U.S. Markets close in 5 hrs 2 mins

Edited Transcript of CEMI earnings conference call or presentation 8-Aug-18 8:30pm GMT

Q2 2018 Chembio Diagnostics Inc Earnings Call

MEDFORD Aug 23, 2018 (Thomson StreetEvents) -- Edited Transcript of Chembio Diagnostics Inc earnings conference call or presentation Wednesday, August 8, 2018 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* John J. Sperzel

Chembio Diagnostics, Inc. - President, CEO & Director

* Neil A. Goldman

Chembio Diagnostics, Inc. - Executive VP & CFO

================================================================================

Conference Call Participants

================================================================================

* Bruce David Jackson

The Benchmark Company, LLC, Research Division - Senior Healthcare Research Analyst

* Larry Haimovitch

Haimovitch Medical Technology Consultants - President

* P. Ross Taylor

ARS Investment Partners, LLC - Partner

* Per Erik Ostlund

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to Chembio Diagnostics Second Quarter 2018 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, [Philip Taylor], Investor Relations.

--------------------------------------------------------------------------------

Unidentified Company Representative, [2]

--------------------------------------------------------------------------------

Thank you. Before we begin today, let me remind you that the company's remarks made during this conference call today, August 8, 2018, include forward-looking statements within the meaning of the Securities Act of 1933, concerning the current beliefs of the company. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, many of which are beyond Chembio's control, including risk and uncertainties described from time to time in Chembio's SEC filings. Chembio's results may differ materially from those projected. Chembio undertakes no obligation to publicly revise or update any forward-looking statements made today. I encourage you to review all of the company's filings with the SEC concerning these and other matters.

With that, I'd like to turn the call over to John Sperzel, President and Chief Executive Officer. John?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, [Philip]. Good afternoon, everyone, and thank you for joining us. Joining me today is Neil Goldman, our Chief Financial Officer. Our results during the second quarter of 2018 reflect strong execution, commercially and operationally. We achieved total revenue of $8.7 million during the quarter, an increase of 112% compared to the prior year period. Our patented DPP technology is central to our business strategy, and we believe its potential is only beginning to be realized in the market. While DPP-based tests can deliver results in 10 to 20 minutes from a tiny finger stick drop of blood, their uniqueness lies in providing enhanced sensitivity and specificity, advanced multiplexing and quantitative results when combined with our DPP microreader. With focus on our DPP technology, we achieved a number of recent milestones, including the following highlights: signed a long-term agreement with Bio-Manguinhos to commercialize DPP tests that detect dengue, Zika and chikungunya in Brazil; initiated shipments of HIV tests to Ethiopia, as part of the largest tender award in company history, totaling $15.8 million over 3 years; commenced the LumiraDx funded collaboration to develop a portfolio of new point-of-care tests that detect infectious diseases; advanced to Phase II in the AstraZeneca-funded collaboration to develop a DPP test that detects an undisclosed biomarker; submitted the dossier to the World Health Organization for the prequalification of our Malaysia facility; and entered into collaboration with FIND to expedite the feasibility of the DPP test that detects Hepatitis C virus.

Today, I will share additional details on these highlights, while reviewing advancements in our 3 areas of strategic focus as well as recent commercial and operational achievements. Neil will follow our details on second quarter financial results. I'll make a few closing comments and then we'll open the call for questions.

Starting with our first area of strategic focus, to expand our core sexually transmitted disease business. We continue to make excellent progress commercializing our STD products and believe there's significant opportunity to expand globally. Net product sales during the second quarter of 2018 were $6.9 million, an increase of 137% compared to the prior year period. Net product sales in Latin America and Africa increased 216% and 351%, respectively compared to the prior year period, fueled by earlier investments in global sales and marketing.

During the second quarter, we had DPP HIV sales of $3.2 million to Bio-Manguinhos, a government agency and supplier of diagnostic products to Brazil's Ministry of Health. We're on track to supply the remaining $2.9 million of the $8.5 million annual commitment from Bio-Manguinhos during the second half of the year. Our long-standing collaboration with Bio-Manguinhos continues to serve as a strong channel to deliver our products to Brazil's public health system.

