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Trinity Biotech PLC (NASDAQ:TRIB)

Q1 2013 Earnings Call

April 25, 2013 11:00 AM ET

Executives

Joe Diaz - Lytham Partners

Kevin Tansley - CFO

Jim Walsh - CSO and Business Development Director

Ronan O’Caoimh - CEO

Rory Nealon - COO

Analysts

Matt Dolan - ROTH Capital Partners

Larry Solow - CJS Securities

Bill Bonello - Craig Hallum

Jeffrey Warshauer - Sidoti & Co

Declan Morrissey - Davy Research

Operator

Good day and welcome to the Trinity Biotech First Quarter Fiscal year 2013 Financial Results Conference Call. (Operator Instructions). After today's presentation, there will be an opportunity for you to ask questions. (Operator Instructions). Please note this conference is being recorded.

Now I would like to turn the conference over to Mr. Joe Diaz of Lytham Partners.

Joe Diaz

Thank you Laurie and thanks all of you for joining us today to review the financial results of Trinity Biotech for the first quarter and the year ended December 31, 2013. As the conference call operator indicated, my name is Joe Diaz. I’m with Lytham Partners. We are the financial relations consulting firm for Trinity Biotech.

With us on the call representing the Company today are Mr. Ronan O’Caoimh, Chief Executive Officer; Mr. Rory Nealon, Chief Operating Officer; Mr. Kevin Tansley, Chief Financial Officer; and Jim Walsh, Chief Scientific Officer and Business Development Director.

At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today’s call does not have a full text copy of the release, you can retrieve it off the Company’s website at trinitybiotech.com or numerous financial sites on the Internet.

Before we begin with 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 and 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 forward-looking statements. The forward-looking statements contained herein are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the 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.

Participants on this call are cautioned not to place undue reliance on these statements, which reflect management’s analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions in to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

With that said, let me turn the call over to Kevin Tansley, Chief Financial Officer for a review of the results. After we hear from Kevin, Jim Walsh will update us on the developments at Fiomi and finally, Ronan O’Caoimh will provide his overview of the quarter. With that, let me turn it over to Kevin. Kevin?

Kevin Tansley

Thank you Joe. Today I'll take you through the results for quarter one 2013. Starting with our revenue performance, total revenues for the quarter were just over $20.3 million. This compared to $20 million in quarter one of 2012, this representing a growth rate of 1.5%. As Joe said, there Ronan will provide more details later in the call as to the makeup of this growth.

In a moment, I will take you through the rest of the income statement, but before doing so, I would like to mention one factor which is new this quarter and that is the medical device excise tax. The tax which is approximately 2.3% is payable on the majority of our US sales. That is not payable on certain products that we acquire in the complete form from third parties and results does not apply to products that require further processing in the hands of our customers as regard to sales. As you would have seen from the press release recorded the new tax separately in order to assist from a comparability point of view.

Now turning to the income statement. This quarter’s gross margin was 50.9%. While this still represents a very strong growth margin, it was lower than the 51.6% we reported in Q1 last year. This lower gross margin is attributable to lower point of care and line sales both of which are higher margin product lines. It also reflects the higher instrument placings of our new Premier instrument which at 67 placements in the quarter was more than double the number of recorded in the equivalent quarter last year.

In terms of our indirect costs, our R&D expenses were very much in line with last year at 855,000, whilst our SG&A expenses actually decreased slightly from 5.2 million to 5 million. This latter decrease is mainly attributable to one-off expenses associated with the acquisition of Fiomi incurred in quarter one of last year.

Our operating profits results broadly in line with quarter one 2012 at 4.1 million and here we are seeing the impact of the lower gross margin which I mentioned earlier offsetting the impact of the revenue growth. Net result of this is that we still achieved an operating margin of 20% in the quarter.

Moving on to our net financial income, this quarter we earned $451,000, which is a decrease of just under a $100,000 on the equivalent period last year. This reflects the falling interest rates available in the markets currently.

Our tax charge for the quarter was 174,000 which is an effective rate of 4% and is very attractive from our point of view. Due to the nature of our tax charge, I expect the charge to fluctuate quarter on quarter whilst expect us to continue to have a low effective rate of tax, it can be expected in the future quarters it will be higher on average.

