Trinity Biotech plc (TRIB) Q2 2016 Earnings Report, Transcript and Summary

Hello and welcome to the Trinity Biotech Second Quarter Fiscal Year 2016 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 questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.

Thank you, Gary, and thank all of you for joining us today to review the financial results of Trinity Biotech for the second quarter of fiscal year 2016, which ended June 30, 2016. With us on the call representing the company are Ronan O’Caoimh, Chief Executive Officer; Kevin Tansley, Chief Financial Officer; and Dr. Jim Walsh, Business Development Director. At the conclusion of today’s prepared remarks, we will open the call for question-and-answer session. But before we begin with those prepared remarks, we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify those forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, but not limited to, the results of research and development efforts, the 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’ll take you through the results for quarter two 2016. Beginning with our revenues, total revenues for the quarter were $26.3 million and this compares to $24.3 million in quarter two of 2015. However revenues this quarter continue to be impacted by currency movement. As you all have seen from the press release, we have restated the quarter two revenues on a constant currency basis. On a like-for-like basis, revenues for the quarter were $26.6 million. Ronan will provide more details on the revenues for the quarter later in the call, so I’ll move on now and discuss the other aspects of the income statement. Gross margin for this quarter was 45%. This compares to 47% in quarter two 2015, this continues the trend of lower margins caused by the currency factors which I mentioned earlier, something which has been a feature of our last few quarters. However, I will point out the 45%, those represent an increase on our two most recent quarters namely quarter four 2015 and quarter one 2016 both of which have margins of approximately 43%. Both represents an improvement of 2%. Now, I’ll move on to our indirect costs. Our R&D expenses for the quarter were $1.3 million, which is consistent with quarter two 2015. Meanwhile our SG&A expenses have increased in the quarter from $6.7 million in equivalent quarter last year to almost $7.8 million this quarter. As you have seen from the previous quarters, our SG&A expenses tend to fluctuate quarter-on-quarter due to a range of factors including the timing of certain expenses principally discretionary sales and marketing costs, travel, trade shows et cetera. We are also seeing the foreign exchange issue actually here and a significant portion of the increase this quarter is due to both our non-cash foreign exchange losses recognized in the period and of course we’re also seeing the impact of the prelaunch cardiac costs which have been increasing each quarter as we approach our launch days. Operating profit for the quarter was $2.4 million compared to $3 million in quarter two 2015. Key factors driving this decrease are the combined impact of the lower gross margins and higher SG&A cost which I mentioned earlier. However, I will again point out the improvement versus quarter one this year by operating profits have grown from $1.8 million to $2.4 million or an increase of nearly 30%. Moving on to our financing costs which includes the impact of convertible notes, our financial income for the quarter was 233,000 compared to 93,000 which reflects improved deposit rates in different time periods over which these deposits have been made. Financial expenses for the quarter were $1.2 million which is consistent with quarter two 2015 and relates almost entirely to the cash interest element of the convertible notes. The non-cash financial income is $800,000 of which $1 million relates to the change in fair value of the derivative embedded in the convertible notes and this is partially offset by about 200,000 of accretion interest again also relating to the convertible notes. Our tax charge for the quarter was 131,000 and this represents an effective rate of just under 6% similar to the 7% reports as an equivalent quarter last year. As in previous quarters, we continue to receive the combined benefit of the very competitive Irish corporation tax rate and tax credits arising in Ireland, USA and Canada. Arriving at a ball that I’ve spoken about so far is that the net result for the quarter is a profit of $2.1 million. This gives a basic EPS of $0.091 per share, while EPS adjusted for non-cash items is $0.055. Fully diluted EPS for the quarter was $0.085. Finally, in the income statement, earnings before interest, tax, depreciation, amortization and share option expense for the quarter was $4.4 million. I will now move on and talk about the significant balance sheet movements since the end of March 2016. Property plants and equipments have increased by 300,000 this is due to additions of 1 million and retranslation movements of 100,000 being offset by depreciation of 800,000. In the same period, our intangible assets increased by $3.9 million, and this was made up of additions of $4.8 million offset by retranslation moments of $200,000 and amortization charges of $700,000. Moving on to inventories, you would have seen that these have increased from $35.7 million to $39.3 million. As I mentioned on our quarter one call, our HIV inventories reduced in quarter one 2016. This trend has now reversed in quarter two and reversed to more normal inventory levels. We also continue to build up premier inventory levels in line with the growth of the business and anticipation of increased production and spare part levels. In addition, there was our normal seasonal increase in the levels of line inventory an advance of the peak line season in quarter three. Meanwhile, trade and other receivables have increased by $1.5 million to $27.8 million. So whilst we saw an improvement in cash collections in the quarter, this was more than offset by the increase due to higher sales billings in the quarter. Meanwhile, our trade and other payables, including both current and non-current remain broadly static at 21.4 million. Finally, I will discuss our cash flows for the quarter. Cash generated from operations for the quarter was $2 million, which is $800,000 higher than quarter two 2015. This is offset by capital expenditure $5.8 million, which was lower than quarter two of last year, due to lower clinical trials costs. The other major cash movements in the quarter were as follows. Share repurchases are $4.7 million, our annual payment for HIV 2 license of $1.1 million, and half yearly interest on the convertible loan notes of $2.3 million, obviously this covers a six month period. The net result is that we have decrease in cash for the quarter of approximately $11. 9 million with the quarter end balance being approximately $85 million. I will now hand over to Jim, who will take you through the latest developments with regards to cardiac.

