Trinity Biotech plc (TRIB) Q2 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Trinity Biotech Second Quarter Fiscal Year 2015 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz with Lytham Partners. Please go ahead.

Thank you, Alison, and thank all of you for joining us to review the financial results of Trinity Biotech for the second quarter of fiscal year 2015, which ended June 30, 2015. 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. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including but not limited to, the results of research and development efforts, the effect of regulation by the United States Food and Drug Administration and other agencies, the impact of competitive products, product development, commercialization and technological difficulties and other risks detailed in the company's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements reflect management's analysis only as of today. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements. With that said, let me turn the call over to Kevin Tansley, the Chief Financial Officer for a review of the results. After Kevin's remarks, we will hear from Dr. Jim Walsh on product development issues, and Ronan O'Caoimh will ramp up the prepared remarks which his perspectives on the quarter. Kevin?

Thanks so much, Joe. Today I will take you through the results for quarter two 2015. Beginning with our revenues, total revenues for the quarter were $24.3 million as compared to $26 million in quarter two of 2014. However, also is the case in quarter one this year, revenue this quarter particularly impacted by currency movements. This has to do with the strengthening of the dollar against a range of currencies which is the effect of reduce in the dollar equivalent of our Euro, Sterling and Brazilian Real revenues. We have restated the quarter two revenues on a constant currency basis which shows the revenues for the quarter would have been $25.4 million if the quarter two 2014 exchange rates were used. As well as reducing revenues, the same currency movements had a similar impact on foreign currency denominated expenses, in fact reduction. So FX will also be relevant we're considering both, gross profit and SG&A movement this quarter. In summary, whilst revenues are lower, so to our costs and these factors broadly offset and hence there is no impact on profitability which is what we mean when we say that the company is naturally hedged from a currency perspective. This brings us to this quarter's gross margin. As you can see from our press release, we are into gross margin of 47%, this represents reduction on the 48% that was reported in Q2 last year. Part of this reduction is attributable to the currency issues I've just mentioned. However, results are being impacted by lower sales of HIV and Lyme products, both of which are in higher than average margins for the company. Moving on to our indirect expenses our R&D expenses have increased slightly from $1.2 million to $1.3 million, meanwhile our SG&A expenses have increased from $6.4 million to $6.7 million. What we're seeing here is the impact of higher sales and marketing costs, particularly those associated with our Meritas business, and these are partly offset by a reduction due to favorable impact on costs that I mentioned previously in relation to currency movements. Operating profit for the quarter was just over $3 million and this compares to $4.6 million for the equivalent quarter in 2014. This is obviously lower than we've seen in other quarters and the principal factors are; firstly, the lower level of revenues this quarter, and Ronan will address this shortly. Secondly, the product lines which have seen the reduction in sales, principally HIV in Africa and Lyme sales in the USA are higher margin product lines of the company. And thirdly, the higher sales and marketing costs that we're incurring particularly in relation to Meritas. Moving on next to our financial expense. This is the first quarter in which you are seeing the impact of the 30-year exchangeable notes which were issued in April this year. We're counting for these notes is quite complex and has a significant impact on the income statement. So it will take some time to take you through the various aspects. The first point is, the counting standards require hybrid financial instruments at this time to be valued using what is called the bifurcation valuation methods. What this entails is value in the derivatives embedded in the instruments separately from the desert self. And just hear where these derivatives of the various put options and call options that are part of the notes. Once these are valued, the residual amounts after deduction of fees is then deems to be the fair value of the underlying desk. Both by definition, the dead elements will be left in the nominal value of the desk itself. Difference or shortfall do you want to think if that way is made up by charging a non-cash interest charge over and above the normal cash based interest charge. This is the first of two non-cash items which are now being recognized in the income statement and disclose separately as non-cash financial income or expense. Second such non-cash item that is recorded in this cash relates to the dividend, the derivatives I mentioned earlier. In this case accounting rules require derivatives of this sort to be value on mark-to-market on a quarterly basis with a change in value taken through the income statements. You assume the income statement that we've recorded a gain of $978,000 this quarter and this is the formation of the two non-cash items I referred to. A fact that it is a gain reflects the fact that the non-cash element of interest which is also the cost of the P&L has been more than offset with a change in fair value of the derivative in this instance. However, this may not always be the case, as the change in fair value of the derivatives can be a gain or loss depending on the change being value of certain assumptions used in the valuation level. The reason we have separated out these items is one, because they are non-cash in nature; and two, because I don't think they are incredibly meaningfully in the performance of the company, and really are the effect of one of the more esoteric applications of accounting standards. In terms of the actual results, the cash interest for the quarter was the cost of $1.1 million or the non-cash items amounted to a gain of just under $1 million. With that, I'll move on to our tax charge. This was $218,000 for the quarter, and this represents an effective rate of 7% versus 6% for the comparison period last year, so broadly similar. The net results of all that I have spoken up so far is that profit for the period was $2.7 million. From the EPS point of view, we've given you the basic EPS calculated off that headline profits which amounts to $0.116. We are also showing on EPS that excludes the non-cash items related to the convertible notes, and this amounts to $0.074 this quarter. From a diluted EPS point of view, there was a change this quarter also. And calculating this amount, the calculation assumes that the note converts in its entirety. Both the share account included additional 5.2 million shares to reflect this fact, whilst the earnings figure is just to remove the after-tax impact of the - both, cash and non-cash elements. Finally, in relation to the income statement, earnings before interest tax depreciation, amortization, and share option expense for the quarter was $5 million. I will now move on and talk about the significant balance sheet movements since the end of March 2015. Property, plants and equipment's increased by $1.5 million since last quarter, this is due to additions of $2.4 million being offset by a combination of depreciation of 600,000 and the retranslation movements of 300,000. Same period, our intangible assets increased by $4.8 million, this was made up of additions of $5.3 million, retranslation movement of $200,000 offset by amortization of $700,000. Moving onto inventories, you will see these have increased from $37.1 million to $38.2 million and this is due to a number of factors. Firstly, we have continued to build up our inventory of rapid Syphilis product in advance, we will be expecting a growth of sales in the coming quarters. Or also the normal fluctuations which encourage you to ordering a production schedule in particular, are inventory of HIV tests increase this quarter due to the lower than anticipated sales in that area. It was also the seasonal increase in Lyme inventory which occurs in December months every year coincided with peak demand. Trade and other receivables have increased by $700,000 to $28.3 million, this reflects the longer payment cycle with respect to instrument sales. Meanwhile our trade and other payables have increased slightly from $20.1 million to $19.8 million in the quarter. Finally, in relation to the balance sheet you will notice that the exchangeable notes are being carried as $109 million, and this represents both the underlying debt and the fair value of the derivatives. Finally, I will discuss our cash flows for the quarter. Cash generation from operations before working capital movements for the quarter was $4.1 million. This was largely offset by efforts working capital movements which significantly impacted by the knock on effect of the increase in inventories in quarter one this year. Meanwhile capital expenditure, during both tangible and intangible in the quarter amounts to $7.2 million, this was higher than normal due to the higher clinical trials costs for our products. The final and more significant cash movement this quarter was the issue of the 30-year exchangeable loan notes which raised a $115 million or approximately $111 million when the related fees are taken into account. Consequently, the company had cash on-hand of $110 million at the end of the periods. I will now hand over to Jim, who will take you through the latest developments with regard to cardiac.

