Trinity Biotech PLC (TRIB) 2016 Q1 法說會逐字稿

Good morning and welcome to the Trinity Biotech first-quarter fiscal year 2016 financial results conference call. All participants will be in listen-only mode. (Operator Instructions).

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

Thank you, Amy, and thank all of you for joining us to review the financial results of Trinity Biotech for the first quarter of calendar 2016, which ended March 31, 2016.

With us on the call representing the Company are Ronan O'Caoimh, Chief Executive Officer; Kevin Tansley, Chief Financial Officer; and Dr. Jim Walsh, Business Development Director. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. But before we begin with those 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 Ronan O'Caoimh will wrap up the prepared remarks with his perspectives on the quarter. Kevin?

Thank you, Joe. Today I will take you through the results for quarter one 2016.

Total revenues this quarter were $23.5 million, and this compares to $25.2 million in quarter one of 2015. However, revenues this quarter continue to be impacted by currency movements. The strengthening of the US dollar has served to reduce the dollar equivalent of our euro, sterling and Brazilian real revenues.

As you will have seen from the press release, we have restated the Q1 revenues on a constant currency basis in order to put this into better context. Ronan will provide more details on the revenue for the quarter later in the call, so I will move on now and discuss the other aspects of the income statements.

As you will see from our press release, we are now showing a gross margin of 43.1%. Whilst this is a reduction on the 47.9% in quarter one last year, it is consistent with the margin reported in quarter four 2015. The reduction in gross margin compares to the equivalent quarter last year is principally due to a couple of factors.

Firstly, this quarter we had lower production levels due to the lower revenues this quarter. Given these lower production volumes, this results in a level of under absorbed fixed costs, namely production, labor and overheads. The result was that these unabsorbed costs then hit the income statement this quarter, in effect increasing our cost of sales and thus reducing our gross margin.

The second factor, then, was the lower level of HIV sales, and this is significant as, on average, these represent higher-margin sales for us.

Moving on to our indirect costs, our R&D expenses increased from $1 million to $1.1 million this quarter. Meanwhile, our SG&A expenses have increased in the quarter from $6.3 million in the equivalent quarter last year to almost $7 million this quarter. Our SG&A expenses tend to fluctuate quarter on quarter due to the timing of certain expenses, particularly discretionary sales and marketing costs. In the last four quarters, SG&A expenses have averaged $6.6 million, and this quarter's expense is slightly above that run rate, due primarily to non-cash foreign currency re-translation charges.

Our operating profit for the quarter was $1.8 million, and this compares to $4.3 million in quarter one 2015. This reduction is largely attributable to the combined impact of the lower revenues and lower gross margins, which I have mentioned earlier.

Moving on to our financing costs, which includes the impact of the convertible notes that we issued last year, it should be noted, by the way, that this is the last quarter where the comparative figures do not include the impact of the exchangeable notes as they were issued in early quarter two of last year.

Our financial income for the quarter was $220,000 versus virtually zero in the comparative period. This reflects our higher level of interest earning cash deposits. Financial expenses for the quarter were $1.2 million, the vast majority of which relates to cash interest in relation to the convertible notes for which there was no equivalent last year.

Similarly, the non-cash financial expenses of $2 million also relates entirely to our convertible notes with a non-cash interest of approximately $200,000 and a (inaudible) of a $1.8 million being recorded for the change of the fair value of the derivatives embedded in the notes.

Our tax charge for the quarter was $182,000, and this represents an effective rate of 9% after adjusting for loan notes.

As in previous quarters, we continue to benefit from the -- from R&D tax credits in a number of jurisdictions, in particular, Ireland, USA and Canada.

The net results for the quarter is a loss of $1.3 million. However, if we were to exclude the impact of the non-cash items relating to exchangeable notes, the profit for the quarter will be close to $700,000. So whilst the basic EPS is a loss of $0.058 per share, the EPS adjusted for non-cash items is a profit of $0.029.

Fully diluted EPS would ordinarily be $0.064. However, according to IFRS rules, the diluted EPS cannot be anti-dilutive and, hence, you are required to scale it back to the basic EPS level. You will see that I've used the $0.064 figure in the press release as I believe this is a more reflective measure of real diluted earnings, but I would draw your attention to the fourth note outlining the correct IFRS treatment.

Finally, on the income statement, earnings before interest, tax, depreciation, amortization, and share option expense for the quarter was $3.4 million.

I will now move on and talk about the significant balance sheet movements since the end of December 2015. Property, plants and equipment have increased by $800,000. This was due to the additions of $1 million and re-translation movements of $500,000 being offset by depreciation of $700,000.

In the same period, our intangible assets increased by $3.8 million. This is made up of additions of $4.3 million and re-translation movements of $200,000, and these are offset by an amortization charge of $700,000.

Moving on to inventories, you will see that these have increased slightly from $335.1 million to $35.7 million, an increase of just under 2%. We continue to build up Premier inventory levels in line with the growth in this business. And, in addition, there was the normal increase in the levels of Lyme inventory in preparation for the peak Lyme season of the summer months ahead, a phenomenon that we see each quarter one.