During the second quarter, we had HIV STAT-PAK sales of $1.5 million under a tender from the Ethiopian Pharmaceuticals Fund and Supply Agency, and we're on track to supply an additional $2.8 million during the second half of 2018. We plan to supply the remaining $11.5 million of this $15.8 million tender over the course of 2019 and 2020, as specified in the tender. We continue to advance toward commercialization of our multiplex DPP HIV-Syphilis test in United States, which is one of our corporate priorities. We filed the premarket approval application to the U.S. Food and Drug Administration, as planned, during the first quarter of 2018, and we're in dialogue with the agency as our submission is under review. We believe a significant market opportunity exists for our HIV-syphilis test due to the growing concerns related to co-infection and a global effort to eliminate mother-to-child transmission of HIV and syphilis.

Finally, we're making excellent progress on our international HIV self-testing strategy. While we are commercializing our HIV self-test in Europe via partners, we're preparing the dossier for WHO prequalification and directly engaged with the expert review panel for diagnostics that oversees the suitability of diagnostics for procurement by the global fund, including PEPFAR, UNAIDS and other NGOs receiving donor funding. Since receiving level 3 procurement through the ERPD process, we progressed with several African Ministry of Health authorities in their country evaluations, which proceeds authorization for HIV self-testing.

Turning to our second area of strategic focus, to build a broad tropical and fever disease portfolio. We're making outstanding progress applying our DPP platform to address the tropical and fever disease market, which we believe offers significant growth potential. I'd like to share some of our notable achievements that we advanced a number of these tests toward commercialization. During the second quarter, we signed a long-term agreement with Bio-Manguinhos to commercialize DPP tests for dengue, Zika and chikungunya in Brazil. We also submitted a number of new product dossiers to ANVISA, Brazil's Health Regulatory Agency, including single test for dengue and chikungunya and a unique multiplex test able to simultaneously detect dengue, Zika and chikungunya from a single drop of finger-stick blood. Our Zika test is approved by ANVISA, and yesterday we were notified that our chikungunya test received ANVISA approval, which speaks to the quality of our test and the speed in which we are progressing. The Bio-Manguinhos commercial agreement as well as ANVISA submissions and approvals are central steps toward commercialization of these new tests in Brazil where we believe a significant market opportunity exists.

Our DPP Zika test is the only rapid Zika test with emergency-use authorization from the U.S. Food and Drug Administration, and we're currently selling to a number of health departments in the United States.

With ongoing funding and support from BARDA, we plan to submit the 510(k) to the Food and Drug Administration by year-end, which will expand the available market in the United States. During the fourth quarter of 2017, we received a $1.5 million to $4.9 million conditional award from UNICEF to supply our DPP Zika system during 2018 and 2019. While the initial RFP conditional reviews are ongoing, UNICEF recently issued a second RFP related to Zika diagnostics, for which we also submitted a proposal. Finally, we continue to advance the development of a rapid malaria test, which represents an estimated $200 million point-of-care market opportunity. We plan to complete the development of our malaria test during 2018 to be followed by verification validation, clinical evaluation and the first regulatory submission.

Turning to our third area of strategic focus, to leverage our DPP technology and scientific expertise via collaborations. We continue to gain the trust of world-leading collaborators who provide funding and support for product development, allowing us to expand our robust pipeline of new opportunities. We believe the products developed through these collaborations have the potential to further transform the company, while also addressing a broad range of conditions. We achieved a key milestone on the point-of-care test to detect a specific form of cancer developed on our DPP platform. We've completed the development of this test with excellent analytical performance, and we are currently in the verification validation phase. This novel, multiplex test, which is funded by our partner, will provide quantitative results from a finger-stick drop of blood in 15 minutes. We're making remarkable progress on the AstraZeneca-funded program to develop a point-of-care test to detect an undisclosed biomarker. As previously announced, we completed the test development on our DPP platform during the first quarter. We're currently advancing through the verification validation phase and remain on track to complete the product by the end of Q2 2019, which includes FDA 510(k) submission and CE Mark application.

