Trinity Biotech PLC (TRIB) 2019 Q4 法說會逐字稿

Good morning. Welcome to Trinity Biotech Fourth Quarter and 20 -- and Fiscal Year 2019 Earnings Call. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Ronan O'Caoimh. Please go ahead.

Good afternoon, everybody. Good morning in the states, and welcome to our conference call. I'm joined here by Kevin Tansley, CFO; and I'm Ronan O'Caoimh, CEO. So without further ado, I'm going to hand over to Kevin, who will run through the quarter and the year-end.

Thanks, Ronan. Before we begin our prepared remarks, I will submit for the record the following statement. The statements made by 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 those 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 effects 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 view only as of today. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements.

In addition, there is uncertainty about the spread of the COVID-19 virus and the impact it will have on the company's operations, the demand for the company's products, global supply chains and economic activity, in general.

Now I'll move on and take you through the results for quarter 4 and then the results for the full year 2019. You will notice in our release that there is an impairments charge being recognized this quarter, which I will discuss at the end of the income statement segment. In the meantime, the metrics I'm going to quote will exclude the impact of this charge. I'll begin with an outline of the results for the quarter and then I'll move on to the results for the year as a whole afterwards.

Total revenues for the quarter were $21.3 million, which compares to $24.5 million for the equivalent quarter last year. As usual, Ronan will provide more details on our revenues later in the call, so I will move on and discuss the other aspects of the income statement.

The gross margin for the quarter was 43.5% compared to 41.7% last year, and hence, significant improvement. However, I would caution that there are many factors which influence our margin, including sales mix and geographical spreads, production levels and currency factors. And therefore, while this should not necessarily be taken as a new normal level, it is obviously encouraging. In achieving this increase, a number of factors were at play.

Firstly, we've been successful in passing on selling price increases to our customers. Secondly, as I've mentioned during previous calls, we've been placing great emphasis on cost control, and this quarter's margin improvement reflects the cost savings that we've made during the year. In addition, we had a lower depreciation charge during the quarter.

Moving on next to our indirect costs. Our R&D expenses for the quarter show a reduction from $1.4 million to $1.3 million. Meanwhile, our SG&A expenses also fell during the quarter in this instance from $6.8 million to $6.4 million. And again, you are seeing the impact of cost savings as well as reduction in amortization.

This resulted in an operating profit of $1.4 million, which represents a reduction of $500,000 compared to last year. If you were to analyze this, you will see that $1.3 million of the reduction was due to lower revenues, but was offset by the gross margin improvement, which contributed $400,000, in addition to lower indirect costs of $400,000.

Moving on to our financing costs, which includes the impact of our Exchangeable Notes. Our financial income for the quarter was $88,000 compared to $158,000 last year, and this was due to a combination of lower levels of cash deposits and lower interest rates. Meanwhile, our financial expenses increased from $1 million to $1.2 million. This increase is due to the inclusion of a notional interest charge for the quarter of $200,000 arising from IFRS 16, the accounting standard governing leases, and in our case, facility leases. The remaining $1 million is predominantly made up of the cash interest element of our exchangeable notes and was in line with last year.

The noncash financial expense, which is disclosed further down the income statement is just over $160,000, which represents the noncash accretion interest, again, relating to the notes. You all have seen in the press release that we quote EPS without noncash amounts and this amount of 160 -- $160,000 that we are excluding. Overall, this resulted in a profit after tax for the quarter, excluding impairment and noncash items of $300,000, and this compares to under $1.1 million for the same period last year.

Meanwhile, profit after tax on the same basis actually increased from $800,000 to $1.3 million, and this was due to a significant tax credits being recognized during the quarter, largely due to the impact of changes in the U.S. Tax Code on our deferred tax balances and Irish R&D Tax Credit. This has resulted in an increase in our basic EPS from $0.038 to $0.061. And similarly, diluted EPS increased from $0.07 to $0.09. Earnings before interest, tax, depreciation, amortization and share option expense for the quarter amounted to $1.7 million.

I will now make some comments on the full year results. Revenues for the year were $90.4 million compared to $97 million in 2018. As I mentioned earlier, Ronan will deal with revenues in more detail later in the call.

