Good day, everybody, and welcome to the Trinity Biotech First Quarter 2020 Financial Results Conference Call. All participants today will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Kevin Tansley, Chief Financial Officer. Please proceed, sir.

Thank you, Eric. Now before we begin with our prepared remarks today, we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides 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 United States Food and Drug Administration and other agencies; the impact of competitive products, product development, commercialization and technological difficulties; and other risks detailed in the company’s periodic reports filed with the Securities and Exchange Commission. Forward-looking statements reflect management’s view only as of today. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements. 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 the company’s products, global supply chains and economic activity in general. So with that, I will take you through the results for quarter one 2020. Beginning with our revenues. Total revenues for the quarter were $21.2 million compared to just over $22 million in quarter one last year. Ronan will provide more details on revenue for the quarter later in the call. So I will move on now and discuss the other aspects of the income statement. Our gross margin this quarter was 43.8%, which represents an improvement on the 42.4% reported in quarter one last year. This improvement…

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Paul Nouri with Noble Equity. Please proceed with your question.

Hey, good morning.

Good morning, Paul.

I forget if you brought this up on the prior call. But do you have an annualized savings that you’ll realize from closing the Carlsbad plant?

Yes. We have – I think we’ll have a saving of about a $2.5 million from the closure of that plant. Obviously, there’s an offset in terms of revenues. And by the way, that closure will proceed on the 13th of June, Paul. It’s on track.

Okay. And the $2.8 million in capital expenditures this quarter, is that an amount that we should think normal going forward?

You will have noticed that number used to be somewhat higher. In previous years, we’ve taken this from run rate. So as I’ve said before, the – you can expect over time that the product development aspect of that will drop over time. So typically speaking, we do about maybe $300,000 or $400,000, maybe a bit higher on PP&E and the rest is product development. At its height, it was about over $3 million per quarter. I expect it to remain at similar-type levels as we’re seeing at the present. It will fluctuate though from time to time, depending on trials, costs and what have you. But the internal cost of such will remain reasonably static or even falling over time.

Okay. And I realize – or I see here that the – you still made a payment on this HIV license fee. But I thought that, that was associated with the product that you sell into America? Is that not the case?

That is a – that’s a final payment that we required to make, which on a license that we had raised a number of years ago – that we have entered into a number of years ago.

Okay. And then the inventory, still really high. Can you tell me what the largest components of the inventory are?

What I will say is that because we manufacture virtually all of what we sell, we have a lot of raw materials, work-in-progress and finished goods. So in some cases, when you’re comparing with other companies, they don’t necessarily have all of those. We also have a large instrument aspect to our business and therefore are required to keep a significant amount of spare parts. And in relation to older instruments, we’ll have to carry them for a number of years. We also have strategic purchases in relation to some of the biologicals that we would use in our production, which would – and therefore, it makes sense to buy significant quantities of that rather than changing repeatedly from batch-to-batch, thus causing a lot of operational efficiencies. A lot of the inventory would be in relation to our hemoglobins, our diabetes line as such, where we do have a lot of the instrumentation-type inventories I referred to earlier. So as well as having your normal raw material, work-in-progress and finished goods, you also have the spare parts aspect. And in this quarter, the fact that instrumentation slowed up during quarter one as the first sign in relation to COVID, we would have seen an increase in such inventories at the end of quarter one.

Okay. And given that – given the current conditions with COVID and it’s difficult to tell which countries might open back up sooner than others significantly and which will start going to the doctor again regularly, are the instruments, you can place them in any country? Or is each instrument you produce placed for like the EU, America, Brazil, et cetera?

They’re essentially location-agnostic. So yes, I mean if one place turns up – turns on quicker than the other, we can just direct our instruments there and as such, though that isn’t a particular problem. We’re not going to – if you’re saying, are we going to end up with the wrong type of instruments? The answer is no. The instruments can go anywhere.

Okay, thanks.

Thanks, Paul.

Our next question will come from Jim Sidoti of Sidoti & Company. Please proceed with your question.

Good afternoon. Can you hear me?

Yeah. Hi, Jim.

