through the CE approval of our guideline-compliant Troponin product and based on the clinical data recently obtained in both Europe and the USA, we can move through our US trials with a justified optimism of an FDA approval in 2015. I conclude now and will be happy to take your questions later and I will hand over to Ronan.

Thanks very much, Jim. I am going to review revenues for the quarter and discuss business development before opening the call to the question-and-answer session. Our revenues for the quarter were $25 million, up from $20.3 million, which is an increase of 23%. When the impact of the acquisitions of both Immco and the syphilis blood banking business are excluded, our organic growth was 5.5%. Our HIV sales for the quarter were $4.5 million compared with $4.8 million in the prior quarter, which is a reduction of 5%. HIV sales in Africa were down 7% for the quarter, but the fundamentals of our African business continue to strengthen with Nigeria in particular performing strongly. The reduction this quarter is typical of the quarter-by-quarter fluctuations that we continue to experience in this market.

Meanwhile, US HIV sales increased 4% during the quarter and this constitutes a very welcome reversal of the previous trend. During the quarter, we began to benefit from our new HIV-2 claim, which was received from the FDA during quarter four of last year. And we won new business in hospitals throughout the US. Now that we have the HIV-1/2 product as opposed to our previous HIV-1 product, we are confident of growing this business in double digit terms year on year despite reduced funding by individual states on public health programs.

Our clinical laboratory business increased from $15.6 million to $20.5 million in the quarter, which is an increase of 32%. When the impact of the blood banking acquisitions are excluded, the organic growth rate was 6% with infectious disease increasing 5%, diabetes increasing 14% and the life science business, Fitzgerald, decreasing 8%. In infectious disease, the US performed well and China continues to strengthen. In Europe, the launch of our new Rapid point-of-care tests are progressing well and we are experiencing particular success with our strep pneumonia and legionella urinary antigen tests.

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, immunofluorescence, and ELISA range of products over the past 18 months.

Now our salesforce are placing the product range onto our existing installed instrument base like all UFs with significant success and the immuno reference laboratory, which is based in Buffalo, has recently launched a new Sjogren's test, that is a dry eye test. This is being marketed through Nicox, which is a specialty ophthalmic company, who have invested heavily in marketing the test with launch having occurred in January. Gross billings for quarter one were significantly ahead of our expectations. Meanwhile our specialist reference laboratory in Buffalo has significantly expanded its service laboratory business with LabCorp.

Moving on to the syphilis blood banking business, which we acquired late last year, Kevin has outlined how integration is successfully progressing. I want to just briefly remind you that the syphilis products that were acquired have a marketshare 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 products and to grow the markets in which these products were sold and in particular to focus on the US market. This project is progressing well and we believe that we will meet our stated goal of growing the business by 20% annually.

Finally, moving on to diabetes, we were very pleased to place 101 Premier instruments during this quarter, up 50% from 67 placements placed in the prior quarter and all of the principal markets in Europe, US and China performed well, but Brazil deserves a special mention. We received approval to sell in January and completed the sale and placement of 21 instruments by quarter-end and we believe that Brazil where we have a direct salesforce will be a very significant market for our Premier instrument and indeed for our entire product range in the years ahead. I am now going to pass back to Denise for a question-and-answer session.

(Operator Instructions). Per Ostlund, Craig-Hallum Capital.

Great, good afternoon, gentlemen, in for Bill this morning. It sounds like everything is tracking frankly exceptionally well. I wanted to ask you real quickly about the integration of the acquired businesses, the Immco and the blood banking businesses. You alluded to it in the release about the consolidation of the blood bank manufacturing coming in Q3. Just wondering if you can quantify the costs that come out at that point. And then maybe a related question, is there anything duplicative left on the Immco side or is that pretty fully integrated at this point?

I will take the second part first. The Immco integration from the start has worked very well and we have integrated nicely. Part of the attractiveness of that particular acquisition was that where we were particularly strong, Immco didn't have a great presence and vice versa. So the areas of overlap were reasonably limited. We have managed to reduce those few areas of overlap and in this quarter have more or less eliminated that. So we will get a slight improvement from that going forward.

