Trinity Biotech PLC (TRIB) 2014 Q4 法說會逐字稿

Welcome to the Trinity Biotech fourth-quarter and FY14 financial results event.

(Operator Instructions)

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

Thank you Amy, and thank all of you for joining us to review the financial results of Trinity Biotech for the first quarter of FY14, which ended December 31, 2014.

With us on the call representing the Company are Ronan O'Caoimh, Chief Executive Officer; Kevin Tansley, Chief Financial Officer; and Jim Walsh, Chief Scientific Officer and Business Development Director. At the conclusion of today's prepared remarks, we will open the call for a question and answer session.

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 revision to these forward-looking statements.

With that said, let me turn the call over to Kevin Tansley, Chief Financial Officer, for a review of the results. After Kevin's remarks, we will hear from Jim Walsh on product development issues and a cardiac update, and Ronan will wrap up the prepared remarks with his perspectives on the quarter.

Thanks so much, Joe. Today I will take you through the results for Quarter 4 and the full year 2014.

Beginning with our revenues, total revenues for the quarter were $26.7 million. This compares to $25.5 million in Quarter 4 of 2013 and thus represents an overall increase of 5%. Ronan will provide more details as to the makeup of this growth later on in the call.

Moving on to gross margins, as you will see from our press release, this quarter's gross margin was 47.5%, and this compares to 49.6% reported in Quarter 4 of last year. This consistent with the trends in other quarters this year whereby gross margins have been lower than the equivalent quarter of 2013. This is mainly attributable to sales mix due to lower line sales, which have higher gross margins, and higher instrument sales, which conversely have lower margins.

Moving on to indirect costs, our R&D expenses for the quarter decreased slightly compared to Q4 2013 to just under $1 million. Meanwhile, our SG&A expenses have increased in the quarter from $6.5 million to $7.2 million. This is mainly due to sales and marketing costs associated with our cardiac business, which is currently not generating matching revenues.

Operating profit for the quarter was $4.3 million. This compares to the higher figure of $4.8 million in 2013, and here we are seeing the combined impact of the lower gross margins and higher SG&A costs. Our operating margin this quarter was over 16%.

Moving on to our net financial income next, this quarter we earned $14,000, which is a decrease in the $118,000 earned in the equivalent period last year. Meanwhile, our tax charge for the quarter was $187,000, and this represents an effective rate of 4.3%, which is slightly lower than the same period last year.

The net result of all I've spoken of so far is a profit for the period of $4.1 million. This equates to a basis EPS of $0.18 and a diluted EPS of $0.176. Meanwhile, our EBITDA and before share option expense for the quarter amounted to $5.8 million.

Before we move on to the balance sheet, I will make some comments on the full-year results. Annual revenues increased from $91 million to almost $105 million, which is an increase of 15%. As is the case with the quarterly represents, Ronan will take you through this in more depth later on.

Gross margin reduced by 1.6% from 49.6% in 2013 to 48% in the current year. As was the case for the Q4 results, this has been impacted by the sales mix due to higher premier and lower line sales.

Operating profits increased from $17.2 million to over $18 million, an increase of 5% for the year. However, at the fall in this year's financial income from $1.3 million to $140,000, this has resulted in a small reduction in profits before tax from $18.4 million to $18.1 million.

Tax charge for the year is just under $900,000 and represents an effective tax rate of 4.7%. The result is that the profit after tax for the year actually increased from $17.1 million to $17.2 million. And over the same periods, EBITDA increased from $22.8 million to $23.8 million.

These profit growth rates are lower than we have achieved in past years; however, there are specific reasons as to why this is the case. As was outlined in the press release, the profit figures cannot be looked in isolation.

We are currently in a situation where as we are incurring significant sales and marketing costs in advance of achieving cardiac sales, our margins on our premiere business are temporarily being impacted by the significant number of lower margin instruments being placed. Also with closure costs in the UK related to the transfer of manufacturing of our blood bank screening products to Ireland, and all of this occurred in the year when our line sales has been lower due to weather-related factors.

I will now move on to talk about the significant balance sheet movements since the end of September 2014. Property plant and equipment increased by approximately $2 million. This increase was made up of additions of $2.5 million as offset by a depreciation charge of approximately $500,000.

The additions in question related to a combination of new manufacturing equipment and significant instrument placements, particularly in Brazil. During the same period, our intangible assets increased by $3.2 million. Additions were approximately $3.9 million, and this was offset by an amortization charge of approximately $0.7 million.

Moving on to our inventories, you will see that these have slightly fallen from $33.8 million to $33.5 million, which represents a normal level of fluctuation. Meanwhile, trade and other receivables have increased by $900,000 to [$26.1 million], and this increase partly reflects the longer payment cycle with respect to instrument sales.

Meanwhile, our trade and other payables, and I include here current and noncurrent, have increased to $23.6 million from $19.8 million. This is due to a combination of timing of payments and the fact that the comparable figure in September was unusually low.

Before leaving the balance sheet, I will focus on some major movements year on year. Firstly, property plants and equipment has increased by $4.9 million, which consists of additions of $6.8 million offset by depreciation of $1.9 million. Meanwhile, intangible assets have increased from $129 million to $145 million, and this was due to additions incurred during the year of $18.4 million as offset by amortization of approximately $2.4 million.

