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Edited Transcript of TRIB earnings conference call or presentation 7-Mar-19 4:00pm GMT

Q4 2018 Trinity Biotech PLC Earnings Call

Bray, Co Wicklow Apr 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Trinity Biotech PLC earnings conference call or presentation Thursday, March 7, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kevin Tansley

Trinity Biotech plc - CFO, Company Secretary & Executive Director

* Ronan O’Caoimh

Trinity Biotech plc - Co-Founder, Chairman & CEO

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Conference Call Participants

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* James Philip Sidoti

Sidoti & Company, LLC - Research Analyst

* Paul Nouri

Noble Equity Funds - Founder, MD, and Portfolio Manager

* Joe Diaz

Lytham Partners, LLC - Managing Partner

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Presentation

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Operator [1]

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Good day, and welcome to the Trinity Biotech Fourth Quarter and Fiscal Year 2018 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, Lytham Partners, LLC - Managing Partner [2]

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Thank you, Carrie. And thanks all of you for joining us here today to review the financial results of Trinity Biotech for the fourth quarter and full year 2018, which ended December 31, 2018.

With us on the call 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'll open the call for a question-and-answer session.

But before we begin with the 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 the 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 view 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'll hear from Ronan O'Caoimh, on his review of the quarter. After which we'll open the call for your questions. Kevin?

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [3]

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Thanks very much, Joe. Today, I'll take you through the results for quarter 4, followed by the results for the full year 2018.

You will notice in our release that there's an impairment charge that's being recognized this quarter, which I will disclose at the end of the income statement segment. But in the meantime, the metrics I will quote exclude the impact of this charge.

So I'll begin with an outline of the results for quarter 4 first. Total revenues for the quarter were $24.5 million, which was virtually identical to last year. As usual, Ronan will provide more details on the revenues later in the call. So I will move on and discuss the other aspects of the income statement.

The gross margin for the quarter was 41.7% compared to 41.5% last year, hence, a slight improvement. This increase is due to the cost savings programs that we implemented earlier in the year. These savings also served to offset the impact of higher instrument sales which tend to have a lower margin, as well as the impact of adverse currency movements, principally, the Brazilian real but also to a lesser extent, Canadian dollar and the euro.

Moving on next to our indirect costs, our R&D expenses for the quarter were $1.4 million compared to $1.5 million in 2017. Meanwhile, our SG&A expenses have also fallen from $7.6 million to $6.8 million. In both cases, you're very much seeing the impact of our cost savings again. But I will say, there was a lower level of discretionary expenditure than normal this quarter. And I would caution, again, thinking of the $6.8 million as being the normal run rate for SG&A.

The benefit of the gross margin improvement, and even more so, the reduction and indirect costs, has had the effect of improving our operating profits from $800,000 to over $1.9 million.

Moving on next to our financing costs, which includes the impact of our exchangeable notes. Our financial income for the quarter was $158,000 compared to $224,000 last year. And this is due to the lower level of cash deposits. Similarly, financial expenses were also lower at $1 million in quarter 4 2018, down from $1.2 million. This is due to the reduced interest charge on our exchangeable notes following the partial repurchase that we made earlier in the year.

Our noncash financial income, which has closed further down the P&L, was just over $400,000, consisting of a gain of $590,000 of the fair value of the derivatives embedded in the notes, partially offset by noncash accretion interest of less than $200,000, again relating to the notes. You will have seen in the press release that we quote EPS without noncash amounts, and it is these noncash amounts totaling to $400,000, which we're excluding here.

The profit after tax of the quarter, excluding these noncash items, was $800,000. And this compares to $900,000 in the same period last year. This might sound somewhat anomalous given our operating profit has improved significantly this quarter, and that our interest expense is lower, which has to be the lower profit after tax. As you would've noticed in the release, this was largely due to a swing in the tax charge. This was caused by the reduction in U.S. tax rates, which were implemented in late 2017, and caused a large one-off tax credit due to the impact on our deferred tax balances at the time.