Hi, good afternoon. Glad to hear you guys are well. A couple of questions. First, on the antibody tests, they’ve been in the news a lot here in the past few days about their accuracy. Some of them are very sensitive, others aren’t very specific. Can you give us a sense on how yours performed? Ronan O’Caoimh: Yes. Jim, Ronan here. Yes. And obviously, we’ve seen that as well as maybe just in defense in general of antibody tests. I’m not sure on what basis the sort of the suggestions that some of the tests are only at 48% sensitivity and 50%, that kind of thing. I’m – that surprises me. It may be that, in some instances that they’re taking samples which are positive. Bear in mind, you don’t develop an antibody for sort of, say, the IgG antibody, you’re not going to develop it for about two weeks. So if you’re taking sort of somebody who’s just contracted the virus a week ago or four days ago, he may kind of come up negative because clearly, well, because the antibody won’t be present yet. So there maybe – it could be some element of unfairness there. But just to talk about our own test rather than anybody else’s, I made a point that our test is fully developed in R&D. It’s transferred into manufacturing. But for us basically to sell the product and get the EUA, which is the Emergency Use Authorization from the FDA, we have to actually – we have to transfer into production and do validation batches, so full commercial batches, right, and then run the actual trials on those batches. So those batches have just been completed at the moment. So therefore, I can’t kind of recite my sensitivity and specificity at this moment…

Okay. Do you have any incoming requests for the product? Do you think you'll have customers right away once you get that initial approval? Ronan O’Caoimh: Yes. We believe we will. And we have all our sales reps around the world investigating and talking to potential customers.

All right. And I was a little surprised to hear you say you think you'll still be profitable in the second quarter even with the lower revenues. I assume that's partly due to the $5 million loan from the U.S. government. Will that be as an offset to SG&A expense in the quarter?

It will depend where the actual underlying – well, I actually don't know. I'd imagine there's going to be some pronouncements as to how one accounts for this. It's a question of whether it be – that will go as an offset purely against SG&A or whether it will go against where the actual costs themselves were. It could end up being either. So I think we're at early stages in our program. But there will be an offset. And as I say, that's the reason why that we're going to remain profitable because, in essence, we are having eight weeks of U.S. payroll effectively being paid for by the U.S. government, for which we're very grateful. Although it's characterized as a loan, the reality is that all but none that are – maybe none of it entirely, but I mean, there's an order process that has to be gone through. But basically, it won't be repayable. Or if it is, it will be a very minuscule percentage of it. Because we've acted honorably. We took literally every single individual back. We've complied to what they requested us to do. So our U.S. employees were only furloughed for, I think, 1.5 weeks. So we reversed it and brought everybody back in. So – and in addition to that then, remember, we're furloughing some of our people in Ireland. Our people in Brazil are working 25% of the time and getting paid to 25% of normal. And in addition to that then, a lot of our variable overheads have been eliminated due to travel, et cetera, various other factors. So the overall impact to the whole thing is that we believe that we will be profitable in quarter two despite the reduction in revenues and indeed that our cash balance will be stronger at the end of quarter two than at the end of quarter one. And then in terms of looking forward, we're already seeing, for example, in our laboratory in Buffalo, we're seeing that our volumes of tests are significantly improving. Like we went – I mean we went – we were only at 33% normal in April. And we're back to that sort of 66% of normal in May. That's kind of where we're at. Because clearly, people aren't running routine tests at this moment in time. They're kind of trying to avoid going near doctors or hospitals. And so we see that changing. So – and while we don't have much visibility on quarter three, any visibility in quarter three, we would expect that, if anything, that we'll get a bounce. Because bear in mind, if you take, for example, a diabetic who hasn't done his A1c for a number of months, it will be a catch-up. So we think, if anything, it will be a bounce. So we would expect that unlike sort of the automobile industry or whatever else, that our business will come all back with possibly a small element of bounce as well.

Okay. So quarter two will be the low point for the year?

Absolutely. I mean, as I say, I don't really have visibility on this. But I would be disappointed if quarter three didn't give us a complete return of all of our business, if anything, but a bit of a bounce.

All right. Well, that's kind of where my next question was going really was all about quarter three. But if we look out to 2021, I know you won't have the U.S. HIV business and you won't have the Lyme business. So that's – I think you said last quarter, that was roughly $5 million of revenue. But aside from that, if you compare 2021 to 2019, is there any reason why you shouldn't get to that level of revenue in 2021?