The net result of all that has so come so far is that profits for the period increased by 6% from 4.1 million to 4.3 million. Meanwhile EPS grew from $0.194 to $0.20 per ADR of the same period. On a dilutive basis from $0.186 to $0.19. Comparisons I have just given there are before the impact of the medical device tax and again for comparability purposes.

Finally, earnings before interest, tax, depreciation, amortization and share option expense for the quarter amounted to $5.3 million.

And then I'll move on to talk about the significant balance sheet movements since the end of December 2012. Property, plants and equipment increased by over 400,000 and this is made up of additions of 800,000 as offset by a depreciation charge of approximately 400,000. I'd like to point out that the additions this quarter included capital equipment required for the manufacturing of our new cardiac test. This is the sight that we're beginning to move from the development phase of the project towards commercialization.

During the same period, our intangible assets increased by 3.7 million. This is mainly due to additions of 4.1 million. This is higher than the previous quarter due to the increased expenditure on the new cardiac tests.

Total intangible additions have been partly offset by amortization charge of approximately 400,000.

Moving on to inventories, you'll see that this has increased by about 2.3 million this quarter. As I pointed out in the past, inventory will fluctuate from quarter to quarter and this quarter's increase follows a decrease in quarter four last year. So that is normal fluctuations, we also see increase the level of premier inventories in conjunction with increased production levels given our expectations for 2013 and the advance of our launch in China. Similarly we have also built some inventories in advance of the stronger line season which will occur in quarters two and three.

Meanwhile trade and other receivables have increased by 0.8 million to 15.4 million. This increase is attributable to timing of certain payments which fall due at the start of each year. In terms of our trade receivables, these remain in very good shape at 51 days. Finally in relation to working capital, our trade and other payables have increased by 1.1 million to just under 13 million and again, this is due to timing issues.

Finally I will discuss our cash flows for the quarter. Cash from operations for the quarter was 5.2 million which was slightly higher than last year. However this is offset by working capital movements totaling 2.6 million. As I mentioned earlier, this is mainly due to increased inventories and the timing of certain annual payments. Capital expenditures in the quarter increased to 4.9 million versus 2.4 million in quarter one 2012. This was due to the additional expenditure on our development activities principally the cardiac products. It should be remembered that last year's quarter (inaudible) one month of expenditure for these products as when we acquired Fiomi at the end of February.

Furthermore, expenditures currently running at a significantly higher level now have just come through the design stage and are entering the clinical trials phase of the project. With that, I will hand over to Jim.

Jim Walsh

Thanks Kevin. I'll take a few moments to provide a brief update on progress of Fiomi. As you'll no doubt aware that worldwide market for point of care cardiac marker testing now stands at approximately $1 billion per annum. And this is growing at a rate of 14%. The market is currently served by three significant players namely (inaudible) cardiac reader platform, a leader with the (inaudible) platform. Within this market, high sensitivity report is the key marker for detection of acute myocardial infection and is essential to the market acceptance of any point of care cardiac platform.

Unfortunately for our competitors, the fact is that none of the three competing platforms just mention (inaudible) as new guidelines for (inaudible) testing at the point of care. These guidelines state that to be complaint, a Troponin POC product must be capable of producing quantitative results at the 99 percentile of a normal healthy population. In this context, the definition of quantitative is the ability to produce results with a co-efficient of variation of less than 10% at the 99 percentile of the normal population. I am delighted to report to you today that we have reached design phase on definitive IOSEC high-sensitive Troponin products. I am also delighted to say that in our hands that our Troponin products 40 meets all aspects of the new FDA guidelines.

Furthermore to our knowledge, the Fiomi high sensitivity Troponin product is the only true point of care platform to meet these new guidelines today. This provide Trinity with unique opportunity to take a significant share of this billion dollar market when our product is approved in Europe later this year and in the USA towards the end of 2014.

Moving on to the clinical trials and regulatory approvals necessary to market our products, let me first address the European approval. As planned, we have now commenced the European clinical trials necessary to obtain CE marking for Troponin. In general, there are two (inaudible) for this trial. The first phase is to determine the upper reference limit of a normal population. This trial has commenced and we are currently recruiting 500 plus gender matched normal healthy people between the ages of 25 and 65 on which Troponin levels have been measured on both the Fiomi platform and on a central lab system. The data from this trial will essentially provide us with a definitive 99 percentile value for our product.

