Q1 2021 Trinity Biotech PLC Earnings Call
Good day and welcome to the Trinity Biotech first quarter 'twenty 'twenty, 1 financial results conference call.
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I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.
Thank you Betsy and thanks to all of you for joining us today to review the financial results of <unk> biotech for the first quarter of 2021, which ended on March 31.2021.
Joining us on today's call is Ron or no Queen.
<unk> can be biotech and John Gill our CFO.
At the conclusion of today's prepared remarks, we will open the call for a question and answer session.
Please be aware that statements made in the course of this earnings call maybe deemed forward looking statements within the meaning of federal Securities laws.
These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements.
Risks include but are not limited to those set forth in the risk factors section of the company's annual report on form 20-F filed with the Securities and Exchange Commission.
Management undertakes no obligation to publicly update or revise these forward looking statements to reflect events or circumstances after today or the occurrences.
Peter good bench well.
With that I will now turn the call over to John Hill, our CFO Trinity biotech.
For a review of the results of the quarter, who will be followed by CEO, Ron or no Queens for an outline of the progress in sales and marketing and the impact on revenue John. Please proceed.
Thank you Joe.
As Joe mentioned I will now take you through the results for Q1.2021.
Starting with revenues.
Total revenues for the quarter were $25.6 million compared to $21.2 million in Q1.2020.
As Joel pointed out and as our typical approach Ronan will discuss revenues in further detail later on the call.
As such I will move on to discuss other aspects of the income statement.
Gross margin for the quarter was 42, 6%.
Impaired with 43, 8% in Q1.2020.
This change in margin has been contributed to by sales mix changes and downward pricing pressure on PC or viral transport medium products and associated collection devices due to lower demand with some customer stockpiling supplies in Q4, 2020, thus reducing market demand in Q1.2021.
In addition, the increased rollout of vaccination programs as Q1 progressed reduce down the focus on COVID-19 testing with consequently reduce demand for PCR virus testing media and associations collection products.
As ever our gross margin remains susceptible to product mix changes geographic spread currency fluctuations and product level variation.
Other operating income decreased from $14000 in Q1.2020 to 1 tenant in Q1.2021 due to the suspension of small 1 ancillary activities at our Irish sites due to COVID-19 public health restrictions.
Moving on to R&D expenditure this remained relatively flat compared to quarter, 1.2020 at $1.4 million.
Meanwhile, SG&A has decreased slightly to $6 million.
This reduction is primarily as a result of reduced selling and associated costs.
These result in an operating profit for Q1.2021 of $3.1 million daughters.
<unk> to $1.7 million reported in Q1.2020 and.
An increase of over 81%.
The $1.4 million increase in operating profit is primarily driven by increased revenues.
Partially offset by the lower gross margin and higher share based compensation costs.
Moving on to financial expenses.
This includes the quarterly cash interest cost for our exchangeable notes.
$1 million.
And $200000 relates to notional finance charges associated with lease facilities.
These notional at least finance charges are required by the relevant accounting standard <unk> 16.
You will note that there are further noncash financial expenses of $160000, which consist of noncash accretion in the accounting carrying value of the exchangeable notes as required by the relevant accounting standards.
Profit after tax before 1 off items and noncash financial expense was $1.8 million compared to zero point $4 million in quarter, 1.2020.
As in prior periods and set out in the press release.
We quote earnings per ADR.
Actively our equivalent of EPS on a standard basis and also before the impact of 1 off charges.
Noncash financial measures.
Using that modified measure.
Earnings per ADR has increased to 8.4 cent from 1.7% in Q1.2020.
While diluted earnings per ADR.
Also increased in this case to 10.1 cent from 5 <unk> in Q1.2020.
I will now move on to address some of the main balance sheet movements, we've seen since quarter 4 of 2020.
Inventories have increased by 24% over the quarter with most of this increase attributable to increases in inventory to support P C or viral transport media and associated sample collection devices.
We increased inventory in Q1 in line with the increase in our production capacity and to respond to market feedback that indicate our customers wanted near immediate delivery of these products.
We did however, reduce output from mid Q1 to manage inventory levels, given the aforementioned reduction in demand.
We have however retained our ability to rapidly scale up production if required.
Meanwhile, our trade and other payables have increased by 17% this quarter driven by a number of items, including the receipt of $1.76 million Paycheck protection program loans in quarter, 1.2021.
Continued working capital efforts to optimize credit terms obtained from suppliers and accrued interest on our convertible notes.
These were partially offset by reduced deferred revenue.
While we do expect that the vast majority of the paycheck protection loans.