Of greater significance is the integration involved in the blood bank screening business where I mentioned in the release there that we have two plants in the UK, one in Cambridge, one in Newmarket, very close to each other, the activities of which can be neatly slotted into facilities in Bray, Ireland and Jamestown, New York according to the particular specialities of those particular locations. Once those plants are closed down in July is our expectation, we can expect a reduction of at least $500,000 per quarter in costs going forward. It may even be higher than that; I want to be a little bit conservative on that. So obviously won't get the full impact in quarter three, but we will have by quarter four.

Okay, that's fantastic. Thanks for that. You kind of blunted the question with the commentary on the Sjogren's assay, but I did want to ask about that. I think the agreement with Nicox, you had the opportunity to work with them on potentially expanding the agreement outside of North America and I think that might be coming up here shortly. Just thought I would see qualitatively how you are feeling about the assay's performance and then that broader opportunity.

Yes, it's performing very well. They have only launched the product in a small number of states at the moment. They will go nationwide later in the year, but the numbers are ahead of our expectations and this looks like it is going to be a very significant and profitable piece of additional business for our Buffalo laboratory, and then obviously there is the potential for going beyond the United States as well. So it is looking like a very lucrative cooperation with Nicox who have invested very, very heavily in this in terms of a direct salesforce.

Okay, good. Maybe just one last one really quick as long as we are talking about the cardiac before and some of the costs coming online ahead of the launch. Is there any way whether to actually quantifying dollars, which might be difficult, but maybe more so just sort of pacing in terms of how the salesforce build and how the marketing build progress over the course of the year? Is it kind of you have what you have for now and then a cold sort of launch as we see more of a spike in those costs or how should we think about that?

Yes, I mean obviously we are sort of at the initial stages at this stage and we are building it up both in personnel and nonpersonnel costs. A little bit lumpy at this stage because we are doing certain one-off costs, but in this quarter we are probably about between $300,000 and $400,000 in this particular quarter and that will rise a little bit in subsequent quarters to maybe over $500,000.

I will say that we will be benefiting obviously from our direct salesforce that exists in the US already, so it flows very neatly into that and also into our distributor network outside of the US. We'll also be direct in Scandinavia and the UK. We will be augmenting our central sales function here in terms of specific personnel dedicated to that area both from a sales and technical point of view. So you will see it increasing during the year.

Okay, that's great. Thanks, gentlemen. I appreciate it.

Larry Solow, CJS Securities.

Hi, good afternoon. Just a few questions. First, on Premier, a pretty nice number there, 101. It sounds like you are on your way to hopefully meeting or even beating your expectations for the year. Can you give us a couple updates on the ion exchange release, when that product is expected or if it has actually come out already? And then secondly just what you are seeing in the field in terms of run rates on reagent consumable type sales.

Hi, it's Rory here. To talk about the ion exchange a bit and maybe Kevin might take up the second part. In terms of where we have gotten to on that, we've done two independent assessments. The first one took place at an independent laboratory in the United Kingdom just before Christmas. The final report is outstanding with the initial verbal feedback has been very, very positive. The second one took place at an independent laboratory in Continental Europe in January and February of this year and again final report is outstanding, but initial feedback has been very, very positive.

As recently as last week, the first live demo in a customer site in the UK took place. They were very appreciative, very favorably commenting on the instrument and in fact, in this quarter, quarter two, the first instruments are likely to ship.

The second part of your question, do you want to comment on that?

Yes, in terms of then China, China was very strong, as I talked about Brazil being -- we were so pleased with Brazil. We have been somewhat astounded by it and we believe that we are going to get a very strong run rate there as the year progresses. Europe has -- Europe has performed well and the United States has also.

In terms of -- just in terms of to quantify things, by the end of this year, we will have close to 1,000 instruments in the field and an instrument typically will generate about $11,000 worth of reagent in a year. So that ought to be kind of $11 million. It won't actually be because of the lag between when we send an instrument out and when it actually starts running and that lag is particularly lengthy in the case of China where there is some distributor set-up as well. So we estimate that probably the gap is between shipment out of the United States and actually up and running in China is probably something between 6.5, 7 months. That timeframe with Menarini is probably like three and elsewhere and in Brazil, in the case of Brazil, probably about two. So we have that time gap as well, but broadly speaking we have an ever-increasing instrument base producing about $11,000 a year of reagent at an astoundingly high margin.