Meanwhile, trade and other receivables have increased from $24.3 million to $26.1 million. This is due to increased revenues, some of which was instrument related and which, as I mentioned earlier, tends to take longer to collect.

Meanwhile, inventories increased from $29.7 million to $33.3 million over the same period, reflecting higher activity levels, particularly in the instrument aspect of our business which tends to be more inventory intensive. Our trade and other payables again including current and non-current actually fell from $24.7 million to $23.6 million.

Finally, I will discuss our cash flows for the quarter. Cash generated from operations amounted to $8.6 million, and this was offset by capital expenditure of approximately $8.4 million. The additional expenditure was related to our development projects and in particular our cardiac development projects, but also reflects the purchase of significant manufacturing equipment and a large level of instrument placements, again, as I referred to earlier in Brazil.

The net result of this is that we had an increase in cash for the quarter of approximately $200,000 with the year on balance now standing at $9.1 million. And this was the first quarter that our overall cash balance has increased for a number of periods.

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

Thank you, Kevin.

I will take the opportunity to update you on the progress on our cardiac marker development program. In particular, I would like to provide you with a detailed update on our Troponin clinical trial, which I'm delighted to say has restarted and is once again recruiting patients. I will also update you on our Meritas BNP product, which as you know obtained CE market approval in Europe late last year.

Firstly and probably foremost on your minds, let me address our Troponin product and the recent recommencement of our US clinical trials. As you know, in October last, we announced the temporary suspension of enrollment into our Troponin clinical trial in the USA.

The reason for this temporary suspension was the observation of higher than normal CVs in whole blood data. Essentially, when testing very lower level whole blood samples Troponin, we observed an increased spread in the data from what we would have expected to see.

Following a root cause investigation, the problem was positively identified as a form of change to a chemical dye, which is purchased from a third party supplier. All clinical trial sites which had received batches of the product manufactured using the offending chemical were instructed to discontinue patient testing immediately, and all clinical data generated using the affected batches was identified, quarantined and excluded from the clinical trial data set.

Since October last, multiple new batches of the chemical in its original format have been obtained from our supplier, and multiple new batches of Meritas' Troponin product have been manufactured and extensively tested. The result of this work is that the project is demonstrating the same excellent clinical performance as witnessed in our European CE trials and in the independent clinical evaluation carried out by Dr. Apple at Hennepin County Medical Center in Minneapolis, which he published at the AACC meeting in Chicago last July. This independent trial shows our product to have what we believe to be market-leading performance, with a whole blood sensitivity of 75% times zero with a corresponding specificity of 93.6%.

The trial which is now recommenced will run at 12 geographically diverse trial sites across the United States. And depending on the AMI prevalence rates, it is envisaged that approximately 1000 patients will be required to complete enrollment. We estimate that these trial sites will recruit six heart attack patients per week, i.e. a total of 72 patients per week.

And at this rate of enrollment, data collection should be complete in a the 14-week period, which brings us to the end of May or early June 2015. Following this, cardiologist adjudication, statistical analysis and submission drafting will take place during the month of June and July with final submission to the FDA planned for August 2015.

In summary therefore, we firmly believe that we have identified the problem and that the fix that we implemented absolutely solved the problem, and that all product manufacturing going forward will continue to exhibit the same excellent performance characteristics as the product which obtained CE marking last year. We are now looking forward to completing the US trial in the shortest time frame possible.

I will move on briefly now to Meritas BNP. On September 25 last, the Company announced that we had received CE market approval for our BNP heart failure tests.

As you know, BNP levels in the bloodstream increase when the severity of heart failure increases. Thus BNP has emerged as a principal biomarker in the diagnosis of acute and chronic heart failure.

Per our CE approval, the BNP product was tested on a predominantly US population of 1424 normal healthy individuals and 665 patients which had been diagnosed with heart failure, ranging across the four major heart failure classifications outlined by the New York Heart Failure Association. The Meritas BNP product demonstrated exceptional sensitivity and precision, which is at least comparable or -- to the much larger and far more expensive clinical laboratory systems, while delivering results in 10 minutes right at the point-of-care.

With regard to our US approval, when I spoke to you last, because the majority of the CE data had been generated on banked US heart failure samples, our plan was to propose to the FDA that the bank data set augmented with a smaller number of prospective fresh samples would be used to support our 510(k) application. In a conversation with the FDA in January last, the FDA made a strong recommendation to us that bank data would not be optimal to support our application and suggested that we would rethink our strategy towards fresh prospective US samples totally.

Moving forward then on this basis, BNP healthy normals will be collected as part of our Troponin healthy normals trial. That is, we can use the same patient for both applications, therefore incurring little or no extra cost. On top of this, 650 heart failure patients equally distributed across the four New York heart failure classifications will be collected at four sites across the United States. And we are currently at the internal review board stage with these sites.

The good news is, however, that the BNP trial is infinitely more straightforward than the Troponin trial. Firstly, only one blood sample per patient is required, as compared to four for Troponin. Moreover, heart failure patients are not generally in an emergency situation, so obtaining consent to take a blood sample is a much easier proposition. And finally, cardiologists adjudication is not necessary in the BNP situation.