Gross margins for the year decreased slightly from 42.7% to 42.2%. The principal factor causing this reduction has been the impact of lower revenues. As I've mentioned to you on previous calls, our manufacturing cost base contains a significant fixed cost element, which in the event that revenues fall have to be spread over a lower base. Another factor was the impact of adverse currency movements, essentially caused by the strengthening U.S. dollar. So as was the case in respect to quarter 4, the impact these factors -- of these factors was largely offset by increases in selling prices and cost savings. And there was also a modest benefit arising from the introduction of IFRS 16. Overall, indirect costs decreased from $34.9 million to $32.9 million, which represents a reduction of over 5%. This was mainly due to reduction of over $1.3 million in SG&A expenses, which was mainly due to cost savings, but we also received a benefit from IFRS 16 of approximately $500,000, which was pretty much matched by a gain that was recognized in 2018 in relation to the repurchase of a portion of our notes. 2019 also saw a reduction of $600,000 in our share option expense. The net result is that our operating profit for the year was $5.3 million, which was down from $6.7 million in 2018. Obviously, the main factor here is the lower revenues and, to a lesser extent, lower gross margin. However, about 60% of this was offset by the reduction in indirect costs.

Financial income for the year fell from $700,000 to just under $500,000, thus reflecting the lower levels of cash and deposits and lower interest rates. Meanwhile, the financial expenses for the year increased from $4.9 million -- $4.4 million rather to $4.9 million, an increase of $500,000. Of this increase, $900,000 was due to the new notional interest charge, which has been included following the introduction of IFRS 16, for which there is no equivalent in 2018. The remaining $4 million of the expense represents the interest charge on our exchangeable notes, which is down on the 2018 charge of $4.4 million following the repurchase of just over $15 million of these notes midway through 2018. In addition to this, there was a separate noncash financial expense of $400,000 recorded for the year, all of which relates to the notes. The net result of the profit before tax for the year was $800,000 versus $3 million in 2018.

The tax charge for the year was $4.9 million, and this includes the settlement, which we reached in relation to a tax audit in one of our entities. So as I mentioned earlier, this was partially offset by tax credits, which arose due to changes in the U.S. Tax Code during 2019 and also some Irish R&D Tax Credits. This resulted in a loss for the year of $4.1 million, which equates to a basic loss per share of $0.194, which, on a diluted basis, was on $0.003. Earnings before interest, tax, depreciation and amortization and share option expense for the year was $11 million.

I'll remind you that I said earlier that the measures I've just given you are all before the impact of noncash items and impairment charges. I mentioned earlier that I'll provide more information on the impairment charge. And as you will see in the release, the amount of that charge is $24.4 million. And as in previous years, this charge arises as a result of an impairment view that we are required to undertake annually. In so doing, a company is required to assess the carrying value of its assets in the context of its future cash flows then discounted at the cost of capital for the business. Companies are also required to be mindful of how these values fit with the prevailing enterprise value or market capitalization of the company as a whole. Consequently, a fall in the share price of the company, like we saw in 2019, is likely to impact the level of an impairment charge taken. Obviously, the extent of the charge is also impacted by the discount factor or cost to capital that was used in the calculation. And in 2019, we saw an increased level of volatility in our share price, which is deemed to be an indicator of risk, and this resulted in a slight increase in the discount rate and, in turn, led to a higher impairment.

Goes without saying that the impairment charge itself is entirely noncash in nature. Just so that you're able to appreciate the impact of the impairment on the year-end balance sheet, I will give you the principal captions which have been impacted. Goodwill and other intangibles were impacted by a reduction of $16.6 million; property, plant and equipment were reduced by $6.3 million; and other assets by $1.4 million.

I will now move on and talk about the significant balance sheet movements since the end of September 2019. Property plant and equipment decreased by $17 million to $9.3 million. This is made up of $11.1 million of assets, which were impaired arising out of the transitional provisions of IFRS 16 and $6.3 million, which are impaired in the current year, with the remaining $400,000 being net additions for the quarter. Meanwhile, intangible assets decreased by $14.3 million. And in this case, the impairment effect, as I said earlier, was $16.6 million. Additions were $2.5 million, and this was offset by amortization of $200,000.

Moving on to inventories, you will see these have increased by $2 million to $32 million in quarter 4, and this was due to an increase in both HIV and diabetes inventory.

Meanwhile, trade and other receivables decreased by $3.8 to $21 million. This is reflective of the lower revenues this quarter versus quarter 3 and, to a lesser extent, the impairment charge I mentioned earlier. Meanwhile, our trade and other payables, including current and noncurrent, have reduced from $37.9 million to $37.1 million, a decrease of $800,000. This was largely been driven by a decrease of $1 million in accrued loan interest.