I didn't quite follow the question. I think you're asking would growth in other areas make up for the loss in HIV and in Lyme. Is that your question, Jim?

Right. Well, when you compare 2021 to what you reported for 2019, will the growth in those other areas be sufficient so that you'll still get to that $90 million of revenue?

Yes. Yes, the answer is absolutely yes. I mean we've lost $5 million. So if you look at what's happened, we basically had a declining HIV business in the USA, which we eliminate. And then [indiscernible] with declining Lyme Western Blot, and we've eliminated that and we've closed the factory. So basically, because of both businesses were – had been declining over a period of years, the fact that we can eliminate the production line in Ireland and we can limit the entire factory in San Diego will mean basically that the loss of that $5 million of revenue, which was declining, will actually be from a P&L and a cash flow perspective be positive, right, which should make that point. And beyond that, we've lost $5 million and you're asking me basically from the end of 2019 to the start to 2020, can we recover that in terms of organic growth within the rest of the business? And the answer is absolutely yes, no doubt whatsoever. If you look even at just – I mean even on its own, hemoglobin A1c would be achieving that level of growth.

Okay, all right. Thank you.

Thanks, Jim.

Our next question comes from Jonathan Sacks with Stonehill Capital. Please proceed with your question.

Hi, all. Thanks for the call as always. Jim's questions on the antibody accuracy were helpful. I had some of the same or some related questions. For the antibody tests, it sounds like a lot of companies have come out with those already. Is Trinity's test different, better or worse, more accurate, less accurate, costs more, costs less? If you could just help us understand functionally. And otherwise, do you expect there to be material differences between Trinity's tests and competitors' tests? Ronan O’Caoimh: Well, yes, I mean I'm reading the same as you are about antibody tests that aren't performing particularly well. What I would say is that is that in terms of Trinity Biotech that we have pedigree in this area. I mean we are a long-established, for nearly 30 years now, supplier of – a manufacturer of high-volume levels of infectious disease ELISA tests. We supplied Quest and LabCorp until a number of years ago with all of their infectious disease range of products. And we supply some of the biggest laboratories around the world still. So I think we have pedigree. And so we – our products are excellent without exception, we believe. And we believe that we have developed an excellent IgG antibody test for COVID. And we believe that we know that the characteristics – performance characteristics of the products exceed the FDA requirements. So we're basically in the high 90s. I'm just reluctant to quote because, as I said, they're still subject to finalization on that. The actual – the numbers that are going to the FDA submission will be of the validation batches, which are just being manufactured at the moment. So – but I'm confident that we will replicate what we did and that the performance from R&D will be replicated on validation batches. So all I can say, Jonathan, is that we have a very, very good product. There are other products out there that are very, very good. I mean, for example, I know that the Abbott and the Roche products are good, their antibody tests. But remember, they run on a slightly different format than the ELISA, but they're very good. Clearly, it's a very crowded space. There's many, many products in there. And some are not very good, I recognize that. So look, I'll just speak about our own, anyway. We believe that ours is excellent and it's right up there with the best of them.

And any rough sense of price point that you could give to us even if it's not been finally determined but just approximate? Ronan O’Caoimh: Yes. I mean I think it's going to be selling, and this is just a broad range, somewhere between kind of $500 – $500, maybe $800 to $900 per plate, which translates to a like $5, $8 – there's 96 in a plate, so $5 to $8, $5, $8, $9 a test, that kind of thing. It's quite a – which is a strong price. I'll give you, let's say, a Toxoplasma or a rubella sort of standard ELISA plates, we'll be selling probably $2 a test or even less.

Okay. And that would be Trinity's sale price? Ronan O’Caoimh: Yes. That would be – no, that would be the price that we would sell to distributors and laboratories all of the world, yes.

Yes. So the price that's Trinity is receiving, not what the end consumer is – it's Trinity sale price. Ronan O’Caoimh: Yes.