So in summary, data collection for BNP will be complete in September, and this will be followed immediately by a 510(k)submission to the FDA. We believe that due to the less complex nature of BNP, the review process should be somewhat more straightforward than that for Troponin, and US approval is expected ahead of Troponin in 2016.

That concludes me for now., If you have questions, I'd be happy to answer them later.

And I will hand over to Ronan.

Thanks, Jim.

Now I'm going to review our revenue for both the quarter and the year and discuss the developments before opening the call to a question and answer session.

Our revenues for the quarter were $26.7 million, up from $25.5 million for the corresponding quarter, which is an increase of 5%. However, when the impact of the strengthening dollar is excluded, the real increase is in revenue for the quarter is 6.4%, which is all organic growth as the blood bank acquisitions were completed prior to Q4 of 2013.

It should be noted that the significant weakening of both the euro and the weakening of the Brazilian real served to reduce our dollar sales in Q4, and that this weakening continued, actually intensified during the past few months. If rates stay as they are, our 2015 revenues would be 3% lower than they would otherwise be.

But it should be noted very importantly that there would be a corresponding reduction in our euro and Brazilian costs, and the overall impact would be a wash as in no change to profit. In summary, if revenues -- if the exchange rates stay where they are, our revenues would decrease by 3.5%, and our costs would also decrease by 3.5%, basically making no impact on EPS.

Moving back to looking at our revenues, our HIV revenues for the quarter were $5.5 million, up from $5.1 million, which is an increase of 7.1%. African sales performed strongly, showing growth of 9% with shipments to Nigeria, in particular, continuing to increase.

In the US, our HIV sales increased 3% over the prior quarter with hospital sales performing strongly, aided by the fact that we are now selling an HIV-1/2 product since we got HIV-2 SEA approval last year. Public health HIV continues to be depressed with sales flat when compared with the prior quarter. I think that's something that our competitors are experiencing also.

During the quarter, we were delighted to receive a clear waiver for our rapid syphilis product. This means we have the only FDA approved rapid syphilis test and also the only clear waived syphilis --we're both the only syphilis approved product and also the only clear waive product. Therefore, it's a totally new market and it is difficult to estimate the size revenues will be. The most obvious comparison, and really the only comparison product, is the clear waived rapid HIV product where Trinity or Assurant can buy a share of $50 million of clear HIV revenues, which sell to mostly public health departments and community based organizations.

Whether this product will end up being 20% or 40% of the HIV market remains to be seen. What we can say is that, one, we are ideally positioned to maximize its potential as we already serve the public health market with our direct sales force selling our HIV product to the same target demographic. And secondly, we have been in contact with all 50 state health departments and most city health departments. Mostly, by the way, they contacted us before we could get to them. And as best we can tell, all are initiating a purchasing plan.

However, this takes time. As in each case, a formal purchase decision is needed followed by the sourcing of funding and then you have the establishment of procedures, sometimes the establishment of a pilot site and of course the training of personnel. Basically, we estimate a 120- to 150-day process. Current indications are that all of the states will buy.

In addition, we have been inundated with approaches from community-based organizations, Planned Parenthood, health clinics and community health centers. We are receiving, by the way, huge support from the CDC in our efforts. With a 60% margin, this is going to be very significant, but it's too early to quantify.

Our clinical laboratory business increased from $20.4 million to $21.2 million, an organic increase of 4.2% with an increase of 6% when currency impact is excluded. Our diabetes business grew 15% over prior quarter. We met our target of 460 premiere instruments for the year and placed 133 instruments during Q4.

All our markets performed strongly -- USA, Mediterranean, Europe and China. However, the highlight has to be Brazil, where our direct sales force placed 32 premiere instruments during the quarter, resulting in the placement of 121 instruments in Brazil during the year.

If that wasn't enough, our new premier resolution instrument, which tests both adults and newborns for hemoglobin variance, for example sickle cell anemia, has just won a number of large tenders in Brazil. And we are now testing 60% of all Brazilian newborns for hemoglobin variance. This business as in the hemoglobin variance business will be a growth engine for us as we target adult and neonatal hemoglobin variance testing worldwide. We believe we have a superior test and instrument when compared with the dominant market leader.

Moving on, then, to infectious disease, which excludes Immco and our recently acquired blood banking business. The infectious disease business grew 2% compared to the prior quarter. The Lyme component of the business was down in excess of $550,000, compared with the prior quarter, and this arises due to the particularly severe winter experienced last year when most Lyme ticks were killed and died.

However, our Lyme business varies annually dependent on winter weather conditions, but our dominant market share remains unaltered. The balance of our infectious disease business traded strongly in the quarter and was up 6%, compared with the previous quarter. The US performed strongly and is benefiting from the advantages of having the Immco autoimmune product range added to its offering. China performed well, and the Brazil approval process is continuing.

Moving on to Immco, which we acquired 18 months ago, we are pleased to report we grew the business 23% in the past year. The business has been successfully integrated, and the Immco autoimmune product range is helping us to grow our existing infectious disease business as I mentioned.