Finally, I will discuss our cash flows for the quarter. Cash generated from operations for the quarter were $2.4 million, and this is broadly offset by capital expenditure of $2.3 million. However, obviously, the largest item relates to close to $6 million of tax and non-note interest. The vast majority of this relates to the tax settlement I mentioned earlier and which was recorded in quarter 2 was actually paid in quarter 4. While the payments during the quarter included interest payments on the exchangeable notes of close to $2 million. This represents 6 months of interest as these payments are made semiannually. Facility lease payments of $800,000. And the net result is that we had a decrease in cash for the quarter from $25.1 million to $16.4 million, a decrease of $8.7 million.

Finally, I'd like to say a few words about the impact of COVID-19 and the impact it's having on our day-to-day business. We've already seen a significant reduction in the level of testing being carried out at our Autoimmunity Laboratory in Buffalo. This is not altogether surprising as the type of conditions being tested or are largely nonacute by nature. And hence, it is understandable that in some cases, patients and physicians have opted to defer these. In our diabetes segment, we are seeing a reduction in instruments being placed at hospitals and other health care facilities as they temporarily defer the acquisition of new equipment while concentrating on the pandemic. To date, we have not seen a significant drop off in consumable revenues, but this may follow as testing in this area may also be deferred at a later date.

Revenues in our life science supply business Fitzgerald are being impacted by the partial shutdown in Chinese manufacturing. China being one of its biggest markets, though we are happy to see that this market is beginning to unwind some of the lockdown measures, which is encouraging.

Fitzgerald is also being impacted on the supply side as significant amount of its products are sourced from China. On a more general level, we are beginning to experience difficulties in shipping as the level of airfreight has contracted significantly. This has begun to become a factor for HIV shipments to Africa, and the last 24 hours, beginning to see some airports in Africa being locked down. It also may become a factor in terms of supply of raw materials, though to date, the impact of this has been limited.

On the positive side, we are seeing a sharp increase in demand for our respiratory Rapid products, and we're increasing production levels as we speak.

In overall terms, we will see a modest negative impact on quarter 1 revenues, but the greater impact is likely to be in quarter 2. So at this point, as I'm sure you can appreciate, it is impossible to quantify this at present, given the level of uncertainty surrounding how long this situation will last and ultimately, how severe it'll become.

I'll now hand over to Ronan, who will take you through revenue and other matters.

Thanks, Kevin. And I'm going to review our quarter 4 revenues and our revenues for the year before opening the call to question-and-answer session. Total revenues for quarter 4 were $21.3 million, which compares with $24.5 million in quarter 4 of 2018, which is a decrease of 13%.

Point-of-Care revenues decreased by 46% to $2.2 million from $4 million in the previous year. This was driven by lower HIV sales in both the U.S.A. and Africa. The decline in the U.S.A. was attributable to the decision to exit this market, which has been in decline for a number of years, while African sales were lower due to the normal fluctuations in ordering patterns that characterized that market.

Clinical Laboratory revenues decreased from $20.5 million to $19.1 million, which is a decrease of 6.5% compared to quarter 4 of 2018. This decrease was due primarily to lower infectious disease revenues, which included lower Lyme line sales due to the migration away from Western Blot testing and lower ELISA sales reflecting the older nature of this technology.

Looking at the year as a whole, total revenues for fiscal 2019 were $90.4 million compared with $97 million in 2018, which is a decrease of 6.8% year-on-year. Point-of-Care revenues decreased from $14.8 million in 2018 to $11.4 million in 2019, which represents a decrease of 23%.

African sales were down modestly in 2019 compared to 2018 due to normal fluctuations that have characterized this market rather than due to any loss of customers. The bulk of the decrease arose in the U.S.A., where the reduction in funding for public health HIV testing programs and also the CDC's recommendation in favor of fourth-generation antigen testing has led to a situation that volumes have declined to the extent that when manufacturing and marketing costs are taken into account it was no longer an economically viable product. Consequently, in quarter 4, the company decided to discontinue this product. This gives rise to the loss of $2 million in revenue, but an improvement in profitability and cash flow.

Meanwhile, Clinical Laboratory revenues for the year were $79 million, which represents a decrease of 3.8% over prior year at $82.2 million. Our Haemoglobins business performed strongly during the year, with growth of 5%. Absent very strong currency headwinds, this growth would have been significantly higher. Instrument placements were strong into all of our major markets.