We also kicked off the previously announced LumiraDx-funded collaboration to develop new point-of-care tests to detect infectious diseases. LumiraDx will fund the product development, subject to certain milestones, and we'll receive royalties on sales of all products developed through this collaboration. We believe these products will provide us with access to a broader customer base and complement our current products. In addition, biomarkers funded through this collaboration can be applied to our DPP platform to further expand our product portfolio. And in July, we entered into collaboration with FIND to expedite the feasibility testing of a rapid diagnostic test for Hepatitis C virus using our DPP platform. We believe the market potential for a high-quality rapid HCV test is significant, as an estimated $71 million people are living with Hepatitis C infection, approximately 80% of which are unaware of their positive status and nearly 400,000 lives are lost each year. Our DPP platform is being successfully leveraged across many areas, and we're optimistic that it will serve as a robust platform for the point-of-care detection of Hepatitis C virus.

Finally, I'd like to update on some recent operational and commercial advances. As we transform the company, we continue to make strategic investments to efficiently scale both our manufacturing and commercial operations. Operationally, we had 2 significant advances during the second quarter. First, we submitted the dossier to the World Health Organization for prequalification of our Malaysia facility, which once achieved will allow us to move the manufacturing of certain products from New York to Malaysia. Second, we took delivery of our first fully automated manufacturing line in New York. Successful validation and implementation of this line will enable the company to increase DPP test production capacity while maintaining our high quality. Both of these operational achievements are key drivers of our growth strategy and our gross profit margin improvement plan. Commercially, we expanded our sales coverage model in the United States market by partnering with MTMC, a nationally recognized contract sales organization with over 100 sales executives in the United States. The MTMC sales team was trained on our products during the second quarter and is focused on the physician office, hospital and urgent care customers, while the Chembio sales team is focused on the U.S. Public Health customers. MTMC's support and expertise, having recently represented one of our key customers, will be instrumental in the anticipated launch of our DPP HIV-Syphilis Assay in the United States.

Finally, we continue to strengthen our leadership team and board of directors. Last month, we announced that Dr. Christine Rousseau joined our executive leadership team as Vice President, Corporate Development. Christine adds extensive global experience in infectious disease, having spent the last 9 years at the Bill & Melinda Gates Foundation. She is focusing on our point-of-care infectious disease strategy and execution, including HIV self-testing and Hepatitis C virus, where she has significant global experience.

Today, we announced the appointment of Dr. Mary Lake Polan to our board of directors. Dr. Polan is a professor at the Yale University School of Medicine and previously served as an adjunct professor at Columbia University School of Medicine and is Chair of the Department of Obstetrics and Gynecology at Stanford University School of Medicine. She currently serves on the board of Quidel Corporation and Motif BioSciences, Inc. and is the chair of Proctor & Gamble Scientific Advisory Board on Women's Health and Hygiene.

I'll now turn the call over to Neil Goldman, our Chief Financial Officer, for details on the second quarter financial results. Neil?

--------------------------------------------------------------------------------

Neil A. Goldman, Chembio Diagnostics, Inc. - Executive VP & CFO [4]

--------------------------------------------------------------------------------

Thanks, John. In the second quarter of 2018, total revenue was $8.7 million, an increase of 112% compared to the second quarter of 2017. Net product sales for the second quarter of 2018 was $6.9 million, an increase of 137% compared to the second quarter of 2017. License and royalty and R&D milestone and grant revenues combined in the second quarter of 2018 were $1.9 million, an increase of 52% compared to the second quarter of 2017. Net product sales growth was driven by strong gains in Africa and Latin America and partially offset by Asia. Gross product margin dollars increased by 34% compared to the second quarter of 2017. Gross product margin percent for the second quarter of 2018 was 14% compared to 24% for the second quarter of 2017. The lower gross product margin percent for the second quarter of 2018 resulted primarily from sales growth in markets with lower average selling prices as well as costs to ramp up production volumes to new corporate levels. Other expenses, which includes research and development and selling, general and administrative expenses were $4.5 million for the second quarter of 2018 compared to $4.1 million in the second quarter of 2017. R&D costs were relatively flat, representing a combination of higher R&D spending corresponding with the growth in R&D, milestone and grant revenue offset by lower spending on clinical trials during 2018, as the company completed its DPP HIV-Syphilis system in the U.S. clinical trial. SG&A increased by $0.4 million, associated with higher compensation expense and sales commissions related to the growth in both our commercial infrastructure and net product sales growth. Net loss in the second quarter of 2018 was $1.7 million or $0.12 per diluted share compared with the loss of $2.2 million or $0.18 per diluted share in the prior year period. Cash and cash equivalents as of June 30, 2018, totaled $9.5 million.

