Chembio Diagnostics, Inc.
Q3 2015 Earnings Call Transcript

Published: 12 Nov 2015

[Operator:]

Greetings and welcome to the Chembio Diagnostics Third Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Sperzel. Please go ahead, sir.

[John Sperzel:]

Hello and thank you for participating in today’s call. Joining me is Rich Larkin, our Chief Financial Officer. Before we begin, I would like to caution that comments made during this conference call today, November 12, 2015, will contain forward-looking statements within the meaning of the Securities Act of 1933, concerning the current beliefs of the company which involve 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. Chembio continues to focus on three business areas

[Rich Larkin:]

Thanks, John. In conjunction with my comments, I would like to recommend that participants review Chembio’s 10-Q filing for additional details. I will first address the results of the quarter. Our total revenues for the third quarter of 2015 of $6.89 million were down 5.8% compared with total revenues of $7.31 million in the prior year period. Product sales in the 2015 third quarter of $6.12 million were down 14.3% compared with product sales of $7.25 million in the prior year period. Research and development milestone grant and royalty revenues for the three months ended September 30, 2015 increased to $678,000 from $66,000 in the prior year period. Our gross margin dollars for the 2015 third quarter increased 9.8% to $2.91 million compared with $2.65 million for the prior year period, due primarily to the increased non-product revenues. The amount of product gross margin dollars for the third quarter of 2015 decreased 13.6% to $2.23 million from $2.5 million in the prior year period. Research and development expenses in the third quarter of 2015 were $1.57 million compared with $0.97 million in the prior year period. This increase is due primarily to the increased R&D activities for projects and grants. Some of the 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 revenues in the rest of 2015, which will result in continued R&D expenditures. Selling, general and administrative expenses in the third quarter of 2015 decreased to $1.92 million from $1.94 million in the prior year period largely due to decreased consulting, stock-based compensation and marketing material expenses partially offset by increases in staffing wages and related costs and increased travel expenses related to our commercialization efforts. Operating loss for the third quarter of 2015 was $579,000 compared with an operating loss of $262,000 for the prior year period. Our net income for the third quarter of 2015 was – net loss, I am sorry, for the third quarter of 2015 was $437,000 or $0.05 per diluted share compared with a net loss of $271,000 or $0.03 per diluted share for the prior year period. Now, I will address the results for the nine months. Our total revenues for the first nine months of 2015 of $19.83 million were down 3.5% compared with total revenues of $20.55 million in the prior year period. Product sales in the first nine months of 2015 were $18.15 million and were down 6.5% compared with product sales of $19.4 million in the prior year period. Research and development milestones, grant and royalty revenues for the nine months ended September 30, 2015 increased $1.69 million from $1.15 million in the prior year period. Our gross margin dollars for the 2015 first nine months increased 9% to $8.62 million compared with $7.91 million for the prior year period due primarily to the increased non-product revenues. The amount of product gross margin dollars for the first nine months of 2015 increased 2.5% to $6.93 million from $6.76 million in the prior year period. Both our internal operations excellence program, which has help reduced our manufacturing cost, along with product mix were primarily responsible for the increased gross margin percentages from our products. Research and development expenses for the first nine months of 2015 were $4.91 million compared with $3.44 million in the prior year period. This increase is due primarily to increased R&D activities for grants and projects. 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 revenues in the rest of 2015, which will result in continued R&D expenditures. Selling, general and administrative expenses in the first nine months of 2015 increased to $6.06 million from $5.34 million in the prior year period largely due to increased commissions on sales in Brazil, increased staffing wages and related cost and increased travel expenses primarily again related to our commercialization efforts, along with professional fees. Operating loss for the first nine months of 2015 was $2,353,000 compared with an operating loss of $878,000 for the prior year period. Our net loss for the first nine months of 2015 was $1,748,000 or $0.08 per diluted share compared with a net loss of $641,000 or $0.07 per diluted share for the prior year period. The company had cash and cash equivalents of $1.1 million as of September 30, 2015 compared with $4.61 million as of December 31, 2014. The decrease was primarily due to net cash used in operating activities of $2.58 million as well as investing activities to fund the purchase of a licensed and purchase of fixed assets of $0.93 million. The license purchase refers to our purchase of the outstanding portion of the post-May 2016 rights to our SURE CHECK HIV 1/2 assay product. The company currently has a positive working capital. However, it has used approximately $3.5 million in cash for the nine months ended September 30, 2015. Our accounts receivable balance as of September 30, 2015 was nearly double our historical levels. As of November 11, 2015 the customers representing $7.9 million of the September 30, 2015 receivables has made $6.8 million in payments since the end of the third quarter of 2015. Our working capital decreased by $1.77 million during the nine months from $12.37 million to $10.6 million. And that concludes the financial review. I will turn the call back over to John. John?

