TRIB - Revenues And Cash Generation Are Expected To Increase To All-Time Record Levels Going Forward

Summary

• Trinity Biotech (TRIB) reported Q2 2020 revenues of $16.02M on August 25, 2020, beating expectations by $3.02M or 20%. Cash increased from $13.2 to $15.7M.
• Management guided for 3Q 2020 revenues of $28M (highest since 2016). I estimate 4Q 2020 revenues could jump to about $40M per 2Q CC comments. Current market cap is $50M.
• Company management expects revenues to accelerate in 4Q due to increased COVID-19 antibody tests sales, both ELISA and 12-minute rapid tests, and sales of a myriad of other COVID-19 products.
• On August 20, 2020, Trinity Biotec announced that it had filed with the FDA an EUA for its COVID-19 IgG ELISA antibody test. EUA submission allows Trinity immediate marketing of this product.
• The ELISA COVID-19 antibody test demonstrated specificity above 98% and sensitivity exceeding 95% in samples beyond 14 days from symptom onset. The company expects CE Mark approval for this test by the end of September Additionally, Trinity continues development of 12-minute rapid COVID-19 antibody test and expects to file an EUA with the FDA for it upon completion.

Discussion

On August  25, 2020, Trinity Biotech (TRIB) Reported Q2 Revenue of $16.02M, Beating Expectations by $3.02M. Management guided for a record 3Q 2020 which will generate strong cash growth. Additionally, management hinted that 4Q 2020 will accelerate even further projecting 40% growth.

During the 2Q 2020 conference call, Company management stated that they have implemented several cost saving measures during the quarter in parallel to increasing revenues resulting from high-demand of COVID-19 products. The combined effect of these two factors helped increase cash at the end of the quarter to $15.7M from $13.2M.

The stock surged 23% closing the day at $2.06 after briefly touching $1.57 due to initial overreaction to earnings. Those selling probably did not know what the earnings expectations were, and it was obvious that MMs contributed to the dip. The stock price has been inching up ever since on higher earnings expectations and the potential of significant catalyst/milestone achievements that investors are expecting and anticipating through the end of 2020. The following chart show the stock price recovery after the August 25, 2020 earnings dip.

Catalysts and Milestones

From the 2Q 2020 earnings/conference call I've extracted the following catalysts that are likely to be completed/accomplished by year end:

• On August 20, 2020, Trinity announced the filing of an EUA for its COVD-19 IgG ELISA antibody test with the FDA - Done
• EUA submission of IgG ELISA antibody test allows Trinity immediate marketing of this product - In progress
• Trininty Biotech's ELISA COVID-19 antibody test demonstrated specificity above 98% and sensitivity exceeding 95% in samples beyond 14 days from symptom onset - Greater sensitivity than ABT test in $750M recent order. - Done
• FDA granting EUA of trinity Biotech's IgG ELISA antibody test - Upcoming
• CE Mark approval of Trinity Biotech's IgG ELISA antibody test to allow sales in Europe - Expected within 6 weeks
• Announcement of rapid 12-minute COVID-19 antibody test EUA filing (faster than Quidel's 15-minute test)- Upcoming
• Trinity can start marketing rapid antibody test upon EUA filing - Upcoming
• FDA granting EUA of Trinity Biotech's rapid 12-minute COVID-19 antibody test - Upcoming
• Blockbuster/Strong Guidance 3Q 2020 Earnings Report - Late November

Earnings Surprise

The real eye opener from the August 25, 2020 2Q 2020 conference call was the 3Q 2020 revenue guidance of $28M. This is the highest revenue level of the last 12 quarters including the time when the stock traded in double digit territory (2017).

This was obviously unexpected even to analysts on the call. Jim Sidoti with Sidoti & Company asked:

"I just want to be clear. Did you say you expect third quarter revenue to be $28 million?"

Kevin Tansley (CFO)

"Yes, $28 million."

Jim Sidoti

"So that represents about 14% top line growth from a year-ago which was also an up quarter. You have not had a double-digit top line growth quarter in a couple of years. And we are in the middle of the pandemic, what's driving that growth?"

