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Edited Transcript of TRIB earnings conference call or presentation 27-Apr-17 3:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Trinity Biotech PLC Earnings Call

Bray, Co Wicklow May 29, 2017 (Thomson StreetEvents) -- Edited Transcript of Trinity Biotech PLC earnings conference call or presentation Thursday, April 27, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joe Diaz

* Kevin Tansley

Trinity Biotech plc - CFO, Secretary and Director

* Ronan O’Caoimh

Trinity Biotech plc - Co-Founder, Chairman and CEO

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Conference Call Participants

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* James Sidoti

Sidoti & Company, LLC - Research Analyst

* Joy Mashaal

* Lawrence Scott Solow

CJS Securities, Inc. - Research Analyst

* Nicholas Michael Jansen

Raymond James & Associates, Inc., Research Division - Analyst

* R. Gregg Hillman

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Presentation

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Operator [1]

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Good day, and welcome to the Trinity Biotech First Quarter Fiscal Year 2017 Financial Results Conference Call. (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.

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Joe Diaz, [2]

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Thank you, Nicole, and thank all of you for joining us to review the financial results of Trinity Biotech for the first quarter of calendar year 2017, which ended on March 31, 2017.

With us on the call today representing the company are Ronan O'Caoimh, Chief Executive Officer; and Kevin Tansley, Chief Financial Officer.

At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Before we begin with today's 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 Ronan O'Caoimh with a wrap-up on his perspectives of the quarter. Kevin?

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [3]

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Thanks very much, Joe. Today, I will take you through the results for quarter 1, 2017. Beginning with our revenues. Total revenues for the quarter were $23.5 million, which is virtually identical to quarter 1 of 2016's revenues. As you can see from our press release, Point-of-Care revenues increased by 23%, whereas Clinical Laboratory revenues decreased by 4%. Ron will provide more details on revenues for the quarter later in the call, so why don't I move on to discuss the other aspects of the income statement.

Our gross margin for this quarter was 42%, whilst this is a reduction on the 43.1% in quarter 1 last year, it is higher than the margin we reported in quarter 4, 2016 of 40%. Reduction in gross margin compared to the equivalent quarter last year is principally due to lower production levels due to the product cull in quarter 4. Given these lower production volumes, this has resulted in a level of underabsorbed fixed costs, mainly production, labor and overheads. We're also seeing some carryover impact from the U.S. dollar strength on distributable pricing, a factor which we would have mentioned in the last couple of quarters.

Moving on to our indirect costs. Our R&D expenses increased $1.1 million in quarter 1, 2016, to $1.3 million this quarter. The $1.3 million this quarter is consistent with the quarterly average spend throughout 2016. Meanwhile, our SG&A expenses remained at $7 million. No change from quarter 1, 2016.

Operating profits for the quarter was $1.3 million compared to $1.8 million in quarter 1, 2016. This reduction is largely attributable to the combined impact of lower gross margins in the slightly higher indirect costs, which I mentioned earlier. However, when compared to quarter 4 last year, we have seen a significant recovery in operating profits. In this case, we've seen growth from $600,000 to let's say $1.3 million this quarter, i.e., more than a 100% increase.

Moving on to our financing costs, which includes the impact of the company's convertible notes. Our financial income for the quarter was $177,000 versus $220,000 to the comparison period. This reflects lower cash deposits post share buyback and slightly lower interest rates.

Financial expenses for the quarter were $1.2 million, which is consistent with quarter 1, 2016, the vast majority which relates to the cash interest element of the convertible notes. Similarly, the noncash financial income of $1 million also relates entirely to our convertible notes with noncash interest of $200,000 and a gain of $1.2 million recorded for the change of the fair value of the derivatives embedded in these notes. This compares to a noncash financial expense of $2 million in quarter 1, 2016.

You would have seen that we've altered our presentation of our income statement slightly this quarter so that the noncash items that have been separately disclosed at the bottom of the statement so as to aid comparability.

Our tax charge for the quarter was just under $100,000. This represents an effective rate of 7% after adjusting for the certain [no-note] items which currently do not attract tax. And in previous quarters, we continue to receive the combined benefit of the very competitive Irish corporation tax rate and tax credits arising in a number of other jurisdictions.