[John Sperzel:]

Thanks Rich. As mentioned in my opening remarks, Chembio achieved a number of important milestones during the third quarter in each of the three business areas; sexually transmitted diseases, fever diseases and technology collaborations. First, we will speak about sexually transmitted diseases. In the second quarter of 2015, Chembio’s European partners AAZ and BioSure launched sales of a private label version of Chembio SURE CHECK HIV self-testing kits in the UK and France respectively. The launch of these self-testing kits in Europe was a great success. And we have received orders that will bring our total sales of these kits to approximately $1 million in 2015. There are approximately 110,000 people living in HIV in the UK, an estimated 26,000 are unaware of their positive HIV status. In France, there are approximately 160,000 people living with HIV and an estimated 29,000 are unaware of their positive HIV status. European health agencies continue to promote the importance of HIV testing and we believe our SURE CHECK HIV assay is particularly well-suited for the emerging European self-testing segment, given its innovative design characteristics and its ability to provide simple, fast and reliable detection of antibodies to HIV 1 and HIV 2. In Brazil, we continue to have a strong relationship with and sales to the Ministry of Health, our sole customer in the country. As a reminder, healthcare in Brazil is a constitutional right and the government funded Unified Health Systems or SUS, covers the majority of Brazil’s 200 million plus citizens. As discussed on prior calls, the arm of the government which handles Chembio products is FIOCRUZ or Bio-Manguinhos. For more than a decade, we have worked closely with FIOCRUZ, Bio-Manguinhos and our products are an integral part of Brazil’s healthcare system. Initial indications for 2016 product demand from the Ministry of Health lead us to believe that Brazil will continue to be a strong market for Chembio. As we have stated in previous quarters, our priority in the sexually transmitted disease area is to be first to market with a DPP HIV- Syphilis combination assay for the United States. While the company is already successfully marketing a DPP HIV-Syphilis combo assay in Latin America, U.S. regulatory standards require additional enhancements for the U.S. market. We plan to initiate a DPP HIV-Syphilis clinical trial in the United States during the first quarter of 2016. And while this is one quarter later than we previously communicated, the scheduled adjustment allows us to incorporate the new DPP Micro Reader into the clinical trial. We anticipate the trial will be completed in six months to nine months from initiation and the cost will be between $1 million and $1.5 million, which includes data collection for both the FDA submission and the clear waiver application, which as you know are sequential filings. We are also in the process of submitting the technical dossier for CE Mark, which will allow us to commercialize the DPP HIV-Syphilis assay in Europe. Second, we will speak about fever diseases. Our fever diseases business had a number of significant advancements during the third quarter of 2015. We received the $2.1 million grant from the Paul G. Allen Ebola program to develop a DPP fever panel assay, a point-of-care test for multiple fever diseases. We delivered our DPP Ebola assay to the CDC for field testing in West Africa, generating initial revenues of $150,000 with committed orders of $900,000 related to DPP Malaria Ebola and DPP Ebola assays for the fourth quarter. We completed development of our DPP Dengue Fever assay, which will begin field testing next month. And we made extraordinary strides to develop a DPP Malaria assay that is ten times more sensitive than the current world leading point-of-care malaria test. We believe there is a significant global need for a simple, cost-effective point-of-care diagnostic test capable of testing for multiple fever diseases simultaneously. The Paul G. Allen Ebola program shares this view. And in the third quarter of 2015, that program granted $2.1 million to Chembio to fund the 12-month development of a DPP Fever Panel assay to simultaneously detect malaria, dengue, Ebola, Lassa, Marburg and chikungunya. Today, these diseases are commonly misdiagnosed due largely to the fact that they have similar symptoms that are difficult to differentiate. Currently available point-of-care diagnostics may lack the ability to test for multiple diseases simultaneously and may lack the sensitivity and/or specificity required to detect infected but asymptomatic patients, information that is critical for preventing the spread of disease. It is the goal of both the Paul G. Allen Ebola program and of Chembio to limit the spread of infection through accurate diagnosis. We are honored that Chembio’s DPP technology was selected as a platform for this important project and we look forward to delivering the world’s first ever point-of-care multiplex test for these serious fever diseases. Another significant development