The highlight at Immco has been the success of our Sjogren's, which is dry eye test, which we do not sell to laboratories around the country. Instead, the test is only run in our own laboratory that we own in Buffalo. And sales of this test during Q4 exceeded $550,000 following its launch earlier in the year. And this product and a number of companion products that we have in R&D at this time have huge potential.

Moving on to cardiac, Jim has dealt with the Troponin FDA submission. It should be noted that European evaluations will now recommence in the UK and France and Germany and Italy and Spain, basically in the five major European countries. And following the completion of these evaluations over the next four to five months, that our distributors will commence selling in their respective countries. In addition, our sales rep in Sweden is now commencing direct sales in Scandinavia.

Meanwhile, in Brazil, we are commencing an evaluation in Rio with the main opinion leader in Brazil in May, and in China, we are six months progressed into a two year journey to regulatory approval. Our Chinese distributor, who is also our very successful premiere distributor, was previously the cardiac distributor for Alere stroke biosite. Meanwhile, our CEO in Brazil was previously CEO of Alere in Brazil and is very familiar with Troponin BNP.

It should be noted that during 2014, our cardiac noncapitalized sales and marketing spend was $2.3 million, or $0.10 per share. This includes the cost of all the personnel supporting the launch of these products, including product managers, salespeople, the personnel who set up distributors, the personnel who conduct evaluations, the personnel who conduct clinical trials, and the personnel who monitor trials and evaluations.

During 2014, our EPS dropped from $0.78 to $0.76. Absent this investment in our cardiac future, our EPS would have grown from $0.78 to $0.86, which would have been a 10% growth.

So leaving you with that thought, and I will just open it up to questions and answers.

(Operator Instructions)

Bill Bonello, Craig-Hallum Capital Group.

Hey, thanks a lot for taking my question. I just wanted to follow up a little bit, Ronan, on the comments, the section you just went through on some of the things that are driving growth. And maybe a twofold question.

I'm wondering if in addition to Lyme, if there are other legacy businesses that are either hardly growing or maybe declining year over year, because with the positives that you've listed as the strong premiere placements, what seems like it should be good consumable pull-through the new HIV product, the traction you're getting on Sjogren's, et cetera. It seems like we should be seeing better organic revenue growth than what you're putting up.

I'm trying to have a sense of what are the offsets to those things? What are you really seeing in terms of premiere consumable revenue right now? And again, what the outlook for 2015 would be.

Just to say at the outset, Lyme is not a declining business. Lyme -- we have 100% Lyme confirmatory business in the United States. And it's not a declining business.

In fact, I think if we took a 10-year graph, there's more people being bitten. But basically a very severe weather can have a big impact. We've had two bad winters from our perspective. Clearly not in the public interest.

In any event, that's not a declining business, but just look at the components of our business. What's declining and what's not.

Our Fitzgerald monoclonal antibody selling business is a flat business. We haven't given up on it in terms of growing it, but it is flat although monstrously profitable. So that's basically the $10 million, $11 million [proponent] just basically refuses to grow and drags our overall growth rate down.

And the other piece of our business we struggle to grow and people who know the business well will hardly be surprised by this, our infectious disease [eliza] business, traditional measles, mumps, varicella, syphilis, if fact all those. That business is a difficult business to grow because of the fact that there's a drag on you from two sides. One, labs are closing and sending their stuff to Quest and LabCorp, and the bigger hospitals are using the big [abage] instruments and whatever.

So we're being squeezed in the middle, and that's the challenge to grow that business. And that's one of the logics behind getting involved in auto-immune where the customer really wants auto-immune, there's a real demand for it and very few competitors, and it runs on our existing installed instrument base.

There's no doubt that what we struggle with really is probably Fitzgerald and the infectious disease business, albeit not the Lyme component of it. I think everything else we have basically promises impressive growth in the future, for instance premiere, high resolution, our HIV business now obviously, greatly supported by its companion syphilis product. And of course the monstrous potential of cardiac. That's what's happening there, and we believe we can move from fairly anemic 4%, 5%, 6% organic growth into strong double-digit growth as basically -- as the growth drivers basically constitute a bigger and bigger share of the business.

That's helpful. And a point of clarification so I make sure I'm not confused here. I appreciate your sentiment on Lyme not being a declining business overall trend.

Did I hear you right? It was down year over year because of the weather, et cetera this year?

Yes, and in fact it's the second consecutive year it's been down. But you recollect that the previous winter was a very, very long winter on the East Coast.

Okay. And then just a second point of clarification with Premiere, where do you think you are these days with consumable pull-through? Are you still holding to the $10,000 per instrument?

How many instruments do you think are actually generating that amount of revenue? Or if that's hard to get visibility on, just trying to get some sense of where we're at with Premiere consumable revenue today and at which point that that really high margin growth starts to offset the impact of the lower margin equipment sales.

Well, just to say that then, we placed 460 instruments this year, I think 320 the previous year and the first year 200. We have 1,000 instruments in the market now, and I'd say probably 900 of them are up and running. There's always will be six or seven months, particularly in China where they take a bit longer to get into the market.