And as for results for the quarter is a profit of $1.2 million. However, excluding noncash items, the profit for the quarter is just over $200,000. Basic EPS is $0.056 per share, and the EPS adjusted for noncash items is $0.01. Meanwhile, fully diluted EPS is $0.05, and this compares to $0.064 in the equivalent period last year. Finally, on the income statement. Earnings before interest, tax, depreciation, amortization and share option expense in the quarter was $2.7 million.

I will now move on and talk about the significant balance sheet movements since the end of December, 2016. Property and plant and equipment have increased by $800,000. This is due to additions of $1.2 million being offset by depreciation of $400,000. In the same period, our intangible assets increased by $1.7 million. And in this case, this was made up of additions of $2.4 million offset by amortization of $0.7 million.

Moving on to inventories. You'll have seen that these have increased very slightly by $0.1 million to $32.7 million. However, we can expect a modest increase in the next 2 quarters due to the Lyme season and the growth of our premier business.

Meanwhile, trades and other receivables have increased by $100,000 to $22.7 million. Cash collections from customers have remained healthy, and the increase is actually due to an increase in prepayments due in this case to the renewal of certain annual contracts, such as insurance, IT, support, et cetera, which tend to occur at the beginning of the calendar year.

Meanwhile, our trade and other payables, which includes both current and noncurrent payables, have decreased from $26 million to $21.8 million. Of this, $1.1 million is due to the payment of the annual HIV license fee. Just to remind people, this is the second to last of these payments to be made.

A further $900,000 is due to payments related to the closure of the Swedish cardiac operation, including redundancy payments and other plant closure costs. The remaining movements is due to the timing of raw material purchases and other vendor payments.

Finally, I will discuss our cash flows for the quarter. Cash generated from operations for the quarter was just under $100,000 compared to cash generated in the equivalent quarter last year of $1.9 million. Here you're seeing the impact of the timing of supplier payments that I alluded to earlier. Capital expenditure for the quarter was $3.6 million, which is a significant reduction from the $5.4 million in quarter 1 last year, and this is obviously due to the elimination of the Meritas expenditure.

The other major cash movements in the quarter was share repurchases of $1.8 million and HIV-2 license payment of $1.1 million. The net result is that we had a decrease in cash for the quarter of approximately $7.3 million with the quarter-end balance being $69.9 million.

I'll now hand over to Ronan.

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [4]

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Thanks, Kevin. I'm going to review our revenue for quarter 1 before opening the call to a question-and-answer session. Given that we announced our year-end results on the 14th last month, 6 weeks ago, I'll be brief.

Our revenues for quarter 1 were $23.5 million, which is virtually identical to our revenues in the corresponding quarter last year. Point-of-Care revenues were $4 million compared with $3.3 million in the corresponding quarter, which is an increase of 23%.

Chemical Laboratory revenues were $19.5 million compared to 22 -- compared to $20.2 million in the prior quarter, which is a decrease of 3.6% or $700,000. The impact here in the quarter of the cull of our MicroTrak and Bartels infectious disease products amounted to $750,000, while the negative impact of currency movements was greatly reduced this quarter but amounted to $250,000. Absent these 2 factors, our Chemical Laboratory business demonstrated organic growth of 1.5% during the quarter.

Moving back to Point-of-Care, we were pleased with the growth of 23% during the quarter. The increase is entirely attributable to higher HIV sales in Africa. As you know, our HIV business in Africa is funded almost entirely by NGOs. Product orders from these agencies tend to be haphazard and our unpredictable in the context of a 13-week reporting cycle.

However, our Uni-Gold HIV product sales continue to be -- sorry, our Uni-Gold HIV 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. And it has done for more than a decade. Funding continues to increase as more and more Africans are put on to antiretroviral drugs with the number now exceeding $20 million.

And however, rather than concentrate entirely on the confirmatory market, we have over the past 2 years developed an HIV screening product, which is about to be launched on the African market. Given the quality of the product and given the price at which we can manufacture this product and given our long-held reputation as the manufacturer of the gold standard on the continent, we believe that we can take significant market share in this segment.

