Chembio Diagnostics' (CEMI) CEO John Sperzel on Q4 2017 Results - Earnings Call Transcript

Chembio Diagnostics, Inc. (NASDAQ:CEMI) Q4 2017 Results Earnings Conference Call March 8, 2018 4:30 PM ET

Executives

Lynn Lewis - IR

John Sperzel - Chief Executive Officer

Neil Goldman - CPA, EVP and CFO

Analysts

Kevin Ellich - Craig-Hallum Capital

Raymond Myers - The Benchmark Company

Larry Haimovitch - Haimovitch Medical Technology Consultants

Ross Taylor - ARS Investment Partners

Operator

Greetings. And welcome to Chembio Diagnostics Fourth Quarter and Full Year 2017 Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded.

I would now like to turn the conference over to your host Lynn Lewis, Investor Relations for Chembio.

Lynn Lewis

Thank you. Before we begin today let me remind you, that the company's remarks made during this conference call today, March 8, 2018, include forward-looking statements within the meaning of the Securities Act of 1933 concerning the current beliefs of the company.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties many of which are beyond Chembio control including risks and uncertainties described from time to time in Chembio's SEC filings. Chembio's results may differ materially from those projected. Chembio undertakes no obligation to publicly revise or update any forward-looking statement made today. I encourage you to review all of the company's filings with the SEC concerning these and other matters.

With that, I’d like to turn the call over to John Sperzel, President and Chief Executive Officer. John?

John Sperzel

Thanks Lynn. Good afternoon everyone, and thank you for participating in today's call.

Before we begin, I'd like to introduce Neil Goldman, CPA, our Executive Vice President and Chief Financial Officer who is joining me on today's call and who started with Chembio in December. Neil brings nearly 30 years of experience spending public accounting and consulting, corporate development, strategic transactions, and management of financial operations for global manufacturing organizations. He will be instrumental as we continue to scale our commercial and manufacturing operations.

During 2017 we demonstrated strong financial performance and meaningful progress toward our strategic and operational objectives including total revenue growth of 34%, net product sales growth of 41%, gross product margin increased of 50% and operating loss improvement of 14% compared to the prior-year.

We’re building the company on the basis of our patented DPP technology platform which offers a number of customer advantages as compared to traditional lateral flow technology. Including enhanced sensitivity, multiplexing and the ability to provide quantitative results when combined with Chembio's DPP microreader.

Our most important product related goals are one, to strengthen our core sexually transmitted disease business. Two, to build a broad tropical and fever disease portfolio, and three to leverage our DPP technology and scientific expertise via collaborations.

On today's call, I will provide a progress reporting each of these areas, as well as a number of commercial and operational achievements before turning the call over to Neil to provide details on our financials. I will wrap up closing comments on our strategy entering 2018 and then we look forward to taking your questions.

During 2017 we continue to strengthen our sexually transmitted disease business which is currently our core business. The 41% growth in net product sales compared to the prior year was predominantly driven by HIV product sales. We believe our strong sales growth is directly related to the recent investments we made in sales and marketing which we will discuss later.

During the fourth quarter, we shipped the remaining $1.4 million of the $5.8 million order that we received from Bio-Manguinhos in early 2017. We also announced an $8.5 million commitment from Bio-Manguinhos to purchase DPP and Leishmaniasis components and intermediate product throughout 2018 and subsequent supply to Brazil's Ministry of Health.

As you may recall Bio-Manguinhos is a subsidiary of the Oswaldo Cruz Foundation which is responsible for the development and production of vaccines, diagnostics and biopharmaceuticals primarily to meet the demands of Brazil's National Public Health System. We have a long-standing relationship with Bio-Manguinhos supplying multiple products for the point-of-care detection of HIV and other infectious diseases.

Subsequent to the end of 2017, we won a three year tender from the Ethiopian Pharmaceuticals Fund and Supply Agency to deliver HIV STAT-PAK Assays between 2018 and 2020 with a total contract value over the three years of $15.8 million. This is the largest tender in our company's history.

During the fourth quarter, we announced the completion of the U.S. clinical trial for our novel DPP HIV-Syphilis Assay. And during the first quarter of 2018 we filed premarket approval application to the U.S. Food and Drug Administration. We believe we're on track to be the first company to market a point-of-care HIV Syphilis Multiplex Assay in the United States.

