Trinity Biotech plc
Q3 2020 Earnings Call Transcript

Published: 17 Nov 2020

[Operator:]

Good day, and welcome to the Trinity Biotech Third Quarter Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, that this event is being recorded. Now I'd like to turn the conference over to Mr. Kevin Tansley, CFO. Please go ahead, sir.

[Kevin Tansley:]

Thanks very much, Nick. Good morning, everybody. I'm joined today as well by Ronan O'Caoimh, our Chief Executive Officer; and also, John Gillard, our new CFO, as you would have seen from the release. Before we begin with our prepared remarks, we submit for the record the following statements. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will and other similar statements of expectation identify those forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, but not limited to, the results of research and development efforts; the effect of regulation by the U.S. Food and Drug Administration and other agencies; the impact of competitive products, product development, commercialization and technological difficulties; and other risks detailed in the company's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements reflect management's view only as of today. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements. In addition, there is uncertainty about the spread of the COVID-19 virus and the impact it will have on the company's operations, the demand for it's products, global supply chains and economic activity in general.

[Ronan O'Caoimh:]

Thank you, Kevin. I'm going to review our revenues for quarter three before opening the call to our question-and-answer session. Our revenues for quarter two were $32 million compared with $24.6 million in the comparable quarter last year, which is an increase of 30%. Point-of-care revenues were $2.1 million compared with $3.9 million in the comparable quarter, which is a decrease of 47%. Clinical Laboratory revenues were $30 million compared to $20.7 million in the corresponding quarter, which is an increase of 45%. Coming back to the point-of-care, our revenues decreased 47% but this reflects the fact that HIV from COVID-19. The reduction compared with last year also reflects that quarter three 2019 was an unusually high quarter for point-of-care revenues. Our expectation is that HIV revenues in the current quarter will be at normalized levels. Looking back to Clinical Laboratory, our revenues increased 45% to $30 million compared with $20.7 million in the comparable quarter. During the quarter, all of the company's product lines are covered significantly from quarter two 2020 levels which had reflected the most severe impact of COVID-19. However, as expected revenues in quarter three 2020 did not fully return to their pre-COVID-19 levels, particularly in our diabetes business where instrument placements were slow with 40 placements. This is hardly surprising as hospitals and clinics were unlikely to purchase new capital equipment in the midst of the pandemic. However, we are confident that these placements will recover in a post-pandemic environment. Meanwhile, our autoimmune business was approximately 10% short of normal levels as due to COVID-19 many patients to fare hospital and doctor visits, except when absolutely necessary. However, these negatives were more than offset by strong sales of COVID-19 related products which include

[Operator:]

First question comes from Jim Sidoti of Sidoti & Company. Please go ahead.

[Jim Sidoti:]

Good afternoon. Can you hear me?

[Ronan O'Caoimh:]

Morning, Jim. Loud and clear.

[Jim Sidoti:]

Okay. Well, first of all, I just want to say congrats. Good luck to Kevin, in whatever you do. And congratulations, John, and welcome to Trinity.

[Kevin Tansley:]

Thanks very much, Jim.

[John Gillard:]

Thank you, Jim.

[Jim Sidoti:]

You called out four items related to COVID that really helped in the quarter; the IgG test, the media, the antibodies, and the respiratory products. Can you give us some quantities; how much revenue they generated? And if you think that they'll continue to generate revenue in the fourth quarter and into 2021?

[Ronan O'Caoimh:]

Yes. I think that the revenue numbers was rounded in at around -- I think it's about $13 million. Kevin, is it?

[Kevin Tansley:]

Yes.

[Ronan O'Caoimh:]

$12 million to $13 million. I won't break it, I won't break down like between the four categories. But what I will say is that, you know, it's difficult to predict where we're going here. I mean, we're not going to give guidance but it not may seem unusual given that we are halfway through the quarter. But given all the COVID factors, both related to our existing business, our traditional business and these new elements of our business; it's very difficult to predict. But what I would say is that -- I think that antibody testing, I think is going to become more prevalent as we've said already, with the onset of vaccinations. I think people in general seem to realize at this stage that COVID is not going away, in any real sense. I mean, it's going to be with us for many, many years. I mean, clearly, we come to terms with it but there will be -- well, it's going to be here for a long time. But -- and I do think that PCR testing will continue in significant volume, certainly right through 2021. So, in those circumstances, I would expect that our COVID-related revenues will remain strong but it's very difficult to predict with any degree of certainty. And that's why I think in this instance, we are going back to our traditional approach of not giving guidance. What I will simply say is that I think -- I think our quarter four will be strong. Beyond that, we don't really want to go further, Jim.