These increases were partially offset by lower HIV inventories, which I have already mentioned earlier.

Meanwhile, trade and (inaudible) receivables have increased by $700,000 to [$26.3] million, and this reflects slightly lower collections during the period. But, overall, the aging of our debtors remain healthy.

Meanwhile, trade and other payables, including both current and noncurrent, increased slightly from $21 million to $21.3 million.

Finally, I will discuss our cash flows for the quarter. Cash generated from operations for the quarter was $1.9 million, which is consistent with quarter one 2015. This was offset by capital expenditure in the quarter of $5.4 million, which is lower than quarter four of last year, and interest and taxes of $200,000 approximately.

The other major cash movement in the quarter was share repurchases of $1.3 million. The net result is that we have a decrease in cash for the quarter of approximately $5.1 million with quarter end balance being $96.8 million.

We will now hand over to Jim who will take you through the latest developments with regards to cardiac.

Thank you, Kevin. I will take the opportunity now to update you on our cardiac development programs. In particular today, I will provide you with a detailed update on our Troponin FDA submission, give you an overview of our clinical data and also give you an update on recent communications with the FDA.

I also will provide you with a brief update on our Meritas POC product, which, as you know, is currently undergoing clinical trials in support of 510(k) application.

So starting with Troponin, firstly, let me give you a brief reminder of the excellent clinical performance we observed in our US trials. It's only six short weeks ago since I provided you with a very detailed review of our clinical performance data. So today, I will provide you with a very high level reminder.

It is probably easiest to explain our clinical performance by comparing ourselves to two of the market-leading products currently approved and widely used in the United States today: (inaudible) Abbott i-STAT point of care Troponin product and the Abbott ARCHITECT central lab Troponin products.

According to the manufacturer's packaging insert, the admission sensitivity of the current FDA approved Abbott ARCHITECT central lab system is 60% with a corresponding specificity of 95%. And in a recent study carried out by [Dr. Apple] at [Headmin County], the Abbott i-STAT Troponin product was determined to have an admission sensitivity of 32% with a specificity of 92%.

In our recent US clinical trial, the Meritas product demonstrated a whole blood sensitivity of 66% and a corresponding specificity of 94%, thus speeding the market-leading i-STAT products by 35 percentage points in sensitivities, while the Meritas also beats the Abbott ARCHITECT central lab system by 6 percentage points in sensitivity.

However, although these results look excellent for Meritas, you will need to keep in mind that we are still actually not comparing like with like. In fact, the Meritas MI patient cohort consisted of 57% Type I MIs and 43% Type II MIs, whereas our competitors would have relied predominantly on Type I MIs only.

If we actually confuse our clinical performance on Type I MIs only, our times zero sensitivity rises from 66% to 75%, which is, in fact, substantially better than most of the data central lab component systems.

Although this is a very brief summary of our performance, it should serve to provide you with the confidence that the Meritas Troponin product is demonstrating exceptional clinical performance and when approved offers a unique commercial opportunity at Trinity Biotech.

Moving on now to our interactions with the FDA. You will now, of course, know that on December 17 last we submitted a 510(k) application to the FDA for our high sensitivity Troponin products. This was the culmination of many months of clinical trial work in the United States. To the very best of our knowledge, Meritas is the first point of care Troponin product ever to be submitted to the FDA under the new guidelines. The complexity [internas] of the new guidelines have raised the bar on clinical performance by many orders of magnitude. The guideline change, of course, has made this clinical trial very challenging for Trinity. However, in the long run, it may yet prove to be a huge advantage to us.

Following our submission, the FDA contacted us on December 23 to confirm that they had received our application and that they had issued our application with a file number. Finally, the third week of January, with the initial administration process complete, the formal review process commenced, and the review clock actually started ticking.

Since then, there have been a number of informal communications with the FDA with relatively minor clarification questions as they work their way through our application.

Finally, some days ago, and within the FDA's published review process, we received a formal response to our submission from the FDA, providing us with a detailed list of questions and comments.

I will take a couple of minutes now to address the type of questions and comments we received. However, before that and in order to allay any fears or concerns you might have, I would like just to say that all of the questions that we received are reasonable and fair. There are no showstoppers or red line items. The questions are more or less what one might have expected.

The very good news is, however, that our pivotal ACS trial, which, as you know, consisted of close to 1500 patients, at multiple trial sites around the USA, followed by a very complicated adjudication process received almost no comments. This would indicate that a trial was sufficiently powered. It represented the appropriate racial and ethnicity profile. It has sufficient geographic spread and, most importantly, met the definition of an all-commerce trial with an appropriate mix of Type I and Type II MIs.

With that said, I will move on now to discuss the questions and comments in greater detail. The questions in general may be segregated into three main categories. The first one, by far the largest category, are questions and comments where the FDA have asked for further clarification or more information relating to certain points. Essentially, this is information requested in order to ensure the completeness of our file.