This quarter, we've returned to a more normal tax charge, and hence, you're seeing the impact on our income statements. For the same reason, we're seeing a basic EPS of $0.038 versus $0.042 last year, and diluted EPS of $0.07 versus $0.077 in quarter 4 2017.

However, if you were to treat both years on a like-for-like basis, profit after tax would have increased from roughly breakeven to a profit of $800,000, whilst EPS would've increased from roughly $0.00 to $0.038. So similarly, diluted EPS would have increased from about $0.03 to $0.067.

Earnings before interest, tax, depreciation, amortization and share option expense for the quarter amounted to $3.2 million. And the equivalent figure last year was $2.4 million.

I will now make some comments on the full year results. Annual revenues decreased from $99.1 million in 2017 to $97 million for the financial year 2018. As I mentioned earlier, Ronan will deal with this later on in the call.

Our gross margins for the year improved from 42.3% to 42.7%. And in this regard, you are seeing the positive impact of cost savings outweighing the adverse exchange rate movements, plus a less favorable sales mix, particularly, given the lower Point-of-Care sales in 2018.

Similar to what we saw in the results for the quarter, we are showing a reduction in the indirect costs. Our R&D expenses fell from $5.7 million to $5.4 million. Whilst our SG&A expenses fell from $30 million to $28.2 million.

Obviously, we're seeing the impact of the cost savings, again, though in the case of SG&A, the reduction was partly due to the gain of approximately $400,000 that we recognized on the repurchase of some of our exchangeable notes in quarter 3 2018.

The net impact of the lower indirect costs and improved gross margin, albeit on lower revenues, is that our operating profits for the year increased from $5.5 million to $6.7 million.

Financial income for the year was slightly lower at $700,000, reflecting the lower levels of cash and deposits, particularly, in the latter half of the year, following the notes repurchase. So this was partly offset by higher deposit interest rates.

Meanwhile, the financial expenses for the year, which is essentially the cash interest charge in our exchangeable notes, reduced from $4.7 million to $4.4 million with the reason being that, that interest is no longer required to be paid on the notes which we have repurchased.

This was the effect of reducing our interest charge by just over $600,000 in a full year or $150,000 per quarter, of which close to 2 quarters of this benefit have been recorded in 2018.

In addition to this, there was a separate noncash financial income of $700,000 recorded for the year, resulting that the profit before tax for the year has increased from $1.6 million to over $3 million. However, after-tax income has seen a more modest increase from $2.3 million to $2.5 million.

Similar to the case in the quarter's result, the tax charge for the year has swung from being a credit of $700,000 to being a charge for $600,000, of which a significant element is due to the changes to the U.S. tax code in 2017. Consequently, basic EPS for the year was $0.114, an increase of 8% versus 2017. And diluted EPS was $0.26, which is $0.003 higher than last year.

Earnings before interest, tax, depreciation, amortization and share option expense for the year was $12.1 million. I mentioned earlier that I'll provide some more information on the impairments charge of $25.2 million recorded this quarter. This charge arises as a result of the impairment review that we are required to undertake annually.

In so doing, a company is required to assess the carrying value of its assets from the context of its future cash flows, discounts of the cost capital for the business. Companies are also required to be mindful of how these values fit with the prevailing enterprise value or market capitalization of the company. Consequently, a fall in the share price of a company, like we have experienced, can impact the level of an impairment charge taken.

Our lower market capitalization also has an impact on the cost of capital used in the impairment's calculations. For example, smaller companies are required to include a small cap premium when calculating their cost of equity. The level of this small cap premium is dependent on a company's market cap, that is to say, the lower the company's market cap, the higher that premium applies. Or in layman's term, the smaller the company is, the higher the risk profile it has. This combines with the increased volatility of our stock and higher prevailing interest rates that propelled our cost to capital forward from approximately 14% last year to over 16% this year.

As you will also have seen in the release, the impairment charges also reflected the latest cash flow projections for the group's cash generating unit and its up-to-date net asset valuations.