was the result of the six-month feasibility project that sought to achieve enhanced sensitivity with Chembio’s DPP Malaria assay. Based on initial testing, the DPP Malaria assay achieved the goal of a ten fold improvement in sensitivity as compared to the current world leading point-of-care Malaria assay. We are extremely pleased with the performance of the DPP Malaria assay and believe it will significantly improve the diagnosis of malaria and provide healthcare workers with a new advantage in fighting this serious fever disease. Based on these results, we are aggressively working towards the development and launch of a new suite of DPP Malaria assays, including a DPP Malaria Ebola combination assay, which we expect to begin field testing in West Africa in 2015 and DPP Fever Panel assay, which we expect to be ready for field testing in 12 months. Lastly, we will speak about technology collaborations. In our technology collaborations, we continue to work towards the development of products that may change diagnostic patterns for indications beyond sexually transmitted disease and fever diseases. During the third quarter, we had several notable advancements. First, we successfully completed a feasibility testing of a biomarker in our DPP cancer diagnostic program. This program, which targets a specific type of cancer is funded by an undisclosed partner. And based on positive results of the feasibility testing, we have moved into the product development stage, which is also funded by our partner. Collaborated by these results, we believe that the utility of the DPP platform may extend to other areas in addition to our focus disease areas. And while it is still early in development, we hope to find new opportunities for DPP in the broader oncology sector. During the third quarter, we also made progress with our DPP traumatic brain injury assay. This project, which is funded by Perseus Science Group is in the feasibility phase. We are currently working with several hospitals to finalize institutional review board or IRB agreements and develop the plan for conducting initial studies of the DPP traumatic brain injury assay using patient samples. Another significant achievement during the third quarter of 2015 was the launch of the DPP Micro Reader as a result of our agreement with opTricon, a leading developer of mobile analysis devices for rapid diagnostic tests. Through our exclusive agreement, which covers the fields of sexually transmitted diseases, certain fever diseases and a specific form of cancer, Chembio will market and sell the DPP Micro Reader as a complement to several of our proprietary DPP assays. The DPP Micro Reader is simple, fast, palm-sized, battery-operated and cost effective compared to traditional point-of-care assay readers. That DPP Micro Reader includes an innovative image sensor to provide quantitative interpretation of diagnostic results when combined with Chembio’s proprietary DPP immunoassay technology. Using a state-of-the-art camera system, the DPP Micro Reader is designed to provide definitive diagnostic results for low analyte concentrations which may otherwise result in faint or ambiguous test results. In addition, the DPP Micro Reader will provide customers with various options to capture, transmit, and store test results. As a leader in diagnostic testing, Chembio intends to stay at the forefront of technology and innovation. We strive to continuously deliver enhancements and always respond to the needs of our customers. The DPP Micro Reader is an important piece of this strategy, allowing us to provide quantitative analysis and data management of testing results for those circumstances that require this capability. In closing during the third quarter, the value of Chembio’s DPP technology was validated in numerous ways. Our products were successfully launched into new markets, such as HIV self-testing in Europe. We received a $2.1 million grant from the Paul G. Allen Ebola program to develop the first ever point-of-care multiplex fever panel. Orders from the CDC for our DPP Malaria Ebola and DPP Ebola assays products that have been under development for less than a year exceed $1 million for 2015. Internal development has successfully produced a DPP Malaria assay, another product that has been under development for less than a year that is capable of competing with the current world leading point-of-care malaria assay. We also continued to advance the U.S. version of our DPP HIV-Syphilis assay as well as our DPP dengue, DPP cancer and DPP traumatic brain injury assays. And we gained exclusive rights to the DPP Micro Reader, which will play an important role in the commercialization of DPP assays in a number of areas. With these advances and growing validation from leading healthcare groups, we believe we are well-positioned to expand our product lines, our brands and our markets worldwide. This concludes our prepared remarks for today. I would now like to open the call for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Per Ostlund with Craig-Hallum Capital. Please proceed.

