Trinity Biotech plc (TRIB) Q3 2015 Earnings Report, Transcript and Summary

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

Thank you, Frank. And thanks all of you for joining us to review the financial results of Trinity Biotech for the third quarter of fiscal year 2015, which ended September 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, Chief Financial Officer for a review of the results. After Kevin's remarks, we will hear from Jim Walsh on product development issues, and Ronan O'Caoimh will wrap up the prepared remarks with his perspectives on the quarter. Kevin?

Thank you, Joe. Today I will take you through the results for quarter three 2015. Beginning with the income statement and our revenues, total revenues for the quarter were $25.8 million. This compares to $27.2 million in quarter three of 2014. However, as was the case in quarters one and two of this year, revenue this quarter have been significantly impacted by currency movements. This is due to the strengthening of the dollar against a range of currencies, which have the effect of reducing the dollar equivalent of our euro, Brazilian real, Canadian dollar and Sterling revenues. Consequently, we have restated the quarter three revenues on the constant currency basis, which shows revenues for this quarter would have been $27.6 million if the exchange rates prevailing in quarter three 2014 were to apply. Ronan will take you through details of the movements in revenue shortly. However, before I move away from revenues, I would like to comment a little more on the currency issue. As well as reducing revenue the same currency movement have a major impact on foreign currency denominated expenses, in this case the reduction. In summary, whilst revenues are lower so to are our cost, so the impact on profitability is not as great as the impact on revenues would suggest. In the past number of quarters the amount of the FX impact on revenues and costs was broadly the same, hence no impact on profitability. Unfortunately, same is not the case this quarter. This is because, in the past all of the non-U.S. dollar currencies have typically moved in the same direction and roughly about the same amount versus the U.S. dollar. This is not the case this quarter, where we have seen the U.S. -- the euro strengthened, but both the Brazilian real and Canadian dollar have both depreciated significantly. This has the effect of breaking the effect of natural hedge that we had in placed. We’ve calculate the impact this quarter to be adverse to over -- to the tune of over $300,000. This brings us to this quarters’ gross margin. As you all have seen from our press release, we earned gross margin of 46.5%. This represents reduction on the 47.9% that was reported in quarter three last year that was more closely in line with the 47% reported in quarter two of this year. The reduction from that level was due to the currency issues I have just mentioned. Particular the continued depreciation of both the Brazilian real and Canadian dollar has squeezed margins in both of these markets. Lower Lyme -- sales of Lyme products which traditionally earned higher than average margins of the company also continues to contribute to lower gross margins. Moving on to our indirect costs, our R&D expenses have increased from $1.1 million to $1.3 million this quarter. Meanwhile, our SG&A expenses have increased from $7 million to under $7.5 million. Couple of factors that played here, firstly, there is the increased costs associated with Meritas, this amounts approximately $700,000 this quarter. And in addition non-Meritas SG&A costs were also higher this period due to normal inflationary pressures. Operating profit for the quarter was just under $3 million and this compares to $4.6 million for the equivalent quarter in 2014. This reduction which I’ve mentioned quite significant is due to the combination of the lower gross margin, corporate pressure on indirect cost and for the first time the impact of currency factors. Moving on to our net financial income, during last quarter’s earnings call, I outlined how the loan notes which we issued in quarter two 2015 were to be accounted for and explained how we present the impact on our income statement. Firstly, the cash element of interest payments is included in the financial expenses line of the income statement. The non-cash financial income and expenses relating to the note are shown separately. This is because, one, they are non-cash in nature and two because I don't think they are very meaningful and they have a tendency to fluctuate significantly due to factors unrelated to the operational performance of the company. For example, this quarter you will see that the non-cash items represent a net gain of $10.5 million, of this $10.7 million represents valuation gains on the derivatives embedded in the loan notes. Such derivatives are mark-to-market each quarter with a change in value taken through the income statement. In this instance, the gain represented diminution of value of the convertible elements of the notes. The remaining $200,000 represents the non-cash element of interest. In discussing the profitability for the quarter as a whole, I will exclude both of these non-cash items. The net result of what I spoke about earlier is that the profit for the period of $12.3 million. From an EPS point of view we have disclosed the basic EPS calculated off that headline profits, which amounts to $0.53, but if you were to remove the impact of those non-cash items related to the loan notes, the profit would have been $1.8 million, which equates to $7.05 this quarter. Meanwhile, diluted EPS, which removes all aspects of loan notes from the income statement for the quarter was 9.7%. Finally, in relation to the income statement, earnings before interest, tax, depreciation, amortization, and share option expense for the quarter was $4.7 million. I will now move on and talk about the significant balance sheet movements since the end of June 2015. Property, plants and equipments remained unchanged at $19.2 million since last quarter, due to additions of $1.4 million being offset by a combination of depreciation of 700,000 and the translation adjustment of 700,000. In same period, our intangible assets increased by $4 million. This was made up of additions to development projects of $4.7 million, offset by an amortization charge of $700,000. Moving onto inventories, you will see these have decreased from $38.2 million to $36.9 million. As expected there was a reduction in our inventory of Lyme disease products, as Lyme traditionally peaks in -- Lyme inventory rather traditionally peaks in the early summer in anticipation of demand and traditionally reduces during quarter three. Also inventory of Rapids, HIV and Syphilis test decreased this quarter due to the higher sales of these products versus quarter two. Meanwhile, trade and other receivables have decreased by $1.2 million to $27.2, despite the increase in sales this quarter. This decrease was due to very strong cash collections in the recent months. Meanwhile, our trade and other payables have decreased by little over $1 million due to the timing of payments. Finally, in relation to the balance sheet, the exchangeable notes are being carried at $99.1 million, and this represents both the underlying debt and the fair value of embedded derivatives. The reduction from $109 since the last quarter is mainly due to the mark-to-market of these derivatives, as I mentioned earlier, when discussing the financial income. Finally, I will discuss our cash flows for the quarter. Cash generation from operations before working capital movements for the quarter was $3.9 million. The working capital outflow was less than $200,000. Meanwhile, capital expenditure including both tangible and intangible in the quarter amounted to $4.3 million, and interest and taxes to a further $0.1 million. This is resulted in net pre-cash outflows of just under -- just over $700,000. The other main movement in the quarter was a payment of our annual dividend, which are $0.22 per ADR amounted to a total payment of $5.1 million. And finally, there was approximately $150,000 of fees paid out during the quarter in relation to the final fees associated with the issuing of the loan notes in quarter two. Consequently, the company has cash on hand of $104.3 million at the end of the quarter. I’ll 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 now to update you on our progress on the cardiac development programs. In particular, I’ll provide you with the detailed update on our Troponin clinical trial and the status of our FDA submission. I’ll also provide a brief update on