Thank you, Kevin. I'll take the opportunity to give you an update on progress on our cardiac market development programs. In particular, I will provide you with a detailed update on our Troponin clinical trials, which I'm delighted to say, is progressing very nicely with patient enrollment now complete. I will also update you on our Meritas BNP products, which as you know, obtained European CE market approval last year, on which we immediately plan to commence clinical trials to support an FDA application. So starting with Troponin, you will remember in February last, the company announced that it has shipped products to the US for clinical trials. Again, just to remind you, there are Tremaine [ph] sections to this trial and I filled each of the sections now individually. Firstly, and by far the most challenging is the ACS trial or the heart attack trial as we call it in the emergency room. Since February, the ACS trial has been running at 12 trial sites across the United States recruiting about 70 patients per week, also which holds almost 1,500 patients. Each of those patients with samples four times namely on arrival otherwise known as time zero, three hours, six hours, and 12 to 24 hours. At each time point, the Troponin level in the patient's whole blood in trials was mentioned. The end of this trial was to recruit efficient number of suspected MI patients to produce a cohort of at least 150 actual heart attacks. I'm happy to report that as of last week we have passed the 150 MI milestone and therefore, this section of the trial is now complete. This completed patient cohort that is for positive/negative MI patients is currently being adjudicated by a panel of three independent cardiologists. It is the role of the independent cardiologists to determine based on the clinical data if a patient actually had an MI in accordance with the definition of myocardial infraction. This of course is the definition that has been adopted by the FDA, and which is called switch problems for the current POC Troponin products on the market. All going well, we expect the adjudication process to be complete by the end of August or early September. This data will ultimately be used to determine the clinical sensitivity and specificity of the Meritas Troponin product. The second major component of our clinical trial is to determine the upper reference level or 99 percentile of our product in a population of normal healthy people. Since February, the URL trial has been running at three sites across the United States. The aim of this trial was to quantitatively determine the level of Troponin circulating in the blood of normal healthy people. This group with 750 people needed to be gender, age, and ethnically matched to be represented of normal healthy people across the United States. Again, I'm happy to report that patient recruitment is complete. With our standard issues, we will now be in a position to determine the 99 percentile for a normal healthy US population on our Meritas products. You may have remembered we have already carried out a study on the European population which resulted in a 99 percentile of 36 picograms of Troponin permeable in whole blood, and 24 picograms of Troponin permeable in plasma. It's expected that the US data will be quite close to these numbers, we would not expect any great variation between population groups. In summary therefore, the patient recruitment to the two main components of our Troponin trial is now complete. In relation to results, although the other quality adjudication process remains on non-closure this time, we can actually see the hospital diagnosis for each patient sample, and although there is no guarantee that the hospital result would agree with the adjudicated results in every case, we are really very encouraged by our data so far. And just to remind you and perhaps provide you with another level of comfort concerning the data, you will remember that sometime back, Dr. Apple [ph], Hennepin County, Emergency Department, conducted a trial on 319 patients presenting in the ER with symptoms suggestive of ACS. Both plasma and whole blood samples were taken on presentation by E times zero, and at 6:00 hours. The results of this study were adjudicated, again US universal definition of MI, just as will be in our Troponin trial. The results of the Hennepin County study demonstrated exceptional product performance which whole blood sensitivity and specificity at time zero equaled to 75% and 93.6% respectively; rising to 87.5% and specificity of 94.7% at 6:00 hours. You will note that this protocol is very similar to that which we used in our FDA trial. So the results obtained should be somewhat indicative of what we can expect from our main US trial. As I say today, everything looks quite encouraging. Still remaining to complete as a procedural study, this will be carried out at three sites in the United States. Either the same sites by the way that have already carried out our URL and ACS trial, so they now understand our products very well. This trial consisted running a number of replicates of high, medium, and lower controls; and three known whole blood and plasma samples each day for 20 days. Now that the ACS and URL trials are complete, the procedure study will start immediately. We would expect the precision data collection to be complete at approximately the same time the clinical adjudication process completes. Finally, writing over actual FDA submission document is at a very advanced stage. The document essentially awaits the final outcomes from the trial that sets just now. The company now estimated that adjudication process will be complete by the end of August or early September, with the submission of the application of the FDA expected in late September or early October. I will now move on to Meritas BNP. The company previously announced that we had received European approval for our BNP heart failure test sometime ago. As you know, the BNP levels in the bloodstream increase as the severity of heart failure increases, thus BNP has emerged as the principle biomarker in the diagnosis of acute and chronic heart failure. For our CE approval, the BNP product was tested on a predominately US population of 1,424 healthy individuals, and 665 patients, which had been diagnosed with heart failure. On this population bank sample, the Meritas product demonstrated sensitivity on procession which is at least comparable to the much larger and far more expensive clinical laboratory systems. Data from this study by the way which was run by Dr. Fred Apple is being presented as I speak by Dr. Apple at the AACC Meeting in Atlanta this week. With regard to US approval, we've had multiple discussions with the FDA in the first half of 2015, the most recent discussion now taking place on July 13th last. The FDA had made a strong recommendation that data on bank samples would not be optimal to support our application and suggested that we rethink our strategy towards fresh perspective US samples only. We have decided to take this advice onboard and will increase the number of trial sites in the US up to 12. The adoption of this new strategy we believe is far better, and will help for a smooth review process with the FDA. However, it will have the effect of pushing our FDA submission days out by three or four months. However, by taking this advice on board, it may well speed up the review process by an equal and greater [ph] in the end. In summary, therefore, we are moving into the home straight for our Troponin application. Patient enrollment is now complete and we are essentially at the end of our crunching stage. All indications of the data look good and we expect to submit to the FDA in late September or early October. BNP enrollment are expected at - it will be expanded to the 12 trial sites as I mentioned, and approval of both products is expected sometime in the first half of 2016. And with that, I'll hand it over to Ronan.