Outside the United States in collaboration with the World Health Organization, we recently initiated a DPP HIV Syphilis study in 10 countries. We believe our DPP HIV Syphilis Assay uniquely positions the company to address global concerns related to increase HIV Syphilis co-infection and mother to child transmission.

The global community has committed to eliminating mother to child transmission of HIV and Syphilis as a public health priority. The World Health Organization estimates that 2 million pregnancies are affected by mother to child transmission of HIV or Syphilis each year resulting in tragically high rates of stillbirth or neonatal death.

These outcomes could be improved through timely identification and treatment of pregnant women, as well as control of HIV and Syphilis in the general population and certain segments including sex workers and drug users.

We continue to expand sales of our DPP Syphilis Screen & Confirm Assay is CE Mark. This unique product is the only rapid test that can simultaneously detect both active and previously treated Syphilis infections taking advantage of the multiplexing capabilities of our DPP technology. It has been successfully deployed in several pilot programs in Africa some of which have concluded and those countries have initiated purchases.

Finally during 2017, we grew our international HIV self-test business by 91% compared to the prior year which to-date has been focused on the European HIV self-test market. Our products including DPP and SURE CHECK brands are well suited for the international HIV self-test markets and we believe they offer meaningful growth potential in several regions of the world which we're actively exploring.

Turning to our second product related objective building a broad tropical and fever disease portfolio. Using our DPP platform, we're developing point-of-care test for some of the world's most significant global health threats including malaria and dengue which together account for approximately 600 million annual basis over 400,000 annual deaths and an estimated $300 million annual point-of-care market.

We completed the feasibility for the DPP Malaria Assay which showed superior sensitivity compared to the market leading rapid malaria test. This superior sensitivity was a key goal of the prior funding from the Bill and Melinda Gates Foundation.

Our 2018 malaria plans include verification and validation, transfer of production to our Malaysia facility, and certain regulatory submissions which are of course the first step in the commercialization process.

As previously communicated, we successfully developed a DPP Dengue Assay and we're also participating in the CDC pilot program which includes our DPP dengue Zika, Chikungunya Multiplex Assay in four countries, India, Peru, Haiti and Guatemala. Our Dengue Assays are now approved by the Malaysia Medical Device Authority and we anticipate additional country registrations during 2018 each successful registration paving the way for dengue product sales.

In 2017 of September we received U.S. Food and Drug Administration Emergency Use Authorization for our DPP Zika System which includes the DPP Zika Assay and Microreader and which was funded by BARDA.

In 2018 we plan to pursue FDA 510 K and CLIA Waiver which are also funded by BARDA. We are the only company to receive FDA Emergency Use Authorization for a rapid Zika test further validating both our patented DPP technology and our scientific expertise.

As of today, we've initiated commercialization of our Zika System in the United States and the Caribbean region. In the fourth quarter of 2017 we are awarded a UNICEF contract to supply at least $1.5 million and up to $4.9 million of purchases of our Zika System subject to certain conditions.

Turning to our third product development objective, leveraging our DPP technology and scientific expertise via collaborations. We have a number of ongoing programs funded by our collaborators to develop DPP Assays for a specific form of cancer, bovine tuberculosis, concussion and an undisclosed biomarker. We're on track to complete the development of the cancer assay and the Bovine TB Assay during 2018 and we're also advancing the development of the concussion assay.

In December of 2017 we entered into collaboration with AstraZeneca, a global biopharmaceutical company. Under terms of the 18-month agreement, we will receive up to $2.9 million from AstraZeneca to develop a quantitative point-of-care test to identify an undisclosed biomarker

Utilizing our DPP platform and our DPP microreader as well as to submit for 510-K clearance by the middle of next year. Based on the successful completion of technical feasibility which occurred during the third quarter of 2017 we're optimistic about the probability of product development success.

We look forward to sharing additional details about the AstraZeneca collaboration including the commercial plans at the appropriate time. In each of the cases listed before our collaborators initiated contact with Chembio based on a combination of our patented technology as well as our scientific and regulatory expertise. We believe there are additional opportunities to leverage these key strengths via collaborations and we’re actively exploring such opportunities.

Finally I’d like to provide an update on a number of commercial and operational achievements. During the second half of 2016 we made a commitment to expand both our commercial and operational capabilities. We put the commercial leadership in place during the fourth quarter of 2016 and we expanded our sales and marketing team in the first half of 2017 placing experienced executives in Latin America, Africa and Southeast Asia.

