Chembio Diagnostics, Inc.
Q2 2015 Earnings Call Transcript

Published: 9 Aug 2015

[Operator:]

Greetings and welcome to the Chembio Diagnostic Second Quarter 2015 Financial Results Conference Call. At this all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Sperzel, Chief Executive Officer for Chembio Diagnostics. Thank you Mr. Sperzel, you may begin.

[John Sperzel:]

Good morning. Thank you all for participating in today’s call. Joining me today is Rich Larkin, our Chief Financial Officer. Before we begin, I’d like to caution that comments made during this conference call today, August 06, 2015, will contain forward-looking statements within the meaning of the Securities Act of 1933, concerning the current beliefs of the company, which involves a number of assumptions, risks and uncertainties. Actual results could differ from these statements and the company undertakes no obligation to revise or update any statement made today. I encourage you to review all of the company’s filings with the Securities and Exchange Commission concerning these and other matters. During the second quarter, we continued to advance our internal product development projects, external partnerships and commercial strategies and tactics. With each milestone, we are better able to define our strengths as an organization and prioritize opportunities to leverage the sensitivity, specificity, and versatility of the DPP technology platform, as well as its ability to Multiplex i.e. to test for multiple diseases with a single patient sample. As a result in recent months, we’ve increased our focus and investment in specific projects, indications and markets that we believe will shape the company’s future. Before I turn things over to Rich for the financial review, I’d like to comment on the company’s financial results for the six months. While revenues for the six months of 2015 were slightly below 2014 numbers, direct sales in 2015 largely overcame 2.68 million of 2014 revenue associated with determination of our US STAT-PAK distributorship agreement, which was terminated effective June 03, 2014. Our R&D revenues of 996,000, although less than 1,076,000 in 2014, was strong in light of the 750,000 milestone payment from our partner in Malaysia, RVR in early 2014. Regarding margins, we are very pleased that our internal operations excellence initiatives help to achieve a 15% improvement in the product gross margin percentage, as compared to the same period in 2014. I’ll provide a more detailed overview of our recent and anticipated milestones following a review of the second quarter and six month financial results by Rich. Rich?

[Rich Larkin:]