Thank you, Kevin. I’ll take the opportunity now to update you on our cardiac development programs. In particularly I’ll provide you with a detailed update on our Troponin FDA submission and an overview of our clinical trial data and of our recent communications with the FDA. I’ll also provide a brief update on our Meritas BNP product, which as you know is currently undergoing clinical trials to support an FDA’s 510(k) application. So, starting with Troponin, firstly let me give you a brief reminder of the excellent clinical performance we observed in our U.S. trials. I have discussed this data with you on a number of recent calls, so today I will provide just a very high level reminder. In our recent U.S. clinical trial the Meritas product demonstrated an admission sensitivity in whole blood of 66% and a corresponding specificity of 94%. I’ll put this data into context for you by comparing our results against two of the market leading products currently approved and widely in use in the USA today, mainly the Abbott i-STAT point-of-care Troponin products and the Abbott architect central lab Troponin products. According to the manufacturers package insert, the admission sensitivity of the current FDA approved Abbott Architect Central Lab System is 60% with a corresponding specificity of 95%. In studies carried out at Hennepin County, the Abbott i-STAT point-of-care product was determined to have admission sensitivity of 32% with the specificity of 92%. The Meritas point-of-care product does speeds the market does beats the market leading Abbott i-STAT products by 35 percentage points in sensitivity, while the Meritas also beats the Abbott Architect Central Lab System by 6 percentage points in sensitivity. However, you will remember that although these results look excellent for Meritas, you still need to keep in mind that we’re still not actually comparing like-with-like. In accordance with FDA guidance the Meritas MI patient cohort consisted of 57% type 1 MIs and 43% type 2 MIs, whereas our competitors would have relied predominantly on type 1 MIs. If I were to re-compute our clinical performance on type 1 MIs only, our time zero sensitivity rises from 66% to 75%, which is in fact substantially better than most of the data central lab Troponin systems. Although this is a very brief summary of our performance, it should serve to provide you with the confidence that the Meritas product is demonstrating exceptional clinical performance. Moving on now to our interactions with the FDA, you know of course that on December 17 we submitted a 510(k) application to the FDA for our Troponin product. To the very best of our knowledge, Meritas is the first point of care Troponin product ever to be submitted for clearance under the new FDA guidelines. In third week of January, the formal review process commenced and the review clock actually started ticking. In April, as I explained on our last call we received the firm response to our submission from the FDA providing us the detailed list of questions and comments. I’ll take a couple of minutes now to remind you of the type of questions and comments we received. However, you would remember I said that we thought all questions we received were reasonable and fair and that there were no show stoppers or red line items. The good news of course was that our pivotal ACS trail, which as you know consistent of close to 1,500 patients at multiple trials sites around the U.S.A. followed by a very complicated adjudication process received very little comments. This would indicate that the trail was sufficiently powered; it represented the appropriate racial and ethnicity profile. Had sufficient geographical spread and most importantly met the definition of an all-comers trial, with the appropriate mix of type 1 and type 2 MIs. The questions in general could be segregated into three categories. The first and by far the largest category were questions and comments for the FDA have asked for further clarification are more information relating to certain points. Essentially, this is information required in order to ensure the completeness of our file. Work on all these questions is now complete. The second category of question is where the FDA had asked for extra data to be generated to support or expand certain claims. This work could be carried out in-house by our own technical staff and what’s fully under our own control and therefore not under critical path. You may remember the two examples of this were related to expanding the list of potentially interfering substances and widening the hematocrit range for whole blood samples. Again work on all these questions are now fully complete. The third category of question was where the FDA had requested extra data to be generated? However, this data required to be generated at external sites. Thus this data generation was driving the critical path. [indiscernible] we had only one new question in this category and it was in relation to our point of care precision study. The FDA had suggest that our data be enhanced at further three sites and that at each site patient whole blood at medium high and low Troponin levels should be run with each sample to be tested with one of the blood sample being taken. They had also suggested Troponin controls to be run over a three-week period at the same sites. On our last call I told that we had applied for IRB approval at each of the three sites and that we would have the necessary data generated and ready for submission with the FDA at the end of July. At this stage, we still got a week or a week and a half’s work of data to be collected, which makes the FDA planned – now planned for August. But what it’s worth however the data generated at least of our eyes looks very, very