Will it be forgiven in due course.
<unk>. They are forgiven, we would continue to account for them is repayable as it has been our policy with prior paycheck protection loans received.
Trade and other receivables decreased by 34%.
Primarily driven by strong cash collection efforts in the quarter on quarter reduction in revenue, which delivered an increase in net collections versus new credit bidding.
Finally, I will discuss our cash flows for the quarter.
Cash generation from operations during the quarter with $5.9 million.
As I mentioned the company received just over $1.7 million a second round Paycheck protection program loans in Q1, which was a non cap rate cap, sorry, which was the non operating cash inflow.
Nonoperating cash outflows during the quarter included capital expenditure of $2.2 million payments for property leases of 0.7 million.
Overall this resulted in a cash balance of $32.3 million at the end of quarter, 1.2021, which is a net increase of almost 5 million in the quarter.
I will now hand over to Ronan.
Thanks, John.
I'm not going to review the revenue to quarter 1.
And for the corresponding quarter in 2020 before opening the call to a question and answer session our revenues for quarter, 1 more $25.6 million.
$21.2 million and corresponding quarter.
An increase of 21%.
Point of care revenues in quarter, 1 by $1.9 million compared with $3.3 million in the corresponding quarter.
The decrease of 43%.
This was primarily due to a delay in the issue of pay Chubby rapid test orders from Africa as a result.
Lots of COVID-19, but also due to difficulty in procuring airfreight transports.
We are seeing evidence of the COVID-19, driven delay debating and we expect that point of care revenues will increase at 'twenty 'twenty 1 progressive.
In March 2021, we announced that we had submitted our Trinity screen HIV product to the World Health organization for approval.
This product once approved will allow the company to enter for the first time, the HIV screening market in Africa.
Which at 117 million tests annually, and the 12 fold bigger market by value.
Confirmatory test market potentially biotech has for many years have dominant market share with its HIV Uni gold product.
And Meanwhile, we have significantly strengthened our sales team in Africa with a number of senior hires in anticipation of a market entry later this year.
The exact timing of the expected approval.
Got to predict but we are.
Hopefully the proof of the jewelry in quarter 3 although it is possible that future prioritization of COVID-19 products by the W. H O that.
The approval could fall into quarter 4.
We see trend screen HIV screening as a huge opportunity for the company given the outstanding performance characteristics.
Also our also makes it low cost manufacturing capability.
Given our existing reputation and presence in the market.
Moving onto clinical laboratory our reps.
For the quarter increased to $23.7 million compared with $17.8 million in the corresponding quarter, which is an increase of 33%.
This increase is primarily explained by strong COVID-19 related products is.
With our PCR by transport mediate product being the most significant contributor.
We have developed and continue to develop a strong suite of COVID-19 related product.
Obviously noted our FDA approved <unk> viral transport medium products performed well during the quarter.
It's the top of the collection device for COVID-19, PCR molecular testing, which is used to store the nasopharyngeal swab, which contained patient sample.
I will get to be tried to visit in a stable environment.
The transport medium stabilizes, a sample and prevent bacterial growth and maintains its integrity until such time as the tested in the laboratory.
In addition to our COVID-19 life antibody test.
It also makes it instrumentation and which is available for sale at both the U S and in Europe. We also expect to submit how COVID-19 rapid antibody test to the FDA before the end of June that's within the next 5 weeks under the emergency use authorization pathway, thereby enabling us to sell the product in the U S.
In addition, the company is developing a COVID-19 rapid antigen test using a nasopharyngeal swab.
On the pet food rather than 12 minutes. The test will be manufactured in our automated manufacturing facility in Ireland with the SaaS, which is virtually identical.
The bathroom, both unit goes and thanks Glenn.
Meanwhile, the company has also experienced revenues.
Increased revenues of our COVID-19, monoclonal antibodies these monoclonal antibodies or the raw material used in the manufacture of COVID-19 outage impact.
Lastly, as a consequence of COVID-19, we have.
Great increases in revenues and by respiratory point of care products.
During our last conference call, we signaled that there would be a reduction in COVID-19 related revenues in quarter, 1 and in fact COVID-19 related revenues in the quarter came to a total of approximately $8 million down from approximately $13 million in the previous quarter.
This reduction is explained.
Bye.
2 large up by large out of just stockpiling prior to year end 2020 and reduction in overall testing levels.
Nation Congrats.
And now moving back to our core business are also immune business generated revenues of approximately 5% lower than the corresponding quarter.