We are working diligently through these questions right now and putting together the necessary support documentation.

It is worth pointing out that in order to provide answers to this category of question, no extra data needs to be generated. It is purely a paperwork issue. This category of question is not on the critical time path and provides no real technical risk.

The second category of question is where the FDA has asked for extra data to be generated through support or expand certain claims. This work may be carried out in-house by our own technical staff and, again, it is not on the critical path. Two examples of this type of question are as follows.

It is normal in submission for a diagnostic product like Troponin that one would provide a set of experimental data showing the common medicines or foods, etc., do not interfere with the test results. Say common medicines like Lipitor or hypertension medicines or, indeed, common food and beverage substances like coffee or alcohol. In our submission, we tested tens of -- many tens of common interfering substances. The FDA has asked us about a few other possible interfering substances, which I think are relevant. This data can be generated in a very short period of time in-house and does not cause a technical risk.

A second example in this category is that in our application we tested patients with a hematocrit level ranging up to 50%. Hematocrit is a measure of the concentration of red blood cells in one's blood. Normal people have a hematocrit of around 40%. Anemic people would have much less than 40%. The FDA has asked that we expand the hematocrit study to include people with up to 70% hematocrit. Again, this data can be generated in-house and poses almost no technical risk.

Fourth, these are both examples of the type of extra data that has been requested. These data can be generated quite easily in-house. In fact, it is just extra work rather than negligible technical risk.

The third category of questions is where the FDA has asked or has requested extra data to be generated. However, in this case, this data must be generated under external clinical sites. We had only one question in this category, and it is in relation to our point of care precision study. The FDA has suggested that our data be enhanced to exceed -- to include three further sites, and at each site we should run nine patient whole blood samples ranging from high to low Troponin levels. Each sample then to be tested with one hour of the blood sample being taken.

They have also suggested that we run Troponin controls over a three-week period at the same sites. Here, again, there is no technical risk, per se. It is purely a matter of carrying out the work and producing the data. Coincidentally, there may well be a positive impact of -- to this request. As, although the precision we had achieved in our original trial met the 2012 MI guidelines, as our manufacturing processes have become more robust, the product that we are now producing has even tighter CVs and showed even better precision.

With that said, we have already applied for IRB approval at three sites. We expect IRB approval in May. We will then produce the required data set and resubmit at the FDA by the end of July because of the external nature of this data will be slowest to obtain and is driving the actual critical path.

In summary, therefore, we think the questions we received from the FDA are reasonable, fair and, very importantly, answerable. There are no red line issues, and although we are -- although we were confident that there will be no red line issues, it is always nice to see that to be the case. We are now working diligently to submit a complete set of answers to the FDA by the end of July, which is well within the time allowed by the FDA. Once received, the FDA will then recommence the review process. Pending that review and, of course, depending on the type of follow-up questions, if any, we believe that it is feasible that the Meritas report on the product can obtain FDA clearance before the end of 2016.

Accordingly, Meritas will be the only point of care product demonstrating market-leading clinical performance to be cleared for sale in the USA in accordance with the new MI guidelines.

I will move on now briefly to discuss Meritas BNP. As you know, BNP levels in the bloodstream increase as the severity of heart failure increases. Thus, BNP has emerged as a principal biomarker in the diagnosis of acute and chronic heart failure. I mentioned on our previous calls that following some of the discussions with the FDA last year, we agreed to expand our number of trial sites to 12. The adoption of this strategy, we believe, will help for a smoother review process with the FDA.

At the end of the studies to recruit 1450 patients, approximately 700 of which with heart failure and 700 without heart failure. At this time, the trial is actually -- at this time, with the trial sites actively recruiting, we are set back to 70% client inpatient recruitment.

At our current enrollment rate, recruitment is expected complete in Q2 with submission from 510(k) clearance in Q3 2016. We are quite pleased that the product looks to be demonstrating in the same high-performance characteristics as we observed in our CE Mark in trials last year.

And, with that, I will conclude and hand back to Ronan.

Thanks, Jim. I am going to review our revenues for the quarter before opening the call to a question and answer session.

Our revenues for the quarter were $23.5 million compared with $25.2 million in quarter one of 2015. However, when the impact of foreign currency exchange movements due to the strength of the US dollar against a range of currencies, is removed, revenues would have been $24.3 million this quarter, thus representing a decrease of 4%.

Point of care revenues for the quarter were $3.3 million, which represented a decrease of $1.3 million on a constant currency basis, which is a decrease of 28%. This decrease is entirely attributable to the lower HIV sales in Africa during the quarter. This reflects irregular order pattering which characterized this market rather than any underlying adverse change in the nature of the business.

As you know, our HIV business in Africa is funded almost entirely by NGLs. Product orders from these agencies tend to be haphazard and are unpredictable in the context of a 13-week reporting cycle. Our Uni-Gold HIV product continues to be regarded as the gold standard and continues to be utilized as a confirmed treating HIV test of choice across virtually the entire continent as it has done for the past decade.