We also built a small globally focused marketing team to support our sales team and our expanding customer base. We believe the 41% net product sales growth we achieved in 2017 is directly related to the investments we made in commercial sales and marketing.

Our philosophy is to start small and build as we grow to help ensure we scale the business in a systematic pragmatic and thoughtful manner. Simultaneously we’re investing in operational improvements to help scale our systems, processes and manufacturing capabilities. In January 2017 we acquired RVR Diagnostics a Malaysia-based manufacturer and distributor of point-of-care infectious disease test. We've integrated the company as Chembio Diagnostics Malaysia expanded the facility and the number of employees and established a STAT-PAK manufacturing line in Malaysia.

We believe this facility will help the company manufacture STAT-PAK HIV assays and future DPP assays at a lower cost providing competitive advantage and/or margin expansion potential. In addition we've ordered our first fully automated manufacturing equipment for DPP assays to be installed in our Medford, New York facility. This new equipment will increase manufacturing capacity by approximately 5 million tests per year while also maintaining the high quality that our customers expect a hallmark of DPP assays.

I’ll now turn the call over to Neil Goldman our Chief Financial Officer and then I'll wrap up with some closing comments on strategic initiatives as we enter 2018. Neil?

Neil Goldman

Thanks John. I’m happy to be part of the Chembio team.

As John shared during the start of the call, Chembio experienced favorable growth in both the fourth quarter and entire year of 2017. Before reviewing the financial details I would like to highlight the presentation of our statement of operation.

For our fourth quarter and year-end 2017 results and on a go forward basis we will be talking about our gross product margin which is calculated as net product sales minus cost of product sales. We will also refer to our gross product margin as we discussed our reported results. We believe this is a better management of our financial performance additional specifics are described in the MD&A section of our SEC filings.

I will start with the fourth quarter results, total revenues for the fourth quarter of 2017 were $6 million an increase of 40.7% compared to fourth quarter 2016 revenues. Net product sales for the fourth quarter of 2017 were $4.9 million an increase of 50.9% compared to net product sales for the fourth quarter of 2016. License and royalty and R&D milestone and grant revenues combined in the fourth quarter of 2017 were $1.1 million an increase of 8.8% compared to fourth quarter of 2016.

Gross product margin for the fourth quarter of 2017 increased to 29.5% compared to 22.5% for the fourth quarter of 2016. Other expenses which includes research and development and selling, general and administrative expenses were $4.6 million for the fourth quarter of 2017 compared to $4.3 million in the fourth quarter of 2016. Net loss in the fourth quarter of 2017 was $2 million or $0.16 per diluted share compared with a net loss of $2.6 million or $0.21 per diluted share in the prior year period.

Now turning to full year 2017 financial results, total revenues for 2017 were $24 million an increase of 34.4% compared to 2016. Net product sales for 2017 were $19.3 million an increase of 41.2% compared to 2016. License and royalty and R&D milestone and grant revenues in 2017 totaled $4.7 million an increase of 12% compared to 2016.

Our sales results in 2017 that John described earlier reflect good teams in every region of the world except the United States which in 2016 benefited on a one-time basis from a former U.S. distributors $1.8 million end of contract purchase of certain products following our notice of termination of that distribution agreement. While last of those products reach their normal expiration date last month.

Gross product margin percentage for 2017 was 33.1% compared to 31.2% for 2016 the increase was primarily driven by favorable overhead allocations. Other expenses in 2017 were $17.6 million compared to $16 million in 2016. The $1.6 million increase was driven primarily by an increase in sales and marketing expenses and professional fees.

Net loss for 2017 was $6.4 million or $0.52 per diluted share compared with net loss of $13.3 million or $1.26 per diluted share in 2016. Cash and cash equivalents as of December 31, 2017 totaled $3.8 million. Last month we completed an underwritten public offering that resulted in net proceeds to the company of $11.0 million after deducting underwriting fees and other costs.

At this point, I would like to turn the call back to John for closing comments.

John Sperzel

Thank you, Neil.