Our Autoimmune business also performed strongly with growth of 6% for the year, with both our product and laboratory divisions performing strongly. Revenues at our monoclonal antibody business, Fitzgerald were down 4%, but the business continues to produce excellent profitability.

Our Infectious Diseases business performed well in China and also performed well around the rest of the world with a single exception of the U.S., where we suffered a significant decline in our business. This arises due to lower Lyme sales attributable to the loss of a contract with one of the major U.S. clinical laboratory service providers and the continued migration away from Western Blot to other testing formats.

We have seen production volumes in our Carlsbad, California facility, which specializes in Western Blot manufacture, declined steadily to the extent that it is no longer -- that it no longer makes economic sense to continue. Consequently, we have taken the decision to close this factory on the 30th of June of this year. During the period, until 30th of June, we will produce the final batches of Lyme Western Blot for our remaining customers while simultaneously transferring non-Lyme products to our other factories.

The combined impact of withdrawing from the Western Blot Lyme business and our U.S. HIV business will result in a reduction in annual revenues of $4.6 million. However, we expect that when the associated cost savings are taken into account, it will result in a positive impact on our annual cash flows of approximately $2 million. The company will be taking a once-off charge for redundancies and other closure costs in relation to the Carlsbad factory in quarter 1 2020, and this will result in a one-off -- a once-off charge of approximately $2 million, with a significant portion of this being noncash relating to inventory write-downs.

Following the closure of the Carlsbad factory on the 1st of July, the company will be operating on a cash flow positive basis and even excludes short-term COVID-19 factors.

Meanwhile, the company has been working on the development of an ELISA test for the detection of antibodies to the virus that causes COVID-19 in human blood samples. This test will determine which members of the population have had COVID-19 and are, therefore, now immune and consequently can safely go back to work and be exposed to the virus. For example, health care workers and et cetera, et cetera. This test will also have utility in monitoring the effectiveness of vaccination programs as vaccines become available. The product, which is substantially complete, is being transferred into manufacturing at our Jamestown, New York facility, where production capacity is significant. Trinity will avail of the emergency regulatory pathways to expedite the commercialization of this test across all of its primary markets, including the United States and Europe.

As already indicated, our production capability is very significant, and the instrumentation that can run this ELISA test is freely available in virtually every laboratory in the world.

In addition to this, the company is developing a rapid Point-of-Care COVID-19 test to detect antibodies, the virus that can be run in approximately 12 minutes, using one drop of blood prick procured by finger prick with spring-loaded lancet.

The utility of this test is similar to that outlined above for the ELISA test. We expect to complete development of this rapid test within the next 2 months and believe that we can avail of emergency regulatory pathways to expedite approval of this test in the United States, Europe and other markets.

So at this point in time, if I could hand back this to Kate for questions.

(Operator Instructions) Our first question is from Paul Nouri from Noble Equity.

I was wondering, what percentage of the cost of goods sold is directly related to the product versus factory overhead and employee pay?

It obviously varies, Paul, quite a lot. But on average -- it could -- you're talking about 20% from materials and of the remaining 80% broadly split evenly between labor and overhead.

Okay. And have you pretty much kept all your employees on so far?

At this point, yes, we've continued to manufacture in full.

And the Fitzgerald unit has not benefited from any COVID antibody sales this year?

Not significantly at this point, no.

Okay. And you noted that part of the reason for the increase in inventory was an increase in HIV tests, even though you're exiting the U.S. market, maybe you can reconcile that for me?

Yes, we -- it's a possibly, I should have said there that it's for the African test market, which is a bigger part of the HIV business anyway. It was a multiple of the U.S. part of the business. That's business, we used to have manufactured in China and recently have taken back to Ireland and have been steadily building up safety stocks. So as we've becoming -- become more adept at manufacturing the products in question, our output levels have been going up, and we've been in a position to put a safety stock in place.

Okay. And then keeping in mind that you're exiting a couple of lines of business going forward. Do you have an estimate for what your baseline is for, I guess, the African point-of-care market and then the clinical lab business?

I think our baseline for Africa will be about $11 million. And then just for -- for the rest, just reluctant to give you an exact number in the current circumstances. But for Africa it's about $11 million.

Okay. And so of this -- all of this remaining business, how much of it is recurring revenue for tests versus placing instruments?

Well, I think all of our business virtually, apart from Fitzgerald and our African business is recurring kind of basically instrument-based business. And indeed, then our Fitzgerald business is very much a recurring business because, for example, if you take an FDA approved product, it may have a Fitzgerald-sourced antibody as its base.