Thanks, Jim. I'm going to review our revenues for the quarter before opening the call to a question-and-answer session. Our revenues for the quarter were $24.3 million, compared to $26 million in quarter two of 2014. However, when the impact of foreign currency exchange movements due to the strengthen of the U.S. Dollar, again the range of currency is removed, revenues would have been $25.4 million this quarter thus representing a decrease of 2%. Point of care revenues for the quarter were $3.4 million, which represents a decrease of $1.2 million on a constant currency basis which is a decrease of 25%. This decrease is entirely attributable to lower HIV sales during the quarter. This reflects the irregular ordering pattern which characterize this market rather than any underlying adverse change in the nature of the business. As you know, our HIV in Africa is funded almost entirely by NGOs, and some of these agencies tend to be haphazard and are unpredictable in the context of a 13-week reporting cycle. Our HIV Unigold product continues to be regarded as the gold standard and continues to be utilized as the confirmatory 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 on to anti-retroviral drugs with number now exceeding 20 million. So despite this very disappointing quarter, we are confident of our African HIV business continuing to grow. In the US, our HIV sales increased 5% 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 the HIV-2 FDA approval last year. In December as you know, we were delighted to receive a CLIA waiver for our Rapid Syphilis product. This means we have the only FDA approved Rapid Syphilis test, and also the only CLIA waived Rapid Syphilis test available in the United States. Therefore, this is a totally new market and it is difficult to estimate the size that revenues will be. Most obvious comparison and really the only comparable product is the CLIA waived rapid HIV products that are sold by Trinity, OraSure and KenBio where we share a market of $50 million of CLIA waive to HIV revenues. We sell mostly into the public health departments and community-based organizations throughout the United States. It's improper to say half percentage of this HIV market, the syphilis market will transpire to be, but we can say though is that we are ideally positioned to maximize its potential, as we already serve the public health market with our direct sales force. We sell our HIV products to the same target demographic. And secondly, we've been in contact with all 50 United States public health departments, and all the city and county public health departments, and especially we can tell all our initiating purchasing plans. However, all this takes time, as in each case there is a purchasing decision followed by the sourcing of funding, and then we have the establishment of procedures, sometimes the establishment of the pilot, and of course training of personnel. So this is in excess of 100 day of the 200 day process. In addition, by the way we've been inundated with approaches from community-based organizations, Planned Parenthood, health clinics, and community health centers. So how big will the market be? Our syphilis revenues during the quarter were $100,000. However, current indications are that our syphilis revenues during the current quarter, that's quarter three will exceed $400,000. We believe that we will gather significant momentum, particularly at the city and public health departments begin to make purchases. We believe that this will be a $10 million plus product, but it's difficult to assess at what point in time we will reach that run rate. Moving onto our clinical laboratory business, our revenues for the quarter were $20.9 million, however on a constant currency basis revenues were $21.9 million, compared to $21.4 million, two of the 14, which is an increase of 2%. This increase was due to the continued increase in premier and incur revenues although this was partially offset by our Lyme sales due to weather related factors and a decrease in revenues. Our premier business grew 10% over the prior period, and during the quarter we placed an excessive 90 premier instruments with all of our key markets; Menarini in Europe, China and the US performing strongly, and Brazil putting in a particularly strong performance. Moving onto our infectious disease business excluding infold [ph]. This business declined 2% over the prior year when currency impact excluded. This decrease is due almost entirely to the fact that the Lyme confirmation components of the business was down $400,000 when compared to the prior year, directed to last year's severe winter. All of the balance of our infectious disease business portfolio with China performing particularly strong. Moving now onto Immco sales, it continues to perform strongly, and the highlight continues to be the success of our Sjogrens test, which is a dry eye test, which we do not sell to laboratories around the country, but we run this in our own laboratory in Buffalo. Sales of Sjogrens during the quarter were $600,000 which is the same as the sales in quarter one of this year as in three months ago. This loss of momentum in Sjogrens sales, this loss of Sjogrens sales momentum arrived due to the fact that ownership of our distribution partner moved from Nicox to Bausch and Lomb, that's the beginning of this year 2015. As the loss of momentum arose, due to transition logistics and training of new sales persons, however, the sales force of Bausch and Lomb is 13X larger than that of Nicox, and we believe that Bausch and Lomb will be a much stronger partner than Nicox in the future as Bausch and Lomb have 150 direct sales reps, perfectly [ph] and the ophthalmologists around the country, so a 150 compared with 12 for Nicox. We're very, very confident of the momentum being regained very quickly. So at that point, this time I'd hand back now to the operator for the question-and-answer session.

