Trinity Biotech PLC (TRIB) 2014 Q2 法說會逐字稿

Good day and welcome to the Trinity Biotech's second-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.

Thank you, Denise, and thank all of you for joining us to review the financial results of Trinity Biotech for the second quarter of fiscal year 2014 which ended June 30, 2014. With us on the call representing the Company 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 remarks we will open the call for a Q&A 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 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 revisions 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. After Kevin's results we will hear from Dr. Jim Walsh on product development issues and Ronan O'Caoimh will wrap up the prepared remarks with his perspectives on the quarter. Kevin?

Thanks very much for that, Joe, and as we've said there, I will take you through the financial results for your quarter 2 2014. Starting with our revenue performance, total revenues for the quarter were $26 million. This compares to $21.3 million in quarter 2 2013 and this represents an increase of 22% of which Ronan will provide more detail later on in the call.

This quarter's gross margin's 48.1% compares to the 49% we reported in quarter 2 of last year. The reduction in gross margin from this level was partially due to the impact of the higher level of placement of premier instruments which at 106 is significantly higher than the 80 placements we achieved in quarter 2 of last year.

We are also seeing the impact of running two additional facilities in the UK associated with the blood bank screening acquisition. I will return to this a little later in the call.

Moving on to our indirect costs, our R&D expenses in the quarter increased from $0.9 million to $1.2 million and similarly our SG&A expenses increased from $5.5 million to $6.4 million compared to the comparative quarter last year. These increases were largely due to the impact of the Immco and blood bank screening acquisitions both of which occurred in the second half of 2013 and hence would not have been included in the comparative numbers.

Another reason is that prior to the launch of our new cardiac products the Company had started to put in place a sales and marketing function dedicated to the launch and support of these products. As was mentioned in last quarter's call, these costs are not yet being offset by the associated revenues which will come in future quarters.

Moving onto operating profit. This quarter's operating profit was $4.6 million, an increase of almost 25% compared to the equivalent quarter last year. This equates to an operating margin of approximately 18%.

This quarter our interest income was more or less offset by interest expenses in the P&L compared to a net financial income of $440,000 in the equivalent period last year. This mainly reflects the reduced level of bonds following last year's acquisitions and to a lesser extent a fall in deposit interest rates which are now available in the market.

Our tax charge for the quarter was $276,000 which is an effective rate of 6% and continues to be very attractive. One of the main contributors has been the availability of significant R&D tax credits in both Ireland and to a lesser extent Canada.

Moving on to profit after tax and EPS. The net result of all I've spoken thus far is that our profit for the quarter has increased by 13% from $3.8 million to $4.3 million. Meanwhile the EPS increased from $0.177 to $0.19 per ADR over the same period.

Finally, earnings before interest tax depreciation, amortization and share option expense for the quarter amounted to $6 million. And this compares to $5.1 million in the equivalent quarter last year, which is an increase of close to 18%.

I'd just like to now take a minute to recap on this quarter's overall profitability. From a comparison point of view I think the best number to consider is operating profit, which I will remind you increased from $3.7 million to $4.6 million this quarter. Within this number we are seeing a number of factors at play.

From an acquisition point of view, Immco has been profitable from day one and this continues to be very much the case. Meanwhile, this has been partially offset by the impact of the blood banking acquisition. As I flagged at the time of the acquisition, this was not expected to be profitable from the outset until such times the two facilities in the UK were closed down.

Production at these facilities has now ceased and we will be vacating the premises which are located in Cambridge and Newmarket in the UK at the end of this month. Consequently, we will see the benefit of lower costs partly in quarter 3 and then fully in quarter 4.

Also from a cost perspective, as I mentioned earlier, we are continuing to see an increase in sales and marketing costs associated with Meritas. However, notwithstanding these factors I will reiterate that we did grow operating profits by 25%, which I believe to be a very good result.

We will now move on to talk about the significant balance sheet movements since the end of March 2014. Property, plants and equipment increased by over $900,000 and this was made up of additions of $1.5 million as offset by a depreciation charge of $600,000.

During the same period our intangible assets increased by just under $4 million. This is mainly due to additions of $4.6 million partly offset by amortization charges of approaching $600,000.

Moving onto inventories, you will see that this has increased by about $2.2 million this quarter. As well as normal fluctuations we continue to increase the level of premier inventories in conjunction with increased production levels and the need to support an ever-increasing installed base. We've also built up some inventories to cater for the peak lime disease season, which typically occurs in quarter 3 in the US.

Meanwhile, trade and other receivables have increased by $3 million to $27.2 million. Of this increase $2 million relates to trade receivables which increased due to higher sales this quarter together with a moderate deterioration in cash collections.

The remaining $1 million increase relates mainly to down payments of plants and equipment which we will take delivery of later this year. This equipment is mainly associated with the scale up required from Meritas. Finally, in relation to working capital, our trade and other payables have increased this quarter by about $400,000 to $16.1 million partially reversing the decrease which we saw in quarter 1.

Finally, I will discuss our cash flows for the quarter. Operating cash flows before working capital movements increased by $1 million from $4.9 million to $5.9 million. However, this is partly offset by the working capital movements I discussed earlier.

Total net total expenditure in the quarter decreased to $4.1 million versus $5 million in quarter 2 2013. The net result of this is that the net cash outflows for the quarter were approximately $1.9 million resulting in the cash balance at the end of the quarter of $15.2 million. I'll now hand over to Jim who will take you through the latest developments with regards to cardiac.