our Meritas BNP product which as you know is currently undergoing clinical trials to support clinical application. So starting with Troponin, you will remember on our July call, I’d like to note that collection of the clinical data to support our FDA submission was complete. Again just to remind you, there are three main selections of this trial but I’ll deal with each of them individually now. Firstly, by far the most challenging is the ACS or heart attack trial in the emergency room setting. This clinical evaluation was run at 12 trial sites across the USA during 2014 and 2015. The aim of this trial was to recruit up to 1,500 patients, presenting in the ED with symptom suggestive of acute coronary syndrome, most specifically, to find from this cohort 150 actual heart attacks. Each of these patients were sampled up to four times, namely on arrival, otherwise with time-zero, three hours, six hours 12 hours and 12 to 24 hours. At each time point, Troponin level in the patient was measured. I reported on our July call that we have passed the 150 heart attack milestone that recruitment of this section of the trial was complete. This complete patient cohort then needed to be 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 a heart attack in accordance with the third definition of MI. This, as you know, is definition that has been adopted by the FDA and which has caused such purpose for the current POC troponin products on the market. The outcome of the adjudication process is ultimately echoes to the term of the clinical sensitivity and specificity of the troponin product. In July, I also said that we expected the adjudication process to be complete by September but fortunately the adjudication process which is out of our direct control has taken slightly longer than we anticipated. However, this week slightly less than 400 patients remain to be put to the adjudicators. The current rate of adjudication, they are running at 100 per week. In fact, last week, in excess of 120 patients were put through that process. And so if this rate continues, adjudication will be completed comfortably before the end of November. You are probably wondering how is adjudication such a slow process. I’ve been general, determination of clear positive or negative MI can be made in matter of minutes rather than hours. However, we have encountered a number, a small number of trickier or more difficulty samples, some of which have taken as much as two weeks to reach the final examination. For example, one of the most recent case is out of Dr. Fred Apple’s site in Minneapolis as follows. A 61-year-old male presented in the ED with headache and dyspnea. No EKG changes were observed. Medical history is extensive for congestive heart failure. The patient has had a prior MI. However, the local troponins were 0.245, 0.3 and 0.3. These values were 10 times the cutoff. However, the site indicated that patient had no MI. The adjudicators, however, were confused with such high troponin values and asked for more information. Going back to the site, sure enough, past medical history at our recent discharge summary stated that the patient has stable troponin values in the range of 0.25 to 0.35. And the details are recorded whenever test is going over -- going pack over the last 12 months. With this new information, the adjudicators had to go back and review this case. In total, this process took more than two weeks. The good news is however that our authority adjudication is taking slightly longer than anticipated. The clinical sensitivity and specificity generated on the cohort of patients adjudicated to this is tramping better than that which we observed in our CE Mark in trials. In our CE trials, we remember we saw time-zero sensitivity of 60%, a market leading result with which we were very happy. However, as of today, our U.S. trial is looking significantly better and is tracking closer to the data generated in the 2014 Fred Apple trial at the Hennepin County Emergency Department where Dr. Apple determined a time-zero sensitivity for Meritas of 75%. Assuming the remaining adjudication continues to trend accordingly, Meritas will undoubtedly be an excellent product with market-leading performance when approved. This is to focus clinical performance in context for you. According to the manufacturers packaging that, the time-zero sensitivity of the current FDA approved have been architect, central lab system is just 60%. Moreover, Dr. Apple -- a recent study demonstrated the other Troponin product who have a time-zero sensitivity as well as 32%. Therefore Meritas with a sensitivity ahead of the Abott central lab system with a correspondingly high specificity is set to produce typical performance substantially better than some of the currently approved central lab systems. However, as you know, Meritas produced these exceptional results in 15 minutes right beside the patient while the central lab results can take more than now or more to report back. Meritas undoubtedly will deliver better patient outcomes. The second major component of our clinical trial was to determine the upper reference level or 99 percentile of our product either population of normal healthy people. Again I reported on our last call that patient recruitment to the URL study was complete. Our statisticians have since completed our work on this data and have determined that 99 percentile in U.S. population to be 36 picograms in whole blood. You may remember for CE Marking we have already carried our similar study on the European population which resulted in 99 percentile of 36 picograms. Although it has taken quite a bit of time and it need a lot of money to determine what we are reasonably expected i.e. that there is no difference between healthy individuals be it European or American. There is, however, quite a bit of satisfaction and confidence in the product to be gained. As repeating this identical value, a two certain time points in two separate studies on two separate continents is a strong indication of the product is extremely consistent, reproducible, reliable and robust. Characteristics not observed in all of the competitive POC products currently under market. The final example, one of our clinical trial is the precision study. This study is being carried out at three U.S. trial sites. These are the same sites that have already carried out URL and ACS trial. So they know the center product very well. This is a very straightforward study. Data connection will be complete shortly and will not be a gaining factor to our FDA submission. Finally, rising our actual FDA submission document is at an advance stage. The document essentially awaits the final outcome from the trial datasets disclosed earlier to be ready for submission. The company estimates that adjudication process will be complete well before the end of November with submission of our application the FDA have planned in December. In summary, therefore patient recruited for Troponin trial is now complete. Determination of URL or 99% percentile is complete and now are already compiled into our FDA submission document. For the reason, we explain the adjudication of our URL has been stored unanticipated will be completed shortly. I’ll move on briefing out through Meritas BNP. As you know, BNP levels in the both stream increased as the fatality of heart failure increases. This BNP has emerged as the principle biomarker into diagnosis of acute and chronic heart failure. I mentioned on our last call that following our discussion with the FDA on the 13th of July last, we have decided to expand the level of U.S trial sets to 12. The adoption of this strategy we believe will help for a similar review process with the FDA. The aim of this study is to recruit 1450 subjects, approximately 700 of which with heart failure and 700 without heart failure. I’m happy to report that the recruitment is running smoothly. The products will be submitted to the FDA early in 2016 and because of the relative simplicity of the facts of the BNP 510(k) process, we would expect FDA approval in advance of troponin in 2016. In summary, therefore, we are moving to the very final stages of preparation of our FDA submission document and will submit to the FDA by mid December. Most encouraging above all of course is that all indication of the clinical data are excellent. The Meritas Troponin product is exhibiting clinical performance. Prior advance of the Troponin POC product currently approved on the U.S. market and is in fact demonstrating clinical performance better than some of the approved central lab systems. I’ll be happy to take questions later but I’ll hand over to Ronan now. Thank you.