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Drew Jones from Stevens [ph]. Please, go ahead.

Thanks, good morning guys.

Good morning. How are you?

Good. When exactly will you guys be unblinded from full ACS results or is that something that happens after the URL part of the trial is completed?

Essentially it will take probably another 30 days or maybe 40 days for that complete adjudication set, for adjudication to be complete. At that stage what will happen is, okay, at that stage we thought adjudicated results, there will be determined on the 150 MI patients. The full 1,500 patients will be adjudicated as either positive or negative for MI, so that will take about another 30 to 40 days I guess. What happens then is you take - so the adjudicators are blinded to the Meritas results and are blinded to the adjudicated results. What happens then is, you take - the result on the Meritas system which will again determine whether a patient is positive or negative based on the level of Troponin is persistent versus that 99 percentile number. We will judge which adult patients were either positive or negative, they will then be compared to the adjudicated results and you will look for equivalents if you like. In an ideal world, it would line up perfectly match, everything that the adjudicators has got will be positive on our test, everything the adjudicators got negative would be negative on our test but of course that won't happen. But that's the process as it goes, so it will be another 30 to 40 days before complete adjudication set of results so we can actually compare our data against the adjudicated data.

Okay. Moving on to Syphilis, and trying to understand that ramp a little bit better. Can you tell us how many customers ordered in 2Q and how many you expect to order in 3Q?

I don't have that information right on my fingertips, and what I could say is that I think we have - we expect - we basically have 400 customers in our system at this moment in time, whether they've actually all - I'm not clear. I don't have those numbers available at this moment.

Okay. And then last one from me, can you walk us through utilization trends for premier boxes?

Yes, the average consumables utilized on the premier instruments are $11,000 per year. That varies greatly from country to country, and it also would vary greatly depending because in some instances we're setting direct as in Brazil and in the United States, and in other countries we're not. So at this step we're taking 50% margin but all in all, our average revenues are $11,000 and our most productive instruments in terms of dollar terms will be in the United States, second most productive will be Brazil, and then I think a portion of the buyer really would be China in terms of usage. That's something I think that will change in time but as we set all along, the medical community in China are tuning into hemoglobin A1C, both the GPs and indeed the diabetics tuning into the usage of hemoglobin A1C and 4X a year testing, it's being reimbursed by the government but awareness is the only - it's a learning curve now. There is huge potential, but at the moment, modest silence.

Thanks guys.

Thank you.

The next question comes from Jim Sidoti, Sidoti and Company. Please go ahead.

Good morning, can you hear me?

Good afternoon, I guess in your case.

Good afternoon, Jim here, loud and clear.

Great. Can you break out what your Lyme disease tests were in the quarter and compared under a year ago?

You mean in terms of dollar numbers?

Yes, or percentage or just give us something.

I mean we're looking at something around basically $2.5 million and sort of $2.5 million last quarter, last year $2.1 million, this year at that kind of level.

Okay. So the big change from year-over-year with them was the HIV test, I guess to Africa?

Yes, I mean our African HIV test were down $1.5 million. As I kind of explained earlier, there is hazard purchasing and it's almost surprising to some extent that we've haven't had these kind of significant variability in the past, we seem to have avoided it but this quarter was particularly weak, it just happened that in the 13-week cycle we didn't receive as many orders as normal. And I don't think it was just a timing, it's just not as if like three orders that came in on the July 1st instead of June 30th, it was just basically haphazard weakness. I'm not sure we recovered over one quarter or over three or four but what I have said in prepared remarks is that, we're confident that our business is in bold and strong hands, and that there is ever increasing spending at dollars being spent fighting HIV in Africa that it's not a hopeless fight anymore because every time you identify HIV positive you can save their lives if you get them onto retroviral treatment at the right time. So it's a battle that can be won, and we're not arbitrages of doing anymore but rather of hope. So in that sense, as more dollars are being spent we absolutely own the confirming, there is nobody else confirms, only Trinity Biotech rights, you can't instance a contrary that we don't do the confirmations in. So this is just random.