[Per Ostlund:]

Thanks. Good morning, John and Rich. A lot of good developments here, I almost don’t know where to start and don’t know how to limit this to one question or related follow-up, but if we could start with a couple of these newer opportunities. So, Europe really looks like a significant opportunity for you. And I guess what I am wondering is you have already kind of telegraphed what the orders for the year could be, given the nature of the customer in other words not being maybe a government provider here, a little bit different market, is that the kind of business that’s going to be a little steadier in the sense that it’s not going to be subject to the fits and spurts of tender and that sort of thing? Is kind of that $400,000, $500,000 a quarter something that you might expect to persist?

[John Sperzel:]

So Per, first thing is the $1 million that we referenced in the commentary, those are orders that we already have for 2015 so just to clarify that. And the second about how to look at this on a go-forward basis, it’s still early. I think as you recall we were a bit cautious in trying to project what might happen with the self-test initiative in Europe, because it is early for the in-country efforts around self-test for HIV. So, I think we should be a little bit careful about trying to predict on a quarterly basis how this might materialize over the next 12 months until we get a couple of quarters under our belt.

[Per Ostlund:]

Okay, that’s completely fair. So, sort of relatively since the Europe piece would fall under lateral flow, I think the lateral flow business optically looks like it has stabilized quite a bit kind of from Q1 to Q2 and then now here in Q3 with some of the benefits certainly being from Europe. But I am wondering if you could just kind of characterize how you feel like the North American business might be stabilizing now that you have worked through the transition to internalizing the marketing on that side in North America?

[John Sperzel:]

Great question. So, as I mentioned, our U.S. HIV product sales during the quarter increased 21% compared to the third quarter of last year and increased 34% sequentially compared to the second quarter of this year. So, we are pleased with those results. And importantly, during the third quarter of 2015, U.S. revenue for each of the three assays increased compared to the prior year period. And U.S. revenue for STAT-PAK and SURE CHECK products increased sequentially compared to Q2 of this year. The only one that didn’t increase sequentially was DPP and that’s because we had a single large order in the second quarter of 2015. You are correct in the fact that we have integrated STAT-PAK into our U.S. operation and our direct selling effort. As you also know, we have a SURE CHECK distribution agreement that is set to expire at the end of May of this year. And that’s something that we are also planning to address and we look forward to updating you on our progress in future calls.

[Per Ostlund:]

Okay, very good. I will get back in queue. Thanks.

[John Sperzel:]

Thanks, Per.

[Operator:]

Thank you. Our next question comes from Brian Marckx with Zacks Investment Research. Please proceed.

[Brian Marckx:]

Good morning, guys. Great quarter. Very impressive. Regarding the malaria assay that was funded by the Gates Foundation, you noted that initial testing has shown sensitivity that was 10 times over the leading malaria assay. So, was that at a static at the same specificity?

[John Sperzel:]

I am not sure what the question is, Brian. Are you asking if we tested it against the world’s leading malaria assays?

[Brian Marckx:]

Yes.

[John Sperzel:]

Yes, we did. At Chembio, it was done by an organization that was working with the Gates Foundation.

[Brian Marckx:]

Okay. So, there was a sensitivity that was 10 times better, so with the specificity the same is what I am trying to get at, I guess?

[John Sperzel:]

So that’s really dependent on which part of the assay we are testing. We tested sensitivity in a number of different levels and we are not really prepared to comment on specificity, because the specificity is dependent on the sensitivity and we are employing malaria initiatives in several different ways, a standalone DPP malaria assay, which could have extremely low level of sensitivity. And then a malaria assay as part of our Malaria Ebola combination assay which has a different sensitivity level and our multiplex fever assay which is still early in the development.

[Brian Marckx:]

Okay. So, what are the next steps for development of this malaria assay, the one that was funded by the Gates Foundation?

[John Sperzel:]

So, I wouldn’t think about a single assay funded by the Gates Foundation. I would think about it as the Gates Foundation funded Chembio’s entry into malaria diagnostics. Keep in mind, at the beginning of this year we were not in the malaria business. Part of using an analogy, we went from 0 to 60 in a very short period of time from being not in malaria to being in a place where we have a malaria assay that was tested by an independent party and it performed at an extremely low level of detection. So, we look at that as a very positive outcome and we intend to take that malaria assay and employ it in a number of different ways. So, try not to think about it only as an ultra-sensitive malaria assay and think about it as Chembio was going to enter the malaria business in a number of different – through a number of different vehicles, standalone malaria testing, combination with Ebola and combination in a full fever panel.