Thanks John. In conjunction with my comments, I’d like to recommend that participants review Chembio’s 10-Q filing for additional details. I’ll first address the results for the quarter; our total revenues for the second quarter of 2015 of 6.72 million were down 9.5% compared with total revenues of 7.42 million in the prior year period. Product sales in the 2015 second quarter of 6.32 million were down 12.8%, compared with product sales of 7.25 million in the prior year period. Product sales in the second quarter of 2014 included 1.08 million of revenue, associated with the termination of our US STAT-PAK distributorship agreement. Research and development milestone and grants and royalty revenues for the three months ended June 30, 2015 increased to 395,000 from a 174,000 in the prior year period. Our gross margin dollars for the 2015 second quarter increased 1.2% to 3.02 million as compared with 2.98 million for the prior year period, due primarily to the increase in non-product revenues. The amount of product gross margin for the second quarter of 2015 decreased 6.6% to 2.62 million from 2.81 million in the prior year period. Research and development expenses in the second quarter of 2015 were 1.76 million, compared with 1.27 million in the prior year period. This increase is due primarily to increased R&D activities for projects and grants. Some projects are on a milestone basis for which revenue cannot be recognized until the milestone is achieved, while expenses to reach that milestone are expensed in the period in --. We expect to see continued project and grant revenues in the second half of 2015, which will result in the continued R&D expenditures. Selling, general and administrative expenses in the second quarter of 2015 increased to 2.16 million from 1.95 million in the prior year period, largely due to increased staffing, wages and related costs, increased travel primarily related to our commercialization efforts and professional fees. Operating loss for the second quarter of 2015 was 898,000 compared with an operating loss of 233,000 in the prior year period. Net loss for the second quarter of 2015 was 664,000 or $0.07 per diluted share, compared with a net loss of 146,000 or $0.02 per diluted share for the prior year period. I’ll now address results for the six month period. Our total revenues for the first six months of 2015 of 12.95 million were down 2.2% compared with total revenues of 13.24 million in the prior year period. Product sales in the 2015 first six months of 11.94 million were down 1.8% compared with product sales of 12.15 million in the prior year period. As previously noted; product sales for the first six months of 2014 included 2.68 million of revenue associated with the termination of our US STAT-PAK distributorship agreement. Research and development milestone and grant and royalty revenues for the six months ended June 30, 2015 decreased to 1,011,000 from 1,083,000 in the prior year period. As previously noted, research and development milestone and grant and royalty revenues for the first six months of 2014 included a 750,000 milestone payment from RVR. Our gross margin dollars for the 2015 first six months increased 8.6%, 5.71 million compared with 5.26 million for the prior year period, due primarily to the increase in gross margin percentage. Both our internal operations excellence program which has helped to reduce our manufacturing costs along with product mix were primarily responsible for the increased gross margin percentage form products. The amount of product gross margin for the first six months of 2015 increased 12.5% to 4.69 million from 4.17 million in the prior year period. Research and development expenses in the first six months of 2015 were 3.34 million compared with 2.47 million in the prior year period. This increase is due primarily to increased R&D activities for projects and grants. And as we stated, with respect to the quarter, some projects are on a milestone basis for which revenue cannot be recognized until the milestone is achieved, while expenses to reach that milestone are expensed in the period incurred. We expect to see continued project and grant revenue in the second half of 2015, which will result in the continued R&D expenditures. Selling, general and administrative expenses in the first six months of 2015 increased to 4.14 million from 3.4 million in the prior year period, largely due to increased commissions on sales in Brazil, increased staffing, wages and related costs and increased travel expenses, primarily related to our commercialization efforts and professional fees. Operating loss for the first six months of 2015 were 1,773,000 compared with an operating loss of 616,000 in the prior year period. Net loss for the six months of 2015 was 1,311,000 or $0.14 per diluted share compared with a net loss of 371,000 or $0.04 per diluted share for the prior year period. The company had cash and cash equivalents of 1.56 million as of June 30, 2015 compared with 4.61 million as of December 31, 2014. The decrease was primarily due to cash used in operating activities of 2.17 million as well as investing activities to fund the purchase of a license and purchase of fixed assets of 0.88 million. The license purchase refers to our purchase of the outstanding portion of the post May 2016 rates to our SURE CHECK HIV 1/2 Assay product. The company currently has a positive working capital; however, it has used approximately 3 million in cash for the six months ended June 30, 2015. Company has the ability to borrow up to 2 million on its HSBC demand note if necessary. Approximately 7.4 million of the 8.9 million of accounts receivable is from one customer, and the company has a high degree of confidence that the receivables are collectable from this customer. Our working capital decreased by 1.57 million during the six months from 12.37 million to 10.8 million. That concludes the financial review. I will now turn the call back over to John.

[John Sperzel:]