Thank you, Kevin. I'll now just take a few moments to update you on progress on our cardiac market development programs. In particular today I would like to provide you with detailed updates on the following topics.

Firstly, I would like to give a detailed status update on the US clinical trials for our troponin product. Secondly, I'd like to discuss the results of the independent clinical evaluation recently carried out by Dr. Fred Apple on the Meritas troponin product. This data that is being presented this week at the American Association of Clinical Chemistry meeting in Chicago.

I would then like to provide you with an update on Meritas BNP, which we expect to have CE marks before the end of August. And I will expand a little on the clinical evaluations necessary to obtain FDA approval.

And finally I will give a brief status update on our chart Meritas platform product, Meritas D-dimer. In advance, however, as a brief reminder, just over two years ago Trinity acquired Fiomi Diagnostics. Fiomi, as you know, had developed a high sensitivity quantitative point-of-care immunoacid platform of which Trinity is now developing a range of cardiac products namely troponin I for fertilization of myocardial infarction, BNP for detection of heart failure and D-dimer for the detection of PE and DVT.

There are 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. The worldwide market for point-of-care cardiac testing currently stands at around $650 million and is heavily E/US centric. To our knowledge the only true point-of-care troponin product capable of meeting the new guidelines is the Trinity Biotech Meritas troponin product, which is currently advancing through the US clinical trials for submission to the FDA later this year.

Moving on, therefore, to the status of our US troponin trials. As you know, in quarter 1 of this year we announced CE marking of our guideline compliance troponin product. CE marking is a regulatory standard necessary to market a product in Europe.

And as I explained on our last call, it is our achievement of successfully developing a guideline compliant troponin product that fundamentally distinguishes Trinity's product from all other troponin products, which now presents Trinity with such an enormous commercial opportunity. Unfortunately to obtain approval to sell troponin in the United States, use of European generated clinical trial data is not permitted. So to obtain FDA approval clinical studies must be carried out in the United States on the intended use population.

The male studies may 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 we have agreed with the FDA to recruit a minimum of 700 healthy volunteers.

This study is currently running at three US sites. The clinical study is progressing well and as of last Friday we had collected whole blood and plasma samples from 413 healthy volunteers.

So as you can see we are now more than halfway through this data collection. I would expect to complete this data collection on the normals in the next couple of months or thereabouts.

Secondly, the longest and by far the most challenging is the chest pain study in the intended use population. A number of months back we agreed with the FDA to carry out this trial at six sites across the United States with a view to recruiting a minimum of 1,500 patients presenting in the ER with symptoms suggestive of ACS.

To date we have recruited 275 chest pain patients. Unfortunately for a number of reasons it has taken longer than expected to gain momentum on our chest pain recruitment.

However, we are now running at a recruitment rate of approximately 40 patients per week and in order to further accelerate recruitment we are also bring online an extra 4 clinical trial sites bringing the total number of sites to 10. This should result in the number of chest pain patients increasing to somewhere between 80 to 100 patients per week, which all going well, should see data collection completed in about four months from now or thereabouts.

In addition to this we have a call scheduled with the FDA for August 11 to discuss a proposal to decrease the number of chest pain patients required from 1,500 to 1,000. This call with the FDA is in response to a meeting that a group of senior US cardiologists held with the FDA early in the summer. The cardiologists suggested to the FDA that the level of clinical data required by the FDA is particularly onerous particularly on point-of-care products.

In summary, this suggested that a cohort of just 1,000 chest pain patients should be sufficient to prove the performance of a troponin POC product. On the suggestion of the cardiologists we wrote to the FDA asking for guidance on the reduced patient numbers thus resulting in a call scheduled for August 11 next. Should the FDA agree with such a revised number of 1,000 patients, this would obviously have a very positive effect on our data collection timelines.

So in summary, after a slow start data collection for a troponin trial is gaining momentum. In addition, the extra trial sites would undoubtedly accelerate data collection and should the FDA be persuaded to reduce the patient numbers from 1,500 to 1,000, the effect would be quite positive indeed.

I would now like to move on to discuss results published this week at the AACC meeting in Chicago on an independent evaluation carried out by Dr. Fred Apple when he evaluated the diagnostic accuracy of our cardiac troponin product. This study was carried out on 319 patients presenting with symptoms suggestive of ACS at Hennepin County emergency department.

Both plasma and whole blood samples were taken and tested on presentation. That is what we call time zero. And then again at six hours.

The results of this study were adjudicated using the third universal definition of MI. And please note that this protocol exactly mirrors the format of our US FDA trials so the results obtained here should be indicative of what we can expect from our main US FDA trials.

I am delighted to report that results obtained demonstrate exceptional performance with a whole blood sensitivity and specificity at time zero equal to 75% and 93.6% respectively, rising to a sensitivity of 87.5% and specificity of 94.7% at six hours. Now just to put those numbers into context, in the study again published again by Dr. Apple in the Journal of Clinical Biochemistry in April 2013, he tested the diagnostic performance of a number of troponin products including the Abbott i-STAT product on a similar patient population. In that study the Abbott i-STAT product demonstrated sensitivity time zero of just 32% rising to 68% at six hours compared to Trinity's sensitivity of 75% at time zero and 87.5% at six hours.