Now I will turn the call back to John for closing comments.

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Thank you, Neil. The Chembio team delivered a strong second quarter and closed the first half of 2018 with outstanding revenue growth and performance across the board. We advanced a number of strategic initiatives during the quarter, which we believe pave the way for continued success. Our core sexually transmitted disease business delivered significant growth, fueled by earlier commercial investments, which we plan to supplement as we expand our global footprint. A number of the tropical and fever disease products in our pipeline, developed on our DPP platform, are approaching commercialization, and we believe the market potential for these products is significant.

Finally, we continue to attract world-leading organizations, which further leverage our DPP platform and our scientific expertise, which we believe have the potential to further transform the company.

With that, we'll now open it up to questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question is from Per Ostlund with Craig-Hallum Capital Group.

--------------------------------------------------------------------------------

Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [2]

--------------------------------------------------------------------------------

I want to start out with actually the hiring of Dr. Rousseau, if I could. Sort of looking for a little bit of background on the courtship process, I guess if you will, since this was a newly created position. I'm curious as to whether you perceived an inflection in any specific aspect of your business, whether it be HIV self-testing or fever diseases or something else that really catalyzed this decision. And then I guess maybe attendant to that, just how critical was her background with Gates in attracting Chembio to her and in the reverse?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, Per. I appreciate your first comments, and we're really excited to have Christine Rousseau part of our executive leadership team. She has tremendous experience from the Bill & Melinda Gates Foundation, right in the wheel house and in the markets that we're pursuing. And a lot of this is really about turning a corner and starting to play offense. We believe there are a lot of opportunities in our core STD business, certainly in international HIV self-test where we're really interested in her contributions in those areas, given her background and her global network. And we obviously knew her from the work that we had done with the Gates Foundation. So we knew that there would be a great fit from a chemistry standpoint.

--------------------------------------------------------------------------------

Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [4]

--------------------------------------------------------------------------------

Okay, very good. Getting into a couple of the relationships that you've either struck or expanded on here recently, so maybe start with the Bio-Manguinhos commercialization effort that you've got ongoing in Brazil, and I appreciate the commentary about the chikungunya approval by ANVISA and the other submissions, when you're looking at the commercialization, obviously, you've got Zika approved there, now you've got the chikungunya test approved there. Do the dengue and the combo assay need to come in tandem before that really lifts, so that you got the full complement of the products there? Or could you start to see some commercialization in Brazil of the individual assays as approved?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

They don't all necessarily need to be approved. There are steps in terms of commercialization in Brazil. Obviously, the first one, which we had talked about in prior calls is that we have to develop the test, and we did that in collaboration with Bio-Manguinhos under an agreement that we signed around the middle of 2016. Then subsequently, we signed the commercial agreement. That commercial agreement is essentially a triggering event for us to submit the dossiers to ANVISA for these products. We had certainly done that in 2017 for our Zika test and received the ANVISA approval. And subsequent to signing this commercial agreement, we submitted the dossiers for dengue, for chikungunya and for the combination Zika, dengue and chikungunya. And so we now have Zika approved, we now have chikungunya approved, the dengue and the combination test are pending approval and that will allow Bio-Manguinhos, along with us, to start negotiating with the Ministry of Health for the business. Those are the steps that are involved in, and we've taken them in a pretty careful, calculated process and I think we're demonstrating really good speed not just in terms of development, but in terms of regulatory submissions and approvals that track record is very good. We have a 15-year history with Bio-Manguinhos, so there's nothing new there.