With reference to the biotech testing volumes down about 10% and product revenues marginally down we believe that this is entirely due to the COVID-19 pandemic as many patients deferred doctor visits unless absolutely necessary.
Good for them that these revenues will fully recover it in the post pandemic environment.
Moving down to our hemoglobin <unk> C business, we continue to have low lower instrument placements with Jos.
Over 40 instruments placed during the quarter, which is slightly more than 50% of normal placement levels.
This was expected.
Spittle in Phoenix are unlikely to purchase new capital equipment in the midst of epidemic.
However, we are confident that these statements will fully recover in a post pandemic environment.
Meanwhile, reagent revenues and by this I mean, the number of tests being run in our diabetes business I'm running at about 90% of normal again due to the fact that patients are less likely to perform discretionary tests during the pandemic.
Meanwhile, we anticipate launching our new midsize hemoglobin I wouldn't see instruments in early 2022.
This instrument will enable us for the first time, she targets out smaller hospitals on diabetes clinics around the world, mostly outside of the United States and your opinion.
Previously we had been unable to serve this market as the processing capability of our premier instrument and also with the cost.
Too large for the requirements of these hospitals and clinics.
Although we have designed to develop the instrument in Kansas City. This would be manufactured in China, thereby enabling us to make the instruments available to the market at a very attractive price.
Could I now hand back to the operator for a question answer session.
Betsy.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
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At this time, we will pause momentarily to assemble our roster.
Our first question is from Paul Nori with noble equity funds. Please go ahead.
Hey, good morning.
Well I thought.
Your your Covid revenue for the quarter was it mostly PCR transport.
Yeah Yeah.
Oh cool.
And the.
The entrance to the antigen tests that youre developing is that going to be for the U S are mainly O U S.
So first Paul it would be fairer it'll be it'll be for a rise around the world. So basically the test will be manufactured in orange on the same automation equipment that we do unit go then that we're about to do trend screen on.
No.
The very efficient cost of manufacturing.
Like under 50.
And so it would be in a position to.
Supply worldwide. So we go into the United States really go the EUA ruche and <unk> in.
In Europe, with CE, Mark and Jeff.
So that's our intention.
So it's progressing well I admittedly slowly but.
It'll be a very good test.
And you said, you're going to submit EUA for a.
Rapid antibody test right.
Yes.
Oh no.
Yeah, I was just going to ask.
Are they substantially use now rapid antibody test and the next question I guess would be as the with the primary setting for it would be.
The hospital or.
Right. So Paul what we what we have is we have already developed a very excellent.
COVID-19 antibody.
Elisa test. So that's now that's a test basically AD that runs on instrumentation and the laboratory.
And that is basically at the EU.
E U and EUA FTA approval, so we're free to sell it.
And in each of those each of those geographies.
The actual sales that was achieved as a disappointing.
I think everybody has seen that.
The level of antibody tests that had been expected.
Didn't actually materialize.
And that the focus has been mostly on PCR testing and then to a lesser extent on antigen testing, but to a modest extent.
Antibody testing between what kind of population tests and that kind of thing.
And.
So but in addition to in addition to that we.
Alright, I'll just submit to the FDA in the next under the EUA pathway.
And the next 5 weeks.
<unk>, our antibody rapid test.
Right, which has which we've been able to have greater potential for setting that they then the laboratory based antibody test.
Okay.
I'm sorry.
Yeah Yeah.
And then you know as.
You know at least for now we're shifting to reopening in the U S differ.
Different countries around the world are experiencing COVID-19 in different ways. Some.
Lowered their COVID-19 cases way earlier and some are actually still rising so as you look at your your markets are there places where are the.
Revenues in your traditional businesses are back to where they used to be or is.
Is it pretty much across the the world, but that's not the case.
We're experiencing baked into that everything is down.
I'm, probably about 10% on that side.
Average out.
And it's just that.
Particularly in the case of diabetes, right, which is somewhat of a discretionary.
The Avon C tests that are diabetic would you that'd be 3 months.
There's a discretionary element to it you know if you want to wait for months or whatever so to some extent.
We were finding that.
Patients don't presented the doctor at the middle of Identic.
And that's less the case in our autoimmune business.
And I think 1 of the principal problems, we've had with HIV is that getting into Africa, it's actually getting the product there because.
Air cargo has become really precious difficult to procure particularly into.
Remote areas of Africa.
So what I, what we do believe is that all of those business components will normalize back to that level.
The pandemic has largely passed and people are largely vaccinated.
Okay alright, thank you.
The next question comes from Jim Sidoti with Sidoti <unk> Co. Please go ahead.
Hi, Good afternoon can you hear me.