Even the fourth-generation Abbott ARCHITECT center lab system from data published in its own instructions for US demonstrates time zero sensitivity of 60% and 78.5% at 6 to 12 hours compared to our 75% and 87.5%. When one considers that the i-STAT product is probably the market leader right now in point-of-care testing, it is quite easy to understand the extent of the opportunity that lies ahead for the Meritas product once the product is FDA approved.

The results of this study lead Dr. Apple to conclude that the Meritas troponin product will be diagnostically useful in both ruling in and indeed ruling out MI in the emergency room setting. Furthermore, this data represents slightly more than 20% of the total data set required for our main US trials, I.E. 319 patients out of 1,500 patients. It therefore provides considerable comfort that our product stands an excellent chance of meeting the now very stringent FDA performance thresholds and obtaining FDA approval in due course.

Moving on to Meritas BNP. Product Development on our BNP product is complete. CE marking trials have been underway for the past six to eight weeks and are nearing completion, and I am happy to say the product looks really good.

There are three main segments to the BNP clinical protocol and these segments are tied both to European approval and indeed US FDA trial approval. Firstly, there is an analytical performance trial which measures such things as limit of detection, limit of quantification precision, interfering substances, etc. This section of the trial is complete and exhibits the necessary performance characteristics.

The second section of the trial involves measuring BNP levels of a reference group of healthy individuals. This reference group must be gender matched and must be categorized by age, I.E. grouping from less than 45-year olds, 45- to 54-year olds, 55- to 64-year olds, 65- to 74-year olds and greater-than-75-year olds.

The performance of the product within each of these age groupings must be measured and published. To date we have measured the BNP levels in 1,352 European and US healthy subjects collectively of which 776 were female and 576 were male. This portion of the trial is now complete and the results are very satisfactory.

The final section of the BNP trial is to measure BNP levels in actual heart failure patients. Again these patients must be gender matched and also must be categorized in accordance with the New York Heart Association heart failure scale, which categorizes patients into a scale of 1 to 4 depending on the severity of the heart failure condition.

To date we have tested just over 600 heart failure patients. To complete our trial we would like to augment this sample set with a further 20 to 30 grade 4 heart failure patients. These samples are currently being collected and the dataset should be completed within two to three weeks leading to CE marking of the product before the end of August.

With the release of the clinical trial have said described it will be suitable for submission for both CE approval as well as FDA approval where unlike troponin a reasonable quality of bank samples should be acceptable. A pre-IDE meeting has been sought with the FDA to determine what extra data they may require to be generated for a full FDA submission and depending on the FDA's response submission for BNP application to the FDA is expected before yearend.

Finally, development of our third product in our cardiac marker panel, D-dimer is now well underway. D-dimer, as you know, is a marker for DVT and PE.

We have made the necessary selection of antibodies in [draws] and chip design. The product is now demonstrating acceptable performance at the clinically relevant range.

I should be in a better position to provide a definitive timeline for availability of the product within the next six to eight weeks but suffice to say right now the product is looking very well. And with that I'll hand over to Ronan.

Thanks, Jim. I'm going to review revenues for the quarter and discuss business developments before opening the call to question-and-answer session.

Our revenues for the quarter were $26 million up from $21.3 million in the corresponding quarter, which is an increase of 22%. Our HIV sales for the quarter were $4.6 million, a marginal increase on prior-year sales. US HIV sales were up 3% and public health spend by individual states continues to be very depressed and we see this reflected in the results of our competitors also.

However, our hospital HIV sales continue to improve due largely to the fact that we are now selling a HIV-1/2 to product following FDA approval for our HIV-2 claim at the end of last year but also due to us taking HIV-2 license at that time. Our African HIV revenues are down 2% but the fundamentals of our business in Africa continue to strengthen. We are the confirmed test of choice in virtually all African countries and continue to receive a premium price for our premium product throughout the continent.

Our chemical laboratory revenues increased from $16.7 million to $21.4 million in the quarter, which is an increase of 28%. However, when the impact of both the Immco and blood banking acquisitions are excluded our underlying organic growth for this quarter compared with the corresponding quarter of last year is 5.2%.

Our diabetes business grew 10%, our infectious disease business grew 4% while Fitzgerald decreased by 6%. The diabetes business performed strongly with 106 premier instruments placed during the quarter giving us 207 placements in the first half of the year. This means that we are in line to achieve our target of 460 placements for the year as a whole.

All markets performed strongly, USA, Europe and China. But Brazil merits special mention as 27 instruments were sold during the quarter by our direct sales force following the sale of 21 instruments in quarter 1, which was our first quarter in operation following approval in January of this year.

As you know, we have been developing a companion product for our premier boronate affinity instrument over the past three years and at a cost of $2 million. The boronate affinity product solely measures hemoglobin A1c, which is a test of choice for monitoring diabetes patients.

Our new premier resolution instrument, which we have just completed is designed to detect and identify hemoglobin variant using ion exchange technology. Normal hemoglobin types include hemoglobin A, hemoglobin A2 and hemoglobin F; the most common abnormal hemoglobin variants include hemoglobin S, C, T and E. Another more recognizable variant you may have heard of is sickle cell anemia, as an example.

Currently we have a $7 million business in the hemoglobin variant identification market through our old high throughput ultra instrument platform. This presence is primarily in the high throughput mega labs in the United States, for example, Quest and Labcorp.

In due course we will transition this business on to our new premier resolution instrument, which we've just completed. And we will also target the low throughput market, which the premier resolution instrument will enable us to do. And that is something that we haven't hitherto been in a position to do.