encouraging. In summery therefore, we think the questions we received from the FDA are reasonably. There were no red line issues. Data collection is adversely complete and we plan to submit a complete set of answers to the FDA in August, which is well within the time allowed by the FDA. Once received, the FDA will then recommence their review process. Pending that review and of course depending on the number and type of follow up questions, we believe that it is feasible that the Meritas Troponin products may obtain FDA clearance even before the end of 2016. Accordingly, Meritas will be the only point of care of Troponin product demonstrating market leading clinical performance to be cleared for sale in the U.S. in accordance with the new MI guideline. I’ll move on briefly now to discuss Meritas BNP. As you know, BNP levels in the blood stream increase as the severity of heart failure increases. Thus BNP has emerged as a principal biomarker in the diagnosis of acute and chronic heart failure. I mentioned on our last call that following our discussion with the FDA last year, we agreed to expand the number of trial sites to 10. The adoption of this strategy we believe will help the smoother review of process with the FDA. The aim of the study by the way is to recruit 1,450 patients approximately 700 with heart failure and 700 without heart failure. At this time with the trial sites actively recruiting, we’re past the 90% point in patient recruitment. Patient enrolment will be completed very shortly with submissions for our 510(k) clearance planned for Q3 2016. The chemical data generated today, it looks very good and we are quite pleased that the product looks to be demonstrated at the same performance characteristics that we observed in our CE marketing trials last year. And with that, I conclude and now handover to Ronan. Ronan O’Caoimh: Thank you, Jim. And I’m now going to briefly review our revenues for the quarter before opening the call to question-and-answer session. Our revenues for quarter were $26.3 million compared with $24.3 million in quarter two of 2015, which is an increase of 8.4%. However, when the impact of foreign currency exchange movements is removed, revenues would have been 26.6 million this quarter thus representing an increase of 10%. Point-of-care revenues for the quarter were $4.8 million compared with $3.4 million in the comparable quarter, which represent an increase of 41%. This increase is almost entirely attributable to higher HIV sales in Africa during the quarter with Tanzania, Uganda, Mozambique, South Africa and Malawi performing strongly. In the United States, our HIV sales increased 5% over the prior quarter with hospital sales performing strongly aided by the fact that we're now selling the HIV 1, HIV 2 combination product. Our public health HIV sales were flat against the backdrop of reduced public health spending on HIV in the states. Meanwhile sales of our point of care product in the U.S. were approximately $350,000, which is an increase of 350% on the current funding quarter last year. However, although, we believe that the product has large potential, the fact is that public health departments move slowly and the evaluation, training, funding and purchasing cycle takes a significant amount of time. We believe that this will be a significant product for us, but it will take 2 to 3 years to reach its full potential. Moving onto clinical laboratory, our revenues for the quarter were $21.5 million, up from $20.9 in the corresponding quarter last year. However, on a constant currency basis, revenues were $21.8 million, which represents an increase of 4.6% compared with the prior quarter. Our hemoglobin, diabetes and variance businesses performed strongly with revenues increasing 9%. We had strong premier instrument placements in all of our principal markets with 83 instruments being placed during the quarter leaving us on target to exceed 350 placements for the year. The exception is Brazil where we made negligible placement this quarter despite strong demand for the product. This arises due to the weakness of the Brazilian real. However, we plan to reenter this market when we increase our level of manufacturing activity in Brazil thereby saving on import duties and on sales taxes and by creating an addition of natural hedge. In addition, we are seeking price increases against the backdrop of a high inflationary environment. Another positive factor is that the Brazilian real have strengthened considerably over the past few months and has now recovered from a rate of 4 to a level of 3.25 today against the U.S. dollar. And at this level we are in a position to tentatively reenter the market on a selective pricing basis during the current quarter. Moving onto infectious disease, this business grew 3% compared with the prior quarter. Our infectious disease in the United States performed well with Lyme sales strong on the back of a mild winter. China performed particularly well with our revenues in Canada, Turkey, Russia and Colombia to name just a few, continue to suffer due to the weakness of these currencies against the dollar. Monoclonal sales in our Fitzgerald subsidiary were flat when compared to the revenues from the corresponding quarter last year. Meanwhile sales of our autoimmune product in Immco performed strongly with revenues increasing 8% when compared to the corresponding quarter last year. Reagent revenues in Europe and the United States perform strongly. Sjogren revenues were $700,000 approximately while the outlook for these revenues have improved significantly following the signing of the contract with one of the U.S. mega labs during the past quarter. With that, I'll now hand you back to the operator for our question-and-answer session.