--------------------------------------------------------------------------------

Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [6]

--------------------------------------------------------------------------------

Sure. Maybe just a quickly follow-up on that with the chikungunya approval having come yesterday. Can you give us a sense as to how protracted an approval process that was? When did that submission actually take place? And is there any -- is there any way we can think of that as a proxy for the other submissions?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [7]

--------------------------------------------------------------------------------

It would be -- I wouldn't suggest using that as a proxy. Each submission has to stand on its own. They're completely data-driven. This is a very stringent regulatory agency, ANVISA I'm referring to. So each one of these has to stand on its own. We obviously wouldn't submit the dossiers for ANVISA approval if we weren't confident in the data, but each one stands on its own.

--------------------------------------------------------------------------------

Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [8]

--------------------------------------------------------------------------------

Okay, that's fair. On the HCV, the core antigen test that you are working with FIND on. Realize we're dealing with some hypothetical here still at this point, getting through the development process, but is there any way at this stage of the game that you can size that potential opportunity? And then I guess related to that, how much does your pre-existing relationship with FIND, whether it's been on the Asian fever panel or anything else, how much does your past relationship with FIND help you as you go through the process on the funding -- the initial funding with HCV?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [9]

--------------------------------------------------------------------------------

So it's probably a little bit early for us to be talking about the market. I mean, I obviously shared some information about the incidents of Hepatitis C globally, but I wouldn't want to start speculating about how big we think that market is for us. With respect to the relationship with FIND, I think that that's important and it's important because not necessarily the personalities, but because of our DPP platform. We are obviously collaborating with FIND on a fever panel for Asia. Following the fever panel development that we did with Paul Allen, we've developed that for Africa, we're developing a fever panel with funding from FIND for Asia. So they're very familiar with the capabilities of the DPP platform, they're very familiar with the scientific expertise and the ability to work together with a diverse set of collaborators. So I think all of that was attractive to the FIND organization as they thought about who to collaborate with to make a rapid -- a high quality, rapid, antigen-based Hep C test. This is not new for us to be working on Hep C. We've been working on Hep C antibody-based assay for quite a while, and we've essentially been waiting for the right time to enter the market. This may be that time, because of the funding and support that we may get with FIND.

--------------------------------------------------------------------------------

Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [10]

--------------------------------------------------------------------------------

Excellent. One last question for me, if I can. You mentioned, John, that you've got the DPP HIV-Syphilis Assay submitted to the FDA on plan in Q1 and just wondering if there's anything you can say to characterize that early dialogue with the FDA that you're having at this point.

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [11]

--------------------------------------------------------------------------------

I wouldn't want to do that. That's ongoing.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question is from Ross Taylor from ARS Investment Partners.

--------------------------------------------------------------------------------

P. Ross Taylor, ARS Investment Partners, LLC - Partner [13]

--------------------------------------------------------------------------------

Two areas I wanted to ask about. One is, you talked about bringing on your new automated line. Can you give us more background on the capabilities of those lines? The costs, the ability to add more and therefore the ability to respond quickly to potential large, new opportunities as some of your irons in the fire get pulled out?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [14]

--------------------------------------------------------------------------------

Sure. First, we're really excited to have the first automated manufacturing line in the facility here in New York. We saw it yesterday, along with our board, mean if I could try to describe it here on the telephone, you understand what a cassette looks like, it has a base and a lid and some number of strips inside of it. Essentially, we delivered the components to the front end of the equipment in a hopper or in a magazine and everything is robotic after that, from the placement of the base to the placement of the strips, to the placement of the lid, to the closing of the cassette, to the packaging of the cassette. So essentially, in on one end we enter or deliver the components, and on the other end is a foil-pouched cassette. So we're really excited about the labor advantages and the ability to scale the business while maintaining our quality and how that automated system will impact it. In terms of scaling the organization and the company on the production side, each of those lines has a capital cost of somewhere around $750,000. And in our most complex test configuration, running 2 shifts, delivers about 5 million test capacity.

--------------------------------------------------------------------------------

P. Ross Taylor, ARS Investment Partners, LLC - Partner [15]

--------------------------------------------------------------------------------

And that's your most complex. So just in a more standard, straight up, you're testing for one thing, such as biomarker or something of that nature, I would assume that's a less sophisticated test, because it's going to have fewer things you're looking for. How many could you produce?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [16]

--------------------------------------------------------------------------------

Can be as high as 10 million.