The market for hemoglobin variants can be divided into the neonatal and adult screening markets. Legislation is changing on a country-by-country basis and is directing that all newborns be screened for hemoglobin variants. Examples of such markets include the likes of the US and Brazil and the trend is spreading thereby increasing the target market for Trinity Biotech.

In addition the market is significantly less competitive than the A1c testing market as there is only one competitor in the market. Both the premier boronate affinity and the premier resolution instrument that we just completed are in essence the same hardware technology. We will obviously achieve economies of scale now that both products are in the market.

Where the instruments differ is in the consumables which are run on them and the software that runs the instrument and interprets the result. During the quarter we formally launched the new premier resolution instrument. The first demos took place in April, were successful and the first instrument has been shipped to a customer in the UK in conjunction with our partner Menarini.

We are currently starting to roll out the instrument to other markets in the Menarini network. And in due course we'll formally launch the instrument in the USA, in Brazil and beyond.

And then in terms of numbers. In terms of worldwide market size we estimate that the neonatal variant is worth $60 million and adult variant market is $30 million.

Our current variant sales on our ultra instrument are $7 million. With the new instrument we now have both the reagent and the instrument to take on our single competitor in a serious way and increase our market share significantly.

Moving on then to the performance of our infectious disease business during the quarter, it grew by only 4% compared to the prior quarter. In fact, the business performed well but very weak lime Western block sales as a result of the particularly severe winter, which killed most lime ticks, was a big drag on revenues.

As the summer is progressing lime incidence is increasing towards normal levels. And we anticipate strong quarter 3 revenues. The balance of our infectious disease business both in the United States and in China performed strongly.

Moving onto Immco, which we acquired at the end of July of last year, we are particularly pleased with its performance. The US has virtually no reagent sales but has monstrous sales potential given that over the past three years the management have reconfigured and standardized the entire product range and has gained FDA approvals on the full immunofluorescence and a lighter range of products. Now our sales force are placing the products range onto our existing installed instrument base with significant success.

Moving onto the Immco reference laboratory, which is based in Buffalo. And as previously mentioned we have recently launched a new Sjogren's test, which is dry eye disease -- a dry eye test. This is being marketed through a company called Nicox, a public company, which is a specialty ophthalmic company who have invested heavily in marketing the test.

Following a trial launch in four states in the United States in January, which went really well with revenues way ahead of expectation, Nicox launched nationally last month. And we are now confident that this partnership will yield significant meaningful revenues in the immediate future.

Meanwhile in Europe, the partnership with Menarini, which remember is separate from our partnership with them on premier and diabetes, is going very well with strong revenue growth. In summary, we are confident of exceeding 20% growth on the Immco business this year. So if we could now at this point hand over to the operator for a question-and-answer session, please.

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

Thanks, good afternoon, everybody and thanks for taking the questions. You touched on actually kind of a lot of this stuff but just maybe to get a little bit of extra color, starting with the cardiac business.

Can you assess Dr. Apple's data, the study from his data versus the European trials? And then kind of second to that, this may be intuitive but humor me, if you will.

I think some of the big spread in your numbers versus competitive products is really at that zero hour number for sensitivity. Can you kind of talk through the practical applicability to the ER doctor in the importance of that number specifically?

Sure. First of all, the data produced in our CE trial versus the Apple trial, the Apple trial looks at least substantially better than the data we produced for the European trials. We had a time zero sensitivity, I believe, I don't have the package insert in front of me, actually -- sorry, I do, as it turns out -- we had a sensitivity in the time zero in the CE trial of 60%, I.E. we detected 60% of patients coming in on presentation.

That has jumped quite dramatically to 75% in the Apple trial. But then at the six-hour time point in the European trial we had jumped to just under 89% and in the Apple trial, again, we are at 88%, 87.5%, I call it 88%, so it levels out about that point.

But the good news is, I suppose, a high sensitivity assay has the ability to rule outpatients. And in a test that has a sensitivity at time zero, 75%, it's very important.

While there may be no definitive diagnosis made in that patient, because don't forget, the new methodology for determining whether you have an MI or not is a rise or a fall in troponin over a period of time, so to have to wait for that extra period of time to need two troponin results over a period of time, but to have a sensitivity of 75% at time zero is actually quite good and is a great help to the cardiologist in ruling out patients. However, as I say, don't make that definitive diagnosis until they get the second time point.

Okay, that makes perfect sense. You talked about this a little bit as well but looking at the prospect of bringing on additional trial sites in the US, it sounds like probably the key driver there was really a function of trying to speed the recruitment but is there any benefit to expanding the patient cohort geographically at all? Is there anything there and how much additional sites frankly are sites coming to you saying that they want to be part of the trial?

First of all, the FDA ask you to have geographically diverse sites. And they were very happy with -- we initially talked about five and then we took it up to six, so they were very happy with that.

It makes it better for them, it makes it better for us quite frankly to have more sites even though it makes the trial more difficult. Because as you add more sites you add more complexity, you add more opportunities for things to go wrong.

So while it's a much more -- the more sites you bring it's the more stringent test of your product's performance. Quite frankly the real reason -- everything being equal, I would much prefer to to have stayed at five or six sites.

It's much more controllable, much more manageable. Unfortunately, it's the nature of our trial. We are asking an ER nurse to take a sample from a patient at time zero, at 6 hours, at 9 hours and 12 to 24 hours.