So do you think you will see that business rebound at the back half of this year or do you think it could take to 2016?

Frankly, I don't know. It would probably rebound overall, I think if we stand back and look at 2014 sales in comparison to 2015 sales, I think you will see we're probably going to end up being at 5% or 6%, not sure of that but that will be my sense. But I think that - if your graph doesn't look at the trajectory over it and extended period of time, it's all trending in the right direction, this is just a haphazard quarter really, basically NGOs don't confirm within the 13-week cycle, the way we had wished them to.

Right. Or you do think you will see that business rebound at some point in the next three months?

Yes, absolutely. When I don't want to say I think that basically we're in one half down this quarter so we're one half up next quarter, I don't necessarily think that would be the case, maybe but I don't so much think so, but I think if you look at the year as a whole it will be - I think 2015 will have higher sales of HIV in Africa than 2014.

Okay, all right. And now switching to Troponin, it sounds like you're basically on the same schedule, you waited out three months ago, maybe couple of weeks or so but nothing dramatic?

No, we're pleased with - the recruitment went very well for us. I think when I spoke in - whenever in the March call, we had hoped we would recruit about - we hoped for 72 patients per week. We started off slower, we started off with momentum maybe 20 or 40 - in the end we were admitting 100 a week, it came in - I think the recruitment came in back on time or within a week or two. So we're quite pleased with it.

Okay, all right. So then can you just give us a sense of what do you think timing will be for the next 12 months? I know you said you will have the products submitted to the FDA, it sounds like early October. Do you think you can get a response back by March of 2016?

Well, we will definitely get a response back within 90 days, that's the rule. So what type of response it will be, it's a different question. We'll have a response within 90 days, that's just a rule for the FDA to have to respond within 90 days. And by the way, I just have to say, at this stage we have a very good relationship with the FDA. This work is being done in collaboration with the FDA, and we are bending over backwards to make sure that everything is done as exactly as this suggests before the go in. So I think underneath that's important to say that this is a collaboration and it has been quite helpful to us. So when it goes in, it will say October, we would expect a response within 90 days, that response could be, guys it's perfect and you're approved; that I think unlikely just difficult product. That will probably come back sometime during the 90 days with list of questions and those questions could be - tell me more information about patients, numbers 1-2-3-4-5, or it could be - show me that the monitoring of the sites was on property and show me the reports from the monitors. There could be some questions like that, that could even say collect more data on 75-year old patients or whatever. So there is probably going to be some questions, we have about a month to submit that data, then you would expect that if you answer those questions correctly, the next month read will result in an approval.

Okay. So assuming you got approval but say April of 2016, are you in a position where you could begin sales right away? Do you have manufacturing capacity to start production?

Absolutely, we're ready willingly to be able to go at that stage.

Okay. So you think it's reasonable to start recognizing revenue by the - let's say the third quarter of 2016 or by the year from now?

Again, as FDA depends what I think is reasonable, absolutely, it's just six months we should see this thing - we need to look through the FDA.

All right. And then, you know on the acquisition front, you've raised the money, are you actively searching for targets right now, what should we think for that?

Peter, we have been actively seeking to identify attractive acquisition targets and to assist us in the process we've attended services of a number of consultants, people whom we've used before and who knows well. So people who have a proven success record - record of success with us, today we've made initial valuations on numerous potential targets but none of them in regard are really suitable, alternatively regardless overpriced. While obviously we love to be in a position to tell you which stage of - a very advanced stage of making an acquisition, we actually can do that because we're not - like we're very mindful of not making an acquisition in haste. So at this moment in time, basically we have not identified anything that we've moved onto the second stage with - we have a number of people looking for helping us to seek out acquisitions. And in terms of what we're looking for, we're looking for a growing company in a growth sector, reasonably into product lifecycle, we're looking for something that's profitable, cash flow positive from day one; we're looking for something that has synergies with the rest of the Trinity's business. But the search goes on, we don't have anything to talk about unfortunately at this time.

Okay, all right. And then the last question, it's just a book keeping question, can you just repeat what you said the add back was to get to the diluted EPS number?

In terms of dilutive, there is two things you need to do is, all that revolves around - the normal options that will be added in just in the denominator. But in terms of the convertible notes you just assume that it is converted in its entirety on the first day of the quarter, so on a realistic assumption, and what you do is, you take all the 5.2 million of shares and include that into the denominator, then obviously you can double count, so hence anything that was associated with the noted health is interest or those non-cash items I talked about would all be removed. So that table in the press release there which shows an impact of $156,000 is a net impact of those add back.

Okay. So that $156,000 gets added to the net income number?

Yes.

Super. All right, thank you.

Thanks, Jim.

The next question comes from Larry Solow from CJS Securities. Please go ahead.

Thanks, good afternoon. Just a few follow-ups on premier, Ronan, I know you don't like to give exact placements but just it looks like year-to-date you're about flat with last year, maybe slightly down this quarter at least. Is that - do you think you've sort of reached a plateau here around this number? Any thoughts on that would be great.