Thank you Jim. I’m going to review our revenues for the quarter before opening the call to your question-and-answer session. Our revenues for the quarter were $25.8 million compared with $27.1 million for quarters three of 2014. However, when the impact of foreign currency exchange movements due to strength of U.S. dollar against the range of currencies is removed, the revenues would have been $27.6 million this quarter thus representing an increase of 2%. Point of care revenues for the quarter were $5.4 million, which is equal to the sales in the corresponding quarter of 2014. There is no currency impact here as virtually all HIV sales are invoiced in dollars. However, African HIV sales have recovered and are more than $2 million higher than their revenues in quarter two. As you know, our HIV business in Africa is funded on entirely by NGOs and product orders from these agencies tend to be haphazard and 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 antiretroviral drugs, with the number now exceeding $20 million. We are confident of our African HIV business continuing to grow. In the U.S., our HIV sales increased 2% over the prior quarter, aided by the fact that we are now selling HIV-1/HIV-2 combination product since we got the HIV-2 FDA approved last year. In December as you know, we were delighted to receive a CLIA waiver for a 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 of the revenues and what they would be. We sell mostly into the public health departments, the departments of community-based organizations throughout the United States. And it's impossible to say what percentage of this $50 million HIV market, the syphilis market will transpire to be. What 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 virtually all of the city and county public health departments. And as best we can tell, all are initiating purchasing plans. However, this takes time. 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 personnel. So this is in many cases, a 200-day process. Our actual HIV sales were $10,000 in quarter one, $100,000 approximately in quarter two and we are just over $300,000 in quarter three, the quarter just completed. And basically, we will gather significant momentum, particularly as the city and public health departments begin to make purchases. We believe that this will be a $10 million plus product, but it is difficult to assess at what point in time we will reach that run rate. Moving onto clinical laboratory, our revenues for the quarter were $20.3 million. However, on a constant currency basis, revenues were $22.1 million, compared to $21.7 million in quarter three of 2014, which is an increase of 2%. This increase was due to the continued increase in Premier and Immco revenues, although this was partially offset by lower Lyme sales due to weather related factors. Our Premier business grew 6% over the prior quarter. During the quarter, we placed just over 70 Premier instruments, significantly down on quarter three of last year. The reason is that we made negligible placements this quarter in Brazil, not due to a lower -- not due to a lack of demand but rather due to the nature of weakening of the Brazilian currency real, as it weakened against the dollar from 2.2 last year to 4. It’s actually at 3.95 as we speak. This constitutes a virtual halving of its value against our reporting currency which is the dollar. Given that we invoice in Brazilian reals, it means that our revenues in dollars have virtually halved. In the circumstances, we have temporarily stopped selling Premier instruments apart from a very few exceptions. Obviously, we continue to service and to supply product onto the existing and installed base. Our plans and how to handle this is one to look for a price increase and we think this will be possible. But the actions of our competitors who obviously have the same problem is a factor here. Also the declines of currency has been so swift and so severe that customers are resisting price increases into hope that the currency will recover. Our second method of handling the difficult problem is that we're increasing the amount of products we manufacture in Brazil as quickly as we can in order to reduce our Brazilian real exposure and to try and match our inputs and efforts. Lastly, we hope we put some political stability in the recovery of the currency and obviously, we have no control over that. On a positive not, the demand for our product is really strong and we are the only hemoglobin A1c product that is manufactured in Brazil. So, we have that real advantage here in the longer term. As we move to more manufacture into Brazil and as we secure price increases, we will recommence setting the Premier instrument in that market. We are committed to Brazil and believe it will become a bigger component of our business overtime. We see it as an important market for example for our Troponin product. Moving onto infectious disease excluding Immco, this business declined 1% over the prior year. This decrease is due to fact that the Lyme confirmation components of the business was down $300,000 when compared to the prior year is directed to last year's severe winter. All of the balance of our infectious disease business performed well and I just want to go back briefly to a point that Kevin made earlier and expand on it. In general, the strength of the dollar is hurting us now. Until now we’ve argued that a strong dollar gives low revenues and also lower costs and that the two match. However, we’ve moved into -- Kevin said, we moved into a different phase now and the strengthening of the dollar is still significant that we are experiencing a new dynamic, which is basically that we are losing sales. We are losing sales for two reasons. Either because our customer cannot afford our product, what we sell in the dollar currency. Examples are Russia and Turkey and Colombia. While alternatively, as in Brazil, which we just outlined where we cannot afford to sell to the customer and we invoice in the local currency as an example, as a good example of Brazil. And we’ve seen a 40% devaluation of the Russian ruble in the past year and as an example, our sales in 2014 were $1.5 million and this year, I think we are going to end up at about $400,000, due entirely to the fact that our customers accounted for to pay for the product. Moving now to Immco, it continues to perform strongly. Sales of Sjögrens during the quarter were approximately $600,000, which is the same as the sales in quarter one and quarter two. And this loss of Sjogrens sales momentum arise is due to the fact that ownership of our distribution partner moved from Nicox to Bausch and Lomb, the Valeant subsidiary at the beginning of this year of 2015. The loss of momentum arose due to transition logistics and training of new sales persons. However, the sales force at Bausch and Lomb is 13 times larger than that of Nicox, and we believe that Bausch and Lomb will be a much stronger partner than Nicox in the future. Bausch and Lomb have 150 direct sales reps, serving optometrists and ophthalmologists around the country. So, they have a 150 compared to 12. So, we're very, very confident of the momentum being regained and being regained very quickly. So that completes my prepared comments and notes. At this stage, could I hand back to the operator, please for a question-and-answer session?