The second part of the European trial will be to initiate the chest pain trial itself. This trial will be run on a combination of bio bank clinically adjudicated samples and on fresh hold got samples from suspected MI patients. With regard to the fresh hold look portion of this trial, Trinity is participating in what is known as the fastest trial for the rapid rule out of myocardium infection in the ER. This trial which is being supervised by some of Europe's key opinion leaders is being run in five sites and should deem significant patient numbers in a reasonably sharp period of time. The CE trials which I say have commenced will through Q2 and through Q3 of this year and we remain on target of a 20C marked product in Q4 of this year.

With regards to the US approval, unfortunately as I mentioned on our last call, European generated data may not be used to support an FDA submission. All data must be generated in the USA on a US patient population. To help steer us through our clinical trials and to help shape our FDA application, I am delighted to say that Professor Fred Apple Director of Laboratory Medicine at Hennepin County Medical Center in Minneapolis has agreed to take on the role of principal investor to oversee the running of our US trials. Dr. Apple is widely acknowledged as one of the key opinion leaders on cardiac biomarkers and was instrumental in shaping the new guidelines for Troponin testing and measurement for the diagnose of IM. We believe that professor Apple's assistance will be invaluable in seeing the company successfully through the FDA process.

Currently, five US trial sites are being recruited. The trials again will consist of a determination of an upper reference level of Troponin in a normal population and of course a formal adjudicated chest pains solely across five geographical locations in United States. By the way we expect this trial to cost somewhere in the region of approximately $4 million. These trials remain on target to commence in Q3 2013 with our FDA submission plan for Q1 2014.

Finally, though we don't seem to talk about it too much on our calls, our BNP product development products developing very well. Our product is now demonstrating market leading performance characteristics. This product shadows Troponin approximately one quarter later.

In summary therefore, we are very pleased with our acquisition of Fiomi. The Fiomi team are working very hard and are dedicated to producing the world's first true point of care paraded platform capable of meeting the new FDA guidelines for Troponin. Our development programs are progressing well and according to plan. Clinical trials are underway and more importantly we have assembled the right team of people to make sure that our trials are carried out in an efficient cost effective and successful manner. We are on track to however Troponin product approved for sale in Europe in Q4 of this year and in US in Q4 of 2014, (inaudible) poised to take a significant share of this $1 billion market and I'll be very happy to take questions.

Ronan O’Caoimh

Thanks Jim. This is Ronan now and I am going to just bring you quickly though revenues for the quarter and business developments. After that we'll open it for questions and answer session. Revenues for the quarter were $20.3 from $20 million which is an increase of 1.5%. The principal factors influencing this were 13% lower HIV sales in Africa this quarter, low lying sales due to severe winter and adverse currency impact due to the weak euro. In Africa, our HIV revenue declined 13% by comparison with quarter one of last year. However this decrease reflects the fact that sales in quarter one of 2012 were unusually higher rather than the fact they were poor this quarter. In fact our African HIV sales this quarter are significantly higher than in quarter two, quarter three and quarter four of last year.

Given that African HIV sales are funded by NGOs and western governments, we can see major fluctuations that don't always use a 13 week reporting cycle. In any event, African revenues continue to perform strongly and we should remember that African revenues increased 34% last year. Our US sales of HIV have been under pressure during the past year as a result of cut backs in the public health spend by many states within the United States. However our US HIV sales have performed well this quarter with an increase of 5%.

Clinical laboratory revenues for the quarter increased from $14.9 million to $15.6 million which represents an increase of 4.4%. however as I have already outlined, if the impact of very low lying confirmatory sales because of the very cold winter are taken into account, then the accruals would have been 8%. If adverse currency movements and flat sales at Fitzgerald are taken into account, then the core clinical laboratory business shows 10% growth made up of 13% growth in diabetes and 8% in infectious disease excluding line confirmatory. It should be remember the weak line confirmatory sales in no way reflects the losses in market share as Trinity Biotech holds 97% of line confirmatory market.