--------------------------------------------------------------------------------

P. Ross Taylor, ARS Investment Partners, LLC - Partner [17]

--------------------------------------------------------------------------------

That's high as 10. So basically each of these for $750k you have the ability to produce 5 million to 10 million.

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [18]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Neil A. Goldman, Chembio Diagnostics, Inc. - Executive VP & CFO [19]

--------------------------------------------------------------------------------

Yes, it's a function, Ross -- this is Neil. It's a function of cycle time, as you can imagine. Doing a little slower.

--------------------------------------------------------------------------------

P. Ross Taylor, ARS Investment Partners, LLC - Partner [20]

--------------------------------------------------------------------------------

Okay. And then the second question is, John, I count you guys as having 8 or 10, perhaps more significant initiatives that you're working with, everything from the AstraZeneca, the Bio-Manguinhos, the Lumira, which didn't get mentioned on this call, cancer, Hep C, the fever panels, the single-standing malaria and chikungunya and dengue and the like. All those seem to be potentially very substantial markets, particularly for a company which last year did only about $25 million in revenues. How many of those, if we look out 2 to 3 years, how many of those 8 to 10 initiatives are out front right now? Should we expect to be doing $25 million or more on their own?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [21]

--------------------------------------------------------------------------------

Yes, so I wouldn't comment on the value associated with each of those, but I would ask absolutely concur with you that we have a number of -- I think it's been characterized maybe by you, Ross, as shots on goal, and I always like to put a little bit of point on that and say that I think what we have are not just shots on goal but quality shots on goal. And I mentioned in last quarter's call couple that we think can be really transformative for the company are the collaboration that we have with AstraZeneca, which is on track to be completed by the middle of next year, essentially less than 12 months from now and the collaboration albeit early with LumiraDx. We think both of those could be significant contributors to the company. Now we're doing some novel things as well to test for any type of cancer drop of blood in less than 15 minutes and provide a quantitative result of a multiplex biomarker, it's pretty novel. We're doing that with our DPP technology platform. And so we think that, that in itself can open up the door for a lot of other opportunities in the broader oncology market. So without going into each one of the ones that you mentioned, we have some things on the table that are progressing very nicely, which we think have the potential by themselves or certainly in aggregate to really transform this business and this company.

--------------------------------------------------------------------------------

P. Ross Taylor, ARS Investment Partners, LLC - Partner [22]

--------------------------------------------------------------------------------

Okay. So it's safe to assume that -- these are -- I mean, these are markets that are substantially bigger than what you're doing in revenues right now. So given your uniqueness and obviously the fact that you guys are considered a thought-leader or technology-leader in the space per everyone you've brought with -- brought on board and the like and all the new deals that you've gotten, it's safe to assume that we should expect that this company should be ramping up in the next couple of years substantially on the top line?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [23]

--------------------------------------------------------------------------------

Well, today, our core STD business generates almost all of our revenue. We hope that in the not too distant future, people look at the company and see the HIV as a simple contributor to the revenue. That's essentially as far as we can go without getting into more details on a piece by piece basis.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

Our next question is from Bruce Jackson with The Benchmark Company.

--------------------------------------------------------------------------------

Bruce David Jackson, The Benchmark Company, LLC, Research Division - Senior Healthcare Research Analyst [25]

--------------------------------------------------------------------------------

So if we could, like, dive into the Hepatitis C opportunity a little bit here, when do you think you might have a viable product for the market?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [26]

--------------------------------------------------------------------------------

Well, the initiative that we announced with FIND includes a 4-month feasibility period for an antigen-based rapid test, so we're kicking that project off now sometime before middle of December. We are going to deliver that to FIND. FIND is going to do their assessment. Obviously, there were 3 companies. If you go to the FIND website, you would see that they announced 3 companies that will go into feasibility for rapid test. The other 2 are DC Diagnostics and Mologic. So we'll go through that process. As I said before, this is not our first initiative in Hep C. We have an antigen-based assay. There's plenty of documentation literature out there about its performance, it's excellent. We've sat on the sideline waiting for the right time for enter the Hep C space, and we think this may be it, because we have a really great collaborator with FIND. They've been granted an awful lot of money to drive performance and improvements in the rapid global Hep C space. And by the end of December, FIND will have made a decision about who they're going to focus on and we hope to be that one.