It goes without saying here that the impairment charge itself is entirely noncash in nature. Just so that you'll be able to appreciate the impact of the impairment on the balance sheet, I will give you the principal captions which have been impacted. Goodwill and other intangible assets have been reduced by $19.2 million. Meanwhile, the reduction in property, plant and equipment has been $6.1 million, with other assets being affected by $1.6 million.

The charge is then reduced by the tax impact of the -- above the previous adjustments, which amounts to $1.7 million, all of which related to deferred tax.

Before leaving the income statement, I would like to mention that we're going to release our quarter 1 2019 results in a few weeks' time, but you will see a different-looking income statement. This is due to the implementation of IFRS 16, which is broadly equivalent to the American standard, ASC 842 and which concerns the accounting for leases. On those new standards, charges, such as rents paid on leases over 1 year for our manufacturing and other facilities, will no longer be expensed to the income statement evenly over the life of the lease. Instead, such leases will be essentially treated as a financing instrument, whereby, the asset even though not owned by the company will be recognized in the balance sheet as a fixed asset and then depreciated through the income statement over the life of the lease.

But there will also be an interest charge, which will reflect an effective financing charge, and which will appear in the financing section of the income statement. So in essence, these rental charges will be replaced by a combination of depreciation and interest. And whilst this is largely a wash overall, it will lead to a modest adverse impact in 2019, which will reverse over time.

I just wanted to give you a heads-up on this before you see it in the release and wonder what is at play.

I will now move on and talk about the significant balance sheet movements since the end of September 2019. Property, plant and equipment decreased by approximately $4.7 million. This decrease is made up of impairment charges of $6.1 million, depreciation in the quarter of $300,000, offset by additions of $1.9 million, with the remainder being translation adjustments. Meanwhile, intangible assets increased by $16.8 million. In this case, the impairment effect was $19.2 million, amortization was $700,000, and additions were approximately $3.1 million.

Moving on to inventories, you will see these have fallen from $32.9 million to $30.4 million. And this reflects the fact that inventory levels tend to fall after the peak Lyme season and also, that a large number of instruments were shipped during the quarter.

Meanwhile, trade and other receivables increased by over $1 million to $24.4 million. This is due to the timing of sales, which were more back end this quarter, and slower collections as some customers seem to take some extra credit as we got to year-end.

Meanwhile our trade and other payables, which includes both current and noncurrent liabilities, have reduced from $21.2 million to $17.9 million, a decrease of $3.3 million. This is being partly driven by a decrease of $1 million relating to the accrued loan interest -- loan note interest, and the decrease in trade creditors which I flagged on the last call would happen, in particular, in relation to the fit-out of our new Buffalo facility.

Finally, I will talk about our cash flows for the quarter. Cash generated from operations for the quarter was $3.2 million, which was largely offset by working capital movements. Interest and taxes represented a cash inflow, with a significant amount to deposit interest received in addition to a refund of historic taxes in Sweden.

Capital expenditure for the quarter amounted to $5 million. And interest payments on the exchangeable notes amounts to just under $2 million. And this represents 6 months' interest if these payments are made semiannually.

The net result is that we have a decrease in cash for the quarter from $35.7 million to $30.3 million, a decrease of $5.4 million.

I'll now hand over to Ronan, who'll take you through the revenues for the quarter and year.

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

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Thanks, Kevin. I'm now going to review our revenues for quarter 4 briefly and then review the revenues for the year before opening the call to the question-and-answer session.

Revenues for quarter 4 were $24.5 million. We're level with our revenues from the corresponding quarter last year.

Point-of-Care revenues were $4 million compared with $3.8 million in the prior quarter, which was an increase of 6%.

Clinical Laboratory revenues were $20.5 million compared with $20.7 million in the corresponding quarter, which is a decrease of 1%.

And now to look at the year as a whole. Our revenues for 2018 were $97 million compared with $99.1 million in the prior year, which is a decrease of 2%.