I indicated that our core infectious disease business grew 8% excluding line. And this reflects a strong performance in the United States with the addition of new esoteric tests is helping us place more new instruments. As a result of our research and development program San Diego, we now have a broad product range coming to market. First in Europe for the approval process takes less time and subsequently the products will be progressively rolled out in the US following FDA approval and in the case of syphilis and harpies following their seasonally waiver. By the end of this quarter, we will have received a CE mark and be setting the following products in Europe and in the UK through our sales force. And throughout the rest of Europe through our distributors, the following products are (inaudible) and sexually transmitted diseases syphilis and harpies and respiratory (inaudible) antigen test will be on sale in Europe by year end and on sale in the US by July 2014.

And moving on to diabetes, I mentioned that growth in the quarter was 13% and the launch of our new premier instrument continues to gather momentum. The big news that we announced today is that we have received Chinese approval. We are really pleased to have achieved this after two and half years of hard work. The Chinese have a huge diabetes problem and their government is determined to tackle this problem and our instruments are best in class is also uniquely suited to the Chinese market because our tests unlike our competitors have always interference from abnormal hemoglobins which are present in a big percentage of the Chinese population.

I was present at the formal launch of the product in China last week and we received orders for the first 20 instruments which will be shipped during this current quarter. We are confident that's immediately achieving a place in trade of 100 instruments per year in China.

(Inaudible) continues to perform well in Europe, and as I explained on our last conference call, the level of business (inaudible) will grow very significantly as soon as our iron exchange version of the primer comes out of research and development and we are confident of achieving this by July this year. We performed well in the United States during the quarter where opinion leaders are progressively endorsing and supporting our instruments. We are continuing to launch the instruments around the world and this quarter we will launch in Eastern Europe, in Scandinavia, in the Philippines and in Malaysia.

In summary, we placed 67 instruments during quarter one and are confident of exceeding the 320 placements during the year that we've outlined. So thank you very much and at this point in time if I could hand back for a question-and-answer session.

Question-and-Answer Session

Operator

(Operator Instructions). The first question comes from Matt Dolan of Roth Capital Partners, please go ahead.

Matt Dolan - ROTH Capital Partners

First, just wanted to touch on the core business. Where are you as it relates to the guidance that you laid out on the last call which was calling for double-digit top and bottom line growth I think exclusive of the device taxes? Is that still your expectation and if so, obviously it assumes a ratcheting up of revenue. So maybe walk us through how that progresses this year?

Ronan O’Caoimh

Ronan here. We know you are still confident of achieving double-digit revenue, a double-digit EPS growth excluding the (LCD). And in terms of a highlighted growth, I don’t propose necessary to give you a quarter-by-quarter revenue. Is that what you are asking me?

Matt Dolan - ROTH Capital Partners

Yes, I mean the run rate obviously needs to tick up and we are just trying to understand if that happens in Q2 gradually or if it is more of a second half of the year phenomenon? companies.

Ronan O’Caoimh

What I would say to you just as in general terms without going through all numbers which I don’t actually happen for to any event. But quarter one is traditionally and typically our weakest quarter because we don’t sell almost any Lyme in the quarter one. And if you think we do $9 million here of Lyme Confirmatory testing, so that means this is always traditionally our weakest quarter. So we would expect it to be lowest quarter. In addition to that, this has been a particularly a week winter in terms of Lyme and the indications are now that April orders have picked up and I think we have 97% of the market and I think we probably would have a reasonably okay year. I think another thing that has happened of course is that we just got approved in China and so you are going to see probably 70 instruments go to China this year, you can work out with that up to couple of million dollars. And you are going to see the launch of our Rapid product in Europe, you are going to see an increasing level of activity by Menarini in quarters three and four as they take the ion exchange instrument, probably more at quarter four. And in addition to that you are going to see a commencement of activity in Brazil in quarter four. So if take that and taking combination without that fact that we had probably a bit of a timing, I really know (inaudible) predictability about our African sales and then in overall terms they are very strong at this quarter. It just weren’t excellent. But recently that come back to an overall terms I think we are confident of achieving what we did. I think the important thing to remember is that quarter one is always the slowest quarter sales-wise intrinsic because it has virtually no Lyme sales. And we do $9 million a year with Lyme confirmatory. We were confident of the 10% double-digit in both revenue and earnings.

Matt Dolan - ROTH Capital Partners

Okay. And then Premier in China. Congratulations on the approval there. Can you remind us, it sounds like that was already baked into your Premier guidance. Just walk us through the pricing and reagent expectations, the economics in that country as you have given in other geographies?