[Jim Sidoti:]

Okay. So do you anticipate that even once the vaccine is out that patients will need to get antibody testing prior to the vaccine to make sure they're not already immune?

[Ronan O'Caoimh:]

Well, it depends; different governments will take different approaches. I think that people may want just but governments may recommend blanket vaccinations, or some may decide to try and identify who already is immune; but I'd imagine they'd go for blankets -- for blanket vaccination. But having said that, individuals may feel by look -- I've already -- you know, if I've already -- basically I am immune and I feel -- you know, I remember I was -- even if I wasn't -- didn't do a PCR test; if I remember, I was sick six months ago, and why would I risk a vaccine? There's going to be many elements of that. I do think that -- I mean, I think there is many reasons as I outlined in my prepared statements why, and -- the -- kind of -- the moment for antibodies will come and it's coming now with the advent of vaccinations. There is numerous reasons why I think antibody testing will increase because their focus standard suddenly becomes on immunity rather than actually live infections.

[Jim Sidoti:]

Okay, understood. And then, switching over to the HIV business. Any update on trial screen and the progress you're making in Africa to get that approved by the WHO?

[Ronan O'Caoimh:]

So, we have submitted all of the modules with WHO, and approval of Trinscreen, with the exception of the actual clinical trials themselves. And what's happened there is that they basically have been stalled because of COVID, and we are still basically a couple of months probably away from -- actually, we've recommenced in the last country in which we're operating. And we're a few months away from the submission of our clinical trials data, but it's difficult because -- with lot of stop-start-stop because of COVID. My estimate at this stage is that they will be into the market by the middle -- certainly by quarter three of 2021 with Trinscreen. And so, I'm -- when looking at something like a quarter one submission of the final -- of the final piece for clinical trial data to WHO, and then expecting the approval within four or five months. But that comes with a warning, just relating to -- it's still difficult to get trials done at the moment in hospitals.

[Jim Sidoti:]

Okay, all right. Well, that was it for me. Thank you.

[Operator:]

Next question is from Paul Nouri of Noble Equity Funds. Please go ahead.

[Paul Nouri:]

For the COVID sales, are they all into the U.S. and Western Europe? Or is it all over the world?

[Ronan O'Caoimh:]

Paul, they are all over the world, but mostly in the United States.

[Paul Nouri:]

Okay. And Jim just asked about the WHO submission; but is there anything else in terms of pipeline development or FDA submissions that you could update us on?

[Ronan O'Caoimh:]

We are -- one thing is, our premiere resolution variant instrument and test are -- they are at the very final stages for submission to the FDA. And again, we've been held up because of -- difficulty of hospitals not really wanting trials run at this time. And -- but we're hoping to get an approval probably April. There -- that probably is the most significant thing in the pipeline other than Trinscreen.

[Paul Nouri:]

Okay. And if the lab in Buffalo, you know, that's been -- since you purchased, a consistent growth story within the company. Is that still growing or has that stalled due to COVID?

[Ronan O'Caoimh:]

Well, I mean it's still growing, but I mean, it's revenues I mean, we're -- I mean, we're down 90% in the month of April, and still probably down around 10%. And one thing that we're just about to start doing the PCR testing in the lab, now even it traditionally it would have been an auto-immune lab, so it was -- we have to -- equipped ourselves and brought in a personnel to run PCR testing. So that should give us a boost and we're hoping that will commence just before Christmas, so we're just waiting for some final authorizations. You know, you need to authorize individuals and certain certificates etcetera, it's hard to get. Again, but -- but -- so we're hoping to get up and running actual PCR testing for COVID. And -- but it's taken a while; so that should give us a reasonably significant boost. But meanwhile, I mean -- I would be confident that our testing volumes will return as pandemic gets under control with vaccinations. But at the moment the reality is that a lot of people are avoiding hospitals, and so the volumes of testing is -- are down. But I mean -- I think the core business is -- it's a growth model and I think in absence of COVID it will return immediately.

[Paul Nouri:]

Okay. So, where are you in getting PCR testing in the lab? Have you purchased all the equipment that you need already? And you need validation and something like?

[Ronan O'Caoimh:]

We basically just need a certificate from New York State to proceed. We had to bring in especially qualified individuals, who basically -- and our focus has been auto-immunity. So basically, most of our lab techs in the lab, basically wouldn't be authorized to run PCR testing; so they needed -- we need to bring in new people and new equipment.