In terms of how they're performing, [Manorini] is performing amazingly well in terms of the actual number of tests per instrument, but it's probably selling less instruments than we'd expected. We had originally thought it might do 11,000 tests per instrument and running at 22,000 or 23,000. So with less instruments.

And that reflects consolidation particularly in their strongest markets which are Spain and Italy which have been through a recession. And USA performing reasonably strongly, certainly very good volumes. But remember, the USA is primarily an immuno-assay market, so the overall available market is not as great.

China is probably the most disappointing. There's lots and lots on instruments but not as much reagent as you'd like. That's what we expected because basically the Chinese have adopted A1C, and the government is reimbursing it. But the actual individual doctor in the village hasn't quite tuned into it yet, and that's an evolving scenario.

And Brazil -- what can I say about Brazil? Wonderful, huge numbers of instruments and very big volume on each instrument. It's a mix. But overall, Bill, to answer your question, it's about marginally ahead in terms of volume per instruments than our expectation was.

And in terms of the gross margin, do you think 2015 could be a year where the consumable pull-through starts to offset the instrument dilution to gross margin, or should that not -- ?

I think this is the year where you're going to see it. We now have a basically -- I mean I think, during January we sent out our thousandth instrument. And by the end of the year, we will be up towards 1,500, around 1,500 instruments.

And so every instrument is an additional $11,000 of ongoing revenue at a very, very high margin. So you tip the balance at some point. Clearly you're improving all the time.

Okay, thanks.

Larry Solow, CJS Securities.

One quick follow-up in terms of placements. Brazil had a really good year for Premiere. Do you expect that to continue? And what do you care to put out about 500 placements you're targeting for 2015 or more than that?

I think 500 would be -- if you gave us 500 now, I'd take it. It should be there. It would be very close to 500. May not quite get to 500, but that's what we hope to do.

In terms of Brazil, I think Brazil will have another equally good year. It might surpass this year. You can't keep doing that because you end up in a situation where you have most of the instruments in the market.

We could certainly have a great 2015 and a reasonably good 2016. And after that, we're going to have just good years because there's only so many instruments being replaced every year. You can't keep doing 120 in Brazil.

Right, and long term as a cumulative number, do you plateau around the 500, 550 mark? Is that something that you --?

I think we will mature in the 500s, somewhere in the 500s. I'm not convinced we will get to 600. It's more or less what I've been indicating all along, somewhere around 500 or 600 we will be maturing. Bearing in mind, having 600 will constitute 30% of all the instruments we've placed in the world.

Just turning to the Meritas, in terms of the modest delay in BNP, might that not really matter? Is it possible the FDA would consider the filings would be relatively at the same time.

Might they look at both together considering its a new platform? And on the flip side, I figured you might not launch until they're both ready to go anyhow. Is that a fair assessment?

First of all, the FDA will handle them as two separate products. It will be two separate applications, and it will be two separate evaluations by the FDA. So there's no bundling per se like that.

They will go in very -- roughly the same time to the FDA. My own gut feeling is that troponin is a much more complex product. There's no doubt about that, much more complex product to evaluate.

BNP, there are three or four already on the market. And in fairness, they are decent products. They work reasonably well.

I think the review process for troponin will probably take a couple months longer than it will for BNP. And if there was a bet on it, I would suggest BNP would come out first followed by troponin.

We're talking weeks, a couple of months tops difference in the two. And I doubt whether we would launch BNP without troponin because troponin is the real driver here and BNP is the add on.

At the end of the day, it might not make a big difference to you guys anyhow because troponin -- you would be waiting for that anyway.

You wouldn't sell troponin, you wouldn't sell BNP You wouldn't get an instrument placement for just BNP on its own. Therefore you wouldn't launch BNP without a [defer].

All you have to do with BNP is make sure it gets approved at the same time as troponin. Earlier is no advantage, really.

Sjogren's in the quarter, do you have how much sales that actually did? And what is your outlook through 2015?

Just over 550 in the quarter, which is pretty remarkable. We go up to the national launch in June.

One thing I should mention is we have a distributor who basically sells it into the opthalmics around the country. And that distributor was Nicox, and probably somebody you have never heard. It's a small [trenched] public company.

They sold to Bausch & Lomb during the quarter, and they have a very big opthalmics sales force. And basically we regard that as a very positive development. Bausch & Lomb went out and paid a lot of money for basically the business is our contract in essence.

Yes.

So I think that's a positive development. In terms of its potential, difficult enough to assess given that now we're also dealing with a new owner.

Right.

But I just don't know.

Long term, what product could this be? Assuming it's middle of the road or whatever. The new owner is not better or not worse than what Nicox was in terms of your expectations.

The new owner would be a lot better because the new owner has actually targeted this as an acquisition basically and paid quite a significant fee for it. And the only thing that was in that business was our distributor agreement.

And in terms of what it can do, I'm a little bit coy about saying a number. But clearly it has grown quickly and can grow more. But I'm just not going to say a number if you don't mind.

Fair enough, fair enough. And lastly on syphilis, at least anecdotally early in the game in the syphilis market.

It certainly sounds like at least anecdotally things are going well. Can your just remind us of your expectation is? I think you have some public expectations for 2015, correct on that for sales?