Thank you, sir. [Operator Instructions] First question comes from Bill Bonello from Craig-Hallum. Please go ahead, sir.

Good afternoon to you. Couple of questions here. On Troponin, which probably seems to be the most important thing right now, can you give us a sense, Jim, of what percent of the cases have been adjudicated, or more specifically what percent of the results you have seen that you are sort of dawning your positive commentary from?

Obviously, Bill, it changes on a day-by-day basis because obviously, as I said on the call there. We are putting at about 100 a week now, okay. A little -- slightly more than 50% is what I’m drawing my conclusion from right now, so slightly more than 50% of the total cohort adjudicated. So it should be indicative of what the other 50% will turn out like on the law of averages. But yes, the answer -- short answer is between 50% and 60%.

Okay. Just a follow-up on that and this is lack of statistics, understanding maybe on my part but if the cases that are most difficult to adjudicate are the ones you haven’t seen yet. Is there a -- are they likely to have more of an impact on the overall outcome and statistics than sort of the easy to adjudicate case?

I understand exactly what you’re saying Bill, but we have turned actually if you like and segregated the samples. With the samples go out and the patients like ours go out as they already, we don’t hold back, we don’t send out easy ones and hold back the hard ones or vice versa, okay. They are going out almost as their countries if you like, okay. So there should be no bias in the day to set the day towards easy or hard samples, okay, if they are gloved randomly. And it’s a tiny percentage of build across lot of problem. When I say 20%, three or four patient samples have caused the delay, not 50 or 60, you know what I mean, but the data today should not be biased in terms of what it were hard or easy, they are going out in a randomized fashion.

So don’t think of even though you said with the impact and the timing was due to this more difficult adjudicate cases, don’t think of those as being the cases that are still sitting there with the adjudicators per se. It’s caused them the whole way along to go more slowly.