Throughout 2017 we made substantial advances in our business with considerable progress in product development, commercialization and financial performance. As we entered 2018 we're well-positioned and we have a number of important wins already under our belt including. We received an $8.5 million 2018 purchase commitment from Bio-Manguinhos, we won our three-year of $15.8 million total HIV contract from Ethiopia. We received a $1.5 million to $4.9 million conditional Zika Award from UNICEF.

We submitted the FDA [PMA] for the DPP HIV syphilis system. We entered collaboration with AstraZeneca to develop a quantitative DPP assay to detect an undisclosed biomarker and we strengthened our balance sheet with a $11 million in capital.

As we think about our key objectives for 2018 we have won overriding theme focused execution specifically focused on sales and marketing, product development, product registrations and manufacturing and quality systems.

We’re particularly excited that we’re on schedule to complete development of the DPP cancer and Bovine TB Assays this year advance development of the DPP concussion assay and the DPP assay for an undisclosed biomarker under the AstraZeneca collaboration.

In summary, we have a patented technology platform a number of high quality products in the market, a robust product development pipeline, significant global market opportunities and experienced team and the capital to execute on our plans. We look forward to providing updates on the next quarterly earnings call.

With that, we’ll now turn it open to questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Kevin Ellich with Craig-Hallum Capital. Please proceed.

Kevin Ellich

John, just a couple of questions. So gross product margin and total gross margin came in a little bit lower than we’re expecting is there anything unusual in some of the tenders and contracts you’ve won that would lead to gross margin coming in 2018. And can you give us any color guys to what's going on there.

John Sperzel

So as far as color is concerned, the one win that we already have under our belt in 2018 is the tender award in Ethiopia the three-year award at $15.8 million total contract. That one is not at the margin level that our business traditionally is. The plan from the start is that we're manufacturing that product here in New York. As you can imagine the volume associated with that kind of a tender win has a pretty favorable absorption impact.

The longer term plan once we get WHO prequalification or certification of our site in Malaysia is to transfer production of that product to Malaysia which we anticipate being in early 2019. Otherwise there isn’t anything that would pull the numbers one way or the other Kevin.

Kevin Ellich

So we should expect a little bit of margin pressure then throughout 2018 because of this, is that - I’m hearing you correctly?

John Sperzel

I wouldn't define it as margin pressure, I think it's got a favorable impact we're essentially spreading the peanut butter over a much bigger base of business.

Kevin Ellich

And just to confirm that the Ethiopia business for HIV that is profitable for the company is that correct?

John Sperzel

Yes.

Kevin Ellich

And then it looks like on the R&D milestone and grant and license royalty revenue that was just a little bit higher than we’re expecting. Are you seeing any of the revenues from AstraZeneca flow in yet or is that on the come?

John Sperzel

I’m going to ask Neil take that.

Neil Goldman

None of the AstraZeneca revenue was recognized last year.

Kevin Ellich

And when should we expect that Neil?

Neil Goldman

It will be over the course of this year and some into next year really related to the timing of that process and when the 510-K filing gets kicked off.

Kevin Ellich

And then since I have you Neil based on our calculation cash flow looks like it was positive 2 million or 2.1 million in Q4 is that right? And just wanted to see you know is that due to the receivables collected from Brazil or you know what's driving that?

Neil Goldman

That's right. It was positive in the fourth quarter certainly the company's successful collection of the significant receivable from our business with Bio-Manguinhos is reflected in that. And in fact that we had nothing outstanding from them at the end of the year and that is part of what you're seeing in the meaningful reduction in accounts receivable from last year to this year and notwithstanding the growth in sales.

Kevin Ellich

And then can you help us give us any goalposts around where we should be thinking cash burn will come in for 2018 or even on a quarterly progression?

Neil Goldman

As you know Kevin, we don't get in a habit of providing direction on things of that level of granularity.

Kevin Ellich

Just thought I'd check. And then John you guys have had a number of wins which is great for the company. What are you most excited about here it seems like there's quite a bit, but you know when you really kind of prioritize everything with the sales and commercial team expansion, how should we think about 2018 in terms of the development pipeline?

John Sperzel

I'm excited that we really did a great job growing our core sexually transmitted infectious disease business which was one of the initiatives that we laid out at the beginning of 2017. And there's no doubt that there is a direct relationship between the commercial infrastructure and the experience sales people that we put in place as driving the sales growth. So we look forward to continuing to drive growth in that core sexually transmitted infectious disease business. So that's one and that’s the majority of our business today.