Thank you. We will now being the question-and-answer session. [Operator Instructions] Our first question comes from Jim Sidoti of Sidoti and Company. Please go ahead.

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

Yeah.

Great, great. You talked a little bit about Brazil and about how you thought that situation would improve when you built that manufacturing there. What’s the timetable for that? Ronan O’Caoimh: Probably about 9 months realistically by the time we get up and running, Jim.

Okay, all right. So some time midway through 2017 you should see that pick up? Ronan O’Caoimh: Yeah, we’ve received approval in Brazil now to basically to manufacture and thereby to receive the reduced VAT or sales tax rate, now I think it will be saving us 17%. So now it’s a matter of just activating that and activating basically point of sales of – sorry. What we need now to do is to setup a new factory and to extricate ourselves from our existing contract manufacturing arrangement.

Okay. Ronan O’Caoimh: It just takes about 9 months.

All right, great. And then on Troponin, it sounds like you are on track with the schedule you put out regarding the FDA, but you did have some increased spending in sales and marketing this quarter after the launch. Can you just give us a sense, is that adding people or is that creating literature, what’s going into that cost?

It’s about making sure both instead of seeing – instead of – as we continue to take on people, we are sort of others continue to take on people [indiscernible] would have been taken on the previous quarter exception, we do a lot of hands on for marketing costs and travel costs and exhibition related costs as well. So it’s a mix there to be honest.

So how quickly after approval is won do you expect to be out selling the product? Ronan O’Caoimh: We would expect to be within a couple of months into the market, Jim.

Okay. So a couple of months after approval you would be in the market? Ronan O’Caoimh: Yeah.

Okay, thanks you.

Thanks, Jim.

Our next question comes from Bill Bonello of Craig-Hallum. Please go ahead.