Thanks Rich. As I mentioned in my opening remarks, Chembio has made progress towards each of its operational goals during the second quarter. Such advancements towards commercial development and collaborative milestones has significantly shaped our strategy. We categorize our activities in to three distinct business areas, sexually transmitted diseases, fever and tropical diseases and licensing and partnerships. I’ll first speak about sexually transmitted diseases, during the company’s early work in HIV, Chembio first established itself as a leader in the point-of-care diagnostics market place. According to the CDC, there are more than 1.2 million people in the United States living with HIV infection. And while the number of new infections has remained relatively stable at approximately 50,000 per year, the incidence of HIV in the United States is not declining. In fact over the past decade, according to the CDC the number of people living with HIV in the United States has increased. Compared to other indications, the HIV market demands unparalleled sensitivity and specificity and Chembio’s long term success serving this station population speaks to the company’s commitment to the highest quality standards and product performance. Chembio has multiple point-of-care HIV products on the market today in the United States and internationally, including our STAT-PAK Assay, our SURE CHECK Assay, and our DPP HIV Assay. Each of these point-of-care HIV test are FDA, TMA approved and clear waved. The company’s development work in HIV continues today, and our proprietary DPP technology allows us to significantly improve the diagnostic options available to this patient group. Specifically, DPP allows us to test for HIV using multiple specimen types including blood and oral fluid. The DPP technology also allows us to test for multiple sexually transmitted diseases simultaneously with a single drop of blood. This is critical as we are observing a rise co-infection rates for disease such as HIV and Syphilis in the United States and abroad. Chembio is actively working internally on multiple development initiatives in the sexually transmitted disease area with our primary focus on the development of the DPP HIV-Syphilis combination Assay for the US market. It is a company priority to be first to market with a DPP HIV-Syphilis combination assay for the US market, and we are confident in our ability to achieve this goal. While the company has already successfully marketed a DPP HIV-Syphilis combination Assay in Latin America, US regulatory standards require additional enhancements for the US market. We are completing our pre-clinical work for this product, and our current focus is on clinical sight selection activities in preparation for the US clinical trial with our DPP HIV-Syphilis combination Assay. We’ve also discussed regulatory strategy with our European notified body, and will submit the technical dossier for CE Mark to pave the way for commercialization of the DPP HIV-Syphilis combination Assay in Europe. I’ll now address our fever and tropical disease business. Over the last year, Chembio partnered with a number of the world’s leading organizations, including the Center for Disease Control and Prevention and the Bill and Melinda Gates Foundation in the quest to develop next generation point-of-care diagnostic test for certain fever and tropical diseases. As I’ve stated in the past, all but one of these projects is funded by Chembio’s partners with initial targets including malaria, dengue fever and Ebola. Chembio’s DPP technology serves as the foundation for each of its fever and tropical disease partnerships, and during the second quarter of 2015 I am pleased to report that we made great progress with a number of these initiatives. First I’d like to update you on our DPP malaria initiative. Malaria is a mosquito borne illness and according to the World Health Organization, there are nearly 200 million cases of malaria annually. For the last six months, we’ve been working under a feasibility grant from the Bill and Melinda Gates Foundation with a goal of developing an ultrasensitive point-of-care malaria assay. In this case, ultrasensitive is defined as greater than a 10-fold improvement in the sensitivity of the world’s leading point-of-care lateral flow malaria assay of which approximately 200 million tests are sold annually. We believe our DPP Malaria assay will deliver a 10-fold improvement in the sensitivity compared to the world’s leading point-of-care lateral flow malaria assay, and we are hopeful to receive further funding from the Bill and Melinda Gates Foundation although there are no guarantees. Second, I’d like to update on our DPP dengue fever initiative. Like malaria, dengue fever is a mosquito borne illness and according to the CDC and World Health Organization, there are between 50 and 100 million cases of dengue fever annually. We are making very good progress with our DPP dengue fever initiative and we expect to begin a field study of our assay in the third quarter of 2015. Thirdly, I’d like to update you on our DPP Ebola initiative. We previously promised to provide DPP Ebola Assays to the CDC for testing in the second quarter of 2015. I am pleased to report that we delivered on that promise, having sold 10,000 DPP Ebola Assays to CDC as of today’s date. And the CDC is currently testing our DPP Ebola Assay in West Africa. I’m also pleased to report that we are working with the FDA regarding emergency use authorization, and we are optimistic about those discussions. When it comes to Ebola testing, we believe a combination Malaria Ebola Assay is what’s needed in the market. That is a malaria diagnostic tool combined with an Ebola surveillance tool. And we aren’t alone in that belief. On June 19, the CDC issued an official health advisory stating the following

[Operator:]

[Operator Instructions]. Our first question comes from the line of Bill Bonello from Craig-Hallum. Please proceed with your question.

[Bill Bonello:]

On the malaria market a couple of things, one, I am just hoping you could repeat the number of tests that you said are currently done by the leading assay, and then may be just give us a little more color on that market. Who’s purchasing these tests, maybe what the dollar size of the market is etcetera.

[John Sperzel:]

In terms of malaria I think it’s fair to say that the public statements made around point-of-care malaria testing by the market leader are that, of their 600 million point-of-care rapid assays, approximately one-third are malaria. So you conclude that that’s about 200 million tests. Today we know that the Malaria Assays that are sold globally mostly purchased by the government including the US government for some regions are in the range of $0.50. They also have the sensitivity level of about 800 picograms per ml, which many people including the Gates Foundation believe is not sensitive enough to eradicate and that’s the basis behind the feasibility project that we’ve been working under the Grant from the Bill and Malinda Gates Foundation, which is really to drive a 10-fold improvement in the sensitivity of the market leading assay. So that means to drive the sensitivity down to a level to touch of 80 picograms per ml or better.

[Bill Bonello:]

Just on that, sort of what’s the timeline there then? You said you’ve been working for the last six months, sort of what happens next and take us through to when we potentially could have a product in the market.