And therefore, to change that product will require a new FDA submission. So in effect, the business is very much a repeat business and movement increases or decreases are very gradual. So really, I suppose the only fluctuating -- significantly fluctuating component of our business is our African business. And then I'd characterize that as of having about 70% to 75% of the entire confirmatory market in Africa, which we've held for a course of 15, 17 years now without any significant movements, gains or losses of countries. So -- and we believe that with basically more and more effective antiretroviral treatment that the benefits of testing are ever increasing. And if we don't see a situation where HIV testing in Africa reduces, so we think that's a very stable business. So we're confident of maintaining that kind of $11 million worth of revenues approximately or $10 million, $11 million worth of business. And then on top of that, as you know, we're now entering the screening market, which is a market of a multiple times bigger dominated by Abbott, and we hope to take a share in that market and are confident of doing so with the advent of TrinScreen and its imminent WHO approval.

Okay. And my last question, just in terms of liquidity is -- maybe you could talk about any credit availability that you have in terms of a credit facility and whether or not there's any consideration to take out mortgages on any of the properties you have as a way of shoring up cash?

And if you are considering selling the Carlsbad plant and if so, if you have a value for it at all?

I'll take those in reverse order. The facilities that the company operates on a by and large, they are leased. We own 2 buildings, 1 in Jamestown, New York. We have 2 buildings there, the factory building we own. We own a premises in Burlington, Ontario in Canada. I would -- I think it'd be safe in assuming that none of those buildings are particularly valuable on their own. They're very essential to us, but they're not particularly valuable monetarily and don't think we would secure mortgage on those to any great extent. We don't, at present, have a -- any credit facilities in place, but that's something that we are working on.

Our next question is from James Sidoti from Sidoti & Company.

Can you hear me?

Yes.

Great. So just want to dig into the new test you're developing now for the COVID-19 virus. You said the first one, which is the Clinical Laboratory test. You said you're through -- pretty much through development and moving to production. So what's -- what does that mean with regards to the FDA? What do you think the time line will be to get approval for that?

Well, Jim, we're expecting that we get emergency use authorization from the FDA. And so it's a very significantly shortened process basically, instead of going through kind of exhaustive clinical trials, you're really involved in effectively validating the product and then basically getting -- requesting Emergency Use Authorizations, which in these circumstances one believes -- we believe we would get. I think subsequent to that, after one release product in the market, there's an element of kind of enhanced trialing of the product subsequent to that. But you should have seen some examples of this happening, it's got EUA approvals. And that's what we expect will happen.

So basically, at this -- where we stand at the moment is that, we have a factory in Jamestown, which is expert at ELISA manufacturing. I mean for example, it supplied up until sort of, I think, about 7 or 8 years -- up until 7 or 8 years ago, it supplied all of Quest and LabCorp's infectious disease requirements across all viruses virtually. And so it is expert in basically high-volume manufacturing. It has all the abilities to do that. So we're transferring this product, which, by the way, is an IgG product. So it detects antibodies and can detect them from about sort of 12, 14 days after infection. And so we're transferring that into production, meantime, going through the validation process to support in EUA. And we're quietly confident of getting the product to the market very quickly. And please don't ask me to be exact of the -- in terms of defining very quickly. But that's our expectation. So basically, we have the product, we have the ability to manufacture in volume, and we believe we have an excellent product and as a instance that, we are very practiced at mass production of the infectious disease vaccines -- of infectious disease viruses.

All right. And just to be clear, this test, this could be conformed on the existing equipment now that's at the LabCorp and Quest-type facilities. Is that correct?

Yes. Yes, I mean basically, every laboratory in the world will have -- has virtually, I think, without exception, the ability to run ELISA test would have the instrumentation in place, whether that be, Labotec, Elabs, ESX, Es2s, Washers, Readers and whatever. So every laboratory in the world will have a -- they'd be -- might be using at the moment for easier tariffs, but they all have ability. So basically, yes, there will be no products in terms of instrumentation being readily available in the laboratories to run this test.

Okay. And then similar for the Point-of-Care test you're working on now, whose equipment would that test run on?

Well, I mean a Point-of-Care test won't require an instrument. I mean it's just -- imagine it in your mind, it's like -- it's exactly like our HIV test or exactly, I suppose, really like a pregnancy test in a sense that you just get a color on the control line and then a color if it's positive and no color if it's negative. So in that sense, so it's just a standard lateral flow test like a pregnancy test or like HIV test. So lateral flow is basically that. So it doesn't require any instrumentation, whatsoever.