Great, thanks. Couple of follow-up questions. Just first of all on the point of care side number was a lot better than we’ve been looking for. Is Q2 do you think a good proxy for the rest of the year, I know this can be a kind of a lumpy business just trying to think about what you think of sort of a run rate for this business? Ronan O’Caoimh: I think it probably is. I think quarter one was particular weak quarter; certainly we don’t see anything like that on the horizon. I think quarter three will be at the level of quarter two or stronger, but I mean clearly some other to be indicating that. But I think in general terms our pipeline is looking strong and we are positive on basically what we’ve produced this quarter can be exceeded.

Okay. That’s helpful. And then just as a follow-up to the last line of questioning. Can you maybe elaborate a bit more on what is in place at this point for Troponin commercialization, what you’ve done from a sales force standpoint and what you’ve been able to do in terms of identifying target accounts, et cetera? Ronan O’Caoimh: Well, we have marketing team in place, we are preparing for the launch of the product in Canada and in the United States to key into our existing sales force. So we have – we have a sales force of 27 – existing sales force of 27 people and they have undergone – ongoing training on our Troponin product and on Troponin market in general and they have been out in the market for the past number of years sending information on the hospitals – on all the hospitals that they just – in terms of how they handle Troponin. We are seeking a senior appointment as in – sales and marketing director to spearhead our efforts in the U.S. market. So we are looking for somebody experienced in this year and that would be – it’s quite a senior requirement within the company and we have just commenced that process with the intention of having somebody onboard around the turn of the year. And beyond that I think – beyond that specific appointment I think all the pieces are in place. We will add in addition maybe somewhere between five and maybe eight sales reps, especially sales reps in the United States. But the detection of that and the key individual, I think we are ready to move.

Okay. That’s helpful. And then just one last question. On the premier side, you talked about the placements, can you talk a little bit about just how the pull through is trending these days? Ronan O’Caoimh: Just in general terms, China is performing very well in terms of the number of instruments that we are placing. So we are more of placing 25 instruments per quarter, more or less exactly. So you can take it at 100 a year, that’s the positive side. The negative side is that the pull-through is so much disappointing right around the $4,000 per instrument per year level, which compares to – roughly our business is more like $10,000 or $11,000 per instrument per year, but we are trying to believe that that will increase and I do believe that we will truly assembled four years time, but actually the most productive instrument of all will be the Chinese’s ones, again the background of 90 million diabetics type 1 and type 2 in the country and universal reimbursement. The missing link clearly is the general practitioner doctor who isn’t at this moment of time basically sending samples into the hospitals, but our instrument is in the hospital ready to be utilized. So – and then moving on to [indiscernible], our best performing instruments are United States instruments, pull-through there is very, very high. Our placements are strong, but they remind that the U.S. market is also immune and immunoassay markets. And so therefore, the pie is somewhat smaller for us. [indiscernible] is our partner in Europe and they have 40% of the European market and basically -- we are basically replacing hybrid [ph] instruments in that market and are enhancing [ph] in effect 40% of the European market and that process continuing exactly as we had expected, so we are kind of three years now into a seven year cycle of replacement. Bear in mind that everything we do in premier is new business because we have no existing business there, so every instrument – everyone of the 350 to 370 instruments that we replace this year is new business, we are never replacing our old instruments. And then of course is Brazil, which I discussed, we did 115 instruments last year with more slow to nothing now because of the rate of the real is at [indiscernible] forward and then positively it just came back to 3.25, we’ve got now an exemption in the state of [indiscernible] to put the factory in place and the combination of the VAT break, the saving on the import duties, the inflationary environment there and the recovery basically of the real which has moved from 4 back to 3.25. I think it’s the strongest performing – most call it an exotic currency, but it’s one of the strongest performing currency this year. So all those factors should enable us to reenter that market fairly quickly. And then beyond that in countries like Turkey, for example, market isn’t that strong because of, not just because of recent political factors [indiscernible] to that yet, but because of just basically the [indiscernible] with the currency has weakened. So, but in general terms China, Europe, USA and Brazil are all performing very well.

Great, thank you so much. Ronan O’Caoimh: Thanks, Bill.