[Brian Marckx:]

Okay, great. Thanks, John.

[John Sperzel:]

You are welcome.

[Operator:]

Thank you. Our next question comes from Raymond Myers with Benchmark. Please proceed.

[Raymond Myers:]

Thanks for taking the questions.

[John Sperzel:]

Hi, Ray.

[Raymond Myers:]

Hi, John. My first question is, John, would you discuss the longer term trend of the Malaria Ebola test sales given the disclosure that you did $150,000 in sales in Q3, but have Q4 orders of $900,000 that would imply quite a trend. Is that – if you could give us a sense of what the longer term trend in those sales could be?

[John Sperzel:]

So, these are sales to CDC for testing in West Africa. As we discussed at the end of the Q2 earnings call, we had shipped DPP Ebola assays to CDC. When we say shipped, you could translate that into sold. And those were for testing of the DPP Ebola assay in Q3. We have a similar plan to ship DPP Malaria Ebola and additional DPP Ebola assays to CDC, sell them if you will before the end of Q4 for testing in West Africa. So, think about those assays as being used for testing in the field, a clinical trial, if you will. Why are we developing a Malaria Ebola combination assay is another question that might come out of that? And I think if you go back to the first Ebola outbreak that was recorded in 1976 and the most recent Ebola outbreaks, which were unrelated, they were in West Africa and the Democratic Republic of Congo. What we have learned is that we reinforced the need for a point-of-care diagnostic test to detect the Ebola virus. And the magnitude of the West Africa outbreak, which included 28,000 infections and 11,000 deaths really underscored the need for an effective Ebola surveillance tool. And so the largest common denominator in Africa around fever diseases is malaria. So, we decided to combine the largest common denominator if you will of malaria with Ebola. And that way, we have a malaria diagnostic tool and an Ebola surveillance tool. And the CDC agrees with this strategy and that’s why they are buying Malaria Ebola combination tests to use in West Africa during Q4.

[Raymond Myers:]

That’s great color. Thanks. And my follow-up I got to ask that’s basically the same question, color and trajectory of the DPP HIV self-testing initiative in Europe that you launched in Q3? That looks very encouraging. Can you give us a sense of where you think the potential is there? And are these stocking orders or is this a business that can continue to maintain that $1 million kind of ramp?

[John Sperzel:]

So as I said before, Ray, I would be careful about projecting that kind of volume on a quarter-to-quarter basis, because it is early and some of those orders would be categorized as pipeline or stocking orders. So, I think we need to get a couple of quarters under our belt before we start to model that self-test business, but I will say this both AAZ and BioSure are two partners in the HIV self-test business are highly motivated. They are the ones that invested in repackaging the product, because we sell them components. They invested in getting the CE Mark. They are investing in the commercial effort and the support effort. So, they are highly motivated and we are optimistic about the potential.

[Raymond Myers:]

That’s very helpful. Thanks. I will get back in queue.

[John Sperzel:]

Thank you, Ray.

[Operator:]

[Operator Instructions] Our next question comes from Ross Taylor with Somerset. Please proceed.

[Ross Taylor:]

Yes, first great quarter and I am trying to get a little bit better color on your CDC test, what kind of time horizon do you expect to the completion of the test? What’s the benchmark for success in these tests? And then what’s the global market look like, both from a size basis and a competitive basis?

[John Sperzel:]

Great question, Ross. So, we don’t know the answer to the first part of the question, which is exactly how long it will take to complete the trial, both for the DPP Ebola and for the DPP Malaria Ebola, but I think you could put some brackets around it that it’s a couple of quarters at the longest. So think about it in that kind of the timeframe. In terms of the market potential for these products, I think if you look at the malaria as the biggest common denominator and you think about what I said to one of the callers earlier about Ebola being a surveillance assay combined with the diagnostic assay like malaria, let’s start with that malaria piece. According to the 2014 WHO World Malaria Report, which is available online, it’s 225 pages. It’s a great read if you are looking for information about malaria. There were an estimated 189 million cases of malaria and 584,000 deaths in 2013. Sales of point-of-care malaria test, rapid test reached 319 million tests. So, the Malaria market is enormous. Second, let’s consider our technology. In January 2015, we received the grant from the Bill & Melinda Gates Foundation. Before that, we were not in the malaria business. We said when we started that that we were optimistic that the DPP platform could get to a low level of detection and perform very well in malaria and this is because we have experience in other fever diseases. And we also had the recent experience in trying to drive down a very low level of detection in Ebola. So, to a comment earlier, there are many activities going on in Chembio in terms of innovation and technology. The one thing that cuts across all of them and where we get great efficiency is that they are all based on the DPP platform. So, when we think about a Malaria Ebola combination assay, we are thinking about taking market share in the malaria space and providing healthcare providers with an Ebola surveillance tool, because we wait for a standalone Ebola diagnostic assay, we missed the opportunity to stop the infection at the early stage and prevent a substantial outbreak like we had in West Africa most recently.