Our Point-of-Care revenues for the year were $14.8 million compared with $16.8 million in the prior year, which is a decrease of 12%.

Our U.S. HIV revenues decreased 10% year-on-year, and this decrease is explained by the fact that public health spending in the U.S. on HIV testing continues to decrease.

Meanwhile in Africa, our HIV sales decreased 13% during the year. This decrease is entirely explained by the fact that one of our large customers in Africa significantly overstocked in 2017, resulting in lower sales levels in 2018.

And for the past 15 years, we have held approximately 90% of the African confirmatory market. And we believe that we will continue to do so given the fact that our product has gold standard.

However, as previously indicated, we have now developed an HIV screening product, which will be launched on the African market at the end of this year. Given the quality of the product and given that -- given the price at which we can now manufacture this product in our new automated plant in Ireland, and given our long reputation as manufacturer of gold standard, we believe that we can take significant market share in the screening segment of the African HIV market, which comprises 170 million tests annually, and is many times greater than the confirmatory market.

Our new HIV Trin-Screen product is currently undergoing independent trials in Africa to support a WHO submission. And it is anticipated that the products will be approved by year-end.

Given that we now have a high-volume, low-cost, automated HIV manufacturing capability in Dublin, we believe that this new product will transform our HIV business into a strong growth engine in the future.

Moving on to our Clinical Laboratory business. Our revenues for the year were $82.2 million compared with $82.4 million in the prior year.

Our Infectious Disease business decreased 13% year-on-year. Our mainline Infectious Disease business decreased 6% year-on-year. And as we have signaled in the past, this is in line with our expectation given the ongoing migration by laboratories from ELISA onto random-access platforms in the U.S. However, during the year, we also suffered a loss of a significant Lyme confirmatory contract with one of the 2 major Clinical Laboratory service providers in the U.S. And this loss, which approximates $2.1 million annually, gave rise to the overall 13% decrease in Infectious Disease revenues.

On an ongoing basis, we expect shrinkage of our Infectious Disease business to be approximately 5% annually, given that other segments of the business have performed well, particularly, China.

Moving on to our Diabetes and hemoglobin variant business, which were served by the Premier and Premier Resolution instruments, they both performed strongly with year-on-year growth of 8%. We had strong instrument placements in all of our principal markets with instrumentation placements of 96 units in quarter 4 and placements for the year of 317 compared to placements of 311 in 2017.

It's important to bear in mind that every instrument we place is new business as we are never replacing existing Trinity instruments, as we are in the early years of the placement cycle.

Meanwhile, our Premier Resolution instruments, which serve the hemoglobin variant market for sickle cell anemia and thalassemia, performed well in Europe, while we submitted the Premier Resolution instrument to the FDA a number of weeks ago and expect approval within the next couple of months.

The receipt of FDA approval for the Resolution instrument will enable us to enter the U.S. market and will also enable us to commence the Chinese regulatory process. These are high-value markets with few competitors. And we believe that with our best-in-class instrument and reagent combination, that we can take significant market share.

Meanwhile, the launch of our new hemoglobin Point-of-Care instrument and test, the TRIstat, adds a significant new business opportunity in our hemoglobin business. Having received FDA approval for the product and the instrument, we are now pursuing Chinese and Brazilian approvals.

During 2018, we placed 150 instruments around the world. And we anticipate significant success with this product, which we believe will quickly grow to constitute a significant percentage of our overall hemoglobin revenue base.

Meanwhile, our autoimmune business performed well this year with 7% year-on-year revenue growth. We have consistently grown this business since its acquisition. The reference laboratory business has been the best-performing part of the business with significant growth coming from our Sjogren's tests range and from the growth with the 2 U.S. mega labs.

On the product side -- on the product revenue side of our autoimmune business, our strategy has been to grow our best-in-class immunofluorescence product revenues, while also growing our enzyme immunoassay product revenues around the world, those particularly in emerging markets and meanwhile, developing our new automated, integrated immunofluorescence processor and reader, which will eliminate the requirement, and for the use of microscopes with our IFA product range.