Ronan O’Caoimh

The pricing would be just under $20,000 per instrument and the reagent pricing will be similar to what we are doing in Europe. We will be gross margin of probably 85%. And in terms of volumes I think initially the volumes would be more like the rest of the world but we do believe that in leading to longer term the volumes would be probably bigger in China that per instrument than anywhere else because of the indications of a big commitment on the part of the government to tackling their diabetes problem. Their genuine commitment is very obvious to us and I think the virtual grabs going on there between the various (inaudible) operators the before those in the confident expectation that the volumes would be very substantial.

Matt Dolan - ROTH Capital Partners

On Fiomi, can you tell us how you will disclose the results of the European study so we can get a feel for the performance of the system in the field as it related to the 99 percentile guidelines? And then any distribution plans or how you plan on attacking the market once approved would be appreciated.

Jim Walsh

In terms of the clinical trials as I say they actually commenced just as we got in the first portion of that trial will be to determine that 99% on number. We already have a pretty good indication of what our 99 percentile is because we have done a dry run if you like on bank samples, Swedish bank samples. We don’t give or take plus or minus a few percent what that number is going to be. It will depend then how quickly the actual chest pain on patients, how quickly we enroll a chest pain patients into those five sides, what I would suggest that we will have a good indication maybe of what we know we have a good indication of a 99 percentile in three months’ time and in 13, 4 or 5 months’ time we will have enough data from the chest pain studies to see how we shape up against that. It starts for the time frame.

Matt Dolan - ROTH Capital Partners

Okay. But obviously bear in mind we are talking about having a CE Marked product available for sale in Europe before year end and obviously the performance characteristics of the product will be published and all of that so it will be freely available.

Jim Walsh

So yes, it all depends on how quickly patients come into the ER, not how quickly we can enroll them, how quickly they come in. And, how many of those patients and the folks that are actually having real MIs. We have actually put six months into our time plan. I am pretty confident that probably we have overestimated that. That it should come before that. We are looking at driving internally for a CE marked products at the early part of the fourth quarter rather than the end part of the fourth quarter, put it that way.

Operator

Your next question comes from Larry Solow of CJS Securities, please go ahead.

Larry Solow - CJS Securities

Good afternoon, guys. Just a few quickies. You mentioned Point-of-Care. Was that, did you said that did $6.1 million sales by product line, the segment was that $6 million, $6.1 million?

Kevin Tansley

Now 4.76 million for Point-of-Care in parts.

Larry Solow - CJS Securities

Got you. Okay, I got a wrong number there. Okay, good. In terms of gross margin, I figured we would have a little sequential pressure from as you place more of these Premier placements. Actually looks like it went up a little bit. Would you expect it to the start to slip down maybe in the first couple of quarters as you place China for instance and from a lot of bigger one-time placements?

Kevin Tansley

You are right Larry, that’s the impact of placing significant amount of instruments which is obviously a good news to our (inaudible) stretching on the gross margin itself. There has been an impact this quarter to an extent on us sales may intervene this quarter little bit as well because of the identify different quarters all the quarters. And you can't expect from quarter to quarter the things will move around under the best starting one-off events coming along. But in essence if was a normal off quarter down on the previous quarter by virtue of the increased placements and lower point-of-care and line sales. I expect it to maybe a little lower throughout the year as we gain momentum on it from here.

Larry Solow - CJS Securities

Okay. In terms to be tax, breaking down the taxes, how are you going to do it going forward? I thought it was going to be in cost of goods. I guess you'll break this line item out?

Kevin Tansley

Just from a transparency point of view it makes it much easier to just place it where we have at the moment from a statutory point of view might do it somewhat different filings with the SEC. that’s our buzz just in terms of say comparability was much easier there, otherwise you could be standing the whole afternoon waiting about the press release saying before medical device tax and after medical device tax. So I think it’s a much easier comparison the way they play that at the moment. And obviously it doesn’t change the results in any way.

Larry Solow - CJS Securities

Just a couple of just miscellaneous. The tax rate obviously a little lower. You had guided to around a 10% rate for this year. Is that still a ballpark number to use?