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

Great, thank you and good afternoon. If I could just may, just a couple of follow-up and just clarifications, just on Troponin it sounds like everything is pretty much aligned with where we were once you guys had your last call, Jim is there any formal process going forward so you re-submit, you answer all the questions for the FDA, is there a new clock or some sort of 90 day clock or should we expect the FDA to come back to you with more questions or how do you, what would be some of the next milestone to look for, if there is something to look for or is it sort of uncertain?

Well it’s sort of uncertain Larry, quite frankly. The first one, there is a formal process, okay. The clock has stopped as we speak, okay. So the FDA are not on the clock right now. As soon as we submit and acknowledge that they have received this resubmission than the clock starts again and in theory I believe they had 90 days to review and before they need comment, okay. Our belief will be that we should receive comments back from them. I would have thought within a month to six weeks of our answers, against our questions going in. And at that stage, a number of things are going to happen. First thing could happen is they could say everything is perfect, thank you very much and let’s get ready to approve this product with more likely to go and come back with some comments, suggestions, something like that, hopefully not asking for anymore data to be generated, but maybe just for clarifications etcetera. At which time when they had sent back they questions or comments like that, the clock stops again and we get extra amount of time to make our answers back to that. We would do that obviously and then start so that again another 90 day clock starts again from the FDA, but because it’s such a thorough review of the first application, okay, and they really did when some of our applications would have gone. We have answered as we believe very, very well all of the questions they have put to us. It should, with a fair way and there should be maybe a couple of months of six weeks to get their comments back. There will be then follow up questions with normally on things like labelling and stuff like that where they say well, okay we are approving it, but we are curtailing the claims to x, y, z or whatever, okay and so you have to change your labelling. You get the labelling approved and then to say, yes you are free to market. So, all going well, as I said in the prepared remarks there is that reasonable chance that this product could be approved before the end of 2016, pending what they come back with.

Okay, great, fair enough. And then just if I may just one, on just switching gears to just SG&A expense and maybe Kevin you could help, in terms of the sequential increase, you mentioned that the substantial significant piece of that was actually related to FX loses recognized with that, is that non-cash, can you just elaborate more on that and maybe quantify it?

It is actually a combination of both. This quarter, actually interesting enough is the currencies have moved somewhat differently. We actually had a strengthening of the euro as such in some other currencies versus last year were weaker. So, not everything moved in the same direction. So, the fact that the currency rate of the euro was stronger that pushed cash cost up from what’s now the differential between the two rates was enormous, but that was the fact, but also what is at play here is when you do your revaluations of any foreign currency denominated assets or liabilities at the end of the quarter, that creates bulk or sort of non-cash amounts and in the case of the last one, I suppose somewhere between 300,000 and 400,000. The cash amounts will be more modest maybe of the order of 100,000 or so.

Got it. So that is basically a balance sheet item that should it has to come through the P&L and you are putting it through on the SG&A line?

Yes it is. It’s something at the retranslation adjustment that has to be performed at the end of each quarter it hits the P&L because you have restage your assets and liabilities of the prevailing rates at the end of the quarter.

Got it. So, all things are equal and SG&A were flat sequentially on a cash basis, next quarter would be closer to the 8 million number or that 8 million that includes your stock comp, so close to a 7 million number I think?

If you would – it is a 7.8 million, which is the number we are having there at the moment, if for example none of those items are there so if the euro went back to the way it was and if we had a complete flash currency then you will be back around the sort of 7.3.

Got it, great. Okay, great, thank you very much.

Thanks Larry.

Our next question comes from Chris Lewis of Roth Capital. Please go ahead.

Hi guys, thanks for taking the questions. Ronan O’Caoimh: Hi Chris.

Chris, hi.

Wanted to start on the Immco business it continues to be a nice growth driver for you, can you elaborate on just how big that business has grown to at this stage and kind of what’s driving the growth and the continued strength within that segment?

Chris, the business is approximately it is just sort of about 4.5 million per quarter of that order.