[John Sperzel:]

I would think about malaria in terms of two potential paths, one path is to develop an ultrasensitive Malaria Assay that is in the range of 80 picograms per ml or lower. That may be used as test to help in an eradication program, that’s a standalone Malaria Assay. We believe that that test will command a premium price in the market, and we have indications from partners that confirm those beliefs. The second is malaria as part of our Fever Panel Assay, and whether we achieve sensitivity level of 80 picograms per ml or lower, would potentially give us an anchor assay on our fever panel that is malaria, that is the most widely used fever assay, and also we believe we would have one of the most sensitive assays in the market if not the most sensitive assay in the market. So think about malaria potentially as a standalone assay and think about malaria as part of a Multiplex for fever diseases. As I mentioned in the opening remarks, we intend to provide the CDC with a Malaria-Ebola Combination Assay during the third quarter of this year. So from a timing standpoint, that should give you an indication of where we are with the project.

[Bill Bonello:]

And then just on the DPP HIV, what’s kind of the timing there?

[John Sperzel:]

I’m not sure what you are saying DPP HIV --.

[Bill Bonello:]

I’m saying HIV Syphilis.

[John Sperzel:]

Okay. So we expect to start the clinical trials in the second half of this year in the US, and we are preparing to do so.

[Bill Bonello:]

Can you give us any more color, I think in the Q you talked about a decline in DPP sales in Mexico, if that’s more of a timing or a trend or if we had one-off orders last year, how should we think about that.

[John Sperzel:]

So the way that I would think about that is, we have a very strong program with the DPP HIV-Syphilis program in Mexico to screen pregnant women and the objective there is to stop transmission of HIV and Syphilis in the pregnancy process to unborn children. That program was launched in 2014 a very successful launch, and we expect that program to continue. We are working with our partner in Mexico to ensure continued sales in that program. I think some of that is timing Bill.

[Bill Bonello:]

The final thing is just in the US HIV testing market, what are you seeing there from any kind of competitive impact. Obviously you guys came out with an improved test with the oral collection, but I know others are out there with antigen, antibody test. What sort of is happening in terms for what the customers are looking for in this market and any share shift that we might be seeing?

[John Sperzel:]

So without commenting on a specific geography globally, what I would say is, and I think you know this, two of the companies report specific performance around HIV, whether it’s domestic or international, and both have reported sort of down sales of their HIV assays. If you look at our performance year-over-year through the mid-way mark, our overall sales have 1.5% to 2% declined. So we are holding our own, and HIV comprises the majority of our revenue. So we believe that having three HIV assays to market and sell globally, whether we do that ourselves in the US, with the case of DPP and STAT-PAK, or we do it through a partner as is the case in the US with our SURE CHECK Assay, we think that that’s an asset to have multiple options for our customers and that’s proving to be through whether it’s for blood testing of HIV or oral fluid testing of the HIV. There is also a lot of discussion about so called fourth generation antibody, antigen based HIV assays, and obviously there’s some uptick in the market on the laboratory side with the CDC recommendation to use a fourth generation laboratory HIV assay, and it’s a little bit early to tell on the uptake in the markets of the point-of-care antibody antigen based assay. I think globally it’s had very little impact to the US; it’s too early to tell.

[Bill Bonello:]

And then just a final question, can you comment at all on sort of your direct selling efforts in the US and how that transition is been going.

[John Sperzel:]

So I commented in the last quarter about the transition of STAT-PAK which is where we terminated our previous US distribution agreement, and I said that we lost some of that sales during the transition and during the second quarter, and going in to the third quarter we’ve initiated a STAT-PAK relaunch program and we are seeing very good traction with that in the US market. We are also now eight months in to the launch of our DPP assay which as you know can be used both for blood and oral fluid samples, and we are seeing exactly what we expected which is slow and steady growth. We continue to see strong demand for our SURE CHECK Assay as well which as you know is marketed and sold in the US by Alere under the brand name Clearview Complete.

[Operator:]

[Operator Instructions] The next question comes from the line of Raymond Myers from Benchmark. Please proceed with your questions.

[Raymond Myers:]

I want to ask you about these market introductions and maybe a little bit about the size of the markets and the estimated timing to significant sales in each of them. So can we start with the Ebola market please?

[John Sperzel:]

Sure. So Ray what’s the question specifically.

[Raymond Myers:]

The question is can you start with describe the size of the Ebola market. You talked about 200 million tests roughly being sold currently by the market leader in that space. Can you talk a bit about what do you think the size of that market might be if you could have a ultrasensitive malaria test combined with Ebola. How big was that total opportunity set that Chembio is targeting?