Okay. Because I do believe the Abbott test that just received approval, that has to run on their test system. So this would be an advantage over that because you wouldn't need to have a test system.

Well, they're doing different things. I mean in the sense of the Abbott test that just been approved is a molecular test, right. And basically -- so basically, that's testing in the antigen. So that can pick up an infection, virtually, immediately. The antibody test that we are -- we have developed -- are developing in the case of the Rapid is an antibody test, right?

So of course, you'll only actually develop the antibody a number of days after infection. So typically, the IgM, you'll get after -- the IgM antibody, you'll get after about 3 days and the IgG maybe after kind of 8, 7, maybe to 7 to 10 days. But of course, to give you an example, some of the importance -- some of -- I mean in any event, most people aren't being tested, actually, ironically, until many days after they actually are infected. But leaving that aside, what's happening, if you look at the statistics that we're seeing at the moment, of course, they're purely monstrously understating the actual number of infections. And if you -- I just take an example of the U.K. right beside us here, they really are only testing people when they're really, really sick. So there's lots of people, younger people and indeed, some older people who are getting sick and getting over. And of course, they would never get a test unless they get really sick. And of course, they come to a point then where they say it's very useful to know if, in fact, you actually -- if you did have the condition and if you have developed the antibodies, because if you have developed the antibodies, you couldn't go into any environment without a mask, whatever and are safe. So you're safe to go back to work, and you're safe maybe to be health care worker, et cetera, et cetera. So as this whole thing moves forward, antibody tests are going to become really an essential component of this whole thing, whole pattern. And the other -- yes, and of course, they are a lot less expenses as well. And bearing in mind that our antibody test, ELISA, will run on blood, with blood and our Rapid run with whole blood from a fingerstick-loaded lancet.

Another important point to bear in mind, by the way, is that, it's not really being said, but the molecular tests, although they're very accurate, the swabs that are being cast sometimes aren't actually as accurate in the sense that they're not getting a good enough sample. So our estimates are that maybe really they're only 80%, 85% accurate, because -- not because the underlying technology isn't good enough but rather because the quality of the samples that are being procured by people of sometimes limited experience isn't good enough.

Okay. All right. And now with regard to R&D expense, it sounds like you're working pretty hard on these. In the first half of this year, should we expect a material pickup in R&D spending in the first half of 2020?

No, I don't think so, Jim. I mean you've already heard Ronan say that the test in question is largely developed from the ELISA point of view. There'll be modest expenditure on that. The Rapid test which has come a little bit afterwards, will require maybe a little bit more. But no, I don't regard a significant uptick. And basically, we've just redeployed people.

Okay. All right. And then you mentioned in the press release that the valuation for the TrinScreen test is on hold temporarily. I know it's hard to look into a crystal ball and see when this whole COVID-19 starts to come back to -- starts to get under control. But is it reasonable to assume that TrinScreen will be approved at some point in 2021?

Yes, I do believe so. I mean also our Ivory Coast trial is finished, but our South African, Kenyan trials are just -- they just closed them down. We were just finishing. So I mean I can't guess when they'll recommence, but let's assume and then this does a guess that it will constitute like a 2-month delay something like that.

All right. And then one last one for me. I just want to make sure I got my math right. On the 2 discontinued products, the U.S. HIV test and then the Lyme test, you said, you expect about a $5 million decline in revenue, but about a $2 million increase in cash flow. So is it safe to assume that operating expenses at that California plant were roughly $7 million?

No, not really. So the figure we quoted there, it's a little bit of apples-and-oranges going on, but the $4.6 million of reduction in revenues was the amount of revenues that those products contributed to 2019's revenues. And obviously, they won't go to 0 entirely in 2020 because we'd still be producing some of the Western Blot Lyme products, and we'll sell those throughout the year. But ultimately, that $4.6 million, if you want to think about it in 2021, will have all disappeared.

The products were declining anyway, but when we get out of the Carlsbad facility as such, we will probably estimate that we probably would have had about $3 million out of revenues between the 2 products at that particular point in time. And the costs associated with Carlsbad were about $5 million, and that's where the 2 comes from.

And the other thing you've to bear in mind is that, there were lot of products in manufacturing in Carlsbad as well, which we had to move to other factories. It wasn't just as simple as -- you know...