Hi, Jamie.
Great. So I believe I heard you said.
The transport media Covid revenue was around 8 million down from about $13 million. So that's down about 40% from Q4.
Can you give us a sense on.
No.
Where do you think that will trend for the rest of the year is there a baseline level that you think continues even if even as the vaccines rollout.
Well just to say that.
Firstly, we didn't say that.
Transport made it was global a date when we said that that does all of the cold drags products totaled $8 million to make that point Jim.
Okay.
The many variables involved including vaccinations and variance.
Typically to predict future demand COVID-19, the COVID-19 related products.
We're really not giving revenue guidance in the circumstances Jim.
It's just impossible to correct.
Alright, but I mean, it seems like it's likely that it'll decline from that $8 million.
Level.
Second and third quarters.
Reasonable to assume.
I think it is reasonable to assume but but again, we don't really it's reasonable to assume but we don't have great visibility on it it is reasonable to assume but it may not happen, but it it would probably be well to what extent, we're just not saying because we don't really have the visibility honest.
<unk>.
And again, new products coming with new products coming through also.
Alright, and then I assume some of those products are used in regions, where the vaccine is still pretty dominant outside the United States.
Correct.
Yes, although most of our revenues actually have been in the United States just make that point.
Okay.
Alright.
The other market, Florida.
You mentioned some hires in Africa in anticipation of train scheme can you.
Well give us some color what type of folks you harder.
Right right well.
Yeah, well, we basically we're in a position to hire them.
<unk> senior person really all of our main competitor.
Basically.
Main competitor was involved in an acquisition in the last couple of few years Big acquisition So anyway.
Anyway. So we were able to basically make a really really good hire of it very very senior person and then that person has brought in some of his previous reports.
We have we have actually a really strong team in position to take on this trip trained screen challenge on indeed to increase our market share.
And indeed, the rest of our range of products, but our primary focus is on trend screen.
1 million tests per year.
1 of those folks are primarily sales and distribution type folks it sounds like is that correct.
Yeah. This is this will be the basically that.
Yeah.
Sales guys.
So just geographically spread right across Africa.
Got it got it I know.
I heard you okay. So now I know the next.
The next 2 or 3 quarters is going to be very hard to predict because you're not sure.
How fast the Covid business will will trail off but longer term do you think the train screen business.
Has the potential to.
At least to offset if not.
Become a larger business than your Covid business was in 2020.
Well I mean to deal with that.
They the screening market is a 117 million tests per annum in Africa and the typical price.
Enterprise data.
Right.
Whatever that works out to about $140 million or whatever.
And basically.
We believe that we can take a reasonable market share.
I mean, the performance of our test in terms of sensitivity and specificity was staggeringly excellence.
I mean just remarkable.
And so the test works very well, we know the market we have a good reputation in the market.
We have been selling the gold standard you're going to go test it.
Basically the commands the highest price in the market for the last 15 years.
And so we clearly have the.
A good very good reputation in the market and in addition to that then we can manufacture the product in a very cost efficient.
And the art is on an automated system.
It has basically almost got limited production.
Production capability.
And in addition to that now we've beefed up our team with some serious hires in the very people that we're.
Setting the majority of the 170 million pets.
So I think.
And in addition to that I I see no doubt, but that will get W. H L warehouse organization approval.
Martha.
Our plan rather than if.
You take all that into into.
Ration and given an intention to March in the undercut the market leader the market leader has about 80% market share.
We believe that we can take a reasonable market share and if you if you.
Ran the numbers basically yet that we potentially here is a lot greater than the <unk>.
But the opportunity, which will probably gradually evaporation.
Yes, the answer to your question is yes, Jim.
Okay, Alright and.
How quickly do you think youll see that those sales pick up or their tenders that you need to win and how often are they they put out.
Do you expect to start winning tenders this year.
Alright, so I as I indicated we believe that we will get approval sometime in quarter 3.
It's possible it may be quarter 4.
So up to try and get clarification from the Tokyo H O on there being a little bit coy in terms of indicating what the timing would be.
But I think we are we hope to get there in quarter 3.
Actual route to market in individual countries.
It depends on being basically placed on the algorithm. So the algorithm will indicate which.
Product will be the screen a lot probably to confirm and in some instances screening can be split you can have a couple of chicken of 2 companies in there.
We believe that as the algorithms come through.
Renewal and they basically tend to come every 2 years.
That will be in every single time, we will be in there and we win some and we both win and.
Sure Selman I don't think so.
We believe that it's it's it's it's realistic to take is that sort of thing.