[John Sperzel:]

I think we have to develop these assays individually, but absolutely our goal is to put together a Multiplex Assay to screen for fever diseases. And the reason is, and if you take Ebola for an example, even in the midst of an Ebola outbreak in West Africa, if you decide for what the CDC said in their health advisory alert, the majority of the times the symptoms that that patient presents with are not going to be Ebola, just given the incidents. They are much more likely to be another fever disease for example, malaria because it’s the big common denominator. So while we think there is some utility for a standalone Ebola test certainly in the midst of an outbreak there is more utility, we think the greater market opportunity is a multiplex assay for fever disease. So we are not really looking to answer the question about does the station have Ebola or do they not, which certainly we can deal with a standalone Ebola Assay, and that’s what CDC is testing in West Africa as we speak. We think that what healthcare providers need to do is answer the question when a patient presents with these symptoms which are common across many fever disease. Answer the question, what is this patient infected with. Not do they have Ebola or not, not do they have malaria or not, but what are these fever symptoms the result of. Is it malaria, is it dengue, is it Ebola, is it another fever disease, and of course we’ve started with malaria, dengue fever and Ebola. So in terms of describing the market, it’s a little bit difficult to say the Ebola market is this big because its new, the malaria market’s well defined, the dengue market is pretty well defined. Putting all of those together, it’s not one plus one plus one equals three. The big M here is malaria and that’s why we think developing an ultrasensitive malaria assay as the anchor assay on our fever panel test is a right strategy.

[Raymond Myers:]

That helps. Thanks John. What we’ve talked about is the introduction of a certain initial sales of these tests to various African markets. When do you think that that could lead to large scale purchases in those markets? What’s your timeframe?

[John Sperzel:]

Well some of that depends on the result of the testing with the CDC, and we don’t want to get ahead with our selves. So we provided the DPP Ebola Assays to the CDC in the second quarter. That testing is ongoing. As we said, we are providing the DPP Malaria-Ebola Combination Assay to the CDC during the third quarter and that testing will be initiated by the CDC and other partners. And so I don’t want to get ahead of ourselves too much, and to see what that performance looks like. But based on the testing that we’ve done in our laboratories, based on the testing that we’ve done in the case of Ebola and the BSL4 high containment laboratories on wild Ebola virus, that’s a live virus, the result are very promising and so we are optimistic that we are going to be able to bring a Multiplex Assay whether its Duplex Assay of malaria and Ebola or a Multiplex Assay as I mentioned before under the project that we are hopeful to get funded to develop a 7-Plex Assay. So these things take time and we are working with the proper channels, whether it’s the FDA for emergency use or in our partnership, the research collaboration that we have with the CDC to do the field testing. We have to work through that process before we start to articulate what the launch timing will be. And I appreciate you respecting that.

[Raymond Myers:]

Can you give some little more sense of the growth of market opportunities and the timing of those or various other partnered products you have. You talked about feeding the feasibility of a few of them. Can you talk about when you expect to reach significant sales of those, and how big those opportunities are?

[John Sperzel:]

It would be too early to start to put those figures out there Ray. We are just completing feasibility on the brain injury marker. We have completed feasibility on the test for specific form of cancer that partner liked the results of that feasibility, and is continuing to fund that project. So we are making progress absolutely and we are pleased with the results and they are on track. But to start to predict when we might be able to come to market with the test for a specific type cancer through that partner or when we would be in the market potentially with the test that could identify traumatic brain injury, it’s just too early. I just would say one thing; we really started an outbound effort in the last year to look for opportunities where the DPD technology platform abide, and I think what you’re seeing in the last year is continued efforts in sexually transmitted diseases, which has been a strength of Chembio. And you are seeing us evolve in to areas that had never been discussed in Chembio before, which are fever and tropical diseases where we have significant market opportunity, and then these other areas and where we are progressing as planned in almost all of those areas, and we are very optimistic because the thesis going in was that DPD was a platform technology that had lots of versatility and we are seeing now, which is great news.

[Raymond Myers:]

Just a final housekeeping question, may be you can touch on your optimism for improving the accounts receivable and touch on the company’s balance sheet liquidity for the second half of the year.

[John Sperzel:]

Sure, great question and thanks for bringing that up. Rich talked about the cash that we have on the balance sheet, he also talked about our accounts receivable being much higher than it typically is and that is predominantly sales to one customer. I can tell you that I have been personally involved in that customer on a regular basis and we are confident that those receivables are collectibles. So when we think about cash availability we expect that a large percentage of those receivables, all of them will be collected and we look at the as cash on the balance sheet if you will.