If you looked at the presentation that we make to investors and look at our website, what we talk about is we say -- and I mean this is a guess -- we say $2 million to $4 million in this current year of 2015. And then we say $4 million to $8 million in 2006. And then we say $10 million plus in 2017.

Got it.

And what I said today was I said HIV is a $50 million market. Will we be 20% which would be $10 million? Will we be 40% which is $20 million? I don't know. I actually just don't know.

But what I do know is we're out the door with inquiries. And we have been in contact with all the 50 individual state public health departments and most of the cities.

And most of the actual -- the contacts have been in the cities, and in most instances that came out almost immediately. The CDC are supporting this whole thing very, very in a major way.

I think people may have noticed that the FDA did a very unusual thing which they never do. They actually put a press release out about this. They put a press release -- certainly outside my experience.

And so we're very enthusiastic about it. But we're just reluctant to say a number and build an expectation that wouldn't materialize.

Got you.

I think what's really important here is the run rate we achieve by December or by whatever month. But it's the run rate that matters.

In terms of quarter one, it's going to be 100, might be 150, but it's small enough. Because in each of the individual -- as I outlined in the prepared notes, each of the individual states have to go through such a big long routine. They can't just buy, they have to set the whole procedures.

Right, right, understood.

But so the real thing is what's going to matter is what the run rate is towards the end of the year. I say this just to say this without quantifying it. We are really very optimistic about its potential.

Great. Okay. Excellent. Thank you.

Jim Sidoti, Sidoti & Company.

Good afternoon. Can you hear me?

Good afternoon, Jim.

Great. Just following up on syphilis. Do you think you will ship any in the first quarter, or do you think that will be more second half 2015 product?

Jim, we said we'd ship about 100,000 maybe quarter one. So there won't be any public health. It's a community-based organization, people like that are actually just buying them out. And we won't land any actual orders. All we've been doing is sending 5 and 10 tests for evaluation, that kind of thing, to the public health departments.

Okay.

I think what's going to happen is I think there's virtually maybe even all [buy]. It's difficult to know how much is high.

Okay. All right. And in terms of BNP, the change in regulatory approval strategy. Does that have a significant impact on the cost?

The answer is a little but not a lot, okay? There are two parts to the trial. Firstly, we have to run about 500 or 600 normal patients. These are people who don't have heart failure, to get a baseline.

And we're piggy backing that on the same set of normals of recruiting for the troponin trial. It's an extra tube of blood to be taken, no more than that. And that's insignificant.

And then we have to get about 650 heart failure patients. We had already suggested to the FDA that we would recruit 300 heart failure patients.

It's an extra 300 patients is the cost of this particular change. And it could be $300 maybe something like that per patient. And then there will be a little bit of admin and that sort of stuff. It's not megabucks.

All right. And in terms of the trial for troponin, in the first weeks you have 12 sites. Are they all running now, and are they running at the level they were prior to the trial suspension?

Like everything else, it takes a while to get up to speed. But they're all running, and by the end of the month I would have thought, by the end of March, they will all be close to the floor collecting samples.

Okay. And finally, can you just review what your distribution strategy will be for troponin? Ronan, you have indicated you've got some extra costs for sales and marketing people. Are those on board already, those people? And how many folks do you think you will need to sell the product?

We have an existing salesforce in the USA and 30 people in the USA, so they will take the product in the states. And they have been preparing for it. I think most of the support, most of the spend we have at the moment is more a marketing spend and a whole support mechanism on the ground for trials.

Like as a matter -- for example, we have three teams of people traveling consistently, and they have sales and marketing personnel who travel consistently between the trial sites for example. And then we would have two product managers in Europe handling the European evaluations.

And direct sales in Sweden basically sitting on his hands after the difficulty we had for three months, and he's hasn't been in the position to sell. He hasn't products to sell, but he now has product to sell.

To all of that spend, which is $2.3 million this year. Basically the $2.3 million spend with zero revenue attaching. I was just making the point that it hits our P&L, it hits it hard.

Okay. And that's it for me. Thank you.

Thanks, Jim.

Chris Lewis, ROTH Capital Partners.

Hi, guys, thanks for taking the questions. For 2015, I understand you don't give a guidance. But can you at least provide a high level overview of how we should think about revenue growth in 2015?

Yes, well, you're absolutely right because we actually don't give guidance, which makes answering the question somewhat difficult in some respects. I think what Ronan has done very well in the call is outline the number of opportunities that are out there in terms of growth. The Premiere business is going to continue growing.

We're going to have our first syphilis sales. Sjogren's is looking very good, and I suppose the slight fly in the ointment in terms of revenue growth per se is the currency which could knock about 3% off. But the key point there is that's not going to have any impact profitability wise.

So definite growth next year. We're not putting a number on it. We've always said in the past we'd like to target double digit growth. You can read within that what you will. And that would be taking into account the FX adverse movement as such.

Double digit, longer term, but you're exiting this year at 5%. I think you'd be growing organically in that mid, single-digit range. What gives you confidence you can get back to the double-digit outlook?

What we're seeing is a lot more things coming through. Ronan gave a very good description of the number of things that are happening in the Company.

We have had a couple of bad years in line, that can't continue. We've retained all the business, but we have been suffering. So that's been a bit of a headwind for us.