Moving back to Clinical Laboratory. I indicated earlier that our revenues have reduced $700,000 during quarter. This is entirely explained by the impact of the cull, which had an impact of $750,000 during the quarter. And I also indicated that the negative impact of currency movements amounted to a reduced $250,000 during the quarter, giving rise to a 1.5% organic growth rate if these 2 factors were eliminated.

Looking at infectious disease. Our revenues declined 16% during the quarter when compared to the prior year revenues. 12% of the 16% reduction arises due to the cull of the MicroTrak and Bartels products with 4% reduction arising from the rest of the infectious disease business.

Our Lyme revenues in the U.S. performed well as did our business in China. However, our revenues in Brazil, Russia, Turkey and Colombia, to mention just a few, continue to suffer due to the weakness of these currencies against the U.S. dollar.

Our diabetes and hemoglobin variant business performed strongly during the quarter with revenue increasing 8%. We had strong instrument placements in all of our principal markets and placed a total of 68 instruments during the quarter. The exception was Brazil, where we made modest placements despite strong demand. 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 on sales taxes and by creating a natural hedge. In addition, we are seeking price increases against the backdrop of a high-inflation environment.

At the end of last year, we also launched our new premier resolution instrument, which served the hemoglobin variant market for sickle cell anemia and thalassemia. This is a high-value market with few competitors, and we believe that with our best-in-class instrument that we can make -- take significant market share. Given the combination of our premier instrument in the diabetes market and our premier resolution instrument in the variant market, we are confident of achieving double-digit growth in this segment in the coming years.

Moving on to then autoimmunity. This business performed well during the quarter with a 7% revenue increase. We've consistently grown this business since its acquisition and believe that it will be a real growth engine for the company, and this double-digit growth can be achieved this year. The reference laboratory business has been the best-performing part of the business with significant growth coming from our Sjögren's tests and from the growth of our business with the 2 U.S. mega-labs.

However, the greatest potential of our autoimmune business is in the product revenue side where we continue to expand our instrument offering in both the U.S. and across the world. And we believe that with this added to our best-in-class immunofluorescence and the larger product range, we will continue to deliver double-digit growth.

So in summary, when all the components of our business are taken together, we believe that we can achieve high single-digit organic growth in our business over the coming year and that this growth rate can accelerate into double-digit growth thereafter.

On the subject of our share buyback, you'll have seen from our press release that we've been active in the market, both during the quarter itself and into April. So far this year, we have purchased 314,000 shares with a total value of $1.9 million. This brings the total amount spent since we initiated the program to just under $12 million.

I'll point out that most of the purchases that have been made this year have been made during a closed under a 10b5 plan, which have effectively acted as constraints on our flexibility to buy shares and therefore limited purchases. Now that we're about to exit a cold period, we'll be in a position to act more freely with the result that I expect volumes to increase in the weeks ahead.

So I just want to reaffirm what we have been saying that it is our intention to buy heavily in the market with a view to buying substantial number of shares, thus making a meaningful reduction in our share count.

So thank you. If I could now hand back and open a question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Larry Solow of CJS Securities.

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Lawrence Scott Solow, CJS Securities, Inc. - Research Analyst [2]

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I was wanting -- just a couple quickies. Just on the Point-of-Care side, Ronan, you've outlined the confirmatory and the screening mark opportunities in Africa. Can you just sort of update us on that? Do you still think that you get potentially some of that screening market in this calendar '17? Or what's your thought on that today?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [3]

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Okay. I don't think so. We can't move until we get WHO approval, and that process is in [train.] But it's -- we'll probably -- well, I don't think we'll achieve that until probably towards the end of this year.

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Lawrence Scott Solow, CJS Securities, Inc. - Research Analyst [4]

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Okay. I mean, do you still think that the Point-of-Care can grow? I know it's sort of a -- I know it's quarterly. It's lumpy. But it's been sort of flat for like 3 years or even down. I know that's partially due to the U.S. funding, but most of your business is still Africa. So is that an aberration? Or is this really just a flat market and maybe you'll get a pickup when you get into the screening side of it -- initial screening?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [5]

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Yes, I think that's put fairly. I mean, I think the growth opportunities is when we can take a share of the screening market. I don't think we have the ability to do that now. As we mentioned in the past, we have equipped our factory now to manufacture in the screening area. So I think we're well positioned given our the reputation. Given the quality of the product and our manufacturing capability, I think, we can take market share.