Hey, we haven’t won that, okay. It just holds up the whole process. While they are opining on those particular cases, they are just not working on the easier ones. So your summary there is correct.

Okay. So that’s very helpful. And then just as a second and unrelated question I guess to Ronan. I am struggling I guess to understand what’s going on here in the clinical lab business and the growth. I understand that your Lyme business is down a little, but it feels like there must be something that we’re missing that there must be some, whether it’s Fitzgerald or something, I mean if Lyme was down 300,000, gash, historically you’ve talked about that as a $9 million business, it’s not that great of a percentage. If Immco is up 6%, I mean something is offsetting besides currency that growth. And just trying to understand what besides Lyme might actually be shrinking?

Well, I mean, I would say you’re taking $300,000 on Lyme for quarter and comparing it with $9 million for a year. So if you annualize, it was $1.2 million. Other than that, I can’t help you. I mean, the components are Fitzgerald gets down. If you look at it, the clinical laboratory, watch in there, you’ve got Premier, which is I said you’ve got Premier which is up, you’ve got infectious disease which is down a piece, and you’ve got Fitzgerald down marginally and you’ve got Immco up. So, I mean, they are the components really of us all adding up to a currency adjusted 1% decline.

Okay. I mean, am I doing my math that the Lyme is about a 1% drag on revenue?

Let me just correct you quickly, no.

300,000 would be higher than that.

300,000 cost.

The cost is higher.

It costs 20 million as far as it’s 1.5%.

Okay. And Fitzgerald, just on a year over year basis, what did you quantify that?

Well, I didn’t put, I mean, I will say, it sounds marginally, it will not be responsible for about just under 1%, but I am talking in the quarter that 1%, just under 1%.

All right. Thank you very much.

Next question comes from Drew Jones from Stephens Inc. Please go ahead.

Thanks. Following up on the Troponin and understanding submission timelines, how much of the submission prep work can you guys do prior to having the full heart attack data in-hand? I guess just I am saying you can be sitting on go once you do have all that data.

Drew, this is, I think, from -- mostly from the end of adjudication, it will probably take two full weeks to actually pull a hold in together and just check everything and dot the i’s and cross the t’s. I think two working weeks and that’s where we’re coming in. So we’re saying really we need to adjudicate 400 more. We are running at a 100, but setting of 120 last week. But let me say I think one guys gets a flu for a few days, takes us four more weeks which gets us to the 22 or 23 of November adding two weeks to pull it up, tie it up, bind, sends off, and we are looking at sort of comfortably I think middle of December. Jim, do you want to add anything to that?

No, Ronan, but that’s -- your summary is perfect. That’s it.

Great. And then lot of promise with Syphilis, it seems like it’s off to a good start. Can you help us understand what’s the awareness of or how much of public health have you guys marketed to at this point, how many of those patients are or I am sorry those customers are in that purchase decision process at this point?

Drew, frankly, I mean, I won’t say that we are delighted with momentum. I would say as I had expected say it’s probably -- I have expected say and hope to say it would be higher this year. As I said, we did 10,000 quarter one and 100,000 quarter two, just over 300 last quarter, and it’s too early to say what we will do this quarter, but somewhere between 4 and 5, I think that kind of a size, $400,000 and $500,000. So I feel so it kind of means that we have a business now that’s annualizing at $2 million. Where it’s going to end? I don’t know. In terms of where we’ve actually made our sales so far, most of our sales have actually not gone to the public health clubs, our public health departments but actually have gone out into community-based organizations transparent been like that. So in fact, really there has been almost no -- we’ve not delivered any significant public health sale yes. And that purely comes from the fact that it’s a slow arduous, tortuous process and we are working through that. So I supposed people are taking encouragement from that in the sense that clearly indications are that virtually all of the public health departments will buy but are known yet there to be in what volume thereby. So does that answer for you? I would say we could get to $10 million, I don’t know how long it’s going to take.

True but probably take to assume a public health orders much larger than community order?

Absolutely, yes, it would be. And the other point to make is that, I think I made it before, but I think couple of the market is reasonable to compare them would be HIV. It’s clearly market, it’s sexually transmitted disease and it’s infectious, it’s got a lot of CDC awareness and that market is $50 million in public health shared between three companies really. And in this instance with Syphilis, we are the only company. And so you could speculate as to what percentage of the HIV market, the Syphilis market will ultimately transpire to be. If I’d say it’s a $10 million, it will be a $10 million market, I am estimating it will be -- it will work out at 20%. I would like to think that that’s a conservative estimate.

Thanks, guys.

Thank you.

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

Great. Thanks. Good afternoon, guys. Just some of my questions have been answered. Just on the Troponin, is it fair to say that your original expectations for the adjudication was probably more like 200 a week and you’re running maybe about a 100 a week, somewhere in that ballpark?

Maybe a 150, 175 a week.

Okay. All right. It may be less 200, okay. So basically you have -- I know you target originally 1500, I don’t know exactly how many there were to get to that 150, but assuming it was about 1500, you basically have done about 1100 since early August or what have you?

Yeah, that would be roughly correct. We didn’t have to go to whole list of 100, the 1500 just because of prevalence. We assumed the prevalence of 10% and slightly higher than that, but your assumptions are broadly correct.