We would hope that would eliminate at the same time as Premiere continues to grow and get the pull-through in terms of the high level of installed base. We're going to have a say in syphilis, and our auto-immune business continues to grow. In particular there, you're seeing Sjogren's already at over $2.2 million run rate as such.

Okay, great. And in terms of operating margins, you laid out incremental investments with cardiac in 2014, expect those to continue in 2015. How should we think about operating margins from the 2014 levels, and what are the key levers there?

Obviously, the business like ours with the cost base tends to be reasonably fixed in terms of how revenue operates. The revenue comes through, and we shouldn't see improved margins. It should be contributed to restored line sales, improved pull-through and Premiere instruments.

Good margins on the syphilis business as well, we would expect. We would expect that improvement in gross margin combined with higher revenues would then provide leverage on the operating margins.

The operating margin has been somewhat suppressed by the factors we talked about earlier in the call. We'd expect an improvement throughout the year.

And on the troponin side, once you submit that to the FDA, can you walk us through the regulatory review process, the different steps involved there and the timing expectations for a potential approval decision?

I'm assuming this is now you're suggesting post having submitted the application to the FDA, yes?

Yes.

The normal process is okay, as far as I understand it with the FDA is that when you submit, they have 90 days essentially to review the dossier that you put in. And that dossier consists of clinical trials and all the interfering substances, data, et cetera, et cetera. It's a pretty big pack of data.

So they have 90 days to review that, and invariably -- two things can happen. A, they can say everything is perfect and we approve you. The shortest time can be 90 days, and they generally do not come back until a couple of days before the 90th day in any case.

I would suggest that's unlikely in this case. It's a complex product, and they have changed the rules around cardiac and expectations around troponin have changed so much over the years.

I would suggest they will come back with questions. What those questions are, I don't know obviously, because we've had three individual calls with the FDA to scope out the trials, to discuss all aspects of the trials. And we are following that to the letter of the law as you can imagine to make sure that we're supplying everything we believe they need.

But I suggest they would come back with some questions. Maybe they will ask for more data, maybe they will ask for different statistics on the data. Expect some questions.

You will then have to prepare an answer and submit that in. We will try to do that -- depending on the question, try to get the answers back in within a couple of weeks of getting the questions. But if data has to be generated, maybe it's a month, maybe it's six weeks. And then it goes back to another 90-day cycle to review that and approve.

And you would expect at that stage if the answers to the first round of questions are appropriate and correct that next time around, you should be hearing the word approved. But there's no guarantee. They have the right to come back as often as they want with questions. But that's the process, but it goes in 90-day cycles.

Perfect. And I think you may have mentioned it, I missed it. How many tests still need to be performed to complete enrollment.

We need about another thousand patient samples. Another 1,000 patient samples for the heart attack trial.

Okay. That was it. I appreciate it, guys,.

Ross Taylor, Somerset Capital Management.

Thank you for providing some of the cost related to troponin and its impact on the EPS line. Could you also tell us what were the costs related to the blood banking facilities, you were running dual facilities and moving over during the year. How much did that cost us?

That's not something -- not impacting on Q4, just to clarify. That's something that was all cleared up in Q3, just in case there's any confusion there.

The -- we were rolling the two facilities for the first seven months of the year. And we would have closed it in July. And once we'd moved to Ireland, we would have staffed it up with personnel from here in relation to the US.

The extra cost of carrying the two businesses and the incremental staff. We managed to do with lower staff here as you can imagine given we have all the infrastructure in place. We estimate that the adverse impact of all that cumulatively will be about $0.07 in EPS terms.

So basically we lost $0.10 a share during the year -- not lost but a negative impact of $0.10 a share to troponin and another $0.07. So ex that, the company would have earned $0.93 a share in the year ex those two issues.

Yes.

Which is fairly significant considering there are people out there who basically are valuing the core business at $12 on the sell side including syphilis, which seems to me to be a little bit on the low side to what would be realistic. Also you had $24 million in CapEx during the year. Can you give us an idea what a normalized run rate going forward should be?

What I would say there on the $24 million, there was significant expenditure in PPE, there was manufacturing equipment that we purchased that we will not be recurring at that level. I can see that falling by somewhere between $1 million and $2 million.

The remainder is in relation to our project, and once we get the trials out of the way, you can see a substantial fall there based on the projects we're running at the moment. So the extent to which we enter into new projects, obviously that is something different, but I can't comment on that at this stage. But you can see a tailing off of $2 million to $3 million as well.

So the $24 million number should fall to somewhere in the $19 million to $21 million ex-ing new projects that you put on.

On that order.

Once again fairly significant. Can you talk about the market potential for resolution in Brazil, and is that something that will also have opportunities outside of Brazil?

Yes, and I mean just to remind people, our legacy business was resolution. And we only got diverted into main line diabetes testing. So the original business we have, that core of $12 million, $14 million business was resolution.

What was holding us back was we had this older instrument that needed replacement. And now we've done that. But what's in there, we supply Quest and LabCorp, we do just about all of US resolution testing.

So you're testing, the most commonly know one is sickle cell anemia. And all newborns progressing around the world are being tested as well for variants.