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Lawrence Scott Solow, CJS Securities, Inc. - Research Analyst [6]

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Okay. And then how about just on a simplest -- I realize it's still very small piece. Anything anecdotally you see -- that's slowly starting to pick up? Or is that still mired in a lot of -- it sounds like red tape and whatnot at the...

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [7]

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I mean, the syphilis -- at the rollout syphilis has been a disappointment -- has been a significant disappointment. Having said that, we continue to make progress but very, very modest progress. I mean, we're in around just over $400,000 a quarter. And I think that -- I do believe -- there's -- the CDC are conducting a trial at the moment -- just commencing a trial and -- in which there -- which was basically -- they're trying to determine how effective syphilis testing is in the sense that [while] as a public health syphilis program actually detect syphilis positives that otherwise wouldn't be detected. And we're absolutely confident the answer to that is very much in the positive. But they remain to be convinced. And I think that -- so they're actually buying a significant quantity from us as we speak in order to (inaudible) trial. I think that the outcome of the trial ought to be very positive for us, but obviously, there's no certainty on that one. But I believe it will be positive. And so we still believe that syphilis can be significant. And I do believe though it could be less significant than we had originally indicated. We have seen this as a $10 million market. I don't think it's going to get there, but I think it's probably has the potential to get to about some 50% of that level.

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Lawrence Scott Solow, CJS Securities, Inc. - Research Analyst [8]

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Okay. And the CDC trial, is there a control group? Are they just using your test? Or...

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [9]

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It's our test.

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Lawrence Scott Solow, CJS Securities, Inc. - Research Analyst [10]

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And then just switching gears real quick on the clinical lab side. So it's been a frustrating couple years. You've shown some light growth in the diabetes side, but it just seems to be sort of camouflaged by every other quarter. It's sort of something else coming down -- I know currency's hurt you guys, but it looks like the infectious disease even outside of the culling activity doing sort of as a slow decline. Any thoughts to that? Could that infectious disease business eventually at least flatten out, so similar to growth in the premier could shine through a little better? Well, I just find that hard to see how you're going to get to this -- last couple calls, you've spoken to a mid- to high single-digit sales growth. I just don't see how it could happen when you have all these things that are declining still.

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [11]

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Well, I mean, if you look at the various components of our business, we have hemoglobins -- diabetes hemoglobin growing 8%, consistently getting better -- higher growth. We've also immunity getting 7% or higher consistently. The HIV flat, but we believe with the screening product that we talked about that it can grow. We then have Fitzgerald antibody business, which is consistently flat, and I think we're -- probably remain so. And then lastly, with infectious disease, which has been at best flat or margin declining. Ironically, when you cull your Bartels and your MicroTrak range, which we're dropping at 14% annual -- 14%, 15% annually, sorry, 17% in [one case] and you cull them, you actually -- and we'll end up in a situation where your infectious disease business will be, I think, will probably hold its own, maybe very, very marginally decline, and because if you at the components, you've got Lyme, which I think is very healthy. You've got China, which is healthy. So basically, you basically call it your weakest component and the other factor is it becomes a smaller percentage of the overall. So if you take sort of infectious disease and Fitzgerald to combine thing between money 30% of the business and then you have HIV growing also immunity growing and diabetes growing, which combine -- constitute 70% of the business. I think that the augment that you get 6%, 7% growth this year actually is solid.

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Operator [12]

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Our next question comes from Nicholas Jansen of Raymond James and Associates.