Kevin Tansley

"Yes, well I mean, I think it's probably something like a 40% growth in the context of our current run rate, bearing in mind that I'd already indicated that autoimmune disease, HIV and diabetes have not returned to full levels that for example, our instrumentation sales are supposed to be reasonably modest in quarter three. So, I mean it reflects the fact that basically, we're selling a new ELISA antibody tests and PCR transport mediums."

"We're selling more infectious disease products like Legionella Urinary Antigen and Strep pneumonia and Strep selling a lot of monoclonal antibodies with COVID related antibodies. So, things accumulation those factors is giving rise to this."

"So again, that'd be five weeks to go to the end of the quarter, but I think we feel confident in that number."

Jim Sidoti

"Do you think those trends continue for the next few months? Or do you think that is, it could go up or down depending on what happens with COVID?"

Ronan O'Caoimh

"I think for quarter four, it's likely to accelerate. And quarter one, it's pretty difficult to foresee."

Jim Sidoti

"It sounds like for the remainder of 2020, you're expecting double-digit top line growth year-over-year?"

Kevin Tansley

"More than that, yes."

Significant Revenue and Cash Generation Going Forward

1. 3Q 2020 revenue guidance is $28M,
2. Management expects revenues to accelerate in 4Q
3. But it is too early to predict 1Q 2021 performance.

OK, let's pause here for a minute and do a simple math to project 4Q 2020 revenues and net income (estimates based on CFO Tansley comments during the 2Q 2020 CC and historical financial data from Seekingalpha):

Assumptions/facts:

1. At least double digit top line growth year over year. CFO said "more than double digit growth." Revenues for 2019 were $90.2M. If I assume a modest 15% revenue growth, that gives me $104M revenues for 2020.
2. Adding the 3Q 2020 revenue guidance of $28M to the $37.2M total for 1Q and 2Q 2020 results in $65.2M up to the end of 3Q 2020.
3. Conclusion: Estimated 4Q 2020 revenues = $104M - $65.2M = $38.8M or almost $40M.

Now to calculate the net income for 4Q 2020 I will use the following assumptions:

1. 4Q 2020 gross margins - conservative 55% as I will explain later. This results on a gross profit of $22M ($40M X 0.55)
2. 4Q Overall costs against revenues from historical data (not including recent cost cutting measures to be conservative): $10M
3. Conclusion 1: 4Q 2020 estimated net income of $12M (22 - 10 and assuming no charge-offs and other significant adjustments)
4. Conclusion 2: Net income $12M/25M (fully diluted shares) = 48c/share (in the same ballpark as competitor CODX)

On an annualized basis that would translate to $160M in revenues and $48M net income. Obviously, this assumes that the COVID-19 windfall continues for 1 more year.

These numbers are staggering for a company with a current market cap of only $40M. Should Trinity Biotech achieve those results, the fair market value for TRIB stock would be about $20/share to yield a $500M market cap. Is this impossible? not really, but time will tell.

COVID-19 Antibody Test Products Partly Responsible for Accelerated Growth

On August 20, 2020, the company announced that it has filed its submission for an Emergency Use Authorization (EUA) for its COVID-19 IgG ELISA antibody test with the FDA.

According to the press release,

• Trinity Biotech's ELISA COVID-19 antibody test demonstrates specificity in excess of 98% and sensitivity in excess of 95%, in samples of 14 days or more from symptom onset.
• EUA submission allows Trinity Biotech to begin marketing the product immediately.

The press release stated:

"This test will determine which individuals within the population have been exposed to the SARS-CoV-2 virus. The transfer of production to our facility in Jamestown, New York is complete, our manufacturing capability is very significant and the instrumentation platforms that perform ELISA testing are available in virtually every testing laboratory in the world."

"This pipeline of COVID-19 products complements our existing Viral Transport Media (VTM) product, which is used in the COVID-19 sample collection process for PCR molecular testing. We have scaled up the manufacture of VTM to meet increased levels of demand over the past months and we expect demand to continue as COVID-19 testing remains critical to the management of the pandemic."