It's a big market, it's dominated by [byrad]. And we now with the launch of the high res instrument have a really compelling offering we believe. And we're just beginning to get going in the United States. We have two of the states, they would have the rest.

And then outside of that, we just have one in Rio and Sao Paulo and in corresponding regions in Brazil, which is a big breakthrough for us. And that is a success we hope to replicate with the European mega labs. It's mostly mega labs that run these variant testing, it's a very specialized area.

We want to get into the big Japanese labs and the big French ones and not -- and so that on our target. We think we have the wherewithal to do it.

The key point is the high resolution which has been a stagnant business over the past four or five years will no longer be that. It can become a growth engine for us as we move forward.

That's the point I was trying to get across earlier today. I think the first breakthrough for us has been the Rio and Sao Paolo, Munich markets. Basically, over 60% of all Brazilian newborn babies are being tested as of a month ago with our high res instrument.

And back on the cash flow side of things. As you move forward, sounds to me -- this Company a few years ago was generating $12 million, $13 million a year in free cash flow. We've gone to where the comment was made, we've basically finally had a first quarter in some time where you didn't have a cash burn. One would expect this Company should move back to being a fairly aggressive cash flow generator as we move through this year as you put some of these one time expenses behind you and as we start to develop the revenue streams for things like syphilis as well as eventually troponin/BNP.

Overall for 2015, you've got a number of factors that are going to help our cash flows going forward. Revenue growth is one. And we expect improved margins as I mentioned earlier on if we get our line sales back, which tend to be higher margins.

We're moving from a phase whereby the instrument revenue isn't dampening our Premiere overall revenue. The pull-through will become a greater proportion. That will help us from a revenue point of view.

Operating leverage as per the question that Chris would have asked. At the same time, once we get through the first half of the year and the trials disappear, we're going to get a lift from that from a cash point of view as well. Throughout 2015, things should improve from a cash perspective for the accumulation of those factors as such.

Okay. So I will put off to the second quarter call the idea of pushing you on using the free cash flow you're going to be generating to buying in stock. It seems to me that right now the core value of your business if you're actually earning about $0.93 on the core value, probably is worth roughly or perhaps more than the stock is trading at if we look out 12 months given the ramp-up in Premiere and the like.

And as you move to where you're not spending capital on some of these other one time items, it would strike me as a positive use of capital. And I think speaking to a lot of your shareholders, I think they would agree that the company get into the market again. You were in that market a while back but not all that far price wise. But this company has developed pretty favorably in that timeframe although the earnings have been masked by a lot of the one time charges.

Okay.

Randy Saluck, Mortar Rock Capital.

Hey, guys. Well, part of the disadvantage of being last in the queue is that everybody asked the questions that you were going to ask. So I withdraw my questions. Next time move me up a little.

Surely you can think of something to ask.

Well, if I have to think of one, the only question I would have is what do you have to do as a company to get ready for selling troponin? You mentioned the salesforce is 30 people.

It seems like given the massive opportunity that troponin represents, you would want to add salespeople. And that leaves me the question, how busy are they right now? What are they doing?

We probably will add people. I don't think a lot of people. But the model we use is a generalist model.

Our sales reps sell everything that we have. And I mean, they are very busy at the moment. The syphilis opportunity is top of the agenda as we speak. And the Premier and neonatal side of things. They are selling everything, they are busy.

But just to say that they we have been progressively training them on cardiac. And they for example have been meticulously working from hospital to hospital as they visit in the normal course of their duties and would know for each hospital how will they handle troponin? What point of care product is being purchased, how many instruments there are, when they're due for a new one, what usage rates and all of that.

We have a big body of information developed. And they're ready to go. But we will add some people.

Okay.

Thanks very much. It's just gone past 5 o'clock. And I think Bill Bonello might just be asking -- if Bill, you're there, could we make that the last question? I don't see any other questions on the list.

You'd like to go ahead with Mr. Bonello's question?

Yes, and make that the last one.

I appreciate you taking the follow-up. I just -- I appreciate the color you're giving on the one-time expenditures, and I think it's important that we all understand the earnings power here.

At the same time, I want to be sure we don't get out ahead of you on the numbers. And so I just want to be sure the troponin costs that you called out.

You're expecting continued costs again this year. We shouldn't be looking at -- again you don't give guidance, but we shouldn't be looking at growth beyond this adjusted $0.90-some number.

I'm imagining we're still talking a 2015 EPS number that's still in the lower half of the $0.80s given the nonrecurring cost. Is that how you guys are thinking about things?

We don't give guidance, but the number was an adjusted number to take out items as such. I think as you expect that those Meritas costs will obviously be incurred again in 2015. It wouldn't make sense to withdraw them at this particular juncture if you can imagine.

That isn't a once-off cost in terms of 2014 only. That's going to continue. It's just a key point there is aren't many revenues matching that at present, and that is what makes an impact on 2014 profits per se. We will get savings obviously out of the UK business, and they will become part of the 2015 numbers as such.

Perfect. Okay, thank you.

Thanks, Bill. Just want to close the conference call and thank you so much. And we speak to you in a couple of months for the Q1 results. Thank you and good afternoon.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.