Kevin Tansley

Yes obviously we've had a very good quarter, this quarter I think 10% of the more appropriate sort of long term number or even medium term numbers (inaudible) I do think it will be that as I mentioned in my remarks I think it will fluctuate from quarter to quarter. Just the way our tax calculations which depends on where sort of the profits rise, which jurisdiction, the timing, the credits we can take et cetera, kind of effect what is this at an individual quarter 13 weeks for sales is a very short time. It is the same for financial accounts as well. So I expect that towards the 10% range.

Larry Solow - CJS Securities

Okay. You mentioned CapEx was $5.1 million. I assume the majority of that was capitalized R&D. Is that number sort of a good run rate to use for this year and then maybe start to come down as we look out into 2014 and beyond?

Kevin Tansley

You are correct first of all, it is mainly the capitalized R&D that is correct although we are seeing some now sort of ramp up in equipment as we gear up for a free-only production. In terms of the capitalized R&D, it will remain high this year. There will be a certain amount of variability depending on the timing of the trials and Jim there obviously indicated earlier on that the US trials will cost a significant around $4 million and depending on the timing of that which will go into sort of maybe earlier next year, that will cause some variability on that.

Larry Solow - CJS Securities

Okay and then just lastly I know you guys have got some calls for share buybacks and now. Any thoughts on that the stock has been on some recent pressures relative to the market which was actually keen to go up in the thoughts of about getting into market on more urgent type pace and are there any limitations and when you contended in?

Ronan O’Caoimh

The last time we brought back was in the quarter four at an average price of $12.47 and then the pricing moved forward and we were skilled for the market and obviously the prices come back somewhat over the last couple of weeks. But obviously during those last number of weeks we've been in a close period, and we would not have been in a position to buy back. I think now that we have just emerged from the gold period. We have monitored the share price very, very closely and will react swiftly to any price weakness.

Operator

The next question comes from Bill Bonello of Craig Hallum. Please go ahead.

Bill Bonello - Craig Hallum

Just a few questions. Can you maybe just elaborate a bit more on the competitive layout in China, what is being done today for A1C testing and who is approved and that sort of thing?

Ronan O’Caoimh

They are ready for operations there and there is BIO-RAD there is Arkray from Japan there is Tosoh and there is Trinity Biotech. We already have an existing installed base with 140 instruments of which probably 120 are operational. That’s our old PDQ instrument. I would estimate BIO-RAD the biggest operator I am guessing about 400 instruments, Arkray and Tosoh may be 200 each. So that’s a landscape, there is a land grab going on at the moment in a sense that called for, working very hard to get instruments placed. I don’t think any would be making flatter money out of the actual instrument placements. Arkray recently made a donation of $1 million to Chinese diabetes association. Having said the Chairman Patrick (inaudible) was with me last week and attended two dinners with me. So I think they are fairly impartial. But fundamentally the Chinese government indicated that they are taking their diabetes situation very seriously, they see A1C testing as the way of both really as a means of screening and diagnose it. And they are confident. And a big of support of that was there is a certain amount of immune-assay work into market. I am talking about the big instrument the architects and the like because their CVs are so wide, they are really not favored, they don’t formally refuse to allow it plus that day basically not favored by the Chinese authorities. So immuno-assay is less of a threshold in the markets. It’s a HPLC market, with the three ion exchange operators being BIO-RAD, Tosoh and Arkray and then Trinity Biotech would go in this vicinity. So all those three competitors have their products approved but they would be previous generation products. We would be the most modern product that proves within the markets.

Bill Bonello - Craig Hallum

So if I think about the opportunity, it is basically similar to everywhere else in that you now have your boronate affinity product approved, you can take share because of the competitive advantages of that and then maybe layer on top of that the emphasis that the government is putting on testing and diabetes. Is that kind of the way of thinking about why the (multiple speakers)?

Ronan O’Caoimh

What you need to understand though is that there is virtually universal healthcare there and there is reimbursement for A1C testing. So, basically I think that is a key piece that reimbursement works very likely in the United States but it is the government who is doing the reimbursing. And so that is the key factor.

Bill Bonello - Craig Hallum

That's helpful. And then, will you just clarify the comments you made on the African HIV sales. I understand last quarter being strong and the lumpiness. But you made some comments about sort of the pace being higher than , I think you said, the Q2, Q3 and Q4 of last year and I wasn’t sure if you were talking about that pace being that the quarter that we are in now or that the sales in Q1 were higher than those quarters?