Sure. I think your comments are accurate, we did 460 last year, we did just over 100 last quarter, and quarter one we did just over 90, now we're just under 200, and just five or six short of 200 now. So I think we'll do 400 or something but it would probably be early 400s. And I don't consider that negative, I don't consider that negative, I think that we basically are seeing a situation where instruments are probably - the instruments are doing more consumed than we had expected they would do. In general terms around the world, particularly in Europe, this consolidation - I think everybody knows that this consolidation, so you've left labs doing more testing. And so within that environment I think we had hoped we might hit 500 and did we may have actually do so but it won't be this year. And we've come from nowhere and taken over 20% of the market share, as you can imagine, our competitors have hit back and are using product pricing and whatever as they are fighting back hard. I mean we've just walked into Brazil and taken such a monster share of the market, it must be golden. In Brazil, it continues to be very strong and I think with 200 or more instruments to share. All the markets are performing strongly, I think any of this is taking a bit longer than we'd hoped, it probably is - kind of Korean, and Malaysian, and the Philippine approval process that we had hoped to turn those countries a bit more quickly but it's just searching on bureaucracy in regulation that it just takes time. So some of those markets - but they are opening up more slowly than we had hoped. So I think we may get to 460, same as last year, but I don't think so, I think it will be kind of early 400, but we still have very, very strong growth trajectory.

And looking at it so just to be concerned, do you think you can always sort of - this 400 number is a sustainable number on placements from an annual basis?

Yes, I do because remember - I mean, firstly, remember that every single one of those 400 instruments or 420 or 430 which is new business for biotech, and in all, it's every case taken away from the competitor because not that many new hospitals being opened and every hospital really has one of these instruments right across the world. So the replacement cycle is lengthening, that's the other factor I should have mentioned, the replacement cycle is lengthening so instruments tend to stay, instruments are probably getting better, more durable, they - and hospitals are more cautious and everyone is financially cautious. So the replacement cycle is close to eight years that makes no difference now. So the positive side of that is, at Trinity Biotech without any installed they can - we will only start replacing our own instruments in six years' time, so after that it's all new business, after that it becomes replacement business. So as a consequence it continues to goes months for growth.

Right. And you mentioned the US has the highest utilization rates but I know that's also one of the areas where you have not had great success in placements, I know you had a market partner, they are still onboard - what do you think is giving you some resistance in the US?

I'm not supposed to democrat the partner but I mean, they really - I couldn't - they did not reason all [ph], they have no relevance to this conversation anymore, they've just - I think they've given up. I think the position we have really in the United States is that, the United States market is different than anywhere or everywhere else in the world with the exception of Germany, and that is that the big immunoassay systems actually are utilized for testing hemoglobin A1C. So that means that the Abbott machine, the Abbott Artek, the Roche instruments, Beckman Coulter instruments, the Johnson & Johnson instruments, those - the Big 5 basically do hemoglobin A1C, they are not utilized around the rest of the world but they are utilized in the United States and Germany. The reason they are not used largely because they give CVs which is like standard deviation errors, about 6% each side; standard deviation but 6% CV whereas ours is a CV of 1.1%. As in fairness to our competitors, it will use HPLC as in also Bio-Rad. So fundamentally, I would argue, we would argue that I think it's not so much a discussion point and absolute fact that chromatography/HPLC gives much greater accuracy than immunoassay systems. But anyway, the bottom line, for better for worse, the United States basically run poor quality immunoassay of hemoglobin A1C testing which doesn't happen around rest of the world. And as a consequence, we only do about 50 instruments a year, so in fact, we've actually been very successful in the much smaller markets in the United States.

And you don't see this trend of this immunoassay back tracking, going internationally, right?

I think the movement is in the direction of going back towards HPLC, the momentum is marginally now moving basically in that direction, it's moving away from immunoassay but the momentum is very modest. So you're not far off in kind of equilibrium position, but you're certainly losing out to immunoassay but getting some gains.

Got it. And you mentioned that the utilization rate - it's still early stages but it's actually running a little bit ahead of the $10,000 - $10,000 was the number you had initially expected. Do you - overtime do you think this number could - which is now $11,000 can grow?

Absolutely it will grow because Meritas volumes are growing significantly. They are growing significantly but the number of instruments are less, I made that point because there has been a lot of consolidation, particularly there are stronger markets which are Spain and Italy. And indeed in France again, you've had a lot of the private labs, and people realize that lot of private hospitals are closing down. And then, of course China is the one that can bring that number way up when it starts gathering momentum. Brazil has performed very strongly, Brazil is way ahead of the curve in terms of - they are very busy instruments.

Okay. Just in terms of quick out there in - it sounds like Sjogrens test, it's slowed a little bit but that sounds like it's just growing pains or the switch into Bausch and Lomb which I think is inevitably will turn out to be a high-class problem. But do you still see this is growing 20% per year in the top line on a long run basis?

I talked well that 20% is a total order but I think we - I'm hoping that it will do, it may fall somewhat short but not significantly short to that. I think Sjogrens - just to deal with Sjogrens specifically, I mean Sjogrens was only launched last year and so it went from zero to 600 in seven months and I'm so far sort of to say at 600,000 quarter one at this year and 600,000 in quarter two. So it lost its momentum, but we seek time that is beginning to pick up again as the Bausch and Lomb sales reps are trained, a lot of them haven't been tuned into a test. So we'll begin to see signs that are improving, I think that was the decent growth driver and we're having good success with some of the mega labs in terms of them taking our products, basically sending it to our reference lab in Buffalo. We've had good success in Europe, and we're having good success basically putting the ELISA range of products - the ultra-immune ELISA products on to our existing installed base. So, I think we're getting very close to 20%, we may not beat it but we get close to it. And I think that's a growth rate we can maintain.