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Nicholas Michael Jansen, Raymond James & Associates, Inc., Research Division - Analyst [13]

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Just kind of on that last topic. Just trying to better bridge. Have you guys thought about strategic alternatives in certain areas of your business that aren't growing to potentially further cull or get out of? Because it does feel like a lot of your stronger performance, your current valuation doesn't necessarily reflect the growth in diabetes and other areas. So just wanted to kind of get your thoughts on the portfolio, the willingness to perhaps shrink more to grow faster longer term and any updates on the Meritas strategic alternative process would be helpful?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [14]

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Nicholas, Ronan here. And I think the -- I don't believe that any more would make sense. I think the particular products we culled, we had a 15% and I think a 17% decline in revenues, and we have got to the point where, given that the amount of support -- technical support that was necessary, though, it just wasn't economical. And -- but I think in general terms, if you look at us as a -- sort of $100 million revenue business, I mean, the model is as simple as this: every incremental $1 million of sales results in an incremental, maybe $0.5 million of profitability. And I'm afraid, unfortunately, on the other side, the same is true. So every shortfall of $1 million will give rise to $0.5 million less in profit. So you're looking at a business where, in essence, most of your costs other than material are fixed. I know it's somewhat of a simplification but it's a reasonable characterization of our business. And therefore, even if you look at something, say, for example, like the Fitzgerald antibody business, although it hasn't been growing, it's a very, very significant contributor. And in its absence, this business will go from being kind of cash flow neutral to being significantly eating cash. So I don't believe that sort of the culls are [indeed disposal] of any individual components of our business would make sense. And then just with respect to Meritas, we are still doing our review but we've nothing to announce at this moment.

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Nicholas Michael Jansen, Raymond James & Associates, Inc., Research Division - Analyst [15]

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Okay. That's helpful. And then just quickly on the HIV screening. I think last quarter you talked about submitting to the World Health Organization for approval. I kind of felt like the timeline might be a little different today than 6 weeks ago but just wanted to kind of get your thoughts on what's going on behind the scenes there.

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [16]

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I don't think there's been any move in the timeline. I mean, we're actually at the point of independent trials as opposed to submission at this moment in time. So I think we all had anticipated it being at sort of the latter end of this year that we would gain approval. I don't believe that we've moved that timeline.

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Nicholas Michael Jansen, Raymond James & Associates, Inc., Research Division - Analyst [17]

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Okay. And then just 2 more. In terms of the Brazil dynamics. I think last quarter, you talked about within the next 6 months, you plan to kind of reenter. Is that still the case where we perhaps should see maybe better growth in Brazil -- maybe the fourth quarter this year to better trends in '18?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [18]

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Yes. I think, well, I mean, the currency has remained around level and somewhat -- there's some price inflation in the market. We've identified a unit factory which we're putting in place as we speak. But it'll be -- it'll -- realistically, by the time we're up and running, it'll be already '18. So I think, at worst, we'll be back into the market in early '18 there.

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Nicholas Michael Jansen, Raymond James & Associates, Inc., Research Division - Analyst [19]

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Okay. And then lastly, if you kind of think about the cost structure today, the free cash flow burn today, I know 1Q is kind of seasonally a lighter quarter for you guys, but just wanted to kind of get your thoughts on how we should think about gross margin progress through the year and is the flat to slightly negative free cash flow for the full year still the expectations given where we ended up in the first quarter?

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [20]

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Yes. I mean, I'll just speak on the point you made and the point that Ronan made earlier on, quarter 1 is the slowest quarter for us just based on the seasonality of products that we have. And then consequently given our cost base, that'll have an impact on margins. So you can expect quarter 1 to be lower. Do expect improvement then throughout the year. The extent that improvement then will obviously be very much driven by the extent of the top line itself. So I do see it getting back up towards the -- into the 43% type levels, and we've made a lot of progress just in terms of getting from 40% up towards that this quarter. And I think we're back on those levels quite soon.

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Operator [21]

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Our next question comes from Jim Sidoti of Sidoti & Company. Jim, your line is now open. (Operator Instructions) Our next question comes from Joy Mashaal of Senvest.

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Joy Mashaal, [22]

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Can you just walk me through the $7 million in cash burn this quarter and maybe talk about what your expectations are for the remainder of the year? The previous caller alluded to the fact that this is a high cash burn quarter. Just can you walk through the components that won't recur and then what your expectations are for the remainder of the year?