Got you. Right. And then just to confirm, the harder case is whether or not they are skewed to data one way or another and the fact is they are mixed throughout. So you don’t know how many more of the remaining 400 are difficult or not. I mean, are you just assuming the average run rate will remain about the same, you will finish sometime in the third week or fourth week?

Well, that said, I think if we do the math we should finish sooner than that. There’s got to be one or two tweaky ones. We are saying it would be completed by the end of November comfortably.

Right, you build old cushion there and then the plus two weeks. Got you. And then just in terms of the BNP and the relative to Troponin, it sounds like so you file the BMP maybe a month later or plus or minus. Do you expect approval sooner? Does that and would that -- I don’t know, maybe I want to put an exact timeline on either one of them, but is sort of a, are you looking at six months for both, maybe a little sooner on the BMP side or what are your thoughts there? Ronan O’Caoimh: I will tell you, without going specific into the days, because when it’s in the hands of the SBA, they make approval and I don’t know what the timeline will be. BMP is substantially a regular 510(k). And regular 510(k) is [indiscernible] been take between 90 and 120 days, okay. Proponent is far from a regular 510(k). It’s more like a PMA in the way its help. So if I was guessing, BMP is going to take less than six months. How much I don’t know. Proponents are going to take about six months or bit more. That’s my guess.

And the fact that the platform itself is new and BMP will be the first on the platform, have any barring and the fact that or not necessary? Ronan O’Caoimh: I actually do very little, quite frankly. Each part its will be reviewed independent of the order and quite frankly, it’s a clinical data review. The platform is almost incidental.

Got you. Okay. And then just switching gears, just on Premier, Ronan, the -- I don’t remember exactly what the placements were last year probably around 100.25. But the 70 number this quarter is, I mean, do you think we’re more at a run rate, if Brazil is sort of zero for -- was the few quarter it sounds like we more of a 300 year place in run rate or somewhere between 3 and 4, then hopefully you get Brazil back and you are back towards the 4 or 4 plus. Ronan O’Caoimh: I think, yeah, I mean, we did 120 in Brazil last year. So, I mean, I think, we’ll probably be into 350 to -- 330 to 360 range without Brazil.

Okay. Ronan O’Caoimh: And but, I am not, but I mean, we’re optimistic of turning Brazil back on.

Right. Ronan O’Caoimh: It’s just, the -- and the drop in the real was so violent.

Right. Ronan O’Caoimh: I mean its, everybody kind of -- but [real breakfast] [ph] watching us. And we have to some extent wait for our competitors also to move their pricing.

Right. Ronan O’Caoimh: I mean the hospitals need this product. There actually is not an indigenous choice available.

Right. Ronan O’Caoimh: We have a marginal advantage. We have advantage over our competitors. The U.S. company and the two Japanese companies. We are the only actually manufactures there.

Okay. Ronan O’Caoimh: Now what we’re going to do now is what we are actually -- what we’re in the process of doing, we’ve went -- we’re well down that line is that we are basically increasing the amount of manufacturing that we’re doing.

Right. Ronan O’Caoimh: So we’re doing certain amount, but we’re going to be doing and also lot more now.

Okay. Ronan O’Caoimh: So we will achieve a natural hedge by doing that.

Absolutely. Ronan O’Caoimh: I mean, I think, I mean, the Brazilian have start to realize, you can’t have your currency basically half in value and expect to buy at the same price.

Yeah. Right. Absolutely. So essentially you have, inevitably you could -- just could give you a competitive advantage at some point in terms of good terms of currency impact so? Ronan O’Caoimh: Yeah. I mean, that’s really I suppose to. I mean, I’m finding it very hard to dress this up as a positive, but I can…

Right. Ronan O’Caoimh: But at the same time, I suppose our dilemma is lesser than our competitors. Having said that, we’re at a lesser size than our competitors, we are as big, big, we’re smaller company.

Yes. Right. Ronan O’Caoimh: And but I do -- and of course all around the other thing is that, I mean, without kind of going into the politics of it, I mean, we noted this was in Brazil at the moment and then one hopes that I’m not saying that they is safety rights and featuring of that. But at the same time, if the police issues can be resolved, I mean, when we hope that the currency might strengthen, albeit we absolutely have no control over that.

I know you have been getting like you are somewhere in the 20%, 25% share, sort of new place on a worldwide basis? Is that a similar number in Brazil plus or minus? Ronan O’Caoimh: No. Like in Brazil last year we were very high percentage like we were…

Right. Ronan O’Caoimh: 65%, 70%.

Okay. Okay. So a big number there. Okay. So all right. Ronan O’Caoimh: Part of this, we can -- we said that we can continue to achieve that.

Right. But at lower price. Ronan O’Caoimh: We simply can’t, but bear in mind, a lot of this are put in under reagent rental basis, but we simply can’t put demand on a non-economic basis, so we just stood back for the moment, but the demand is still there.

Right, right. I understood. And then I guess all the reagent, the value the reagents also will be cut in half essentially be it … Ronan O’Caoimh: We’re taking that on the chin as we speak. I mean, I think it’s hard to assume whether we’re quantifying maybe $300,000 this quarter, I mean it’s a heist, it’s a big heist.