That's a very very difficult specimen to take. Because you have to manage that patient over a 24-hour period. And a lot of the hospitals even though they say they have second shift and third shift covered, they actually don't have the right sort of people.

So you tend to think if you were to look at the actual numbers of people coming into the ER and the number of chest pains, you would be led to believe that the trial could be done very very quickly. But actually when you go through the actual logistics of it, the recruitment times are quite limited.

So what has actually happened is, we started off this trial a number of months ago and disappointingly getting four and five patients being recruited per week in ERs where there's many many many multiples of that turning up. It has taken a set length of time to get the logistics sorted out.

I think just in layman's terms so people understand, the practical difficulty we have here is that when an individual is lying on a hospital accident emergency bench trolley, worrying basically about dying, thinking they have just had a heart attack, irrespective of how charming the nurse is, indeed, how persuasive she is, that individual may be disinclined to actually sign onto a trial even though it's for the greater good of humanity. And that is a difficulty we have basically is that the vast majority way into the 90%, the high 90% of people basically tell us to bugger off when we approach them. That is the practical difficulty we have.

That makes sense. Very artfully stated. I like that, okay, that's helpful.

Maybe just turning to the diabetes side here really quick. And you sized the market for some resolution side, which was actually my first question on that.

Will the instrument -- the resolution instrument, and I don't know how many you might have factored into your thought process here for the second half of the year, but will those go toward the 460 target? And then you also did talk about they do have a different consumable profile. Can you get any more specific on that?

In terms of the 460 instruments, obviously we've just launched the instrument at this stage. And there will be additional to the 460 that we are doing at present of the basic premier if you want to call it that, premier 9,210.

Okay, it's Rory here. The other point to make is that this gets rolled out on a market-by-market basis, so it doesn't all happen simultaneously across Europe with Menarini.

There's obviously training involved. We started in the UK. That training is finished for the UK.

There is training going on this week for other jurisdictions. And that will get rolled out on a piecemeal basis, so I wouldn't expect humongous numbers in the second half of this year. Obviously it's more so a 2015 product.

Okay. And then the consumables side?

Bear in mind that we have a $7 million business already here. So for example Quest and Labcorp with really really high throughput instruments. So our ultras would be doing huge volumes in there.

So we will replace the ultra with the premier but it will not give rise to any additional business. It's just adds those securities into the future.

So there will be a lot of that kind of thing, a replacement of existing instruments. We've just won a couple of contracts in both Rio and Sao Paulo as well for neonatals worth I think about $750,000. Those instruments will go in there.

I think typically the instruments will actually be higher volumes and much higher value of reagent throughput than the typical premier that would be in a glucose lab, you know? I think it can have a very material effect on the business but in terms of instrument placements they wouldn't be that staggering.

Okay. That works. Thank you.

Larry Solow, CJS Securities.

Hi, good afternoon. Just a couple of follow-ups.

We'll start with premier where you left off. On the target 460 placements in 2014, what percent or approximately what percent of the market are you getting in terms of worldwide placements for A1c machines in 2014?

Larry, our estimate is there are 2000 instruments placed annually in the world. That will be 22% of all the worldwide placements.

And I suppose we aspire to hitting 600, hope maybe not quite in 2015. But I think we have a shot at getting very close to 600 instruments in 2015 and of course that would give us a 30% worldwide market placement share and would obviously after a six-year period give us a 30% -- say that that gives us 30% of the world market. So that's what we are working towards.

That sort of -- your target's sort of plateauing around plus or minus 30% share going forward, or within a couple of years? And what's the current utilization or run rate, average price or total reagent sales on these machines and how long is it taking to ramp up?

Obviously we are adding apples and oranges here because for example in China we are going through distributors and in Menarini in Europe we are going through distributors, in the USA we are going direct and in Brazil we are going direct. But on average we are thinking that our instruments will do about $11,000 per annum of reagent.

Got you. And generally does that take what, a couple, two or three months from -- or six, or longer on average? I realize maybe China is a little longer but from time of sale to time it gets to that point?

Again, we are adding apples and oranges. In the USA it will be a month because we are doing it directly. In China we think it's about seven months because our distributor in many, a part from Shanghai, Guangzhou and Beijing, he is using some distributors, so there's another cog in the wheel.

So probably seven months there because he also takes a while for the products to ship there. And in Brazil three months, probably. So I think on average four to five months.

Got you.

And Menarini then take the [Metro Central] Lab in Florence and distribute them to the individual countries and that adds a couple of months onto it as well.

Got you. In terms of Fiomi, or Meritas, in terms of the group or the group of cardiologists you referenced went to the FDA, is that sort of the same to ask for the perhaps the guidelines are too stringent and may be reduced to 1,000 patients, can we assume this is the same group that was instrumental in setting up the guidelines and perhaps Dr. Apple was a part of that, or maybe excluding him because he's doing this trial but --?

You can absolutely assume that, yes. I don't think it's any secret that the group of physicians that went were Dr. Apple, Dr. Wu and Dr. Hollander because they are seeing it firsthand. And they are coming at it from a very practical standpoint.

They just need a good point-of-care test in the ER and they want it fast. They just think that the hurdle is a bit too high and is probably unnecessary. Whether the FDA agrees with that I have no idea but I'm going to find out on August 11 as to whether they have bought into that particular theory.

Even if they don't, the difference is probably six weeks.