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [23]

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No problem, [Joy.] The -- I'll actually start at the bottom of the cash flow statements because that's where you're more likely to see the sort of the less-recurring amounts, although the first one that stands out is the license fee of $1.1 million. That's an annual license fee, and it's the second to last. We've got one more next year and that's it. And you won't see it again in any of the quarters this year. You've got once-off items related to closure costs. You would have seen that we had provided about $5.5 million for those at the end of last year, and we've spent about $2.5 million. There's a further $900,000 now that brings it up to about $3.3 million, $3.4 million. There's still scope for further payments then out between now and the end of the year. Some of those could even drift into next year due to the nature of the commitments. Share buyback is obviously going to be a feature. I'll leave that out. So that'll be a feature of the -- just the availability of stock and what happened to the market share price, et cetera. And the other big factor this quarter in terms of contributing to the burn would have been the change in working capital, and that was primarily on our payables side, and I see that being less of a factor going forward. So I see that being reduced. And that was the major factor that would have really pushed us negative in terms of free cash flow, per se, and that we would see an improvement on the free cash flow by virtue of the fact that this is our weakest quarter. So we should have enhanced cash from operations and anticipating less in terms of working capital drain. So there is a -- so that a twin boost would come there. Won't be overly specific as to what I think the actual out-turn will be, but I do expect improvements in each of the quarters, and there will be fewer then of the one-off cost.

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Joy Mashaal, [24]

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All right. Sorry, can you just repeat how much of the one-off costs are remaining from the initial amount that you expected?

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [25]

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Approximately 2.

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Joy Mashaal, [26]

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Okay. Okay. All right. And so the major components going forward will be your -- obviously, your interest payments and the share buyback for the rest of the year.

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [27]

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Correct. Absolutely. Yes.

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Operator [28]

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Our next question comes from Jim Sidoti of Sidoti & Company.

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James Sidoti, Sidoti & Company, LLC - Research Analyst [29]

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Can you hear me now?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [30]

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Yes.

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James Sidoti, Sidoti & Company, LLC - Research Analyst [31]

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Great. So a couple questions. One, it looks like the Abbott-Alere deal is going to go through after all. Is there anything that you think gets spun off from that might be interesting for Trinity? And are there any other consequences of that deal that you think could be either positive or negative for Trinity?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [32]

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Jim, I really don't think it's going to make much difference. I mean, the only possible impact would be in Africa, where they're -- dominate screening, but I don't really see it making any difference to us, really.

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James Sidoti, Sidoti & Company, LLC - Research Analyst [33]

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Okay. You don't take they'll be asked to divest anything?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [34]

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Well, they have been -- obviously, they've been asked to divest their Troponin -- their cardiac business. So as we speak, Abbott are earlier -- are trying -- endeavoring to sell their Triage business. Right? So it's available in the market. We had a look at it out of curiosity. But obviously, I think you've learned we're not in the Troponin business anymore. So they have been asked -- they've been forced by the European regulators to sell that. I mean, it will just give them like 1,300% of the point-of-care market. So barring that, I think that's the only divestiture that we see coming that's obvious. I don't really believe it's going to make much difference. I mean, so earlier had 100% of most of the screening market in Africa. And now, Abbott will have it. You know? And they were so -- their determined -- Abbott sold their Determine business under duress to Alere, and now they've got it back.

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James Sidoti, Sidoti & Company, LLC - Research Analyst [35]

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And then -- in at least the Northeast, you actually -- it seems to be a bump a year for ticks. Do you anticipate any pickup in the Lyme disease tests here as a result?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [36]

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I'd say, I mean, the previous winter was a soft one as well. So I'd say similar in size, but certainly, not going to be a bad year.

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Operator [37]

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Our next question comes from Scott Hood of First Wilshire.

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R. Gregg Hillman, [38]

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This is actually Gregg Hillman for Scott Hood. Just real quick. What percentage of your business is from the United States?

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [39]

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It's close to 70%.

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R. Gregg Hillman, [40]

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70%. And who are the major payers in the United States right now at this point?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [41]

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Major -- sorry, what? Payers did you say or players?

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R. Gregg Hillman, [42]

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Payers.

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [43]

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Well, this is a very dispersed -- I mean, I'll say the 2 biggest players in the U.S. market -- in the diagnostic market would be in terms of users would be Quest and LabCorp; Quest #1, LabCorp #2. You mean in terms of users. And after that, then, really it's dispersed to cost 5,000 hospitals.