The press release added"

'In addition, the Company is developing a rapid point-of-care Covid-19 test to detect antibodies to the virus that can be run in 12 minutes using one drop of blood procured by finger prick. This test will have utility like that outlined above for the ELISA antibody test. Once development and transfer to manufacturing of this rapid test is complete, we intend to avail of the FDA’s EUA pathway to expedite its approval for sale in the USA."

CEO Ronan O’Caoimh commented:

“We are very pleased to announce the submission of our Covid-19 ELISA antibody test for FDA Emergency Use Authorization (EUA). The test demonstrates both impressive specificity and sensitivity. Meanwhile, the ELISA testing platform with its excellent reputation for quality and widespread adoption makes it an ideal format for large scale antibody testing.”

During 2Q 2020 conference call, Jim Sidoti kept pressing on the relationship between COVID-19 antibody tests sales and the projected revenue explosion going forward:

"And then last one for me for the IgG test that is already received the EUA approval, are you receiving inquiries regarding that? And when do you expect sales to commence?"

CEO Ronan O'Caoimh replied:

"There is huge interest and it's not just in the USA but around the world. And so, we have huge interest. And yes, it is looking very promising. We have we also of course are going to be CE Mark will enable us to sell in Europe and we hope to have that within the next six weeks."

Jim Sidoti

"So does your revenue guidance with $28 million of revenue for the September quarter? Does that include any sales for that test?"

Ronan O'Caoimh

"Yes, it does, yes."

Investors do not seem to understand that test manufacturers can start selling their tests right after filing for EUA. But the laboratories or companies buying those tests have to validate them first. After the client validation process is satisfactory they can sell volumes, millions if needed to those clients. Since Trinity Biotech have long-term trusted relationships with Quest Laboratories and other US and large global distributors and test providers they must be already be fulfilling major orders to sound so convinced about their 3Q 2020 revenue guidance and 4Q 2020 revenue and cash flow projections. Once companies receive the coveted EUA from the FDA they can sell those tests without having to go thorough the validation process that I discussed above.

Why is Trinity Biotech Realizing Quick and Substantial Growth Due to COVID-19 Products?

There are abundant clues to Trinity's fast success in growing revenues significantly today and in the foreseeable future

The following comments by CEO O'Caoimh in previous conference calls offer some of these clues:

"..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. 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."

"We are one of the biggest manufacturers of rapid tests and we are the confirmer of choice for HIV, for example, in Africa. So, our test will be good. We have a fully automated production line, so we can manufacture in volume."

"And just to make a general point, I know it may appear that we're not particularly quick in doing so in developing this test, but basically sometimes to develop something very, very good, it does take time."

This attention to detail and passion for accuracy will pay dividends going forward since many tests that are currently being sold are yielding inaccurate results, and this in turn may help the company gain market share.

Another positive is that because of the current and expected high demand globally, companies in the sector are realizing very high margins on COVID-19 antibody tests.

CEO O'Caoimh commented in the 1Q 2020 conference call:

"Yes. I mean I think it's going to be selling, and this is just a broad range, somewhere between kind of $500 – $600, 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 is quite a – which is a strong price. I'll give you, let us say, a Toxoplasma or a rubella sort of standard ELISA plates, we'll be selling probably $2 a test or even less."

"That would be – that would be the price that we would sell to distributors and laboratories all of the world."

One example of this is COVID-19 test competitor Co-Diagnostics (CODX) which reported the following results for 2Q 2020 compared to almost no revenues prior to the pandemic:

• Company continues COVID-19 test sales and reports $24.04 million of revenue in Q2.
• Net profit of $12.6 million in quarter and net income per common share of $0.43.
• Gross margins of 70% on sales of Logix Smart™ COVID-19 test kits.

I expect overall gross margins for Trinity Biotech to increase to the 50% - 60% range from the pre pandemic range of 40% to 45% in 3Q 2020. The relatively lower overall gross margin for Trinity Biotech compared to Co-diagnostics is because Trinity Biotech sells a myriad of tests globally compared to CODX sales which are primarily COVID-19 related. If Trinity can deliver its 12-minute rapid test during 4Q 2020 as expected, revenues and gross margins will likely go up significantly.