In addition, funding continues to increase as more and more Africans are put onto anti-retrovirals drugs with the number now hitting 20 million. So despite the very disappointing quarter, we are confident of our African HIV business continuing to grow.

In the US, our HIV sales were flat over the prior quarter with hospital sales performing strongly, aided by the fact that we are now selling HIV 1, HIV 2 combination products since we got HIV 2 FDA approval last year. And our public health HIV sales were down against the backdrop of reduced public health spending on HIV.

Sales of our point of care syphilis product in the US were approximately $400,000 during the quarter, which is a huge increase on the corresponding quarter last year, but a modest increase on quarter four sales. We believe that this product has large potential, and both state and city public health departments move slowly and the evaluation, training, funding, and purchasing cycle take a significant amount of time. We believe that this will be a $10 million product for us, but it will take two to three years to reach that run rate.

Moving on to clinical laboratory, our revenues for the quarter were $20.2 million, down 2% from $20.6 million in the corresponding quarter. However, on a constant currency basis, revenues were $21 million, which represents a growth rate of 2%. Our hemoglobin diabetes and variance business performed strongly with revenues increasing 8% and strong Premier (inaudible) in all our principal markets with the exception of Brazil, where we made negligible placements this quarter, due to the weakness of the Brazilian real. However, we plan to reenter this market when we increase the level of manufacturing activity in Brazil, thereby saving on import duties on sales taxes when creating a natural hedge.

In addition, we are seeking price increases against the backdrop of a high inflation environment. We hope to recommence placing instruments later this year.

Moving on to infectious disease, this business was down 3% on prior year. It continues to suffer from weak Lyme sales at the end of this Lyme season due to the previous harsh winter.

The balance of the business performed well, particularly in China. Fitzgerald had a weak quarter with revenues down 11% when compared with the corresponding quarter. Immco performed well with revenues increasing 7%. During the quarter, we increased the testing volume at our reference laboratory in Buffalo (inaudible) for Quest Laboratories.

Over the past three quarters, our Sjogren's revenues have been approximately $600,000 each quarter. This quarter our Sjogren's sales increased to $700,000. We believe revenues will now continue to increase following the training of the 150 Bausch & Lomb sales reps.

In general, the strength of the US dollar and the weakness of many of our customer currencies is causing a significant loss of sales. As an example, our Russian sales were $1.8 million in 2014. Since then, the ruble has depreciated 60% against the dollar, and our 2016 sales looked like barely exceeding $100,000. The Turkish lira has dropped 30%, and the Colombian peso has dropped 43%, and the cost of Brazilian real has halved, and all of these are important markets for us.

If we invoice in US dollars, then our customer cannot afford our products. If we invoice in lira or reals or pesos, then we can't afford to supply. It is proving difficult to grow our revenues with this -- against this currency headwind.

Undoubtedly, this has been a very disappointing quarter. However, a number of factors need to be borne in mind. The list has been culled entirely by HIV in Africa. We are not losing market share, and the market is not contracting. NGO orders are often haphazard and unpredictable, and this 13-week cycle has been unkind to us in this quarter.

Another factor has been that in quarter one, it is traditionally our lowest quarter revenue wise with very low Lyme sales at the end of the Lyme season.

Another factor is that the coming 2016 Lyme season will be strong, given the mild winter we have just had.

Lastly, just to say that with Premier placements expected to be approximately 350 during 2016 with syphilis sales growth and with Immco growth including increased Sjogren's sales, that all these factors will drive growth in the coming quarters.

And now if I could hand back to the operator for a question and answer session.

(Operator Instructions)

Larry -- I see Larry Solow is queued up for first question. Larry, can you hear us?

Yes. I can hear you fine. Can you hear me?

Yes.

Okay. Just a couple of quickies. Just on the Fiomi, the Meritas, it sounds like -- just to confirm -- the only potential variability -- and I realized the exact filing date really at the end of the day is not the major concern, but the only potential variability would be timing of just accruing and getting these retrial sites nine (inaudible) site complete. Is that fair to say? And the rest of the other data is sort of in your control in-house and should be done fairly soon. Is that?

That is absolutely correct, Larry. Virtually everything can be done in-house, excepting for the bit that I outlined there to you on the precision study. Okay?

Now, it is limited to three trial sites. So there is not -- and it is actually limited to nine patient samples as well. So it is not a mega study. It will take us a couple of weeks to get the IRBs. We have already submitted to the hospitals for the IRBs. And because we are not making any diagnosis, this is purely for precision. The IRB process is fairly short and (inaudible).

So we would hopefully be -- have our IRBs approved in the first week or second week of May. We then conduct our work. See, it is actually three weeks of solid work to do that. And then, you have to write it up, etc., etc. So I am hoping, quite frankly, that saying end of July is giving us a little bit of wiggle room there, but it is not an extensive trial, put it that way.

Okay. I got that. I just wanted to make sure that you are giving yourself a little bit of room there. Just, you know.