Ronan O’Caoimh

Well just to clarify, what I'm saying is the Quarter 1 ’12 was a particularly a big quarter. It was very, very strong. Look what I'm saying is that Q2, to have qtr3, to have quarter 4, to have the actual sales into Africa were lower than Q1 of ’13. So what I'm really trying to say is that Q1 ’13 was actually quite a good quarter in Africa that the overall increase in business I think started at more than 34% last year. So I'm saying Africa is doing very well, and just because we are down 13% on the comp of the quarter, last year, took me (inaudible). Actually we had a very, very good quarter. The other quarter was out of left field.

Bill Bonello - Craig Hallum

Got it. I just wanted to clarify what (multiple speakers)

Ronan O’Caoimh

I am just looking at the numbers here. The bottom line is that my sales in quarter one of 2013 in Africa were $100,000 more than quarter four, $200,000 more than quarter three, $600,000 more than quarter two. $500,000 less than quarter one just because we had a wild quarter last year in quarter one.

Bill Bonello - Craig Hallum

Got it. And then just on the Troponin side, a question for Jim, is it anything, I mean you had fairly positive comments to make about Troponin when you reported the fourth quarter and I think at that time you were suggesting that you were getting good results off the bench. I guess I'm trying to understand if any sort of data or information since that point of time that that is sort of incremental to those either to do what you were seeing when you talked to us back at that time?

Jim Walsh

Yeah, sure Bill. What I was saying in Q4 when I spoke to you, we had data indicating the platform did seem to possess the sort of the abilities to use high sensitivity and very tight reproducibility. And sort of what happened since is that we have actually the product to completion. We had a platform that was in I suppose, moving through the process of product development okay. And there were many sort of like, if you like, tweaks that had to be made to many sort of you know important terms of the instrument and in terms of the disposable, together to what we would call a design freeze, okay. It's already fine to maybe once or twice in a lab to get some good results. But it's a hell of a lot different to be able to do that every day, day in and day out, independent of what operator is actually running the test. And it was what we had built into the technology. We were showing good results that December and we are still showing probably well, quite substantially better results now. What we have probably done in the mean time is made the product robust. It's reproducible. It can be run time and time again, by notable different operators, skilled or unskilled. And you can still get the same high quality results. And that's been the type of work that has taken place over the last sort of four to five months. From the time we had it working very well to now having it working well every time. That's the only difference.

Bill Bonello - Craig Hallum

Glad. Okay, that makes sense. Just when I think about that, I mean obviously there is still a big leap in going from the bench to what may or may not work in clinical trials. But I assume that relative to where you were when you talked to us last this gives you increased confidence that you have a product that is going to hold up well in the clinical trial front?

Ronan O’Caoimh

Totally, totally, Bill. We have run many hundreds of samples internally at this stage. Some banks, some fresh. We prepare ourselves most of the time to sort to (inaudible) stratus instrument which is the actual instrument that runs in the hospital right beside our facility in Uppsala. So you can never tell what is going to happen in a clinical trial. But all indications would be that we (inaudible). It will be out of left field if we encounter something that sort of tracks the performance of the product when they put out in the market. But you never know until you put it out and it runs several thousand fresh samples and see what happens but all indications are if I was a betting man I would say we are there.

Bill Bonello - Craig Hallum

Sure, okay. Well great, thank you very much.

Operator

The next question comes from Jeffrey Warshauer of Sidoti & Co. Please go ahead.

Jeffrey Warshauer - Sidoti & Co.

Can you provide the geographic breakdown of the 67 placements of Premier in the quarter?

Ronan O’Caoimh

Without having them in front of me, with just from memory, you would have let me see, in Europe it's probably about 30%, 35% maybe, in the United States just have 25%,and then around the rest of the world.

I know that sounds wonderfully accurate information but broadly speaking that’d be it.

Jeffrey Warshauer - Sidoti & Co.

And then in the US the breakout between direct and through your distributor and have you made any headway there?

Ronan O’Caoimh

That would be like maybe a 100% direct.

Jeffrey Warshauer - Sidoti & Co.

And what can you do to help spur growth through distribution?

Ronan O’Caoimh

Jeffrey, we are working on that. we are not happy with it. But basically all but a couple of (inaudible) so far have been through our own efforts. Having said that, the availability of lifts in that have been useful. But we are not really getting an engagement from our partner that we would like, and we are working on it. They are just a bit more passive than we wish.