[Ross Taylor:]

Okay. And so obviously, these are game changing from the company’s perspective?

[John Sperzel:]

We believe so.

[Ross Taylor:]

And what kind of capital investment would it take and what these – is it something that you are going to need if or when you are successful, you are going to need capital infusion to do this or is this something where you can build it out of the current infrastructure? And additionally if you needed capital infusion, would you see upfront payments I think that nature from these organizations as a source of that capital?

[John Sperzel:]

So, I think if you look back over the last year, Ross what you have seen is a very deliberate effort by Chembio to structure our research and our development initiatives around external funding. And we received external funding for our malaria initiative, for our dengue fever initiative, for our fever panel initiative, for our Ebola initiative, for our cancer initiative, so for brain injury initiative, so this has been deliberate effort to take our platform technology and find the partners that would pay for it and so coming back to malaria, that’s absolutely the case there. Now, I will say there is a lot that we have to learn about the commercialization around malaria testing, but what we know today is we have the right technology platform to deliver the kind of results that customers want. We believe that we can manufacture it with our partner in Malaysia at a low cost of goods. And those two confirmations lead us to believe that we can effectively commercialize this product. We have distribution channels in many of these countries, where these diseases are endemic. And so we don’t believe we need capital infusion to commercialize these assays and we haven’t needed capital infusion to develop the assays, which we view us as both being very positive.

[Ross Taylor:]

Okay, thanks. That’s actually great news and continue the good work.

[John Sperzel:]

Thank you.

[Operator:]

Thank you. Our next question comes from Matthew Campbell with Laridae Capital. Please proceed.

[Matthew Campbell:]

Good morning, John.

[John Sperzel:]

Good morning, Matt.

[Matthew Campbell:]

Good morning. Just wanted to echo the great quarter, especially congratulate you guys in getting your receivables in line and your customers current, that’s really reassuring.

[John Sperzel:]

Thank you.

[Matthew Campbell:]

I wanted to ask a couple of quick questions here. Could you describe this new reader a little bit more in detail? What the advantages of this reader are versus what’s currently on the market?

[John Sperzel:]

So, the advantages of this particular reader are its size, its performance and frankly its cost as well as the capabilities of storage, transfer etcetera. We are talking about a small, handheld reader, okay? It’s below the $500 price mark. I can tell you based on nearly 30 years of experience in point-of-care testing that that can be a unique competitive advantage in the market. In terms of our competitors, for some reason, many of the lateral flow tests have lagged behind other types of test in terms of the incorporation of some type of digital reader. If you look at blood glucose testing, it started out as a visually interpreted business and quickly led into optical readers, digital readers, etcetera same goes to our basic urine testing in doctor offices and clinics. It started out comparing to a color chart now readers sort of proliferate that business. We have seen it with Becton, Dickinson entering the flu market with a reader-based system. So, these systems are what customers want in terms of data capture, data storage and data transmission and we believe we are going to be in a leading position to bring the DPP Micro Reader into this space.

[Matthew Campbell:]

That’s helpful. And where do you guys stand in terms of sales force? How many people did that have?

[John Sperzel:]

In the United States, Matt, we have 5 people that continue to be focused on the public health sector.

[Matthew Campbell:]

And is that – are you comfortable with that number or are you looking for more salespeople as we go forward?

[John Sperzel:]

We are comfortable at the moment.

[Matthew Campbell:]

Thanks very much. Good job.

[John Sperzel:]

You are welcome. Thanks, Matt.

[Operator:]

There are no further questions. I would like to turn the floor back over to John Sperzel.

[John Sperzel:]

Thank you again for your participation and continued support of Chembio Diagnostics. We are looking forward to updating you again next quarter. Have a great day.