Okay, great. And in terms of the HIV franchise, it sounds like you expect growth to accelerate in the US through the year and then in Africa, I realize it is lumpy, but any color on the developments in Nigeria and do you still expect growth for the full year out of Africa?

We do, Larry, we do. Yes, I mean if you look at the progression over the past three years, the African story has been a very positive one and I think it continues to do so. The fact that we are down a few percent this quarter is just the kind of fluctuations you'd expect on a 13-week cycle when you are selling to NGOs. But in overall terms, Trinity Biotech is the gold standard that does the confirming in all the major African countries with the exception of Uganda and the overall dollars that are being spent by NGOs, principally the US government in Africa, continues to increase and we continue to benefit from it given that we are positioned as the gold standard doing virtually all of the confirmation selling at a premium price to all the competition.

I suppose the one significant country that we weren't participating in in a big way was Nigeria and now I think we have addressed that and our Nigerian sales are kicking in very nicely. Albeit we actually had very small sales there this particular quarter, but that is the kind of fluctuations you get. So in overall terms, I think the HIV story is very positive. Africa is very, very positive and where we were suffering in the US with contraction of sales, I think the gaining of the HIV-2 claim from the FDA has rectified that and we now are actually winning contracts where we previously were not in a position to compete at all because of the lack of the license -- the lack of the claim.

Okay, great. Just two quickies on Fiomi, if I may and then I will stop. I assume that Dr. Apple, the trial that you referred to, which reported good results there, that won't be part of the FDA package, is that correct?

That is absolutely correct. It would have been done outside sort of the remit of the FDA trials. They are exactly the same patients. These would have been chest pain patients walking into the ER clinic in Hennepin County. It is run on our product exactly as it would be during the clinical trials, but unfortunately the FDA wouldn't allow that type of data to be included as part of the formal trial. But to all intents and purposes, it's the same test, it's the same product, it's the same patients, it's the same assay. So to all intents and purposes, the results would be the same, but unfortunately it would be a great start to have 293 patients, but they won't allow that.

Right. Understood. But it is still certainly as you said a very important reaffirmation of the efficacy of the test. Just any -- I realize it is early in Europe, but anything anecdotally how is the product being received, were people aware -- obviously the awareness level is not nearly what it is in the US, but were hospitals even aware this is coming out, doctors, any feedback you are getting on that?

I think, Larry, it's just a bit too early because really, because the CE Mark is a self-regulatory process, it doesn't carry the weight of an FDA submission and really we need to do -- we need to do evaluations with key opinion leaders in the individual countries. Jim referred to it earlier. And those evaluations have in most cases commenced at this moment in time, but they are going to take a few months and really until they are completed, one is wasting one's time trying to actually sell and being practical about it. There just isn't the awareness there.

The other thing you have to bear in mind is that the extent of adoption of point-of-care Troponin testing in Europe is running at maybe like around 10% of the level of adoption in the United States. So there is not the same awareness of the benefits of Troponin testing. There hasn't been the same level of debate and in circumstances like what it is in the 2015 market and the lack of menu becomes relevant as well and therefore that is why it is so important that we get BNP in there as well for example. So it is going to be a slower process. I think the prize is huge, but the timeline will be slower than in the United States in the context of adoption.

Right, as you said before.

To some extent, it is a missionary sale.

Understood. Okay, great. Thank you very much. I appreciate it.

Jim Sidoti, Sidoti & Company.

Good afternoon. Can you hear me?

Hi, Jim.

Great. I just want to confirm the sales from the two acquisitions last year. They contributed approximately about $3.6 million. Is that right?

Say that again, Jim.

The Immco and Lab 21 sales in the quarter were approximately $3.6 million. Is that correct?

No -- oh yes -- of the -- it was a little bit higher than that, just slightly higher than that.

Okay. And I'm sorry; I missed some of the commentary on the trial. When do you expect to have a package ready to submit to the FDA?