--------------------------------------------------------------------------------

Bruce David Jackson, The Benchmark Company, LLC, Research Division - Senior Healthcare Research Analyst [27]

--------------------------------------------------------------------------------

Okay. And then, hypothetically speaking, let's say, that you get the green light in December, what would the development time line look like in order to get the test completed?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [28]

--------------------------------------------------------------------------------

Yes, it's too early to say. But if you look at some of the other test developments that we have underway in the fever and tropical disease area, I mean, they're gone pretty quickly. I can say, almost all of them have been development times of less than 18 months and many of them many much shorter than 12. So hopefully that brackets it for you a little bit, Bruce.

--------------------------------------------------------------------------------

Bruce David Jackson, The Benchmark Company, LLC, Research Division - Senior Healthcare Research Analyst [29]

--------------------------------------------------------------------------------

Okay. No, that's helpful. Looking at LumiraDx. So [Ron's] old company had some Hepatitis testing in their portfolio. Lumira is supposed to be theoretically looking at the infectious disease areas. Is this something they might be looking at? Are there any restrictions between taking what you learn on the FIND projects and then applying it to a project for the LumiraDx people?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [30]

--------------------------------------------------------------------------------

Yes, we haven't disclosed the details of the LumiraDx collaboration. So I can't get specific on which test it is or which analytes we can work back and forth with. So sorry, I can't answer that right now, Bruce.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

Our next question is from Larry Haimovitch with HMTC.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [32]

--------------------------------------------------------------------------------

So 2 questions, number one, there were a lot of positive developments in Q2. What would you say was the development that you were most enthused or excited about?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [33]

--------------------------------------------------------------------------------

Well, I think the first one is the ramp in sales. Obviously, we're very focused on driving growth and transforming the company. So we're really pleased with that. The second is -- I'm sorry, I can't say one or two, but the second is the advancements that we've made on the product development, in particular, couple collaborations, the cancer test and the biomarker that we're developing for AstraZeneca. We're really pleased those were -- those are big milestones for us. And then lastly, just continuing to build a really strong leadership team and a strong board of directors. So I'd say those are the 3 that we're really happy about that occurred in the second quarter.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [34]

--------------------------------------------------------------------------------

Okay. And then my follow-up question, John, is, you have a new sales force you're in the process of training for the HIV market in the U.S., can you talk a little bit more about? Give us a little more color about that?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [35]

--------------------------------------------------------------------------------

Larry, I'm sorry, the call -- it's a little hard to hear your question.

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [36]

--------------------------------------------------------------------------------

My question was, your training a sales force in the U.S. -- an outside sales force. Can you talk a little bit more about that particular agreement and the significance to Chembio?

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [37]

--------------------------------------------------------------------------------

Sure. So are you referring to our collaboration with MTMC?

--------------------------------------------------------------------------------

Larry Haimovitch, Haimovitch Medical Technology Consultants - President [38]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [39]

--------------------------------------------------------------------------------

So we entered that agreement with them effectively April 1, and so during the second quarter we went around to all of their regional meetings and trained their folks on all of our commercially available products in the United States. So they have been sufficiently trained. People have targets. And they're out there selling all of our HIV products right now. Obviously, this is going to set the stage for the launch of our HIV syphilis assay, which we think is going to be an important growth driver for the company and one where we think we can capture meaningful market share in the U.S. We're also planning internally for that launch and doing what you would typically do from a premarket standpoint, setting up evaluation sites, building white papers and clinical data, establishing key opinion leaders, putting a strategy together around pricing, promotion, et cetera.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

(Operator Instructions) There are no more questions at this time. I would like to turn the call back over to John Sperzel for closing comments.

--------------------------------------------------------------------------------

John J. Sperzel, Chembio Diagnostics, Inc. - President, CEO & Director [41]

--------------------------------------------------------------------------------

Thank you for joining us today as we reviewed our second quarter financial results and discussed progress to our 2018 priorities. We're increasingly confident in our ability to leverage our DPP platform and scientific expertise. We have the right technology, the right team, and we're pursuing significant market opportunities. We look forward to providing you with updates as we continue to execute our plans. Thanks, and have a great day.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.