This strategy is working successfully for us. And we have achieved significant success during the year in China with our IFA product range.

At this point, if I could hand back to the operator for a question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from Jim Sidoti of Sidoti & Company.

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James Philip Sidoti, Sidoti & Company, LLC - Research Analyst [2]

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Can you just remind me what are the steps left to win an HFO -- WHO approval for the HIV screening test?

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

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Well, we have to complete our clinical trials, collate all the information and then submit to the WHO. And then they will review that and may or may not inspect our factory.

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James Philip Sidoti, Sidoti & Company, LLC - Research Analyst [4]

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Okay. And how much longer till you submit?

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

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We're hoping to submit August, September.

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James Philip Sidoti, Sidoti & Company, LLC - Research Analyst [6]

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Okay. And then once you win approval, how long before you think you would see revenue from that product?

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

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I think we've -- I mean, I think virtually all African countries review their algorithms every 18 months or 2 years. So -- but they're continually being reviewed. So there's a continual flow of applications. So I think it would be fairly immediate.

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James Philip Sidoti, Sidoti & Company, LLC - Research Analyst [8]

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Okay. And then, Kevin, you mentioned that there's going to be an accounting change for leases that would impact the balance sheet. Now in the past, you've talked about, I think, up to $3 million of cost savings that you expect to generate from some of the initiatives you're already taking. Would this be -- would this offset that? Or would this be pretty minor relative to that?

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [9]

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Well, the first thing I'd say is that the cost savings are real, they're cash savings. And you're seeing the benefits of those coming through. The changes, I'm talking in relation to the leases are purely bulk entries. And so it's due to a change in how leases are being -- are going to be accounted for in the future. So in essence, in the past, when you would've leased a building from a landlord, you would've just taken an annual rental charge. Now it's almost as if it looks like you bought the actual building in question. You put it on the balance sheet as a fixed asset, you effectively put an interest charge through and then you depreciate it. So what's going to happen is, broadly speaking, you're going to see our rent probably going down by the order of about $3 million, which would've gone through partially above the line, partially below the line. And we have -- then we will see an increase in depreciation, a bit lower than that, maybe by about $2.5 million. And there'll be an interest charge of $800,000 or $900,000. So if you top that off, you're probably going to see a negative impact somewhere in the region over the course of a year of about $400,000 or $500,000. So about $100,000 a quarter. But again, I stress, it's purely book adjustments we're talking about here. And you'll see this for every company. It's being implemented in the IFRS, which obviously impacts the rest of the world. And it's going to be implemented in U.S. GAAP at the same time, and obviously, the 2 accounting bodies are in league with each other in that regard.

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James Philip Sidoti, Sidoti & Company, LLC - Research Analyst [10]

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Okay. And then last one for me. Do you think in 2019, you both have turned the quarter regarding cash flow? Do you think you'll be cash flow positive in 2019?

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [11]

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Yes. Our stated aim is very much to be cash flow positive for the year as a whole. I'm not saying it's going to be like that in every individual quarter. For example, obviously, with a quarter coming up, quarter 1 is typically our weakest quarter. But for the year as a whole, we would be -- we are very much targeting a cash flow breakeven. And that will come from growth, the implementation of our savings and obviously, the lower interest charge at the moment as well. So yes is the answer to your question.

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James Philip Sidoti, Sidoti & Company, LLC - Research Analyst [12]

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Okay. And related to that, the $5 million in CapEx in the quarter, was that unusually high? And do you expect that to come down?

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [13]

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You're going to see fluctuations. They are certainly a bit higher on the PP&E side. And as I said, I would have liked that before in relation to the Buffalo facility. That's something we did in the second half of last year, and that's not going to replicate the -- in our intangible profits. But intangible projects, you see, are more fluctuating. Cash profiles, you can see, expect some ups and downs and also some quarters to be lower, so they might be a bit higher depending on third-party costs. So for example, as our trial costs come through in relation to similar projects, that's going to have an impact.