Because CODX was able to enter the COVID-19 test market faster than Trinity Biotech, it is market cap exploded from less than $30M to at one point exceed $1B and currently settling in the $500M area. In contrast, Trinity Biotech's current market cap is only $50M but I expect to reach $300 - $500M in the next two quarters. This is not an unreasonable expectation since Trinity's yearly revenues could double from the current $80M - $90M to and annualized rate of approximately when Both the ELISA and the 12-minute rapid test sales are in full swing in 4Q 2020 and the early part of 2021. Since there is no visibility on what the virus, and vaccines, and therapies will do later in 2021 it is hard to predict performance at that time.

In the rapid-test market, one company making noise for its May 8, 2020 FDA cleared antibody tests is Quidel. Quidel (NASDAQ:QDEL) market cap has increased by over $4B since the announcement to a whopping $10B market cap primarily due to the expected effect of its rapid test sales on revenues and net income. Quidel's claim to fame is it is 15-minute test. Recall that Trinity Biotech's rapid fast test is expected to give results in 12 minutes.

A May 22, 2020 article provided the following clues to Quidel's success:

"Quidel has been absolutely "inundated" with requests since gaining emergency authorization from the Food and Drug Administration on May 8, Chief Executive Douglas Bryant told Investor's Business Daily. Within days of the announcement, Quidel inked 480 new contracts."

Future Revenue Explosion Much More Than COVID-19 Test Platform

In addition to the various reasons that I discussed above about positive tailwinds for the testing industry in general, the following are a few more reasons why Trinity Biotech differentiates from the competing focusing primarily on COVID-19 testing:

During the 2Q 2020 conference call CEO O'Caoimh commented:

"This new pipeline of COVID-19 products (COVID-19 ELISA and 12-minute rapid antibody tests) complements our existing Viral Transport Media (VTM) product, which is used in the COVID-19 sample collection process for PCR molecular testing. We have scaled up the manufacture of VTM to meet increased levels of demand over the past months and we expect demand to continue as Covid-19 testing remains critical to the management of the pandemic."

CEO O'Caoimh further added:

"We are seeing higher sales of some of our point-of-care respiratory products, such as Legionella disease and Strep pneumonia, given the increased testing for these conditions in light of COVID. With regard to our life science supply subsidiary, Fitzgerald, we are also seeing some increased revenue in relation to COVID-19. Fitzgerald currently sells a range of COVID monoclonal antibodies for which we expect demand to remain strong for the rest of the year."

Significant Positive Tailwinds For COVID-19 Antibody Test Companies

Below are several reasons why COVID-19 testing demand (and production) could increase exponentially in the future:

Upcoming Flu Season Will Increase Testing Demand Exponentially

This fall, doctors are concerned about a potential swell of people with respiratory symptoms who might seek testing to figure out which virus they have, stressing capacity and supplies of components needed for both kinds of tests.

As companies plan to increase testing in months ahead, experts believe that the viral testing capacity will be strained since flu and COVID-19 use some of the same components and reagents.

Furthermore, the upcoming flu season will complicate Covid-19 testing efforts, public-health officials say, because both ailments can have similar symptoms like fever and fatigue, along with other viruses such as respiratory syncytial virus, or RSV.

Emily Volk, president of the College of American Pathologists commented:

“I see this like us ramping up as a nation after Pearl Harbor was bombed. I think right now, it’s the calm before the storm with the fall flu season.”

Dr. Volk said she is pushing lab’s suppliers to ensure there will be enough swabs and transport liquid—needed both for flu and Covid-19 laboratory tests.

Supply shortages for chemicals needed to process tests, and are likely to continue, in part because most flu tests rely on the same components, equipment and personnel as Covid-19 tests, pathologists say. According to experts in the field, around 30 components feed into a Covid-19 test. A shortage in any one of the components holds up capacity causing shortages.

COVID-19 spread fast and often in unpredictable ways and this was seen as states reopened before hitting public-health checkpoints—and as some Americans refused to wear masks. Efforts to expand testing capacity couldn’t keep pace, supply-chain constraints persisted, and big diagnostic companies, including Quest Diagnostics Inc. and Laboratory Corporation of America Holdings, or LabCorp, were quickly overwhelmed with demand.