The second is, we are doing a really good job advancing the development of products in our tropical and fever disease area. We declared that we’re going to begin the commercialization process for dengue and malaria this year which are huge markets with a lot of upside potential for the company.

Just keep in mind that the commercialization phase does include regulatory approvals and those can be a little bit unpredictable. But we fully intend to apply for and get certain registrations in 2018 and that will open the door to the commercial sales.

And then the third thing is on the collaboration side we’re obviously thrilled to have a partnership or collaboration with AstraZeneca to develop a DPP test for a certain biomarker. I think most diagnostic companies around the world would be thrilled if AstraZeneca knocked on their door and you can imagine we're quite thrilled, but we're even more thrilled that through the technical feasibility in a very short amount of time we demonstrated that we could identify that biomarker in fingerstick blood in 10 minutes.

So we’re very optimistic about the product development side of that collaboration and certainly look forward down the road to talking more on these calls about the commercial collaboration.

Operator

Our next question is from Raymond Myers with The Benchmark Company. Please proceed with your question.

Raymond Myers

John let me first ask you about the timeline and gross margin implications of instituting the automated manufacturing in New York. And you mentioned getting the Malaysia manufacturing facility up and running shortly?

John Sperzel

So we wouldn't be prepared to talk about the specific gross margin impact it’s a little premature Ray. I think when we get further out into 2018 we can give some color on that. The automated manufacturing line for the New York facility we expect to be delivered in the next month.

As far as transferring certain production to our facility in Malaysia we do need to get the World Health Organization to certify that site and that’s a process which we are pursuing as we speak. So I think once those two things occur we can give you more color on the gross margin impact.

Raymond Myers

If I can ask about how long would the World Health certification typically take for a site like Malaysia?

John Sperzel

Hard to predict, what we've done is we've assumed that it takes all of 2018 and hopefully we’re pleasantly surprised.

Raymond Myers

Given the goal of having more efficient manufacturing in 2018, can you reframe the size of the global HIV market in 2019 and beyond what's the opportunity to Chembio for deploying its efficient manufacturing over that opportunity?

John Sperzel

Well it actually crosses all three segments of the product Ray. So we're not just thinking about automation for today's business which certainly can have a positive impact on margins which was your first question.

But we’re also thinking about it in terms of our future business as we discussed in the prepared remarks the market for malaria and the market for dengue is enormous on the order of 300 million in annual sales of point-of-care assays today. So we don’t have to go out and create a market, we have to go out and take share with what we believe is a better product in terms of performance.

And so we need to plan the production capacity for that. And if you look at the collaborations that we’re developing in a product along with AstraZeneca we’re developing a test for certain type of cancer I mean any one of those things could come in significant volume as well and we need to prepared for that.

So we're starting with our HIV business and we’re preparing for these other businesses that are going to come online as we go forward. And this modular type systems that we’re acquiring for our New York facility is very scalable. So one system has the capacity of 5 million test a year. We can add a second, a third and a fourth as we go very scalable.

Raymond Myers

Regarding just the HIV part of the business one recently this $15.8 million Ethiopia tender and there are many countries in Africa and around the world that order HIV products. How many more or how large an opportunity is that to win more tenders in more countries?

John Sperzel

So that’s the third largest screening tender in Africa as Africa has been made up of many countries and unfortunately there's very high prevalence of HIV and other sexually transmitted infectious diseases. So we are pursuing on any given day multiple tenders on the continent.

Operator

Our next question is from Larry Haimovitch with Haimovitch Medical Technology Consultants. Please proceed.

Larry Haimovitch

Couple of questions first question John. There was a little bit of color about the effort in Asia. I know that you were very excited with the acquisition you made that it gave you a beachhead to start entering some of those Asian countries where you needed a lower cost manufacturing. Can you give us some update and color on that please?

John Sperzel

I think that was one part of the pieces. The other part of the pieces that maybe doesn't meet the eye is that it was – it serves as a commercial beachhead for us in Southeast Asia, somewhere that this company has never been in its prior 30 years. And the real value of that is from a regulatory or product registration standpoint, the ability to sell under a pre-sales certificate throughout the region if you have approval in country of origin.

I can tell you that right now at least a half a dozen of our products are already approved by the Malaysian Device Authority, the equivalent of the FDA in Malaysia. And that's going to give us an opportunity to go into Singapore, Thailand, Indonesia and many other countries under a pre-sale certificate.