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Operator [14]

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The next question will come from [Bill Lappe], a private investor.

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Unidentified Participant, [15]

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I have a few follow-up questions. From -- on the [Trin] and on the prescreening test, how far are you in the tests? In other words, you've already started the clinicals. Do you think that'll be done? I mean, you're projecting maybe August. But do you think that'll be done earlier based on your progress going forward? Are you getting all the patients and everything you need?

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

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Yes. We're working at 3 different sites in Africa. And we would hope to be finished July and then collate and then submit.

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Unidentified Participant, [17]

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Okay. Is your product better than the competitor's product, besides maybe you can have the pricing competitive? In other words, is your prescreening product better than what's out -- you believe, than the one that's out there now? I mean, you're the gold standard than the other one?

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

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Yes. I mean, I think the HIV -- I mean, the market leader in screening is Abbott. The market leader in confirming is Trinity Biotech. Virtually, they perform virtually identically. In practical terms, there is very little difference between the screening and the confirming test. I know you would expect one to have higher sensitivity than the other. But in reality, the levels of sensitivity and specificity are so close to 100%, as in 99.99% and higher, that you could regard both our existing test and Abbott's existing test as virtually flawless. And I think the same description would apply to the Trin-Screen product. So basically, all 3 are excellent products. And the performance would be difficult to differentiate between the 3, frankly.

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Unidentified Participant, [19]

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Okay. And do you anticipate -- is there any other approval besides the FDA -- and there's not like an FDA or Irish approval of selling this product once you get the WHO approval. Is there anything you have to do from a regulatory standpoint to sell it besides...

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [20]

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Okay. No, you haven’t -- go ahead.

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman & CEO [21]

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WHO approval would -- at this stage, is similar to -- in terms of how onerous it is, it would be similar to FDA.

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Unidentified Participant, [22]

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Okay. Okay. But you've been with them before. I mean, they approved your gold standard test, right? The other test, right? Yes. You haven't mentioned Syphilis. Are you selling much in the Syphilis market? What's going on there? Anything happening with your Rapid Test in Syphilis?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman & CEO [23]

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Well, we're the only approved and a clear way to the FDA and clear way to approved Syphilis Rapid Test in the United States. And then we're selling some, around $1.5 million of -- just under that level. So it's a significant disappointment in terms of how it's worked. But we're working on it. I think the CDC have been ambivalent in terms of their involvement here. And that hasn't been a help. And in an environment where public health dollars are scarce, and we've seen that with the HIV spend, it's proven their disappointment, frankly. I mean, I think we had estimated originally that this could be a $10 million product. I mean, it may grow to be a $3 million product, but it's no blockbuster.

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Unidentified Participant, [24]

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So tell me this, Ronan, you put in -- you own about 10.8% of the company now. And you went out and bought the stock in the old market, which gives us a lot of confidence. What's your big foresight now for the company? Where are you optimistic? What are you excited about going forward in 2019, 2020?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman & CEO [25]

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I think we're in a situation where, clearly, as I've described, we have an Infectious Disease business, which is in decline. But that's never a smaller part of our business. And we have an HIV business, a Point-of-Care business, which diminished last year, but I explained that the reason for that was entirely due to -- in fact, it was a Tanzanian ordering process. And that's -- so basically, our 2017 sales were high, in a sense, higher than they might have been, and then they overstocked. And so '18 was lower as a consequence. And I think with the advent of now -- remember, we have now -- that if we stopped manufacturing our HIV product, and I'm talking about our existing confirmatory products and as well as the fact the coming Trin-screen products, we now are -- have stopped manufacturing in China. And we have developed through -- invested $5 million in a manufacturing facility here and basically, have significantly cut back maybe 70%, 80% reduction in our cost base per unit.