Okay. Great. And then you discussed a little bit about the transport medium and growth in that. But I don't know that we've heard too much about that business in the past. Can you give us a sense of the magnitude of that business or tell us a little more about it? Ronan O’Caoimh: Well, just to clarify. So basically, when somebody gets – is being tested for COVID, you know that they basically will go and that they will get a swab, which is put down – or puts up their nose and basically into their mouth. And then that swab then is put into a tube, which is sealed, right? And it is that swab and that tube that we manufacture. So it's a very integral part of the whole thing. And that then is transported without refrigeration to a laboratory, where the PCR test or the molecular test is run. So our test – our swab and collection device basically has reagents inside that preserve the sample, that stop for bacterial growth, that actually provide nutrients to the virus to maintain it for basically subsequent testing. It's an FDA-approved device and, as you could imagine, is proving to be in extremely strong demand at this moment in time. And for us really, the challenge is one of manufacturing rather than finding customers and enhancing our manufacturing capability. In terms of its potential, I think in quarter – in this quarter, we could be looking at, maybe depending on how quickly we can ramp up and all that kind of thing, maybe $2 million. But it has enhanced potential beyond that in the near subsequent quarters.

And pre COVID, approximately-what was the run rate in revenues on that product for a year, just approximate, to give us a sense? Ronan O’Caoimh: Jonathan, let me just – suffice to say, modest.

Right. Like low hundreds of thousands of dollars or something? Ronan O’Caoimh: Yes.

Okay. Thank you very much. I’ll hop off, good luck to getting the FDA approval and with everything else. Appreciate it. Ronan O’Caoimh: Thanks, Jonathan.

[Operator Instructions] Our next question will come from Bill Lapp, a Private Investor. Please proceed with your question.

Hello, Bill? Ronan O’Caoimh: Yes.

Yes. Are you ready for me, Bill Lapp. [PH] Ronan O’Caoimh: Yes. Hi, Bill.

Yes. Just two quick questions. If that's too much, I can stop at one. As a follow-up to Jonathan's question on the transport medium product, is there – what is your competition on that? Because there's been some problems with that. And if your device is superior, it seems like there there's a great amount of demand. Is there anyone else making that type of transport medium product? Ronan O’Caoimh: Yes. There are quite a number of people in that market, yes. But as you can imagine, at the moment, the demand around the world is really strong. So I mean, Bill, as I explained, for us, it's really the challenge is being able to make it rather than sell it.

Where are you manufacturing it? Ronan O’Caoimh: We're manufacturing it at the Jamestown factory in New York.

Okay. One other – do I have – can I have one more question, a quick one? Ronan O’Caoimh: Of course, Bill.

I'm not clear about what you're doing about the Trinity screening. You're holding off. Can you give a little more flavor on that? I mean I realize with the COVID-19, it's a problem. But are you – can you give us a little more guidance on where that's going to go? Ronan O’Caoimh: What happen was we were really just finishing our trials in three countries, which are in Africa. And basically, we're just literally within the last probably month on those trials. And they all just closed down because of COVID. And that's how things remain. So basically, we expect that they will open up in the next month to six weeks. And as soon as that happens, we will complete. Our countries are South Africa, Kenya and Ivory Coast, right? So it depends, it could be different openings in each country. But I would imagine that sort of, I don't know, by September, let's say, that we'll be able to submit to the WHO. What we have actually done is – I mean the WHO submission is kind of like it's kind of box loads of documentation that you send in. You will need a truck for it all. So what we've done is we've sent everything else in, right, all the factory stuff, all the various documentations. We've sent sort of three quarters of the truck basically load of documentation to them. And so the last piece then that will catch up will be the actual trial data.

Do they start doing anything? Do they start looking at that data?

They've acknowledged receipt. But obviously, we don't know exactly what they're doing, the extent to which they're doing it. But we assume that they are reviewing it.

So that's good. So you're not going to… Ronan O’Caoimh: I think we should have everything in within two, three months, that sort of thing, depending on how each of those individual countries opens up.

Is there still a demand for those prescreening tests? I mean is Alere doing still a big volume on that? Ronan O’Caoimh: Yes, absolutely. And I mean I know that will have been – there obviously will have been a slowing down as we've experienced of the African HIV business. But I mean it will all be back within a few months, we believe.