Jeffrey Warshauer - Sidoti & Co.

Understood, thank you.

Operator

The next question comes from Declan Morrissey of Davy Research. Please go ahead.

Declan Morrissey - Davy Research

Just a quick question on a capital allocation. I know you discussed your buyback policy earlier. Just your potential M&A pipeline, any particular technology you think would complement your existing portfolio or any products that would complement your portfolio in diagnostics? Just give us some color around that?

Ronan O’Caoimh

Hi DeClan, Ronan here. I think at this time we are not only looking for acquisitions. There is plenty happening. Well plenty of organic growth. We know we’ve (inaudible) whole range of it of rapid Point-of-Care tests Jim has talked about. What we are doing in cardiac and with the new platform in field that can be utilized for many diseased conditions. So we could teach this about them. Either try products for our (inaudible) there and of course we are developing the new iteration of the un-exchanged Premier instrument in Diabetes. So I think we have plenty to be doing and we are very confident of building a very impressive organic growth momentum.

And so we are not looking for anything at the time and I don’t there is any obvious kind of gap technologically in terms of something we really badly need. We had looked at going down to the Point-of-Care molecular route. We still kind of have interest in that area. I think what we are doing in Cardiac is a lot more interesting that we have been probably happy enough to put to one side and maybe possibly even leave it to one side.

So DeClan, the answer to your question is we are not looking for acquisitions and that we feel we are busy enough as it is. We don’t want to kind of disperse our efforts by little. That maybe we could just have one last call (inaudible). It's nearly 5 o’clock.

Operator

Okay. The next question is a follow up question from Larry Sollow of CJS Securities.

Larry Solow - CJS Securities

Two quickies. I well combine them in one. Just on the Premier. First of all, on China I think you had guided toward 50 placements this year. But it looks like you said 70. I know 20 are up front but is there any difference between the 50 and the 70 that is in your presentation?

Ronan O’Caoimh

I think what is happening is that we launched the product last week in China and we basically came home with an order for 20 instruments that have to be delivered as soon as possible, literally within the next week -- by the end of this quarter. companies.

And then being consistent with what I said that I thought we could have a run rate of 100 a year. I think then we would have hoped to do 25 in quarter three and 25 in quarter four which all adds up to 70 this year which is higher than we had originally expected. That is where it comes from as well I didn't quite expect to have firm orders so quickly.

Larry Solow - CJS Securities

Just on Thermal Fischer. Did your guidance, you know, your targets or whatever, are you assuming that you guys don’t really help too much (inaudible) in the U.S. obviously they are not, I mean they are helping a little bit but at the end of the day when who places it. It's been all you . Is that why you are assuming (inaudible) in your term. And is there any way you can tighten the grips on them or you know is there a reason why they might not be as focused on it and (inaudible) options (inaudible) will be great. Thanks.

Ronan O’Caoimh

I don’t want to come on the phone and beat them up.

You understand. In terms of where we are I think that we will meet our targets for 2013 for the United States because as well as we would have taken a cautious approach given that they haven't placed a lot of instruments for us last quarter. And so in terms of how we are going to handle this, we are continually talking to them -- the old adage you can bring a horse to the water but it is hard to make him drink. Thermo Fisher basically are to some extent are a little bit like Sigma, like they are kind of a (inaudible) company.

They operate on smaller margins and they are not a full-service distributor who takes 45% and who sweat us if you know what I mean. They take a smaller margin like in the high teens and so you don't get as much engagement. Their reps have many, many products to sell. So it is not always -- what tends to happen is you might get very effective engagement by certain reps in certain parts of the country and then almost none in other parts. And then Central Management can be very committed but it doesn't always go all the way down the line. So we have to deal with those issues but in any event, I think going forward the chances are that most of the headway we make in the United States will be through our own sales reps.

Operator

That concludes the Q and A session today. I will now turn the call back to Ronan O’Caoimh for closing comments.

Ronan O’Caoimh

Thank you so much and thank you everybody for your interest and attention. I look forward to talking to you in 3 months’ time for the quarter 2. Good bye and good afternoon.

Operator

Ladies and gentlemen, the conference has now concluded and you may disconnect your line. Thank you for participating and have a pleasant day.

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