[Paul Nouri:]

Okay. Okay, and then last question -- yes, good.

[Ronan O'Caoimh:]

So we're just waiting for the State of New York authorization to proceed.

[Paul Nouri:]

And the authorization is a COVID-specific authorization or it's a traditional New York State approval that you need?

[Ronan O'Caoimh:]

It's more PCR -- it's a more PCR . It's basically that the individuals need to be -- and it needs to be certified for running PCR testing -- PCR rather than COVID, it's -- you know, it's a whole category, molecular testing.

[Paul Nouri:]

Okay. And then, my last question; I know you guys have been placing a good deal of instruments into Brazil, the diabetes instruments; has that proceeded or not yet because of the currency issue still?

[Ronan O'Caoimh:]

We've really stopped placing instruments again in Brazil because the currency is disastrous from our point, it's moved out now; it's or something today. So it's been a relentless weakening of the Brazilian currency; so we have -- with rare exceptions we're basically not placing any instruments unless we get a very strong price. So, it -- yes, so effectively we've stopped placing instruments in Brazil.

[Paul Nouri:]

Okay. All right, thank you,

[Kevin Tansley:]

Nick, just based on the listing here; I think we've got one more question just to take?

[Operator:]

That's correct. One last question. Bill Lap , private investor. Please go ahead, sir.

[Unidentified Analyst:]

Yes, good morning. Thank you for taking the question. I'm -- I'm trying -- good morning. I'm sorry to hear you're leaving, Kevin now, sad to hear about it. Good luck to the new CFO. Anyway, you know, you -- off the four items you talked about on the COVID-19 update; you don't want to break it down but can you say which one has got the most volume of the four there? Is it the viral transport media, the largest revenue producer at this time? Can you mention which one is -- with the $13 million?

[Ronan O'Caoimh:]

Yes, at this moment of time, the viral transport media is ahead of antibody, in terms of value.

[Unidentified Analyst:]

Okay. And one other question; I normally limit it to two. How many tests do you think you'll be doing when you get authorization on the -- for the PCR test in the lab? How many can you do a day, once you get? Is it just a matter of getting the personnel or you have enough volumes? As a test, most people need the lab test right away. You have any estimate of how many you can do?

[Ronan O'Caoimh:]

I think it has the potential to do like $3 million or $4 million a year, that kind of thing. It's not transformational ability, you know. And -- so we don't have monstrous capacity, so probably $2 million or $4 million a year potential, is the kind of annualized level that we probably achieve.

[Unidentified Analyst:]

Is it pretty profitable?

[Ronan O'Caoimh:]

Yes, it's very profitable. It's just difficult to build, it's difficult to -- you know, it's difficult to build, and basically, it's very, very difficult to run big volumes quickly. You know, they take time, and classified personnel.

[Unidentified Analyst:]

Okay. I think that's it; good luck. But you're not giving any forecast. I thought last time you were going to give a forecast for the fourth quarter, but you're withholding any guidance to the fourth quarter. Correct?

[Ronan O'Caoimh:]

I'd say we're making an unusual type of project, given that we're already halfway through the quarter but given all the uncertainties that COVID has created in terms of our core business and ; it's difficult to give an accurate forecast going forward. But I do -- I already had the case that we've got to have a strong quarter four, and -- but rather put the numbers on the side, I think it's fair to return to our policy of not providing guidance. And the only reason that we did it last time but we had a sudden very significant change, and we thought we needed to be patient about that, you know Q - Unidentified Analyst Okay. All right, thank you. That's all -- I mean, go ahead. What did you say?

[Ronan O'Caoimh:]

I said we are confident of a strong quarter.

[Unidentified Analyst:]

Thank you.

[Operator:]

This concludes our question-and-answer session. Now, I'd like to turn the call back over to Mr. Ronan O'Caoimh for closing remarks.

[Ronan O'Caoimh:]

Okay. I'd like to say thank you, all, for your time and your support. And I just, on a personal level, I'd like to say that to wish Kevin well, and to thank him for 15 years when we've worked together and for his professionalism and support; I'm going to miss that. And -- so thanks, Kevin. And just to say also that we're very pleased, and we've recruited a super CFO in John Gillard. And I look forward John to working with you in the years ahead. So, anyway -- but -- so just to leave it for today, I'd say, thanks, Kevin, thank you so much.

[Kevin Tansley:]

Thank you, Ron.

[Ronan O'Caoimh:]

Everybody, good afternoon. Thank you.

[Operator:]

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