And you continue, it obviously is growing above where you are, your corporate average, so can you walk us through kind of what’s driving that growth. Ronan O’Caoimh: Yes, number of factors, obviously Sjogren’s is part of that. The lab business in general is doing well, it has got – we’ve got a reference laboratory in down town Buffalo, which has been performing very well since we have acquired this. Within this obviously Sjogren’s has been a new product we have added on since we have acquired Immco and that has been growing hopefully as well that that will accelerate now that the new arrangement that we have put in place, one of the mega labs in the U.S. On top of that we are looking at growth outside of the U.S. in the international markets, we’ve got a very good distribution network, we’ve got a base business of infectious diseases in place, which we would look to marry with the Immco range of products, there are natural synergies there and so that is about as an opportunity as well. As is the case in the U.S. prior to the acquisition Immco made very little sales directly in the U.S. They essentially is another sales force. We have obviously now plugged that product range into our sales network and looking to get growth there through again giving them the first opportunity to sell in the U.S., but also by having synergies at are existing infectious diseases business.

And then the growth margin ticked up nicely compared to the past two quarters, how should we think about gross margins going forward?

What I would say about gross margin is, gross margins will hope around quite a bit and the reason being that there are lot of factors that have played there, you are talking about sales mix, even within sales mix you allow customer mix layer on top of that you have got currency issues and then other factors can effect like levels of production etcetera timing of which batches our completed etcetera. There are a whole range of factors that go into it. So, I would never, I would always caution people about sort of expecting them to be very linear and predictable per say. They were always [indiscernible] of hopping around per say. We expect that over time that we will improve the key drivers to make that happen will be one, obviously a growth in revenue, by virtue of the fact that we have got a very significant fixed cost base, the more we can drive through our cost save the greater we will be able to spread our overheads and that would help us in terms of our gross margin. We also have out here our premier business the more instruments we put out in the field, the more throughput that we will get in those instruments and the reagents pull through essentially the higher margin business. So, over time that has been increasing each quarter, obviously we started with a very low base because initially we are putting out very significant numbers of instruments, which would be very low margins and then over time building up a revenue stream of reagents, let’s say which are higher margin. So, those types of factors will lead to an underlying growth, that’s before cardiac comes on or cardiac separately. So you can expect it to go up but I caution again they’re expecting just a very linear growth rates. There are a number of factors, they play each quarter and 13 weeks is very short. So I’ll be looking at underlying trend over a number of quarters rather than from one quarter to the next. I did say I come back to cardiac. When we get up to speed of cardiac post launch, you can expect higher margins again there. So if you’re looking at the medium to long term that’s a further driver of improved margin for the company.

Great and I just have one more question. Congrats on returning to the positive revenue growth, reported revenue growth in the quarter. Going forward, I know you don’t give guidance but can you just talk about how you feel you’re positioned to continue and sustain that year-over-year quarterly revenue growth on the positive side going forward? Thanks.

Yes. Chris, I think Larry asked something there, Bill asked something there and so I just repeat what I said there. We don’t have huge – we don’t have much visibility on quarter three for example. I do think the quarter one was of course we won’t see repeated over an unusually poor quarter, and I would expect that quarter three would match or exceed quarter two. And similarly for quarter four, let’s say, that we have less confidence for quarter four because typically it’s just a slightly – it’s a slightly softer quarter because Lyme, for example, disappears in quarter four. But certainly quarter three is looking stronger than this quarter, but visibility at this moment in time in the middle of – just after the middle of July isn’t great but I would certainly see nothing like quarter one again and I think quarter two will be beaten next quarter.

Okay. Thanks for the time guys.

[Operator Instructions] Our next question comes from Nicholas Johnson of Raymond James. Please go ahead.

Hey, guys. Just wanted to talk a little bit about the balance sheet and cash flow use for the balance of the year. Certainly you’ve always been acquisitive, we haven’t seen a deal about a year or so. So just wanted to get your thoughts on the pipeline and then secondly on kind of free cash flow. I would assume that some of the capitalized R&D tied towards the Meritas launch. We’ll start to ease a bit but I would assume some of the operating expenses associated with ramping up that sales force might be an offsetting. But just wanted to get your views on where the cash on the balance sheet looks at your end? Thanks.