The problem -- I tell you, the only problem I can foresee is, what they have asked us to do is take real patients with either high, medium, and low Troponin. Okay?

Right.

And so somebody with a 200, somebody with a 100, and somebody with a 20, if you like. So it is often hard just on the day you are there to get the guy with the 50. There might be three turnkeys, and there might be a bunch of 100s. You know what I mean? There is a little bit of selection work to be done. (multiple speakers) But it is not a big deal.

Right.

But I think, just to remind you, as a follow-up to what Jim just said earlier, that we are quietly pleased about this because it will enable us to showcase our improved CV performance.

Right. So, at the end of the day, hopefully, this actually benefits you guys for the label and all. So it will hopefully be a high-class problem. And these three sites, will these -- are these former sites where you did the other -- the last study?

We are using two former and one new one, actually, because our IRB process is so benign, we wanted to do it quickly. But, put it this way, they are all guys who know what they are doing, Larry, okay?

Good. No, that is great. Good to hear that. And just a couple quick on the operations.

Ronan, just in terms of HIV, I know it is inherently a lumpy business, I think you had a little lump last year, too. And maybe sales are flat or solidly down year over year, even though you think they are still growing. Is there -- any chance you make up some of these sales in the coming quarters? What gives you confidence that maybe there is a slowdown for several quarters in a row, maybe not as quite this low, but do you have any (multiple speakers)?

I know that we had a miss last year in quarter two when HIV came in low enough as well. But, despite that, I just think we have been just victims of a poor 13-week cycle. If it had been a 14-week cycle, an extra week, it would have been fine, kind of thing, you know.

So I just think just the reality is that HIV -- HIV revenues don't just do us a favor of kind of coming in equal every 13-week period. (inaudible). Yes, I think probably it will come back. I think probably quarter two will be stronger, but nothing at all from back then. But I think over the longer period, it will all equalize. So it is just one of those things. Reality is what it is. The revenues just are haphazard.

Nicholas Jansen, Raymond James.

First, I want to talk a little bit about the balance sheet. Obviously, you guys raised capital about a year ago from the convert. We haven't seen any M&A activity. Certainly, I would expect valuations to have potentially adjusted given the end markets and then considering some of that is going on in the capital markets. But just wanted to kind of get your thoughts on M&A, where we stand, and is it likely that we see something this year from a deal perspective?

I am certainly hoping that you will see something this year, and we continue to seek out acquisition opportunities. And yes, I think that we are going to see valuations become more civilized.

Although, having said that, we would have also been shown that recent Magellan acquisition that Meridian did, and we would have taken the view that it was too pricey. It was over 4 times revenue. So, but all that is a matter of perspective. But certainly that was our perspective. But we continue to seek out one or more acquisitions, and we would certainly be hopeful of finding something, and we now think we have a history over the years of being able to identify and close deals. And this is a new experience for us to have sourced an acquisition for such an extended period of time without success.

So I think we will get there, but we are just a mindful of not overpaying.

That is helpful. And then, my second question would just be on overall consolidated organic growth. Obviously, it has been a little bit lumpy over the last few quarters. Certainly HIV in Africa plays a role in there. But I am of the understanding that you finally cycled through some more easier comparisons beginning in the June quarter. So I just want to get a better sense of your thoughts on, can you deliver consolidated organic revenue growth in the back half of this year, irrespective of kind of what goes on with FX from here? Thanks.

Well, I think in my prepared remarks, I made reference to that, that I think if, yes, that I think we can and I believe we will. And I think this particular quarter was just a particularly weak one. It is traditionally the weakest in any event, and then you will have just had a very poor 13 weeks of HIV sales.

Yes, I think that the rest of the year will be much stronger, and I think we have benefited, as I indicated, from the addition of Sjogren's and also the autoimmune business. So, additionally, syphilis. And from the constant, just (inaudible) away with the price of the new Premiers, and against a background that is stronger as opposed to what we had this year of a very, very weak Lyme season would have been stronger this year, undoubtedly. And, in addition to that, we should get some price increases in Brazil. And the currency -- the Brazilian currency has come back from BRL4 to I think BRL3.55, (inaudible), [BRL60] over the last few days.

So, yes, absolutely we believe that our revenues will grow organically through the rest of the year.

Bill Bonello, Craig-Hallum.

Ronan, I am wondering if you could just comment a little bit on the broader environment, obviously with Abbott planning on acquiring Alere. There is the potential for disruption in a lot of the markets you play in. There has been some switches in the HIV market in terms of some of the providers there and what distributors you are working with. I am just wondering if you see sort of the unique opportunity right now in the marketplace to take share because of some of this disruption and any other kind of general commentary on the environment?

Well, with respect to HIV, I mean, clearly now (inaudible) being the Goliath in African HIV, Abbott now becomes -- takes over that space.

What is happening up to now is that Alere dominates screening, and we dominate -- virtually entire dominate confirmatory. And I don't really see much change happening there. I mean, I don't know exactly what Abbott's plans are. I am assuming they won't divest it. And so I don't see much change there. And, of course, when you referred to some distributor changes, we haven't actually had any distributor changes. So I am not sure what you mean there.