So a big part of the pieces of us acquiring the business in Malaysia was around having a commercial beachhead and a faster track to get regulatory approvals which, is proving out. The other piece of it is of course a lower cost manufacturing site, not for all of our products, but for some of our products.

And we're starting with STAT-PAK that happens to be the product that we won the first line position in the HIV algorithm in Ethiopia. As I said before, we're starting to manufacture that product already for Q2 deliveries here in New York. And once we get the WHO certification of the Malaysia site which by the way is ISO 1345 certified that we will transfer that production of STAT-PAK to Malaysia. So it's actually going exactly according to plan and we're very pleased with the progress.

Larry Haimovitch

And commercially in 2017, did you show a nice uptick in that region vis-à-vis what you had the previous year which I know RVR wasn't part of it, if you look at...?

John Sperzel

I can tell you that the cumulative sales in the Asia-Pacific region from the time this company was founded was not zero, but it wasn't far from it. And Neil can update on where we finished in 2017.

Neil Goldman

Larry in 2016 our sales in Asia were about $227,000. And last year they were a little over $1.6 million which is a 615% increase.

Larry Haimovitch

So you did show some real nice progress there.

Neil Goldman

Yes.

John Sperzel

And we’re just getting started…

Larry Haimovitch

John my second question would be for you. Obviously the AstraZeneca alliance or potential alliance could be something very big. How do you foresee other pharmaceutical alliances developing, given that this has been a good start already in that part of your business?

John Sperzel

I'm not sure that I would limit it only to pharmaceutical companies because if you look at the collaboration that we've had so far, we've had different kinds of collaboration. We’ve had collaboration with philanthropic organizations or government organizations where they funded certain product development. And we've chosen those quite carefully.

We want to make sure that that when we collaborate with somebody and whether there's funding involved or not that it serves our purpose. It's in our strategic headlights. So that's been one element of it. Another element of it has been diagnostic companies if you will that have come to us and said look we'd like to solve this particular problem and we can't solve it on.

For example traditional lateral flow technology because it is not sensitive enough it can’t multiplex, it can’t provide a quantitative result and those things play to a strength of the DPP platform.

So the cancer partnership that we have is a good example of that the brain injury or the concussion assay collaboration is a good example of that. With AstraZeneca, of course we're very pleased about that because it's a huge pharmaceutical company. I believe that there are other opportunities across all three of those spectrums opportunities for us to get funding, opportunities for us to collaborate with other diagnostic companies and opportunities for us to collaborate with pharmaceutical type companies. And as I said before we're actively pursuing a number of those as we speak.

Operator

[Operator Instructions] Our next question is from Ross Taylor with ARS Investment Partners. Please proceed.

Ross Taylor

First, congratulations on what was really a transformational year from the spectrum of the science I think 2017 definitely proved that science works. And it looks like you're off to a strong start for 2018. Before we get into, some of the more philosophical questions John, couple of things. One is, obviously Ethiopia is what a three-year contract?

John Sperzel

Yes.

Ross Taylor

And how does that play out dollar wise is that pretty evenly distributed or should we expect more of that to fall in years two and three?

John Sperzel

I have Neil take that Ross.

Neil Goldman

We plan to begin shipping in the second quarter of this year and recognizing probably just north of $4 million for the whole year of 2018 and the balance divided somewhat between 2019 and 2020

Ross Taylor

And so hopefully if you end up with you Malaysian facility okayed by then you'll actually generate, the better margins on the bulk of the order.

John Sperzel

Correct.

Ross Taylor

Also John you talked about the idea that you're looking at other HIV tenders in Africa, two things first who had the Ethiopia prior to you?

John Sperzel

So it's been in a number of hands, what I can tell you is that, the two companies that were competing for the first line position were Chembio and what was formerly [indiscernible] and now Abbott diagnostics.

So we're pretty pleased that we won it for the obvious reason because of its contribution. But we're also pleased because it was a David and Goliath story and we were victorious in that. And I think it demonstrates our commercial capabilities. You don't have to be large to win these kind of tenders you have to be smart and you have to have good people on the ground and we put really good experienced people on the ground.

Ross Taylor

That definitely have for the investments and people have been powerful. Looking away from Africa, what other markets should we see. You've basically historically you know Latin and South America has been Brazil and nothing else. Should we expect you being able to penetrate the other Latin American markets with HIV product?