Trinity Biotech has been a trusted and one of the main test suppliers to Quest Diagnostics and LabCorp for over a decade according to CEO O'Caoimh.

Experts say that prevention efforts could yet mitigate both COVID-19 and the flu season, but they aren’t counting on that and say the U.S. must prepare for surges in COVID-19 cases along with similar-looking respiratory viruses.

As many as 45 million people in the U.S. get the flu every year, leading to more than 34,000 deaths, according to the CDC. Not everyone is typically tested for it.

How Big Will Convalescent Plasma Therapy Be?

Going forward, a potential boost for companies offering antibody tests might result from the implementation of the EUA announced by President Trump to use blood plasma as COVID-19 therapy.

The so-called convalescent plasma is among a host of potential therapeutics that have been undergoing testing in clinical trials. The hope is that infusions of antibody-rich plasma from those who have recovered from COVID-19 can be injected into ill patients, kick-starting their immune system and allowing them to fight off the virus until they can generate their own antibodies.

Convalescent plasma is taken from the blood of people who have recovered from COVID-19. At the end of March, the FDA set up a pathway for scientists to try convalescent plasma with patients and study its impact. It has already been used to treat more than 60,000 COVD-19 patients.

However, like blood, convalescent plasma is in limited supply and must come from donors and that in turn will require significant antibody testing to screen donors. And while there are promising signals from some studies, there is not yet randomized clinical trial data on convalescent plasma to treat COVID-19.

Globally, convalescent plasma is used in just about every third world country as one of the only ways they have to try to combat the pandemic and because it is inexpensive and available. It's available only if people that had survived the disease volunteer or (get paid) to donate their blood. I often see on Facebook, that people are begging and praying for donors that would come forward with a certain blood type to save a loved one.

Brazil, with the second largest global death toll only behind the US is a huge COVID-19 antibody market and Trinity Biotech is well positioned there having a large presence for over a decade

Concerns About Rushed/Premature COVID-19 Vaccines

The global rush to develop COVID-19 vaccines might be too simplistic and might prove ineffective or provide limited protection causing the population and Governments to lose faith in them thus increasing uncertainty and fear towards the deadly and unpredictable COVID-19.

For Russia to declare that they have a working vaccine is ludicrous and only those with half a brain should believe these claims. As many of us from third-world countries know Russia and China will use every trick in the book to further their global expansions goals. And a Russia COVID-19 vaccine is one more, and a big one, item in the expansion-goal toolbox from this country in my opinion.

Dr. Soumya Swaminathan, the World Health Organization's chief scientist, warned that authorizing a vaccine too early and with too little data could create a variety of negative consequences. Dr. Swaminathan warned this week that authorizing a vaccine too early and with too little data could create a variety of problems.

Dr. Swaminathan further commented:

"The risk of approving a vaccine prematurely for us is that, first of all, it will make it very difficult to continue with randomized clinical trials. And secondly, there's a risk of introducing a vaccine that's been inadequately studied and might turn out to have a low efficacy, thereby not doing the job of bringing an end to this pandemic or even worse, have a safety profile that's not acceptable."

Dr. Mike Ryan, executive director of the WHO's health emergencies program is concerned that introducing a premature vaccine to larger and perhaps more diverse parts of the population could cause the emergence of negative side effects, underscoring the importance of the collection of safety data.

Dr. Ryan commented:

"The difficulty and the the challenge with the vaccine is, at the moment, we're moving from vaccinating tens or hundreds of people to now vaccinating thousands of people," he said. "We need to get the safety and efficacy data from those studies. Because if you move too quickly to vaccinating millions or hundreds of millions or billions of people, we may miss certain adverse events that you won't pick up with smaller numbers so you need to maintain monitoring."