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R. Gregg Hillman, [44]

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Yes. Okay. And in terms of -- is there any risks -- does the government have any say in terms of what these entities pay for these tests? Is there any regulatory risk from the government in terms of...

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [45]

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I think there's downward pressure from -- I mean, I think, from the insuring entities, in general. Some of them are from the government. In general, there's downward pressure on pricing, but that's an ongoing factor.

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R. Gregg Hillman, [46]

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And then the price in the United States, is that gone down or up? Or how's the pricing been over time? Or...

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [47]

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Well, pricing is going down. I mean, if you look at the buying power of Medicaid, Medicare and then the principal insurance companies are always under downward pressure with reimbursement. And I think that's an ongoing dynamic in the business.

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R. Gregg Hillman, [48]

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Okay. So that means you'd have to increase your efficiencies for producing your tests over time as we go forward. Is that correct?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [49]

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Yes, I think that's a fair characterization. Yes.

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R. Gregg Hillman, [50]

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Okay. And then finally, is there any like trade associations or trade periodicals serving the industry for critical testing for infectious diseases? Or...

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [51]

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There's a broad range of publications out there. We wouldn't necessarily be promoting any particular publication, per se, but there's a lot of publications dealing with each of the sections, whether the infectious disease or on the chemistry side.

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R. Gregg Hillman, [52]

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I mean, from the commercial side, just -- or political side. Is there any organizations that represents -- I think there's a clinical laboratory organization that lobbies in Washington. But is there any...?

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [53]

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There's none that we remember of.

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R. Gregg Hillman, [54]

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Right. Okay. And then your comments on -- your comments on syphilis earlier. Is -- I think isn't syphilis on the rise in the United States right now?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [55]

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Yes, very much so. Yes.

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R. Gregg Hillman, [56]

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Okay. So it's probably natural that the testing for syphilis should go up. And then how's your test position relative to other syphilis tests?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [57]

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Well we -- I mean, there are many syphilis tests in the laboratory market. But in terms of the point-of-care market and public health, we are the only FDA-approved point-of-care test. And in addition to that, we're the only CDC -- we're the only FDA-approved product. And in addition to that, then we are the only product with a clear waiver. Right? So we have that and double exclusivity. So for a competitor to enter the market against us, they have to first get an FDA approval for the point-of-care test and then get a clear waiver in order that it could be used like in the public health environment. Thank you very much, Gregg. We look very much forward to meeting Scott on Tuesday. And right so, say thank you very much. Is Larry Solow back in? Larry? Is that our last question?

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Operator [58]

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Our last question is from Larry Solow of CJS Securities.

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Lawrence Scott Solow, CJS Securities, Inc. - Research Analyst [59]

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Just a real quick follow-up. So in terms of pricing, I mean, I know obviously, there's a lot of pressures from insurance companies that have been going on forever and a lot of noise on the political side about drug price cuts. But I mean, it seems to me that some of that's not actually happened yet. In terms of diagnostic testing, prices on your stuff, I mean, that to me, so I thought that was a little bit below the radar. It's a lot cheaper. It's not what I'm talking about, several hundred thousand dollar drug therapies. We're talking about needed tests that I don't think are very expensive or what this political -- what I think is a lot of hot air. But I don't think that's really been targeted, right? I mean, has that really impacted your business, per se, so much? I think that's really not true, but at least...

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman and CEO [60]

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I mean, we're certainly our pricing policy isn't sort of like a Valeant's. But yes, I think you're probably right there. But in general terms -- I think, the last questioner's point is fair. I mean, I think in general terms, there's downward pressure on pricing. I mean, if I was to look at, for example, the price that we would supply our Lyme Western Blot test now compared to 15 years ago. I mean, our prices have gone up in the meantime, but our -- our costs have gone up, but our selling price has gone down. There is that constant pressure. Okay. So thank you very much, everybody, and we'll speak to you again at the next call in July. And thank you.

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Kevin Tansley, Trinity Biotech plc - CFO, Secretary and Director [61]

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Bye.

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Operator [62]

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