So, in that, I don't see really much difference unless Abbott were to surprise us by divesting. Bear in mind that we have developed a new product, which we haven't talked an awful lot about, which is a new recombinant-based rapid HIV test that will enable us to enter the screening market. And, of course, that remains our plan.

To move on into cardiac, I mean, clearly, the two major incumbents, especially in world rapid character testing are the (inaudible) and Abbott with i-STAT number two, Alere with their (inaudible). Of course, now Abbott are acquiring Alere. So that is going to give them basically just about 100% of the -- certainly of the US and Troponin point of care market. And it is possible that there will be some activity in context of monopoly and then be forced to divest something. But I suspect that won't happen because it is not a huge segment.

From our point of view, it means that instead of battling two companies who are battling one, I mean, there are pros and cons there. Certainly, we would have perceived Alere as being from a Troponin perspective being a company with problems. And -- but I think there are pros and cons. I think, overall, it probably doesn't make an awful lot of difference. I mean, what we hope to do is we hope by the end of the year to enter the market with a guideline compliant product with performance that is monstrously ahead of the market leader with both of its products. And we have much better sensitivity, we have much better specificity, and we have much better CV, and we are guideline compliant. And we think that is going to basically be a very strong combination that can do very well in the market. And it just happens that we will be competing only with Abbott, not just Alere as well. So on balance, I would say marginally positive in our favor.

Okay. That makes sense. And then, just on the distributors side, I wasn't talking about you. I was talking about Chembio taking back the sales of its own product of Alere.

Yes. Well, just to deal with that, again, that hasn't really made much of a difference that we can see. That piece (inaudible) only 6 million piece for us in any event, and we sell into hospitals, probably about $2 million is sold into public health, and about $4 million we are not really feeling much difference. I mean really from our point of view, whether Abbott -- excuse me. Whether Alere is selling their Chembio product or whether Chembio themselves are selling them, it doesn't make a huge amount of difference to us.

Just as a follow-up, then, also maybe a little bit more color on what you see happening in the A1c market, whether you are seeing the kind of -- you talked about 8% growth, but whether you are seeing the kind of consumable pull through, what kind of uptick you are seeing in Europe, just anything of note on Premier.

Yes. I will just take advantage of your question just to clarify something. When I say we have got 8% growth in our hemoglobin business, of course, what actually we have is we have no growth in our traditional (inaudible) business, and we have 16% growth in our hemoglobin A1c. So the Premier is doing extremely well. But bear in mind, since it is a legacy business there, which does okay, we are now about to launch a new instrument, and I think it will do quite well. It can do very well and not only for growth, but just bear in mind that there is a legacy business which is fairly static, and then you have got the Premier business doing very well.

So the actual growth of Premier is more like 16% and given that the two components are more or less of equal size at this moment in time.

In terms of how it is doing, I mean it is doing very well, and obviously it is dreadful to be in a situation where this huge demand in Brazil, and we can't satisfy it because the real is half the value. But, outside of that, our partnership with [Manrini] is moving along very well, and in due course, we will inherit 40% of the European market. And that is basically -- that is happening.

In the USA, which is largely in the immunoassay market, we are doing well. But bear in mind, there is only a certain percent of the entire market available to us.

In China, we are placing instruments at a very impressive rate, but as we have shared with you in the past, our concern is, is that the amount of reagent -- amount of tests run manually on each instrument isn't what we were hoping, but it is certainly growing and growing quickly, and I think we will get there. It is just a matter of when. And the background to that is that Chinese GP -- general practitioners -- are not all tuned in to the advantages of hemoglobin A1c testing for diabetics, but they are progressively becoming more so.

So what is actually happening is that our sales in BIO-RAD and Tosoh and Akray, who are the four players in the world, we are all basically involved to an extent in the land grab of trying to get our instrumentation in place in the Chinese hospitals to take advantage of the avalanche of business that will inevitably arrive when all of those Chinese diabetics of whom there are like Type I and Type II, 90 million when they are at the point of which they are all basically tested for A1c four times per year.

So in the event -- so yes, all going very well. Obviously, the concern is Brazil, and we have an action plan to get back into that market.

Walter Schenker, MAZ Partners.

Really two questions. First, we are to understand that the FDA, to the best of your knowledge, has reviewed the full component filing, and therefore, at this point, the list of questions you received were all they came up with after doing due diligence or review of a whole file. They didn't stop halfway through and come up with a list of questions for something like that?

Walter, you're absolutely correct. This is a full review of our full filing document, and the list of questions we have range across the full document. So it is not a partial review when it is up. This is a full review and a full comprehensive list of questions on the full documentation.