Okay. One other question, if I may. I'm not clear on your sales. In other words, you got the test that you're going to be selling to the lab. Who – I mean who do they go to have the test performed? I mean does the lab just notify different medical people that the lab – that the test is available if they want to use the Trinity test? And then how does that also relate to – when you do the finger – when you do the rapid test, is there an instrument you can find out the answer in 15 seconds or whatever you said it was, 15 minutes? Is that – that's not at a doctor's office or anything, right? Where would that rapid test be performed?

Just in terms of our customers, we would sell to hospitals and clinics. So basically, the places where the actual testing is taking place. So we ourselves don't actually recruit for patients and we don't actually come in and contact patients or patient samples. The only exception in our whole group is in relation to in autoimmunity, where we do have a reference lab. But even still, a lot of our samples there will come from Quest and LabCorp or from people like that. In terms of rapid tests, they again would be carried out, probably less so in physicians' offices, but would happen in hospitals and clinics as such. But at a later stage, you can expect that there'll be some sort of rollout of various testing programs and rapid testing could form a part of that, just depending on what approach various governments or public bodies take. And – similarly in relation to private companies as well, a lot of private companies will be looking at screening their employees for antibodies just to determine how safe it is for them to return.

But do they need a separate machine to read it? I mean what kind of – draw the blood, is it you're going to give them a machine to read it?

It's like a pregnancy test. It is a change of color. You can just look at it.

Okay. I understand. Okay. I see. All right, thank you. No more questions. I appreciate. Thank you.

Maybe last question from Paul, please.

Our final question comes from a follow-up from Paul Nouri with Noble Equity. Please proceed with your question.

So for the Africa study, can you remind us what the size of that is?

You caught me on that, Paul. I just can't remember. I won't make up an answer, let me think. Three sites, I think, if I had to guess, I'd say 500, probably 250 each. I'll tell you in an e-mail later on that, right?

Okay, thanks. And then…

Probably about – I'd say maybe 1,000 per site, maybe 500 positive, 500 negative. I can't remember offhand exactly what the size of each trial is. But it's of that magnitude. And then…

And then the – on the rapid test, you have a couple of months, I guess, you've given yourself for development. Are you – maybe you can talk about where you're at in the process, what kind of hurdles you're trying to get over to get it to the point of validation. Is it a whole new product you're putting together? Or are you basing it off of technology that you've already been using? Ronan O’Caoimh: So we're talking now about the rapid test?

Yes. Ronan O’Caoimh: Okay. So just to clarify for people, what we're talking about here is a rapid 12-minute test. So it will operate exactly like the HIV test and it look exactly like it, so like a pregnancy test. So you take a drop of blood that you get from a spring-loaded lancer, right, or like a finger prick. You put that drop onto basically the blotting paper, which basically is onto the cassette. You add 4 drops of wash solution. And then the sample migrates basically by lateral flow along the cassette. And then what you have is you'll have a test line, a control line to show the whole thing is working, a color change. And then above that, you're going to have an IgG line and an IgM line, all right? So it's actually a dual test. And what the – so the – basically, IgM comes earlier, IgG comes later. And so what you're really only missing probably is the first about three days, four days of infection, right, which, of course, the PCR test will catch, although in reality, most times, the PCR test is run much later than three or four days after infection. But anyway – so basically, that's what it does. So it tests IgM, which basically – so after infection with COVID, the first antibody to be actually developed is the IgM and subsequent to that, the IgG. And what this test is going to basically tell you is it's not typically used to determine whether somebody basically has a live infection but rather to tell whether somebody has had the infection in the past and is therefore regarded as immune. Now I know there's a big debate going on as to whether or not people will be immune after…

Just a last question then. Are you developing this for a product that's going to give the consumer an answer in their home? Or are you developing it for the doctors' office? Ronan O’Caoimh: We're developing it for any of those uses and beyond into the public health, whatever. It can be used in many, many instances, be it in the doctors' offices, that can be used. I mean it's not our focus actually to sell into the home for home use. That's not our focus, but for use in out-clinics, [indiscernible] around the world, any uses.

All right. Well, thank you. Ronan O’Caoimh: I mean in the same way that Abbott's or Quidel's tests are being utilized in that basis. All right. Thanks, Paul. Ronan O’Caoimh: So I think at this stage, maybe we closed – we have no more questions. So we'll close the conference call and say thank you very much for your support, and talk you soon. Good afternoon.

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