And so we basically now have a scenario where we can compete in a very real sense, in a very -- with a very efficient factory for both confirmatory tests and the coming screen tests -- screening tests. And we believe that, that would provide a growth engine for us moving forward and a very significant one. And I'd identify that probably as the single biggest growth opportunity for us. In addition to that then, you've seen that our Autoimmunity business grew 7% last year, and it's continued to grow. And we think with various things that I outlined and particularly, with the advent of the new instruments which is a 2020 phenomenon and -- but that we can increase that growth, right? And then, similarly, with our hemoglobins and Diabetes business, you saw that we placed 317 instruments this year, 311 last year and continue to place instruments there. And so the Premier business is doing really well. I think it grew 8% this year. We believe we -- with the advent now of the Resolution instruments and the TRIstat instruments, that we can increase those growth rates.

So in summary, I think that we are turning the corner. And I think that you're going to see revenue growth. I think that we're very disappointed with the current market capitalization of the company. We think it's over, done. But we accounted -- we're working to basically to increase that by virtue of increased revenues. And again, Kevin has talked about our cash flows. We're determined to maintain our cash flows at a minimum level of $30 million. We're very cognizant of the note. We bought that down to $100 million. So our net debt, as we stand, is $70 million. We're conscious of that being sort of maturing in 3 years and 2 months' time. And we will consider strategic options as we move forward. But for the moment, I think our concentration is on turning -- and basically, we believe that we've hit bottom and that we can improve from here. We can improve, increase our revenues, we can stabilize and increase our cash flows, increase our earnings. And I think if we do that, we'll -- it'll strengthen our share price. And we can consider our options and moving forward, whether we would actually have a -- conduct a sale process or not.

But we think at this moment in time, it's a wrong thing to commence that process. And what we need to do is we need to basically improve the performance and then do that.

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Unidentified Participant, [26]

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And why you put your money where your mouth is. So that's good. What about Brazil, did you ever get the manufacturing going there?

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

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Brazil. We're still waiting for ANVISA, that's the Brazilian equivalent of the FDA. We're still waiting for the -- they've approved the factory. They haven't actually approved the product. So we're basically standing, waiting for the approval. And it's imminent. I think the change of government. Actually, I know that seems like a strange excuse or reason to give. But the change of government resulted in ANVISA being virtually inactive for a period of about 2 months. And that has -- because we had hoped to have had the approval by now, but we haven't. But it's imminent. Basically, we're waiting. As soon as that comes through, we'll have savings, we'll reduce our cost base there, and we'll be in a position to recommence instrument placements.

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Operator [28]

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(Operator Instructions) The next question will come from Paul Nouri of Noble Equity.

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [29]

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Do you think there's a point in time this year, a certain quarter where the growth drivers of the lab business will kind of overcome the drag of the other side of the business, the ELISA business?

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

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Yes. And I mean, well, we do. I mean, we expect -- we anticipate that we'll grow revenues this year. We don't tend to give guidance. But I think if we were to look at Jim Sidoti's numbers, we'd be relatively comfortable with them. They might be under -- marginally on the demanding side. But -- so they would reflect growth. And we do believe we can do that. And I mean, I think last year, we were hit with a -- we got a $2 million hit when we [launched] the Lyme contract. And on top of that then, we had a $2 million hit with the Tanzanian business. So if you were -- so that turns $99 million into $97 million. Without them, it would have been $101 million. It would have been anemic growth but it would have been growth. So to answer your question, the answer is yes, we do believe so. We will achieve growth this year.

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [31]

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And I guess the Brazilian currency was a bit of a drag in 2018. Do you have any idea what we can expect on that in 2019?

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

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I mean I think if we get 14% for that, it'll continue to do so. I mean, I think it has gone a little weaker again still. So I mean it's just as difficult to predict how that will move. But I mean irrespective of how it moves and what we've done is we have largely now achieved a bouncing -- a situation where we bounce our currencies. And so with the advent of the factory change -- sorry, with the advent of the ANVISA approval in the factory -- in the new factory, we basically have that, a natural hedge in place.

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [33]

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And in terms of gross margin and cost structure for 2019, will it be similar to 2018?