Okay. So that is the main reason you feel having seen everything they came back with so comfortable. You never know when it is the FDA, but what they come up with to this point. (multiple speakers)

It was very encouraging, for instance, as I said in my statement, but encouraging that the ACS trial, which it was undoubtedly the most complex trial ever undertaken by Trinity Biotech. We got one question on it, and it wasn't -- it was a clarification question. The 99% trial for the normals, I don't believe -- I can't remember, no question of note on that. And it is in those areas where we would say other companies have been thrown out to date. A lot of companies have got to the position where they are more reviewed and, essentially, that we are told to rerun their trials.

So that is what gives us some comfort is the full review and the questions we got are the questions, I guess, okay.

What will happen next is, when we put in our answers, I am assuming it will lead to another round of questions. So if I understand our answers to those questions. But theoretically, with the fair wind, that should be it. It will be down to -- ideally, down to labeling issues and that type of discussion then, okay? That is the ideal world. I obviously can't guarantee that, but that is what you would hope should happen.

Okay. And just one sort of general question. When one looks at the 20-F, you forecast various developmental spending for 20 -- you show 2015 and you show 2016, there is 10 different products or programs -- I made up 10 -- where you are spending enough money to put it in the 20-F. Are there any of those that we should be especially cognizant of, or you are especially high on which we haven't discussed as to a whole bunch of new different types of tests?

I think most of the (inaudible) I think most of those projects you would be familiar with, and they are obviously concentrated on the Troponin area and the separate projects there for for cardiac (inaudible) Troponin, D-dimer and BNP. We also have the device itself, so projects there on that.

And similarly, then, in relation to the diabetes side, we have been enhancing our instrument there and with a new version due to be coming out there in the near future as well. So there are a range of projects in there, but there is a level of granularity you are seeing, and the 20-F is probably -- we tend to group those maybe more so when we are talking on the call. So I think you will be familiar with all of those virtually.

[Ross Taylor], (inaudible).

Most my questions have been asked, but could you go into a little more depth into how you see yourselves adjusting your operations so that you can sell into Brazil, that you can potentially sell into Russia with currencies that might well stay weak for some time?

Yes, Ross. In terms of -- frankly, in terms of Russia, I mean I think there are political issues involved here also. I mean, the extent to which our business has collapsed there is (inaudible) currency. I think it comes right from the top, a directive which basically is discouraging importation.

But to deal with Brazil and -- which is significant for us -- well, apart from lighting capital and hoping that that real will actually strengthen, like it has done and it has kind of come from BRL4 back to BRL3.50, I know it is BRL3.60 right now. I think we're also having an inflationary background. So, as an example, we had to give -- and we have no choice, really. We had to give 12% salary increases to our people in Brazil recently. And so the background really it took 15% inflationary background. So that is what enabled us to get price increases.

Beyond that, what we are doing is, at the moment, we are using a contracts manufacturer to do some of the manufacturing for us and but not an extensive amount of manufacturing. And that enables us to basically save some transportation costs because there is an awful lot of reagents of water basically or heavy reagents used in the Premier testing. And so we save on transportation costs, which are quite expensive in Brazil, but we also save on duties.

And however, if we were to move to manufacturing ourselves, which we are endeavoring to do, there are special -- there are certain provinces in Brazil where there is a significant VAT -- sales duty tax and which is available. And so the VAT in Brazil is about 28.5%, but there is a 17% component of it which can be saved throughout the entire organization, if you were manufacturing in Brazil. And we are endeavoring to take advantage of that.

So to set up a modest factory instead of basically having contract manufacturing done for us and the benefit would be that you could continue to save or you would get additional savings on import duties, which is typically around 17%, although it can be higher, and then you will get a 17% VAT or sales tax break as well.

So the combination of those factors -- those two factors and an inflationary background, which should give us price increases, should make a significant difference and, of course, the fourth factor would be if the currency were to strengthen. And I think look how much we've seen with President Rousseff and indictment and all of that and the way the Parliament voted. I mean I think that has actually been perceived as a positive by the international community, i.e. so that the cash (inaudible) process all to involve a stronger currency. Although I notice now there is protection there.

So the (inaudible) hopefully the fourth will give us -- will enable us to go back in there. And just to remind you, in our first year in Brazil, we placed 121 instruments, so we took the market by storm. We could place another 121 instruments this year, but we wouldn't make any money at the current rate. So we had to temporarily withdraw.

Okay. Also, when you announced the buyback, in place of a dividend, I think that it was viewed by many of your investors as positive. That said, I got a number of comments this morning from people who have felt the pace of the buyback was rather anemic. Can you explain or tell us how aggressive are you going to become? I mean, you are looking at a story you guys seem very confident with going on. Obviously, you have a ton of cash on the balance sheet, a more aggressive buyback, but probably build some goodwill with your investors who felt a little frustrated with the convertible offering a year ago. So looking at this where you put $1.5 million in where the year before you took, what, about $5.5 million on a dividend. It just seems that somehow shareholders, we haven't quite gotten what we have given up yet. So can you address that?