Okay. But for 2021, we should assume operating expenses down around $5 million from 2019 levels

Yes.

As a result of the -- that facility being closed. Okay. All right.

(Operator Instructions) Our next question is from Walter Schenker from MAZ Partners.

Two questions. First, on the ELISA test, you can make millions of these, and you said volume you did 2 very large labs, I'm just trying to get an understanding, if making it in volume is thousands, tens of thousands, millions?

Yes, we can make millions. Basically, then -- yes.

Secondly, while you talked about only testing or initially testing people in the health care or emergency providers and stuff. As people go back to work, one of the concepts is to, in fact, test people for antibodies because they would not be at risk, which would make a much larger market, this would be applicable to anybody who to check if, in fact, they have the antibodies, correct?

Yes, that's correct. Walter, yes.

And just the last on that, and then I have a growing question. Not trying to rip people off, but other type of antiviral test you may have done in the past are $1, $10, $20, I'm not asking why you done prices, just in order of magnitude of what a test might go for, that you sell.

Well, I mean really, that varies. But I mean if you take a test for measles, for example, an ELISA test for measles is kind of like it was bottom of the barrel. To me, it's a very simple, simple test. It probably would be selling out of a company like Trinity Biotech for $1 a test or something like that.

But then the other tests, more esoteric might be up at $5 to $6. So it would depend. But certainly, yes, this -- I mean it would be -- I'm not sure what the pricing would be, but it would be more the latter than the former.

Okay. And then Ronan, we've had discussions over the last couple of years about the price of a 100 or under $100 million medical testing company, which has to carry public company expenses, worldwide marketing and research expenses, given how many countries you operate in, it would generally still be the view of management and the Board. I know you can't speak for the Board, you can speak for yourself as a large holder and part of management. That on a long-term basis, a $100 million or less revenue company, which operates on a worldwide basis, just can't get very profitable.

I mean you're saying that, not me. I don't really know how to respond to that.

Well -- okay. I'll ask the question differently. We have a couple of years out a bond payment coming due, and -- which the company is going to have to address, history of the last 5 years would argue that a $100 million, we can't make a lot of money. So the company either has to be meaningfully bigger or pursue other strategic alternatives. That's a question not a statement.

Yes. Okay. And I would accept that. And I think we're very conscious of the fact that we have the bond maturing of $99.9 million in the 24 months' time. And we're extremely conscious that in -- we may have to take steps, and we're looking at all our all of our options. And it could include a sale of a part of the business or indeed, all of the business, as many possibilities here, I don't just -- I don't want to kind of spam, unsettle and even my employees who are listening on the call or anything like that. But yes, clearly, we have to look at all of those kind of options.

Our next question is from Jonathan Sacks from Stonehill Capital.

Very interesting to hear about your development of a COVID antibody test. Can you just tell us a little bit about the potential competition for that test? Are there lots of other companies developing tests for that purpose now? Is it difficult to do? And is Trinity differently or uniquely positioned versus others by virtue of capabilities or manufacturing capacity or otherwise?

Jonathan, I mean, I think, if you Googled kind of COVID-19 tests, you got a very long list, or lots of molecular tests and maybe sort of test Rapid's and whatever. Most of them are probably Chinese, but there are a lot of people involved in it. I think it's reasonable to assume that an awful lot of companies are working on this, some may be talking about it and some not talking about it. So all I can say is that we have developed a test, an IgG test that we think it's very good. We have the pedigree, in the sense that we've done it before. We know where we're at. We have the production capability, and we have a reasonable market capability. So -- but let there be no doubt that there'll be a lot of people very busy working on COVID test at the moment. And I'm not going to start speculating as to who is where and that whole process.

But just looking at ourselves, we've developed a good test. As I mentioned, we were the sole supplier -- virtually sole supplier to Quest and LabCorp until a number of years ago, on virtually their entire infectious disease and ready-to-test for that that detected various viruses. And so clearly, we have the capability and the experience.

So -- and so we'd be quietly confident that this can be successful. I mean there are I think, there's 2 things. The 2 things that are going to basically get question marks over is whether we can get the approvals that we require and whether we can gain the custom that we can acquire -- that we have required. I have no doubt about that we have a decent product and have no doubt that we can manufacture. We've ticked those 2 boxes, but no doubt in the next 2 boxes, I think, there need to wait and see. But we would be quite confident to gain the approvals.