[Operator:]

Our next question comes from the line of Larry Heimowitz from [HMTC]. Please proceed with your question.

[Unidentified Analyst:]

Rich I think you mentioned a number for the sales from Alere that ended in June of last year. Did I catch it right, was it something like about $1 million that you had in last years’ first half from the Alere relationship, is that correct?

[Rich Larkin:]

Close to 2.7 million in the first half of last year for STAT-PAK in the US.

[Unidentified Analyst:]

Okay, and then of course it ended I think it was June 1 of 2014.

[Rich Larkin:]

That’s correct.

[Unidentified Analyst:]

So can you give us a comparable John I know you’ve gone to a direct effort when you broke agreement a year ago now, more than a year ago now? What was the comparable number for this year’s first half relative to that 2.7 million last year?

[John Sperzel:]

Well we wouldn’t want to break it out that way Larry for competitive reasons. We try not to talk about sales of particular assays in certain markets because today the majority of our sales are made up of HIV testing. But what I can do is give you some color around it. And that is that, we had an agreement with a partner that effectively prohibited us from talking to any customers, and so there was also a wait period in that agreement, and we basically started from a standing start if you will on June 4 of 2014 and going out and speaking to customers. Prior to that time, we had no experience we could get any customers in the United States related to our STAT-PAK Assay. We could speak about the DPD Assay, which at that point was PMA approved but not yet [Clearview], and so we started that venture in June 4 in fact of 2014 and what we found over the course of the next period of months is that our partner had successfully transitioned much of that STAT-PAK business to other tests. One being their test, the other being the SURE CHECK Assay which we share, and so our focus has been from the day we launched our US commercial initiative to speak to customers initially in the public health market and identify their needs and then position whichever product best hits those needs. So we are not so focused on whether we tapped DPD sales or STAT-PAK sales or even SURE CHECK sales through our partner in the US. We are more interested in the fact that they buy a product from Chembio, whether it’s one of those three, even if it’s through a partner. So that led us to the second quarter and going into the third quarter, we launched our STAT-PAK Assay, because we are certainly not going to lay down and say why we lost sales in the transition, that’s disappointing. While it’s disappointing, we are going to continue to fight to regain those sales and improve them as we go forward. And so we launched a specific initiative initially targeting public health to drive more widespread screening for HIV, because as I mentioned in my early remarks, the incidents of HIV in the United States is not declining. More people are living with HIV in the United States. We think one of the answers to help turn that around is more widespread testing, and so we put together an initiative to help drive more widespread testing in public health, which is cost constraint.

[Unidentified Analyst:]

Let me ask the question a little differently. I would assume given that you’ve had flat revenue and actually declining revenue to some extent. That the 2.7 million is not -- you are not back to where you were a year ago and that because of what’s happened in the way the agreement changed it’s taken some time for you to regain that momentum. Is that fair to say that you are not -?

[John Sperzel:]

That’s a fair characterization. But also keep in mind a specific reference point. The market leading US HIV company reported sales that were down in double-digits quarter-over-quarter half year-over-half year. So, yes that’s a fair characterization.

[Unidentified Analyst:]

And then another question John on the HIV-Syphilis test which I think Bill Bonello asked earlier. I wanted a little bit more color on it. I thought you said that you intend to begin the clinical trial in the second half. Do you have any color on that comment, in other words, do you know what the trials’ going to look like, how many patients the FDA is asking you to enroll and roughly how long that might take you.

[John Sperzel:]

We absolutely do, I wouldn’t want to lay all that information out publicly because we are still in discussion with the FDA about the clinical trial and we want to be respectful of those communications.

[Unidentified Analyst:]

Sure.

[John Sperzel:]

I will just reinforce Larry that getting to market with a HIV-Syphilis Combination Assay is our number one internal product development priority, and we’ve made it a company mission to be first to market with that test, and we are confident in our ability to do so.

[Unidentified Analyst:]

When do you think the actual trial will begin John? It sounds like you are still negotiating the final protocol. Do you think it’s fair to say before the end of this calendar year that the trial will actually be underway?

[John Sperzel:]

That’s our goal.

[Operator:]

There are no other questions in queue. I would like to hand the call back over to Mr. Sperzel for closing comments.

[John Sperzel:]

Thank you very much for your participation in today’s call. We look forward to updating you further at the end of the third quarter. Have a great day everyone.