Okay. And I guess that the Lyme is sort of nothing you can really do about sort of a macro factor, but how about just in terms of Fitzgerald, sales of - I think it seems like it's taking another ligand, is there anything causing that or is that just sort of a business that's going to bouncing along in the bottom?

The thing to say about Fitzgerald is it turned over $11 million which gives us EBITDA of about $4 million. It's a very profitable business, it just doesn't give any growth and it contracts marginally, it seems like year-on-year. The difficulty we face really with Fitzgerald is, we're a middle man in Fitzgerald, we basically source monoclonal antibodies and we sell them onto into the trade. The difficulty we face is that we can work very, very hard but basically when a customer is using quite a lot of the products he has a big incentive to basically seek out and find the original supplier. And of course, such a scenario results inevitably in our demise, we just get zeroed out of the equation. And that's basically the weakness in the model really. So basically, you can work very hard to go two steps forward and doing that three months in a row and then suddenly going six steps backward.

Got you. Just a couple of quick questions on the cost side, gross margin is obviously continuing to trend down. I guess this quarter was clearly, probably regularly impacted by the drop in HIV, let's hope that this is the bottom but what's your sort of outlook and perhaps premier - I don't know if that get accretive on the gross margin side but any thoughts on that will be great.

Yes, obviously from our point of view I hope it has hit the bottom, I mean it is down a little bit this quarter and as we've highlighted there it is impacted by the fact that both Lyme and HIV which are very good margin products for us, and that's where our revenue line has suffered. So there is an impact there on the gross margin. The percentage is also a couple of hundred blips in relations to the FX effect as well which really isn't an impact on overall profitability but those manifests after a small extension relation to gross profit line. And premier, as each quarter goes by, deals improve in terms of its contribution, obviously when the instruments were being placed such high volumes would vary few actually, relatively speaking, and the field already - it was having more of a drag and just continue to go, haven't reached the crossover point, whereby it is higher than the groups average. So that will be coming in the forthcoming quarters. The key thing for margin in the future that will be what the revenues are going to be, just given our sort of fixed cost nature - the fixed nature of our cost base, and also the mix of such. Now I think we're going to let somebody else in.

Sounds good, thank you.

Thanks, Larry.

The next question comes from Chris Lewis from Roth Capital Partners. Please go ahead.

Hey guys, thanks for taking the questions.

Hi, Chris.

I wanted to start on Troponin update, you talked about your encouragement with the data you've seen so far. I understand some of that is still blinded but I think you mentioned some hospital data, so perhaps you can elaborate on just what type of data you've seen at this point and what gives you that encouragement you talked about?

What actually happened is, on a daily basis when we're doing our clinical trial, the patient comes in, he comes into ER because he is feeling ill, he is either positive or negative but he will be treated in ER as he would normally be and if he looks like a cardiac patient, she will be more likely a Troponin sample will be taken, at least the central laboratory of the hospital or wherever to send the sample and they will test that sample for Troponin, either we get a result, and that the Troponin result couples with the other clinical symptoms like an EKG and etcetera, etcetera. Then make a determination whether that person is either having an heart attack or is not having an heart attack. So that data is known to us. Separately to that, our sample is taken from that same patient, it's on our device and we of course can see our results. So we can compare our results in general to the hospital outcome. So you can see - it's not adjudicated but you can see what the hospital got and there is no guarantee that this will work fine for very clear cut heart attacks and very clear non-heart attacks. It only becomes so you are going to be very much aligned, adjudication of the hospital is probably going to be very much in line on the very clear samples, it's only under very marginal samples that are very close to them etcetera where the adjudication may differ from the hospital result. So all we can say at the moment is we can track results against the hospital or either central lab system or whatever is running in the hospital. And that data - we track pretty well with that data. I'm really saying is that based on what - we have sight of how we compare with the million dollar machine that takes an hour and a half to run, but what we're saying is we're very closely aligned to their results.

Okay, good. And then what type of announcement or data will you release or what should we expect when that adjudication review is completed and then when you submit to the FDA?

It's a question that we still ponder here but our favorable mind is that we won't announce that result, we won't announce the results of our clinical trials, and the reason for that is, as I said earlier on, we have a very, very good relationship with the FDA right now, there is no rule to say that you can't announce the results, so that's the first thing. We could if we felt we have to, we would, but it may well be seen as this was forcing the FDAs hand that the Trinity Biotech announces excellent results or whatever now submitted to the FDA and it's - I believe it will be a negative against Trinity in terms of our relation with the FDA, if we were to go - as to put out a statement like that because it backs the FDA to a corner and quite frankly, I don't think any of us want to do that. So our good feel is that we should - we will obviously say when the clinical trials are complete, we will tell you whether we have submitted, what I think you can take for granted that we wouldn't submit if we didn't feel our data was good enough to be approved by the FDA. I think what we'll do, we'll do the same as Abbott and Roche etcetera do. We won't basically just put up and highlight basically on the billboard how wonderful our results were because we think that could be counter-productive.