Nicholas, your question there in relation to the free cash flow, you’re correct absolutely when you say that the investment in the Meritas will decrease. We are going through a phase now. We are actually having reduced expenditure in relation to Troponin you’d have seen that in the cash flow compared to say this time last and we will be spending an awful lot of money on trials etc. We’re putting a lot of resources into that. The whole process of getting back to the FDA is hugely a labor intensive, lot of work going into that and obviously there were certain amount of third party cost associated with trials and for the additional data, but that has been coming down. I will point out though that the EMP is still going through very much. Its regulatory process and the cash intensive phase of its trials etc where the trials and sales are nearly completed the cash as you can imagine tends to follow a little bit afterward. So that remain to be a feature for some time. You’re right as well that there is an off selection relation to the investment from making a relation to the SG&A cost. So I do expect that there will be an improvement from that sort of nice position in terms of investments and in terms of the intangible costs versus the OpEx as such. In relation to the rest of the business and it only meets [indiscernible] as the level of revenues will very much drive the profitability. The profitability will drive the operational cash flows per se. So whilst we are not giving guidance in relation to revenues, the stronger the quarters we have will be better for the operational cash flows per se.

Okay, then on M&A? Ronan O’Caoimh: With M&A, we are continuing to seek out acquisitions and we’re looking at few things at the moment. We really at all times in the past year we have been looking at something finding difficulty really with price expectations of vendors, but we are looking at a couple of things at the moment. But we are – I couldn’t say that we are anyway close to doing a deal. We are just really continuing to search, finding it little bit frustrating but have to determine not to overpay. So we’re just continuing on our search, nothing to report.

Okay. And then my last question would be on Troponin in terms of the national lab agreement that you called out that should help drive an acceleration of the current revenue base that you disclosed earlier in the call, just wanted to get a little bit more details if you can? I know it’s perhaps a contract that you can’t disclose but any broader thoughts there might be helpful in terms of the magnitude of opportunity there. Thank you. Ronan O’Caoimh: There is only two national mega-labs [indiscernible] so it’s fair enough to say which one it is but it is a significant development for us because they will be processing quite a lot of dry eye samples. And so really it actually has – it will have a significant impact on our business in terms of how, what percentage it can grow 30%, 40% over a period of the year. It is that kind of potential. But that still needs – it still needs input from Bausch & Lomb sales reps because really want to tell, it opens up a market that was previously closed to us but it’s not just – you still have to sell us to the specialist if you’re following. So basically in the absence of a deal with either Quest or LabCorp, some of that customer wasn’t available to us and now is worthy.

Okay. Thanks for the color. Nice job on the quarter. Ronan O’Caoimh: I think it’s a typical stage. I think there is only one question left which is Paul from Novel Equity. So I think maybe we’ll make that the last question if we could and then we’d wrap it up.

Our next question is from Paul Norrie of Novel Equity. Please go ahead.

Hi, thanks for taking my question. A quick one, why the inventory build in the quarter?

Our inventories tend to fluctuate a bit as well partially due to seasonal factors. We are entering now the heavy lime season, so we’ve been building up our inventory in advances as we tend to manufacture more in quarter two than for any other quarter so that we’ve got the inventory available to service customers in quarter three. We also had unusually low HIV inventory at the end of quarter one, so we have built up back up again somewhat as well. So you’re seeing what was unusual dip in quarter one being reversed in quarter two. We are very optimistic in relation to the rest of the year in relation to Premier. We’ve bought a lot of parts there in relation to manufacturing but also spare parts. We carry a significant spare parts inventory in line with the continued growth of our installed base. So there are a number of factors driving that but again I would caution and looking at one quarter versus the next, I would tend to look over a period of time rather than one.

Okay. Thanks.

Okay. Thanks, Paul.

So maybe at this stage, I would close up the call. Thank you very much everybody for your support and look forward to talking to you again in a couple of months time, so good-bye and good afternoon.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.