Right, exactly.

Once the 10 sites are going, exactly.

And to the best of your knowledge and I realize there's not 100% transparency with your competitors, but obviously these guys, the Abbotts and the Roches of the world have noted their tests are insufficient and easier said than done but are they working on a better test, what do we sort of know publicly in terms of that?

Quite frankly, publicly we don't know anything really. But the one thing I do know is the sites that we are running our clinical trials in the United States are the sites that other cardiac products would be run in if they were going to do it.

And we don't see any dossiers or folders or other products from the competitors in there right now. So I suppose intuitively we believe that there's not that much happening but we don't know that for a fact.

Right. And obviously the could be research behind the scenes that you wouldn't know. But if they were actually running trials already or had run trials that would have to be public, essentially, is that fair to say?

No. Actually, it doesn't have to be public. I don't believe it's not mandatory that it is public for this type of product.

For instance, Trinity Biotech is not on any FDA clinical trial websites saying we are doing clinical trials. We checked into it, it's not necessary to do that. So if it's not necessary for us I guess it's not necessary for a Alere.

Got you.

We would have to believe that our competitors must be working on some sort of a plan B. They just can't be waiting for us to take the market away from them.

Right, right, okay. Just a couple of housekeeping questions.

You mentioned the drop in Lyme disease year over year. Do you happen to have an approximate from what it was this year versus last in the Lyme test sales?

Well, it's down -- this quarter versus last quarter -- it's down about $300,000. So it's sort of just in the below-$2 million barrier.

Hoping we'll have a $3 million quarter next quarter. It seems to be picking up.

And the contributions from Immco looks like between Immco and Lab 21 we are a little under $4 million. Can you tell me is it in cost still sort of on pace to reach close to the $15 million for the full year?

Yes, we think it will get there. It's obviously end loaded toward the end of the year but we think we will -- remember I said I think I'm comfortable it will do 20% with us, yes.

Right, great, thanks so much.

Ross Taylor, Somerset Capital.

Thank you, gentlemen, it's been a very interesting and informative call. Couple of quick questions.

One, I heard you comment that US premiere sales were actually good. And I think that's a bit of a change of pace from the past where I think we've been a little disappointed with the pace of sales in the US. Am I correct in that?

Yes. As we explained before, the US opportunity isn't as big, Ross, as elsewhere because other countries, because US is unique in using immunoassays. What I mean by that is that the Abbott ARCHITECT and the other four big iron instruments by the biggest companies, Johnson & Johnson, Roche, they have an A1c test and it is utilized in the USA.

So that makes the scale of the size of the market less than people would expect. So I think we are going to end up -- it's going to be up a 70% to 80%, perhaps even maximum 90% instruments-per-year market for us into the future.

And we are on course to do 70% this year. And I will just make this point that a US instrument is probably worth the equivalent of three elsewhere because you are selling direct and because the pricing is much more attractive.

But yes we had a good quarter this quarter. Sometimes, for example this quarter, I think we wouldn't want a particular contract with a buying group where we put seven instruments in. So you can have timing differences as well.

Okay, on Fiomi, when we look at the situation you talked about the point-of-care market being roughly $650 million. Does that include lab tests that are actually -- talking to people in this space that there aren't a lot of hospitals where the clients who just don't trust the tests enough that they actually use lab tests as part of their triaging process and although it takes a fair amount of time. Are you picking that up in the number when you hit a $650 million --?

No. Our best estimate is that the troponin market, point-of-care market, is $350 million and the BNP is $300 million. That's where the $650 million is.

Now, just going back to troponin, so we have $350 million of point-of-care troponin and we believe that there is another $900 million of laboratory troponin making a total of $1.25 billion. Now just to pick up on that, there are really no circumstances in which one really should be waiting an hour and a half for a troponin result.

And therefore if the quality of the point-of-care test was good enough, there ought to be a migration from the laboratory into the point-of-care of that $900 million. And in doing so the $900 would become a number probably 3 times greater because the unit price per test is so much higher.

So there's two opportunities for us here. One is to compete with the existing participants being primarily Alere and Abbott in the United States. And then the second opportunity is to basically to encourage people to convert from the laboratory test to a point-of-care test, so to ease into that $900 million.

Yes, which obviously makes the market and then the potential for the products substantially greater than a lot of people on the street have been talking about.

Yes, I think it is as well. But at the same time to convert the use of some of the laboratory model to a point-of-care model it takes quite a bit of effort.

There needs to be persuasion and there's a missionary element to it. The low-hanging fruit is clearly the existing point-of-care business.

And once -- when the FDA has approved Fiomi and we are looking forward, obviously this is a platform not just two tests or three test at this point.

Sure, Ross, absolutely.

Can you talk a bit about that and how the platform rolls out?

Well, you are absolutely right. The platform is a quantitative point-of-care platform.

So quite frankly, almost any test you want to put on a deck and run as an immunoassay can be put on this particular test. We would be looking at product groupings. So if you think that this platform will be in the ER, so we'd obviously like to put some assays that will that face in the ER.

So the sort of assays we are looking at are obviously we have our three cardiac products, which will quite frankly keep us busy for the next little while. But then adding onto that believe it or not there is a very nice market for pregnancy testing in the ER. And you might wonder why pregnancy testing?