Understood. And then FX impact, I understand it was a headwind on the topline, on the bottom line, was it…

It's pretty close to neutral actually Chris, so we pick up and turn to the cost of sales, and we pick up in terms of SG&A, and that offsets the negative impact on revenues, that's very broad, it's pretty much a natural hedge.

Okay, and just one more for me. Clinical lab, I understand Lyme was down a little bit this quarter but up 3% on a constant currency basis, going forward is that low single digit growth rate, say 3% to 4% on a constant currency basis for clinical lab a sustainable growth rate level to expect? Thanks.

I think more like 5% to 6% I think is probably more to sustainable level, I mean, I obviously don't have crystal ball but that's what I think excluding what's just after happening this quarter I think that's probably over that course, I think that's where it would be averaging.

All right, thank you.

Thanks, Chris.

[Operator Instructions]

Operator, I think we're running over 5' o clock, I think with just two more questions I think we'll leave it at that if you don't mind.

Our next question comes from Pearl [ph] from Craig-Hallum Capital. Please go ahead.

Thanks, good afternoon guys. I will try to be brief here. First question for you, probably for Jim here, on BNP, you talked about the 12 sites recruiting, are these the same 12 that you were utilizing for Troponin? And do you get any benefit because of the familiarity with the instrument or anything like that from using some more sites across the two separate trials?

The answer is adverse. There might be two exceptions but I think virtually the same set of sites. And their optional fees is advance to that because the research nurses are now trained, they understand the platform very well; we're not starting - it's not like the first time we're starting with Troponin where we're starting it from scratch and it just takes ages to get them up and running and you've got muse for the system. So there is directional advantage in that. The PIs know us well, the research nurses know us well. So I think 10 of those 12 sites are actually the same sites as before, and quite frankly, we might have started the BNP trial maybe a month ago but we didn't wanted to distract from the focus that the sites had on Troponin. So now that the ACS and URL trials are over, they are going to kick right straight into the BNP trial.

Perfect, that makes sense. And then just a follow-up I guess on Troponin, I think it's probably been asked a few different ways and so just I guess, maybe one little new ones on it. You obviously had some vagaries with the timing of recruitment for the ACS trial because you're kind of contingent on getting the right people in and getting them to buy into the trial but it sounds to me like the stuff that's left, the precision study is more or less with the 20 day timeline. So I guess as you look out at it, is there really anything that can take a left or right turn on you to impede that kind of late September, early October submission at this point?

The only kind I can think of right now is the adjudication. I would assess 90% of the samples are easy to adjudicate, so - but if you take we have 1,500 samples, a 150 MIs, so that means there is 1,350 negatives. Of those 1,350 negatives, probably one ER [ph] got negatives, you or I can't adjudicate it because it's actually negative. So they can be adjudicated in a matter of minutes I would have said certainly, less than an hour per patient. There can be a few samples where - that can be difficult to adjudicate and the adjudicators may want to ring up the hospital and ask for further data, etcetera, etcetera and/or extra copies of the ECGs or that sort of stuff. So it's the only thing to control, the rest we can do ourselves. The adjudicators are independent, yes we are paying them, but they are there to adjudicate properly. And so I can't see it slipping or I can't see them taking more in a couple of weeks more than I'm saying but that's the only thing that's out of our control, it would be to adjudicate us. And the other thing is, I can't dictate if one of them doesn't go and take two weeks holiday in Hawaii, that's the sort of thing that can - I can't think of anything, not major that's outside our control.

We have a final question from Walter [ph] from Ness Partners. Please go ahead.

I think I'm the only person who wasn't from sale side. And to kill it but to do it quickly on Troponin, you are well aware that [Technical Difficulty].

Walter, you're breaking up there. You've disappeared, Walter.

Okay. You are well aware of the standards the FDA is looking for, for a new point of test for Troponin?

Absolutely, Walter.

You have indicated that your test is - as best you could tell us so far coming in very close to central lab tests?

I think we have proven that Walter in the independent trial by Fred Apple. Our data would be equivalent, indeed better than some central labs if that was done.

And therefore the conclusion in question is, the central lab level that you are - have generally been comparable to on this trail would meet the criteria the FDA has indicated that you need for a new approval - I relish this very simple, for a new point of care Troponin test?

I think you're - that's the reason we are already out there. We are very, very clear, we are absolutely confident that we might meet the FDA guidelines, absolutely we're confident of that. And we feel that we meet it very comfortably, with plenty of - with plenty to spare.

And that would mean, just to again reiterate, it would be substantially more accurate than any of the current point of care test in the marketplace?

Walter, we again - we know that and it's not just independent proven again, if you look at some of the work Fred Apple did when he evaluated our product, it was the best product in the market right now undoubtedly in point of care, it's the Abbott ISO product, the others don't count as far as I'm concerned, the Abbott ISO product is the best product in the market. And in an independent trials done by Fred Apple about a year or 18 months ago, I noted two separate trials but the Trinity Biotech products, he got a sensitivity at time zero, 75% on the ISO products, in a similar trial 6 months prior to that, he got insensitivity of 32%. So that's just independent data, I have a 32% Trinity having 75%. So it's fair to say we're better than that result, and that's independent, not done by us.

Okay. Thank you very much.

Thank you, Walter.

Thank you. I know we ran out a bit longer, so sorry. Thank you to everybody, and we'll talk to you soon. Bye.