25% market share over the course of.
3 between 3 and 5 years are kind of thing so in the context of our size, it's a very very significant opportunity.
Okay and then the last 1 for me is on the <unk> instrument.
We plan on rolling out next year.
What's the strategy in terms of pricing do you charge the instrument or do you basically.
Let's let the customer use the instrument in exchange for <unk>.
Contract for.
Disposables.
Well in fact and in essence will be primarily selling the instrument because the only market in which we sell direct so I would actually place at instrument and you know kind of the cost, but their balance sheets et cetera is really in the United States and in Brazil. So in the United States. This instrument really won't we may not even bother actually bringing it to the market.
The U S.
Typically a bigger hospitals. So we're really not focused at all on the U S. So so yes, we would we would place some on our balance sheet and when we basically do reagent rentals in Brazil.
The main focus would be what we would sell this instrument to our distributors are right around the world who will then basically do the reagent rentals themselves. So what was what were endeavoring to do here is to provide an affordable instruments.
To place it in large volumes, we don't really endeavor to make any realistic any serious money as the actual instrument placement itself, but rather the end. So thanks anywhere a razor razorblade model, though we place to raise there.
Just marginally over cost and and seek.
Seek too.
Profit from the sale of the.
The blade so the reagent.
It's all about telling the reagent.
So so basically typically.
So but at the moment Premier goes into hospitals that will run a 10000 or more tests per year.
And the sweet spot for this instrument is between 3 and 8002.
So I'd tests per year.
And so it's got a lot, especially with potential that remember we've got a we've got instruments placed all over the world All basically all of the second World third World.
And that's been primarily our focus.
Okay got it thank you.
Thanks, Jim.
Yes.
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Our next question comes from Bill Lapp, who is a private investor. Please go ahead.
Good morning, Ron and John.
Things were pretty well covered.
I have some questions on why we're spending the time on the rapid.
Anti body test in Nebraska, and it just seems like the market is pretty competitive and it seems like we're late so I'm wondering what the thinking is I don't think the autoimmune lab testing you did much I don't know what you said the sales were minimal, but we're not seeing so can you explain why you're pursuing the rapid antibody test in a rapid antigen test.
When there seems to be plenty of competitive products and you haven't even been approved for the rapid antibody test in U S and the rest.
And you're spending money for the rapid antigen test, where do you see a big Mark Hurd Youre going to capture whats the thinking for going forward on this.
Hi, Betty.
Nice to hear from you just to say by the way Betsy we'll close the call. After the after this question.
But so so well.
I would concede Scott.
I can see that I would concede that the antibody test.
<unk> basically has disappointed in terms of in terms of the size of the market.
Having said that I think that there's a greater cause there.
There is greater market potential for the rapid antibody test than there is for the day. The laboratory based 1 and it's for that reason that we are actually.
Finishing basically the the launch of the product by submitting to the FDA in the next 5 weeks, but I, but I would see that that product is unlikely at least as we see things at the moment should be and to be a huge.
Huge revenue generator.
But to put that in response to your question about antigen testing I think.
Does that interest in testing will remain.
I mean COVID-19.
Although the populations will largely be vaccinated with the windows are.
Sure and I think the Covid antigen test it would be a very important parts of the armory of Trinity biotech given our ability to manufacture sort of under 50, and then also makes it basis.
Okay. So you will be competitive with the Abbott test.
I just sent John an article in the Minneapolis paper about the testing that we're doing here, but you know in a lot of companies are requiring the test <unk>. So I'm. Just I was just wondering if you think you can penetrate that market, even though you're a little late because of the rapid NUCYNTA cheapness of it right.
Yes, yes.
Yeah Okay.
When do you expect that to be done to rapid antigen test when do you think you'll have that ready.
We're just we're just we're just basically not going to give a prediction on timing here.
But you don't want to mislead.
We're just not making a timeline on it but we're working as quickly as possible.
Possible on it.
Okay, and that'll be will that be.
Do you wait.
Grant Yeah, we didn't use it would be you would be using the EUA pathway again yeah.
Okay, and then in Europe, and Europe Windows CE Mark though.
Okay Alright.
Alright, well I can see why you're you know last on the last call. You mentioned your most exciting thing was the W. Really true in the transcript I think I understand why.
Volume that makes sense. So good luck on getting that in the third quarter.
Thank you for joining.
So a question.
Thanks very much.
Alright, well. Thank you everybody for joining us this afternoon and for your support and interest and.
So good afternoon and speak to you next.
Next conference call.
Bye bye.
Thank you everybody. Thanks for your time.
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