Well, as I said there, we are estimating that it will take maybe between five and six months from now to get all the data collected. So if you take that -- we'd be very optimistic the data will go into the FDA before the end of the year, but I suppose the unknown thing, it's all about prevalence. We can collect the samples, no problem. We will collect 1500 samples within that timeframe. It is how many actual heart attacks can you collect within that 1500 cohort. And we need to produce about 200 MIs within that 1500 patient cohort to be considered by the FDA to be statistically significant, if you like. So all indications are that we are at about a 13% prevalence right now. Everything looks good for it. So I'd say some time October, November, December timeframe. I can't be any closer than that, but before the end of the year definitely.

All right. And the increased sales and marketing expenses that you referenced in the press release, are those in Europe or are those in the US?

Well, those are in both, but most of it is actually physically located in Europe. For example, we've taken on a sales rep out of (inaudible) in both Scandinavia and in the UK for example, but they are working with the key opinion leaders at the moment and aren't actually selling anything. So we have, as Kevin alluded, $300,000, $400,000 worth of cost this quarter, which cost us $0.02 with no sales attaching, but it is a key, it's an essential investment in our cardiac effort.

So as you get closer to approval in the US, should we expect you to ramp up the salesforce here or do you think that the salesforce you have in place will be able to handle it?

I think, Jim, we will ramp it up, but we do have a good salesforce in place and we are going -- and we take a generalist approach. So I think the existing sales reps will be selling the product, but we will ramp it up. But I think in the US case, I don't see the imbalance -- I don't see an imbalance between revenues and costs. I think the two will happen together. It is a different dynamic because there is a greater awareness of Troponin in the United States. But in terms of Europe where you have got a virtual missionary sale, you are going to have this time gap between spending the money and marketing and actually benefiting from revenues.

Is there a particular trade show that you plan to really start to market the device prior to approval or will you wait for approval?

Absolutely. Well, for instance, we will have our product at ECMED in a couple of week's time. We will be at Medica, for instance, in Dusseldorf. We will be at AACC in the United States. We will attend all of the major -- all of the major diagnostic trade shows. Trinity will be there and of course, (inaudible) and Troponin will be front and center at those exhibitions.

You will be showing the device at the AACC even without -- even prior to getting the approval?

Absolutely. Absolutely.

Thank you.

Bill Nasgovitz, Heartland Funds.

Yes, good day. Just turning to the Premier line, you mentioned I believe astounded by sales in Brazil. What do you account for the strength there and what is the I guess the worldwide opportunity for this product?

Hi, Bill. I suppose -- I don't know if he is on the line now, but I will give the credit, a lot of the credit to our CEO in Brazil because he is a very good guy. He was running Alere's operation and we recruited him and it has taken us a long time to get the approvals in Brazil. There is a lot of bureaucracy, but he worked through it and he has got and we always believed that if we got the approval that he could be a real star performer with his team and he has proven it straight out of the blocks, fairly staggering performance and I think you will see -- I think he will build on that as we move forward. So I put it down maybe to the guys on the ground being very -- just very well known in Brazil. He is one of the -- basically the senior man in diagnostics in Brazil; I give him a lot of credit.

To come onto the next part of your question, Bill, in terms of the quantum of the size, we would estimate that there is 2,000 instruments placed worldwide for A1c annually. So we are talking about doing 460 this year. So we are talking about taking 23, placing at the rate of 23%. We hope to have 23% of the world placements this year. Now there's a long way to go, but it is not bad from having a zero start in January 1, 2012 as new entrants into this market. But that is the quantum of the size and the kind of thing we hope to achieve is we hope to get to 600 instruments annually within about another two years. The replacement cycle is sort of every six to seven years. So you'd have -- the quantum here is you'd have maybe 4,000 instruments in the market eventually doing $11,000 each. That is $44 million of reagents and I'm ignoring the instrument because you make very little money out of the instruments. So $44 million worth of reagent assay and 80% gross margin is sort of $35 million, which is $1.50 per share or $1.60 per share. So that is the quantum of the opportunity here. It is very significant in the context of our size.

Ronan, I like your math. Congratulations. Thanks.

Thanks, Bill.