But there is similarly some rules that if you have a lady come in with trauma into the ER before they can do any sort of imaging or any sort of x-rays they need to determine if that lady is pregnant. And of course the standard old urine pregnancy test doesn't work in that environment. So a pregnancy test would be a very valuable test to put on the platform.

Then you have tests for the likes of kidney damage markers and liver damage markers that would again be suitable to the ER. That would be nice.

And if you were to go into the intensive care wards there could be another panel of assays that could be brought in there like for instance test for sepsis or various other assays. So, yes, the platform is just that, it's a platform. And we have plans, once we get our head above water from the cardiac development, to start putting assays on there as quickly as we possibly can.

So when I look at this as a layman, it seems to me that with troponin, when the FDA approves troponin and all the science says it should be approved, that it actually creates for you guys a chance to be a significant player in the testing market, point-of-care testing market in the ER as well as other parts of the hospital, which is a groundbreaking or changing situation for this Company, is it not?

Absolutely. I think what is evolving now is a situation where we become a significant player in critical care.

The big players there being probably Radiometer and Werthen and so is Abbott with the i-STAT. And that's basically where we are going with it and an ever-expanding panel of product.

Okay. And I can't let you go without asking you about syphilis. I know at this point I guess we still are waiting for Godot with the FDA but can you give us a bit of an update now?

Yes, so just to remind people, we are the only company with a rapid syphilis test approved by the FDA at the moment. But the reality is that that's of very little value without a clear waiver.

Because there are really only certain -- the only environment in which a rapid syphilis test is utilized really is in the public health lab outside the hospitals. The hospitals just tend to use the traditional method, the laboratory method.

So the public health opportunity for syphilis we estimate to be very significant. I'll remind you that the public health HIV market in the United States is $40 million to $50 million. And there is no logical reason why syphilis wouldn't be a very significant amount of that number.

So the only thing really that is separating us from actually entering that market is the fact -- in a meaningful way -- the fact that we don't have a clear waiver, which basically is an approval for a non-phlebotomist and nurses to be able to actually run the test. And the FDA are really really slow to give these clear waivers. And we have worked progressively over the past -- through the years -- trying to get that clear waiver, so far without success.

But we have worked diligently at it. And we are at the stage now where we have submitted what I would regard as genuinely the final, final, final data to the FDA. It's almost inconceivable, in my opinion, in our opinion here, that they could ask any further questions.

I think we've got a good shot at getting an approval from them. I know the CDC would like the product to be approved because it's clearly in the common interest that people with syphilis ought to know that they have it for all so many such obvious reasons. And it's an excellent test.

And so I think we've got a great shot. But I would characterize it as a 50-50 shot. And in terms of what the product could do if we were to get the approval, I think we could be in double-digit millions within 18 months.

Double digit. So you would see this as being basically a AIDS-plus type product, market size?

Yes, I think it would be a very substantial market. And I would also just point out that our sales reps, we have special sales reps selling into public health labs because they are already selling the HIV products. This is an obvious logical companion product for us.

I think everybody can understand that. The reality is that the incidence of syphilis is so much higher than HIV it would actually survey very very useful purpose.

And so we will await the FDA's decision. I think it should be forthcoming one way or the other over the next three or four months.

Okay. And I have to say I'm actually amazed this is the first healthcare company I have dealt with which is located outside the US which has not been asked a tax inversion question but I'll leave that to someone else. Thanks.

Jim Sidoti, Sidoti & Company.

Good afternoon. On multiple calls you have indicated that the troponin test, the market for that is really the US, that there isn't a big market in Europe for that because they are not doing point-of-care there. But how about for BNP, with that have a market in Europe as well?

Yes, it will, Jim, but the difficulty we face is that -- the difficulty we face there is the BNP market in Europe is mostly a doctor's office market, which is a different route to market, a little more difficult to achieve. So I think the real way we sell our BNP test in Europe is as a companion to troponin.

And so what we're doing is we are working very hard on trying to get the opinion leaders to run evaluations in each of the individual European countries. And I think successful evaluations there should result in European sales in those individual countries and then BNP will be the companion to it.

It's quite a difficult thing for us with our current menu to, for example, to space Alere in the doctor's offices around Europe. That is a difficult thing to achieve.

All right. So it seems like really the key is to get that first FDA approval and then it's kind of off to the races on that one?

Yes. I would put it another way, our focus in Europe is on the ER, not on the doctor's office. And for ER, our calling card is really troponin and then BNP is a very important companion product but our calling card is most definitely troponin.

Right, right. But if you get it adopted in the US that might give you some ammunition to help convert some of the European ERs to point-of-care?

Yes. To put it another way, we have a wonderful troponin test, better than everybody else. But our BNP is more or less the same as everybody else's, that's the real key point.

Okay. All right, and then just a detail on the revenue breakout. It seems like there's about $3.5 million from the two acquisitions you did last year, is that right?

A little bit higher than that, but of that order, yes, that's right.

And then was that more Immco than Lab 21, can you break that down even further?

Absolutely. Obviously Immco is by far the bigger share of that so you are talking about sort of 75% to 80% but being Immco. Immco was over $3 million.

Okay. And do you expect the Lab 21 business to accelerate now that you have the production facilities consolidated, or at least the profitability to improve, I would assume?

Yes, we have been running double factories for the past couple of months, you can imagine with batches being sent here. And then we've had all the cost of close down but that should be -- that will be complete at the end of July -- at the end of August.

We are just nearly there now. Literally, they've just gone on holiday and they won't be coming back on Friday. So it's just closed, you know?