Yes. Just to say that we obviously were only in a position to buy back for a limited period of time because we only announced our results six weeks ago and then we went into a closed period of 31st of March. So we were only actually able to be in the market for under three weeks or less -- two weeks, two and a bit weeks. And so we bought back $1.5 million worth of stock, which I know wasn't significant. The issue as far as there are constraints on what we can buy. We can't be the first buyer. We can't be the first trade. We cannot be the last, and we can basically buy, I think, 25% is the moving average, excluding what is outlined.

And so basically, there is a limit to what we can buy. Now, we can buy blocks, and we will endeavor to buy blocks. So we didn't actually get any in the short period of time when we were in the market. But just to be very clear, Ross, we are committed to a buyback, and we think that a buyback makes compelling sense at the prices that we find ourselves at at this moment in time. So you will see us by aggressively, and as soon as it can go in, I think we can go in tomorrow, I think it is 36 hours? I can't remember. We (inaudible) 48 hours and we go back in, it will straight back in. So you will see us in the market, and we will buy aggressively. And more aggressive.

So basically, we only were in the market for a very short period of time. We had to -- we can't exit the market again until the 31st. I know we could have put a plan in place, but we chose not to at that stage. So if we put a plan in place, we could have been in the market for the past three weeks.

Chris Lewis, ROTH Capital Markets.

Just a couple of follow-ups. On the syphilis point of care product, can you just provide an update on where you are in terms of getting those public health departments on board? Ronan, you talked about that being a $10 million product within two to three years. So when do you think you'll start to see more of an inflection point in that business?

I think soon, although I might -- I think soon is the answer, and we are beginning to see bits and pieces coming through. But just the whole process from training through evaluation to funding and purchasing, it is just -- it just seems to be -- it is such a slow process, and I know it is frustrating. But we actually are going through that process with virtually all the states as we speak. So we do believe it -- we can get to kind of quantum that we said in the timeframe we set. But it is going -- it is a bit of a slog, frankly, you know.

Understand. Yes. And Premier, can you tell us how many placements you had in the quarter and how many placements you are expecting for Premier for the year?

It was 85 this quarter, and we are hoping to do 350 plus for the year. Just to remind you, we did 460 last year, and the difference really reflects the fact that we came out of the Brazilian market. So that 350, we think -- 350, maybe some over that. It will depend if when we get really back into the Brazilian market properly. If we do, we will exceed that number comfortably.

Got it. And then on the gross margin side of things, talk about the under absorption of fixed overhead and some unfavorable product mix. It has been around 43% the past two quarters. How should we think about gross margins going forward from here? Thanks.

There is a couple of things -- a couple of those one-off features. I think in the last couple of quarters it is around 43%. If you remember last quarter, the margin was impacted by a reclassification of costs concentrated within quarter four itself. So we were kind of getting 4 times the impact in one quarter. So, but for that, the margin would have been in around the sort of 44.5%, 45%, that sort of number. But for the absorption issue, this quarter, it would have been somewhere similar, somewhere between 44% and 45%, again. So that is roughly where I would be thinking of us.

Obviously, the big driver, however, for margin, from our point of view, will be the extent to which the top line grows. And that is a direct correlation between top-line growth and margin improvements, just given the sort of very heavy fixed cost nature of our cost base and such. And you are seeing it particularly this quarter and what has happened in relation to the HIV production, per se. Okay.

The last question is Larry Solow. And maybe, operator, then we finish.

Larry Solow, CJS Securities.

Just two quick real fast. Just on the SG&A, you mentioned there was some -- sounds like those translation expenses, those non-cash (inaudible). Is that basically balance sheet? The stuff that gets -- that moves in the currency. Is that really what that is on the SG&A?

Larry, Kevin here. Yes, I think that is exactly it. Yes. So certain foreign denominations balances which are just recalculated at the start and at the end of each quarter, and so that is what you are seeing there. Hence, it is a non-cash, so it is a non (multiple speakers) is all.

The [$400,000] number or something like that?

Approximately that number, yes.

Okay. Because I get that (inaudible) and sort of put it in below the line, too. I know some companies put that on the other line item, but that is okay.

And then just lastly, just on Immco. I know when you guys acquired it, you viewed it as a 20% annual grower. It is obviously been a little -- it has been a little shy of that. Is that all mostly due to Sjogren's slowness in the ramp because of the transfer to Bausch & Lomb, or are there other issues there? Thanks.

Well, it is not so much other issues, I mean, yes, I think in the first year we did get 20% growth out of it. This year, we may not. I mean, in this current quarter, we got 7%.

But I think certainly if Sjogren's were to do better, we would be getting closer to 20%. But I mean 20% is aspirational. But overall -- I mean, it is an aspiration that we continue to have. But, in overall terms, I think we would have to characterize Immco as performing well, and we do see it as a niche that we can really grow into. And it is an ideal niche for us, and we think that also means it is a good space to be in and we think this can be big for us in time. And this can be another Premier.

So we are very enthusiastic about it. We are just not quite getting that 20% right this quarter just passed, but we are very optimistic about it. We like the business a lot.

Okay. So thank you very much, and I think at this stage we will close the call, and thank you for your support and look forward to talking to you next quarter. Bye-bye.

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