Chris Lewis, ROTH Capital Partners.

Hey, guys, thanks for taking the questions. You mentioned around that 5% to 6% organic growth rate I think in the underlying clinical lab business. I guess going forward, excluding the acquisitions, is that a good kind of mid-single digit growth level to expect as we look out into the future?

I was hoping it would be a little bit higher to be honest. You would've seen we would have a bit of a drag this quarter in relation to our Fitzgerald business. Also in relation to -- it would have been a little bit lower in relation to Lyme sales as well. So I would be hopeful of that actually increasing going forward. So obviously the Premier line is in there as well. So that is going to drive higher growth going forward.

And it is actually going to see -- obviously, Immco and its growth, we are going to stop talking about it as an acquisition and it is part of the overall infectious disease business. And so I think that will drive that rate up into the double digits.

Right. Okay. And then on the Fiomi, I was hoping you could talk a little bit more on Dr. Apple's trial. Are there specific reasons to account for the better performance in that trial versus the CE Mark trial results that you can point to?

Well, I suppose one thing I would put it down to is first of all the Swedish trial was conducted over six or seven sites within Sweden and without -- some of those sites were managed better than others, put it that way. Dr. Apple, he is a professional; he knows exactly what he is doing and more precisely his team of research nurses really know their business. So they would -- and they do this frequently for many companies, not just Trinity. So I would have said we had probably the A team on this particular trial and I suppose the good news for us in the United States is if you look at the trial sites and if you look at the actual -- the pedigree of the people we have running our trials, you have really a who's who of cardiology in the United States wanting to trial our products.

So you have Dr. Apple in Minneapolis, Alan Bu in San Francisco, which is up there as the foremost key opinion leader, Dr. Peacock at Baylor College again the same. Dr. Hollander and the new guy, Dr. Christensen, all of them are top of the range. So we think with those sort of guys, yes, they will run a very professional trial for us. But essentially the product is exactly the same. Perhaps there is one thing that might contribute to a slightly better result in the United States is that the predicate devices in the central labs, there are differences in Dr. Apple's lab. The predicate device there is the Abbott Architect system whereas the predicate for some of our trial sites in Sweden was the new Roche Troponin T system, which has a higher sensitivity, but isn't approved in the United States. So there are some of those factors, but in general the results were better, but not significantly different, but certainly better.

Okay, good. And then in terms of the US FDA pivotal trial, can we expect any type of interim look at that data as you progress down the road with that trial and enrollment or will kind of the first top-line look be when you submit to the FDA later this year?

Unfortunately, the first top-line look as you say will be just before we submit to the FDA. It is a blinded trial unfortunately. Our tests will be running parallel with whatever predicate is running in those labs on a day-to-day basis. We will not know and of course, in this particular trial, it is not like a standard 510(k) trial. We are not comparing ourselves to the predicate; we are comparing ourselves to what three cardiologists actually adjudicate the actual result to be. And that adjudication won't take place until all 1500 patients have been completed. So the unfortunate thing is that we really won't know the results until the very end and there is no way to actually sort of check, if you like, within that system. And that was the real reason for running that 300 or the 293 patients in Fred's lab. It was to make sure that everything would run perfectly well.

All right. Understood. And then just a financial question. Gross margin I understood was a bit depressed here in the quarter with the higher Premier instrument sales. I guess going forward how should we expect that gross margin to trend throughout the remainder of this year?

Yes, it is going to be heavily influenced obviously by the mix of instruments and as we continue to be successful with instrument placements, obviously slightly counterintuitively it pushes our gross margin down. I think we will have a certain degree of fluctuation from that point of view. The most important thing to think about is about our gross margin will improve over time as the ratio of new placements to the existing install base falls and that reagent throughput becomes an increased factor. Also then as we are getting our cardiac products out into the market, they have got very attractive margins going into the future as well. So that is going to be a benefit for us going forward also.

Okay. And then any appetite on M&A at this point or do you feel pretty comfortable with the business structure and the focus now?

Yes, we are very busy with lots to -- we are not looking at that at all definitively.

Okay, great. Thanks for the time.

Thanks very much. It's nearly 5 o'clock; we will take maybe one last call. One last question, excuse me.