Right. So how long can you wait? Ronan O’Caoimh: We need to do is we need to get pace. We need to do more and more of the manufacturing down there.

Right. And how long is that process you can take when you can get from where you are today to a satisfactory number? Ronan O’Caoimh: It’s a progressive thing. And we had already, as you know, we were doing a certain amount of manufacturing down there.

Right. Ronan O’Caoimh: And we’ve been doing it to some extent with reluctance. Now we’re doing it with great enthusiasm.

But do you think within a few quarters? Ronan O’Caoimh: We did it initially in order to get the product approved and get it in there.

Right. Absolutely. Ronan O’Caoimh: We were reluctant manufacturer. Now our whole body language has changed. We’re very enthusiastic.

Will you be able to scale up like a significant chunk within a few quarters or is it a much longer process in that? Ronan O’Caoimh: A couple of quarters. I think, couple of quarter. It’s progressive. I mean some of the elements are more difficult to transfer.

Okay, okay. Fair enough. Ronan O’Caoimh: Very progressive over a year. But we can get price increases as well just to make that clear.

Right. So if the competitors don’t increase price, you sort to have wait and see what happen, I guess, if they plan or not? Ronan O’Caoimh: I mean, we’re seeing the same kind. I didn’t talk about it. But for example, in Turkey, we have a similar problem except it’s just not as big.

Right. Ronan O’Caoimh: We are invoicing in dollar. The dollar has strengthened and our customer basically -- our customer is finding it hard basically for the price. And as a consequence, we’re just buying less. So that’s the factor. And it’s just the reality that you’re seeing right across the world. You have the issue in Columbia as well. And it’s just a reality of our -- anyway its basically a consequence of just a strong dollar.

Absolutely. What do I just trend in general outside the currency in terms of Premier placements going on in other places and I know you have talked about sort of a consolidation going on where labs are using less machines, higher utilization, how has that been planning out? Ronan O’Caoimh: I mean, the rest of our Premier business is doing very well. Everything is -- I think the one concern you have is that we’re putting a lot of instruments into China and they’re running enough lot of reagent at this moment in time and we need that to change. We need those instruments to be busier. And it’s happening but its happening more slowly than we’d like. I mean, I think that’s probably the other dynamic that’s there. Meanwhile, we’re getting approval in more and more countries and we’re broadening our base. So we’re reducing our reliance on Europe and Brazil and China.

And the next question comes from Jim Sidoti from Sidoti & Company. Please go ahead.

Good afternoon. Can you hear me? Ronan O’Caoimh: Hi, Jim. How are you?

Great, great. So it’s been about six months since to raise the money. Just can you give us an update on what’s going on, on that front? Ronan O’Caoimh: Yeah. Jim, we’re not actively speaking to identify attractive acquisition targets, and to assist us in that we’ve retained a services of number of consultants. And as we’ve used in past and whom we know well. So -- they’re working at it and we’re working at it. But today, we’ve done valuations of numerous potential targets. None of them are retired as really suitable. In most instances stuff, we’ve looked at with regard to just unrealistically over priced. And so we’re mindful of not making an acquisition in haste and over paying for it. So at this point in time, basically we’ve not identified anything that we’ve move on to kind of second base to it. In terms of what we’re looking for, we’re looking for companies that are growing better in the growth factor and that they’re already part of their product lifecycle, something as profitable cash flow positive, something that will give us synergies with the rest of our business and so the search goes on. But unfortunately at this time, I’ve nothing that we can share with you.

All right. And with regard to the Troponin process, will you let us know when you file with the FDA or will you just wait for the next earnings call to update us on that? Ronan O’Caoimh: I can give you an absolute assurance. We will put our press release out on that one. No, we’ll let you know immediately.

All right. And then last question, you said I believe that the HIV sales were up about $2 million compared to the previous quarter.

Yes.

Okay. But your net sales were up about $1.5 million. So where was the weakness? Was that mostly the Premier placements?

No. Okay. So, last quarter, we had a week quarter. And we were in HIV remember so we had $2 million up there.

But overall revenue is only up about a $1.5 million. So, you were $0.5 million down on the rest of the business, is that primarily the Premier instruments?

I think you missed the -- you have to take into account the currency side of things there. Obviously, the currency was about $1.7 million.

So, currency was worse than the previous quarter?

It was, yeah.

Okay. All right. Thank you.

And our next question comes from Nick Jansen from Raymond James. Please go ahead.

Hey, guys. Lots been asked, so maybe just one or two follow-ups. First, now that you feel like you’re having the U.S. education process pretty much wrapped up almost, when do you start thinking about selling this internationally? I know it is being on hold because you’ve been trying to get the U.S. trial up and running and finalized. So, when do we think that we can maybe see a little bit of revenue from this investment in the first half of next year? Thanks.