Recently, Russia announced that it would authorize a vaccine that it calls Sputnik V, named for the world's first satellite, launched in 1957, before phase three data was available. Medical professionals around the world criticized the move, saying it remains unclear whether the vaccine is safe and effective. I believe the promise of an early release of Russia's vaccine is political move by Putin to take advantage of global fear and that by doing so it helps his ambitious global expansion goals. China and Russia governments are taking advantage of Trump's isolationist stance to gain global influence. This way they can sell more of their products in more countries and receive concessions from countries leaning to the left in terms of rich natural resources (oil, lithium, gold, etc.).

The approval, which came with much fanfare, occurred before Russia had tested the vaccine in late-stage trials for possible side effects and for its disease-fighting ability. It is not clear whether the slow start to the vaccination campaign is a result of limited production capacity or second thoughts about inoculating the population with an unproven product.

Although this could end up being unfortunate for humanity, the more uncertainty about vaccine effectiveness and therapy effectiveness the greater the need for accurate and reliable COVID-19 antibody tests.

One thing is certain about COVID-19 vaccines, and many experts concur, it will not be an easy an quick global implementation for many reasons that are already public. Famed Doctor Fauci is convinced that full global  implementation of COVID-19 vaccination will not be accomplished at least through the end of 2021.

COVID-19 Antibodies Can Disappear After 2-3 Months

Evidence is mounting that COVID-19 is unlike any virus humanity has ever dealt with before. For instance, there is plenty of research that suggests that the virus is highly mutating which could cause vaccines (developed in Russia, India, other countries, and even those in the US) to be less effective than they might appear in shortened and rushed clinical trials.

It is now know that people who develop antibodies after becoming infected with the COVID-19 may not keep them more than a few months, especially if they showed no symptoms or had mild symptoms to begin with.

Previous studies had found that most people who became infected developed antibodies. Health departments around the world give antibody tests as a way to prove a person has already had the COVIFD-19.

Scientists in the Wanzhou district of China studied 37 people who became infected with the COVID-19 and showed symptoms and 37 people who became infected and showed no symptoms, according to a study that was published in the online journal Nature.

The article states that eight weeks after recovery, antibody levels fell to undetectable levels in 40% of asymptomatic people and 13% of symptomatic people.

Business Insider reported that the researchers tested for two types of antibodies: immunoglobulin G (IgG) and immunoglobulin M (IGM). IgG usually develops over a longer time period, meaning it’s a better indicator of long-term immunity.

Is COVID-19 Re-infection Possible?

It appears that it is possible and some cases have already been reported. A 25-year old from Reno man who tested tested positive for COVID-19 on April 18, had symptoms including a sore throat, headache, nausea, and diarrhea. By April 27 the symptoms had resolved, and two COVID-19 tests came back negative on May 9, 2020.

But then, some 48 days later, the man started experiencing headaches, cough, and other symptoms again. Eventually, he became so sick that he had to be hospitalized and was found to have pneumonia.

According to the research done on this individual, the patient did not have any immune problems that might explain reinfection, and they were not taking immunosuppressant drugs. So, if COVID-19 can reinfect a healthy, young individual and get that person even sicker the second time time, imagine what would happen to an older individual with a compromised immune system.

Immunologists had expected that if the immune response generated after an initial infection could not prevent a second case, then it should at least stave off more severe illness. That’s what occurred with the first known reinfection case, in a 33-year-old Hong Kong man. These might be isolated cases but the evidence is just starting to come out and there might be more frequent than we all wish, unfortunately.

Normally, the immune response creates memories of the virus, should it try to invade a second time. It’s thought, then, that people who recover from COVID-19 will typically be protected from another case for some amount of time. With other coronaviruses, protection is thought to last for perhaps a little less than a year to about three years. With COVID-19 it appears that the protection only last about three months.

Getting Used to Life With COVID-19 for Decades to Come??

The World Health Organization Director General Tedros Adhanom Ghebreyesus stated recently that the global coronavirus outbreak is the sort of disaster whose effects will last far into the future.

Mr. Tedros commented:

“The pandemic is a once-in-a-century health crisis, the effects of which will be felt for decades to come."

“Early results from serology (antibody) studies are painting a consistent picture: most of the world’s people remain susceptible to this virus, even in areas that have experienced severe outbreaks."