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [34]

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I've mentioned this before. One of the key drivers of our gross margin is volume. We've a significant fixed cost base. So the more growth we have on our top line, we will get an improvement on our gross margin. And obviously, that will be accentuated by the savings that we've implemented throughout 2018. But we'll get the full year effect of that in 2019. So I do see an improvement there. I don't anticipate an increase in relation to our SG&A and indirect costs as a whole. So in essence, any growth that we do get from the top line should flow very quickly down to the operating profit line. And so consequently, that'll drive our efforts, one, to grow our profits, but two, to get to the cash flow breakeven position that we're looking for.

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [35]

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And do you have any open credit line in place?

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Kevin Tansley, Trinity Biotech plc - CFO, Company Secretary & Executive Director [36]

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We have modest credit lines in terms of some equipment facility, we've got some short-term facilities. So we don't at this point. We do have relationships with a number of banks. But we don't have a formal facility in place. I think the days whereby you can have facilities resting there are largely gone. Just as I -- just in case and everyone has one. Just but in terms of the capital asset in relation to banks now, they typically come with a charge. And therefore, you're only going to basically pull through on those in place if you thought that you needed those imminently. Otherwise, you're basically paying a charge for something that you really don't need.

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [37]

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And are you still in the market for buying back your bonds opportunistically?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman & CEO [38]

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No. I don't think so. I think we've -- we decided to maintain our cash balances at $30 million and trying. And then our intention is -- we believe, it's just a long time we've achieved cash flow breakeven. And that we, basically, would only buy back in a scenario where we had strengthened our cash balances beyond $30 million. We might -- so if we got it to $40 million, we might spend $10 million, if you know what I mean. But we've established $30 million as our base.

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [39]

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And then going back to the Syphilis Test, I mean there are articles out recently that STDs, I think, are at a record in the U.S., and on the rise in other developed nations. Are you doing anything on the lobbying front to try to get more money allocated towards this?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman & CEO [40]

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No. To be honest, I don't think we are. I mean, we've spoken with the CDC, who are the biggest influencers here. And so in that sense, maybe we've lobbied it, in the sense that we've tried to persuade them. And in fact, we ran a trial with them, so with them in essence, yes, with them, basically, where we tried to prove to them that there was benefit to, due to a public health, the Syphilis problem. So basically, that people would otherwise -- people would be -- HIV, sorry, that Syphilis positives would be detected as part of a public health program and basically, who otherwise wouldn't be, if that program wasn't in place. And we ran quite a big trial. And we proved that we haven't seen it, and probably, we thought that they were satisfied of that. That's only like 6 months ago. And we thought that might have changed their approach. But they -- so far, they haven't allocated any resources, either of any sort, financial or otherwise, to pushing the Syphilis Point-of-Care test. So what we're doing meanwhile is we're working...

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Paul Nouri, Noble Equity Funds - Founder, MD, and Portfolio Manager [41]

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And the -- I'm sorry, the Point-of-Care hemoglobin device that you have, how quickly can that put out a result?

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Ronan O’Caoimh, Trinity Biotech plc - Co-Founder, Chairman & CEO [42]

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TRIstat is like 12 minutes. And it -- so it's a very quick test. But it wouldn't stop running. It repeats every sort of 2 minutes, but the 12 minutes refer to just a one-off. And so it's -- we're not launching it in the U.S.A., right. There are other providers, I think, that serves the U.S. So our emphasis is mostly Southeast Asia, Brazil and some second-world countries. We placed 150 instruments last year. And we'd hoped to place a multiple of that this year. And we're still awaiting Brazilian approval. And that'll certainly -- that would increase the level of activity significantly. As soon as we receive that, we're anticipating getting that in the next 3 or 4 months.

Right. I think we have no more questioner. And so I think we'll close the call now. Just to say thank you, everybody. And speak to you -- we'll speak again at our quarter 1 results. So good afternoon, and thank you.

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Operator [43]

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