John Sperzel

So the short answer is yes we have a new partner in Mexico. I would expect us to make a comeback in the market in Mexico with our STD, HIV-syphilis products. One of the other challenges that we've had and this really goes throughout Latin America and also throughout Asia is most of the products that we have sold into more developed regions have never been registered in any of the countries in those regions.

So if I just give a 30 second sort of overview of the regulatory environment essentially CE mark covers Europe and the Caribbean region. Most all our products that we've commercialized have been CE marked. WHO prequalification generally covers Africa many of our products are WHO prequalified. Obviously the FDA whether it’s a PMA or a 510-K covers the United States and U.S. territories like Puerto Rico. And then you have to go country by country in most other parts of the world. So throughout Latin America we literally have to register the products country by country and the same goes for Asia-Pacific.

So I can tell you that we have a massive undertaking underway to get our products registered country by country in Latin America and country by country throughout Southeast Asia. We are not pursuing China, India and Japan at the moment. So just to keep things focused, we are very focused on Southeast Asia and all the countries in Latin America.

Ross Taylor

And where do you stand with regard to WHO and Zika and also the same with the FDA and the regulatory test?

John Sperzel

So FDA - I'm sorry, WHO with Zika is an ongoing process. I’m not able to give an update, but I will as soon as we can. As far as the FDA is concerned, of course with Zika we’re the only company that has FDA emergency use authorized rapid Zika test and we are currently pursuing 510-K and that's a process which we think will take all of 2018. And fortunately is funded by the U.S. Government Health and Human Services or BARDA.

Ross Taylor

And with the AstraZeneca test, I assume that that is one that will basically be linked to that. You don't have to actually market that test that effectively that when someone, an oncologist or a doctor is looking at using the AstraZeneca product they will be required to give that test to individuals before they prescribe them the specific drug or cocktail or drugs or whatever it is that, they're working at is that correct?

John Sperzel

We can't comment on any of the details related to the collaboration with AstraZeneca. I think you referenced a particular category of their business. We can't comment on any of that unfortunately.

Ross Taylor

But is the general concept behind the idea of how well it will play out correct and that you actually this will be something that you do not have to build a sales force for, but rather will be sold along with something else. Can you comment on that?

John Sperzel

I can't comment on that either Ross.

Ross Taylor

So I’ll just assume I'm right until you tell me I'm wrong. Lastly 2017 as I said at the beginning and my question was the year that proved the science. Is 2018 is going to be the year that we look back and see it as proving the business model, the ability to translate your scientific success into what should be a you know by the end of the year on a quarterly run rate basis of earnings profits?

John Sperzel

I think that's a great comment and a great question. So let me take the comment real quickly, this proving the science if I can use your words. As you know we've developed a number of different products on the DPP technology platform and while we can get excited about them, the best endorsement that we can get in proving the science is that, world leading collaborators want to work with us or that probably more importantly the most stringent regulatory agencies around the world approve the products and there I’m talking about FDA, WHO, ANVISA in Brazil I mean these are very stringent regulatory organizations.

And many of our products are approved on the DPP platform in various countries around the world. So couldn't agree with you more about the science being proven as far as the financials of it. I mean the real measure of success isn’t that we get products developed and then we get products registered. The real measure is that, we get them across the commercial goal line and we start to create revenue and margin and contribution.

As mentioned in our prepared remarks we put the global commercial team in place in 2017 and we're certain that they had a direct impact on the results in 2017. So we're going into 2018 with a couple of really good wins under our belt in Brazil and in Ethiopia. And we expect to have a lot more wins that we can share with you in future calls and driving revenue growth is going to trickle down on the P&L. And our hope is that we can continue to drive that forward.

Ross Taylor

While I hope proves to be more than a hope, but actually a reality and congratulations on a great 2017 and looking forward to seeing what 2018 brings us.

John Sperzel

Thank you Ross, really appreciate it.

Operator

Ladies and gentlemen we have reached the end of the question-and-answer session. I would like to turn the call back over to John Sperzel, President and Chief Executive Officer.

John Sperzel

Thank you all for the time this afternoon. Hope you have a great night and we look forward to updating next quarter.

Operator

Thank you. This concludes tonight’s conference. You may disconnect your lines at this time and thank you for your participation.