I mean, our biggest concentration has been on bringing these products through the U.S. trials, because that’s the big price for us, the U.S. market. But in terms with our emphasis, the second biggest market probably is Brazil as far as we estimate. The third biggest would be China. And surprisingly maybe for you, the fourth biggest will be Europe. In terms of Brazil, evaluations are ongoing as we speak and won’t take it a lot longer, maybe another three months. We need to get the product register down there. In order to facilitate that on a timely basis, we need to do a certain amount of manufacturing there and we are doing that as well. So, we are basically, we are putting in place with our contract manufacturer and arrangements put into parts of the manufacturing down there. And so the combination of a positive evaluation by the key opinion leaders in Brazil, the registration in Brazil and with the confidence of and the manufacturing arrangements will enable us to enter that market. Our CEO of our operation down there was previously the CEO of the main competitor and will be very knowledgeable in a market and he’s confident of taking a significant share. In terms of China, we are one year into it, probably two in a half year in registration process. And our distributor there was previously the distributor of the market leader, point-of-care of Troponin Company, basically in China. And then thirdly in Europe, we have evaluations ongoing in the five major European countries, which are basically U.K. -- Germany, France, U.K. and Spain and Italy. So those evaluations are ongoing. And just to remind you what happen was, we stop those evaluations at the same time that we stopped our U.S. trial for the same reasons basically with the product problem. And we concentrate our efforts initially, when we recommenced on the U.S. and subsequently we got those evaluations back up. Those evaluations are all nearing completion. We have distributors in place in all of those five major European countries and sales will -- bear in mind, we already have the CE Mark. So, sales will commence as soon as we get positive evaluation outcomes from the key European leaders in each of those five countries. But let me say, having said all of that, the key price is United States. We estimate that the point-of-care markets for Troponin is $350 million around the world and $280 million of that opportunity is in the United States.

Okay. That’s all for me guys. I will keep it short.

Thank you.

And our final question comes from Michael Jones from Harland. Please go ahead.

Hi. Congrats on the quarter and the results and the trial so far. My questions just regarding, thinking a little bit further out. What’s the capacity of the manufacturing of Troponin and what’s the ramp up going to look like, what should we expect, assuming everything goes as expected?

As it stands at the moment, we have a manufacturing capability a little about 4 million units, right. But it is not difficult for us to ramp that up significantly. But we have a current ability to manufacture like sort of $50 million worth of product. But we can ramp that up with relative ease and by spending $2 million or $3 million.

And you don't foresee any bottlenecks in the supply chain or anything like that?

I don't think so, Mike. Having said, I mean, I don’t want to pretend that it’s simple. I mean, we have -- part of our difficulty in running to this trial was product works perfectly well in R&D and certainly doesn’t work so wonderfully when it goes into the manufacturing process. So I don't mean to kind of minimize the issues there. But having said that, I think that we’ve handled them well and we’ve good people who strengthened the manufacturing team. We strengthened our operation in that sense. And we brought in a Chief Scientific Officer who came from Abbott’s Data. He was a head of R&D there. And he manages the Swedish operation top to bottom now and has brought a lot of experience with him. But I mean, I think the time to actually perfect that too is probably applies -- is probably the FDA submission is while it’s going through the FDA submission.

Good. Great. Thanks.

So look we’re confident there.

That’s great. Thank you for that.

Thanks, Mike. I think Chris Lewis wanted to ask the question. I think that’s it one more person there.

Certainly, sir. Next up is Chris Lewis from Roth Capital Partners. Please go ahead.

I will make that the last question please.

Hey, guys. Can you hear me right?

Hi, Chris.

Hi, Chris.

Sorry, I’ve been bouncing around calls here, but just a kind of one question. What do you think the adjudicated data sensitivity in this trial is tracking better than next CE Mark trial? And kind second part of my question how confident are you that the final data in this trial will be consistent with what you've seen thus far? Thanks.

Okay. Well, the first part of your question. The patient cohort in the United States is slightly different that the patient cohort we had in Europe, okay. In Europe, we didn’t actually -- we actually piggybacked on already running clinical trial, what’s called fast stress trial. And fast stress trial essentially excluded particular types of heart attacks known as STEMIs and NSTEMIs, okay. And those are people who are -- those are pretty major heart attacks people who are all, as they arrive at the door if you like almost are having heart attacks, okay. And it’s very easy to diagnose, but they were excluded from the European trials. They absolutely made it mandatory that those patients were included in the U.S. trials. So in some ways the product is behaving the same, but the patients cohort is slightly different and the FDA insisting on those types of patients being included in the trial essentially helps our number, okay. And we saw that in the Fred Apple in 2014 as well. So Fred got 75% sensitivity in that trial and his patients would have been very similar to that switch are now in our current trial. So it’s nothing got to do with the test per se, it’s got to do with the type of patients that the FDA suggested should be included in the trial. The second part of your question is how comfortable they probably be that remaining data [indiscernible]. I am not statistician, but we are more than 50% without the patients in a randomized fashion have produced this type of data across all sites, across all the closed sites across America. It’s hard to believe that the next 50% or next 40% can’t be dramatically different, but it doesn’t mean to say it couldn’t happen, but I think it’s more than that. We are 60% of the way there, that’s our data. It’s pretty randomized in terms of the way we select patients and where we select the patients from. So on that basis we would have to -- you would have to comfortably believe that the remaining 40% should act similarly to the first 60%.

Great. Thanks for the time.

Thanks Chris. Okay. So I would say thank you to everybody and we’ll talk to you soon. And yes, good afternoon. Thank you.

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