And in terms of the approvals, would you think the United States is the first place or would act the fastest or someplace else? If you could help us think about what regions might have the fastest track for approval of these products?

Well, I mean, I think, our concentration basically would be CE mark for Europe and the FDA with Emergency Use Authorizations. I mean they are primary focused right now. I mean I think armed with that, you got all other markets would open up, you know.

And I certainly understand you don't know exactly when those things can get approved. And I'm guessing that's months, not weeks, but that you'd likely be hopeful that it's something you could be selling in this calendar year in 2020, if approved, is that a fair way to think about it?

Yes, absolutely -- I'm very much talking about this calendar year, absolutely. I'm talking short months.

Our next question is from [William Lapp], a Private investor.

Based on Jonathan's question, I think you're correct based on what I've been hearing on television and others that the FDA is going to move this as fast as possible. And I think -- I don't think you'll have much problem getting this approved, if it does what you say it will. There are other tests out there. In fact, Mayo was developing some tests you may want to look at that came in. And they start attributing this morning, you may want to Google that and see what they're doing. But I think you have the right approach on this. But is your -- is Abbott also looking at something like this developing this test?

Well, I mean Abbott's got approval, I think, yesterday, a day before, I mean, 2 days ago.

Yes, but that's not the same kind of test that you all approve on. And is this...

Exactly. That's a molecular test.

Yes. So I think they're also talking about the anti -- the same type of test you have. So I guess -- but there must be -- there'll be enough demand that more than 1 test would be good, right?

Yes. I mean, Bill, we've no doubt, but there'll be other companies would develop the antibody test there.

Okay. And so in Africa, for the -- for your other -- the screening test, you never finished then getting all the sites and all the data done so you could finish the submission. Is that correct? Because Kenya was closed down, is that what you said?

Yes. So basically, there was 3 sites. So South Africa, Kenya and Ivory Coast. So Ivory Coast is finished. And South Africa and Kenya were just virtually on the point of completion, but they've just closed down the past 10 days. But I'm guessing here, I'm estimating that they'll open up again. I'm not sure of the timing, but I mean somewhere between, I don't know, 2 months and 3 months probably. And I think -- so that's the extent of the delay. And I think following that, then we can submit to WHO, and hopefully, we'll get an approval before the end of this year.

Okay. So we're still pursuing that, and that's still something that looks good for us if we get it, right? I mean there's still a demand for it.

I mean, to be very clear, our TrinScreen strategy is core -- of core importance, the future of the company, and we've invested significantly in it. We're strong believers in this. And we think that we can succeed there. We already basically dominate the confirmatory market, and we're an established producer of Rapid HIV test, regarded as the gold standard in Africa, and we think we can leverage that and take a decent market share in the screening market. We're confident of doing that.

Do you have any feeling -- I know it's early, but do you have any feeling what kind of tests -- what kind of volume you could do in the COVID test? Have you have any plan at all?

I'm going to resist -- I don't want to kind of -- I don't want to build expectations unreasonably here. If you don't mind, I won't do that. I won't get involved in that, other than to say that there is huge logic in the concept of screening at some point in time to ascertain who basically has been infected and who hasn't. There so much advantage to knowing that.

And there are many people -- I mean in the U.S., you're earlier in the whole pandemic than some of the European countries, but in reality is that there are many, many people who have been infected and quietly recovered, never basically been to the doctor. I know, numerous such people. Bear in mind, at the moment, for example, just take the U.K. as an example, I mean you basically have to be really sick before we can even give you a test.

Yes. Well, the U.S. goal is to get everybody tested.

They're saying otherwise. Just self-isolation. Self-isolate and then you recover and then you're never part of the statistics.

But you still may have it, you don't know. But once you develop that, does that -- the question is, will it stay so that it will be that your immune system is such that you are okay and it won't come back, but I think...

I can just debate about this, I mean, yes, you are immune, the question mark is to how long you're immune. I mean for most viruses, if you think the whole concept -- the whole vaccination concept, you're immune for life. But I mean there is speculation that may be only immune for 2 or 3 years. But I don't think anybody is suggesting that you're immune for less than that. So as -- from a point of view of this pandemic and you can regard somebody who's had it has been immune.

Okay. Well, this test could be good for Trinity, if we can make some money with it that would be good. Other than the fact that...

Okay. So listen, thank you very much. I see there's no more questions. So I think we'll close the call. And thank you for your support and interest, and we look forward to speaking to you soon on our quarter 1 conference call. Good afternoon. Thank you.

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