Ross Taylor, Somerset.

Thank you, gentlemen. Great quarter and I have to say the science continues to be exceptionally impressive. Real quick so you can get to it, talk about the dynamics of the US point-of-care market for Troponin, how many ERs are we talking about, what kind of average sales does an ER or in the way of tests and therefore perhaps sales should we be looking for inside the US market?

I think we are actually probably talking about a $300 million market just for Troponin, a $300 million market. We've got 10,000 instruments of $30,000 each. That is broadly speaking the kind of thing we'd be talking about and that market is shared really in essence between three parties, Alere, Roche and Abbott i-STAT. So as Jim has outlined, we meet the FDA guidelines and they don't. We are a significantly better test and one would hope that you'd have a very, very quick adoption.

Yes, and I would agree. Obviously the litigious environment in the US in healthcare makes it a very different game than it would be in Europe once the FDA (multiple speakers).

Ross, maybe just to add to that, that is the point-of-care market that Ronan spoke about. There is also a $900 million central lab market worldwide and theoretically, if the point-of-care tests are good enough, there is no logic for running a central lab system for cardiac patients because you need a result immediately, not two hours later. So if the product was good enough, and we believe ours is, there is a potential for some of that central lab to move to the point-of-care as well.

Okay. So basically the market is $300 million plus, that is Troponin. Obviously BNP would be on top of that?

Of course.

BNP would match it dollar for dollar in fact.

So the US market could be potentially -- point-of-care could be $600 million in the US market?

Yes.

Which is obviously huge in the math; we've gone over the math before. I think it should be fairly clear to anyone. Also, Premier, New York Times Sunday had an article or an editorial in it about diabetes talking about India where they expect within 20 years or so 100 million Indians potentially to be positive for diabetes. We have heard about China, Brazil. I have never heard talk about India. Is there a market for the Premier machine in India?

Ross, there is a reason you haven't heard us talk about India and that is because of the fact that, yes, it is true that there is a monstrous diabetes problem in India and there's huge potential for A1c testing, but there are a lot of very cheap A1c locally manufactured products available and we have found that basically it's a pricing problem really. It is difficult for us to compete in that market. Clearly, our quality would be excellent, but in the context of cheap locally manufactured substitutes being available, it is more difficult to break into that market.

Yes, and that makes a great deal of sense. Lastly I can't let you go without talking about -- we obviously are still kind of hanging on the syphilis point-of-care test. Is there any progress, any feedback, further feedback on that from where we were last time?

Well, I think the last time we talked about it I put it down as kind of a 50-50 chance. It was like a flick of a coin as to whether the FDA will give us a CLIA waiver, which would open up a very significant market for us, potentially and logically as big a market as you have in HIV point-of-care in the United States, which is like a $50 million market. If you think about it, if you add OraSure, ourselves and Chembio Alere. And where are we right now? I suppose I still think we are 50-50. I don't want to build expectation, but we have recently just given some additional information to the FDA and it is excellent, excellent data and we continue to invest hopefully not foolishly. So we are still 50-50, Ross. I am not going to -- I don't want to build expectations, but I do think we are going to have a final resolution of this I think before very long within the next, Jim, what three or four months?

Absolutely. I would also say I don't want to talk down or up, Ronan. Our product is CLIA-waivable; there is no doubt about that. It is not the product's fault if it is not CLIA-waived. It is purely an FDA attitude to CLIA waiver or whatever you can read from that.

Well, yes and we look at -- obviously it is another potential significant positive from an earnings and cash flow situation, which could come in even before we start to see the revenues from Troponin here in the US.

Well, yes. I mean I think this is the potential -- I think at this stage that we will either get it or not get it in the next four months. Now having said that, we have been astounded at the number of extra questions that have been asked in the past. But, at this stage, we think really there's -- there is nowhere else to go except say yes or no kind of thing.

Okay, well, thank you and keep up on the opportunity Troponin. All these things represent is fantastic and next quarter you can talk about the platform more.

Okay, thanks a lot. Thank you very much and thank you to everybody for your support and interest and we look forward to talking to you again next quarter. Goodbye.

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