Okay. All right, thank you.

Chris Lewis, Roth Capital Partners.

Hi, guys. Thanks for taking the question.

First on troponin, so let's assume FDA submission by the end of this year. Can you walk us through the process thereafter and I guess the associated timing expectations post-submission through a potential FDA approval?

Well, Chris at that stage once a product is submitted, our job is done, normally. So normally what would happen, if this was a regular 510(k) you would expect that it could be, well, theoretically you would expect it would be turned around within 90 days.

I don't believe 90 days is going to happen with this troponin test. It's a longer review because again, this is not a normal 510(k) as you know very well for you. Compare yourself to a predicate and if you are equivalent to the predicate well then you get a tick in the box to say you are approved.

Our predicate here in this case is what three cardiologists actually say was the true result. So I would suggest like normal -- I would think what will happen is we will submit to the FDA. They will take their 90-day window and will come back with some questions for clarification, etc., etc., etc.

I would be surprised if they don't. You get about a -- normally, it varies, again, -- you maybe 30 days to answer that set of questions, if you can. Hopefully they are not going to ask you to generate any great amount of data that takes loads of time to do that.

Hopefully it's just clarification and maybe statistics, etc. You resubmit again within that 30 days and then have another 90 days to cogitate over those answers. I would have thought it was probably somewhere between -- I'd be amazed if it was shorter than four and it shouldn't be longer than six.

Okay. So if all goes according to plan, I guess by the first half, end of the first half of next year is kind of the expectation for approval?

That's a good guess. I would've said yes.

Okay. And then just turning to the clinical lab business, I think you mentioned ex-acquisitions underlying organic growth was around that 5% range. How should we think about that business, the underlying organic segment of the clinical lab business going forward? And I guess what are your high-level takeaways of how that business and segment is tracking relative to your expectations so far this year?

We got 4% out of infectious disease, which is clearly disappointing. And I explained though that the drag there was a very big component of that business is Lyme Western blot and basically there was for a few ticks biting in quarter 2.

I think what you are going to probably see is, bear in mind that Immco will become part of the infectious disease business. And so I don't know for how much longer we kind of separate it and talk about it separately. So that will actually serve to enhance the growth of the infectious disease business.

In essence what you have is you have the premier business, the glucose business, the diabetes business growing solidly. It should be, particularly now with the second instrument out, it should be doing double-digit growth. And I think the infectious disease business, which has been doing kind of 6%, 7%, can get lifted to be on 10% by Immco and also aided by the blood banking.

So I think of that point in time we aspire to basically have the entire business at double-digit growth and that's kind of excluding the whole cardiac opportunity. With a bit of a drag obviously with Fitzgerald which is more or less just hung at around just around $11 million a year of revenues for a number of years now. And we find it very difficult to grow it.

I would say in its defense that it's an extremely profitable business. It's EBITDA number is so-so impressive, so it contributes but -- it contributes very well to profit but it just retards our organic growth rate. Does that answer your question, Chris?

Yes, that's great. And then turning to the point-of-care segment that has hovered around the 4%, 5%, 4%, 6% level through the first half of this year.

Maybe talk about the impact first from what you are seeing with the HIV-2 claim in the US and the benefits you have seen from that so far in the field. And then bigger picture, what type of growth trajectory should we expect for the business going forward?

There's two elements of that business. One is the hospitals kind of finger pick business and wherever a nurse gets jabbed by a needle they will automatically run an HIV test, so every US hospital carries those tests.

And we were greatly disadvantaged by the lack of an HIV-2 claim -- an HIV-2 license and we were beginning to suffer very badly. Now the taking of the license and the granting of the claim by the FDA has changed that around. And now we are winning new hospitals all of the time because the reality was we were actually losing because of the lack of the license.

So that's on a positive trajectory and we will do very well. What is a drag on our US HIV business is the fact that the individual states are spending less money on their public health programs. And I think if you looked at our main competitor in this area and their results, I think they were nearly down 20%.

So you know that basically has been a real problem and so there's two competing things that are happening. Less a public health spend and an increasing hospital share resulting sort of all in the same kind of a level flat business. And we are hoping -- we believe that the public health spend will improve.

We do believe that will happen at which point I think we are going to see reasonable growth in that market. Bear in mind this is only a $6 million segment of our business and it's not that significant.

Understood. And then just one more from me.

On the cash balance that has come down a little bit here the past few quarters, there's some moving parts it sounds like this quarter. But I just guess going forward given the increase spend on clinical activities and the commercialization resources for cardiac troponin and BNP eventually, how should we think about the Company's current cash balance versus utilization and needs going forward? Thanks.

Just to mention one thing. Of course we have a possible [in-coat] beginning to have an impact now and we also have had a drag from Lab 21, which ceases as of this weekend and that becomes profitable.

In addition to that, there obviously is a very big spend him at $3.5 million spend on the cardiac trial, the troponin trial. But that will -- a lot of that has been spent, it stops very quickly.

So I think at which point we should revert to positive cash flows over all, so I don't see that as being a problem. I think we have plenty of adequate cash.

Okay, great. Thanks.

I think this is a record for us in terms of length of call. I just say thank you to everybody, thanks for your support and your interest and we will talk to you next quarter.

Enjoy the rest of the summer. Bye-bye.

Ladies and gentlemen, this concludes our conference. We thank you for attending today's presentation. You may now disconnect your lines.