“Many countries that believed they were past the worst are now grappling with new outbreaks. Some that were less affected in the earliest weeks are now seeing escalating numbers of cases and deaths.”

Ultimately, we may never see mass gathering like football, soccer, and other sports as well a rock concerts like we did before. Countries may have to build larger airports to force social distancing and airplanes that used to fly 300 people may have to fly 100 for years to come. Is this an alarmist and crazy statement? I don't think so, but only time will tell.

To me, to return the world to some kind of normalcy, accurate and reliable COVID-19 antibody testing and effective therapies to fight the virus will be more important than vaccines.

Financial Situation

Regarding the $100M debt due in May 2020, CFO suggested that with strong cash generation they see going forward it's not a pressing issue at this time.

The following discussion extracted from the 2Q 2020 conference call gives more clarity into this issue:

Sam Roboski (Private Investor)

"Tell me how much money do you owe, what is the date of the obligation and the $28 million, did you say you to be cash flow positive and as long as you continue this into $28 million range, assuming you will continue to be cash flow positive. Thank you."

CEO Ronan O'Caoimh

"And so our total indebtedness is $99.9 million which is at the 4% bonds and it falls due in May 2022. Yes, but $28 million worth of revenue we would be significantly profitable and depending on working capital movements, would expect over period of number of quarters to be significantly cash flow positive, but it's just an element of building your dentist book first. You don't take the X number of days before you get paid, but basically yes, and that level of revenues would generates significant profitability and significant cash flow positive."

Sam Roboski

"So, with the debt due in 2022 do have a plan have to pay this or you did a way to get closer to the timetable."

CEO Ronan O'Caoimh

"Well, with many thoughts on that and something we review all of the time, but we don't really go into all of our thoughts on that at this moment of time but we're very encouraged by the strong revenue that we're projecting for quarter three and which we see a sort of continuing and even being enhanced in quarter four."

So at the end of 2Q 2020 the company had $15M. Conservatively, this amount of cash will double by the end of the 4Q. If the positive trend in revenues due to COVID-19 demand and the return to normal sales on the rest of the product portfolio the company could end up 2021 with $60M - $80M in cash. The CEO and CFO stated categorically that there is no intention of raising equity at this point, but it would make sense to sell a couple of million shares when the stock if North of $15/share. With the anticipated performance it is very likely that the stock price will be trading between $15 - $20/share at some point in 2021

Analyst Opinion

One analyst has a BUY rating on the stock with a $5/share price target.

Based on the questions and answers from today's conference call I expect upgrades and an increase in price target in the foreseeable future.

As a comparison, analysts have an average price target of $31.5/share on CODX stock.

Coincidentally, both TRIB and CODX have about 26M outstanding shares but TRIB's float is significantly smaller because of greater institutional and insider ownership

Institutional Ownership

Several institutions own 51% for the company's common stock. Stonehill Capital Management LLC is currently the company’s largest shareholder with 14% of shares outstanding. Paradise Investment Management LLC and Hunter Associates, Inc. are the second and third largest shareholders.

Per the latest filing, insiders own about 18% of shares outstanding. On June 6, 2018 CEO O'Caoimh purchased 430K shares at $6/share to increase his holdings in the company to 3.6M shares. The resulting float is less than 10M shares.

About Trinity Biotech

For those of you not familiar with Trinity Biotech, according to its website, the company specializes in the development, manufacture and marketing of diagnostic test kits. Our continued success is based on the fact, that as a company, we consistently achieve standards of excellence in the quality of all we do.

The test kits we manufacture are used in the clinical laboratory and point-of-care segments of the diagnostic market, to detect infectious diseases, sexually transmitted diseases, autoimmune disorders, cardiac arrest, hemoglobin disorders, and in the detection, monitoring and control of diabetes. We are also a significant provider of raw materials to the life sciences industry.

Quoted on the NASDAQ exchange, and with facilities spanning Europe, America, South America (Brazil), our products are sold in more than 110 countries. We reach our customers worldwide by combining the skills of our own sales force with a network of international distributors and strategic partners.

Conclusions

• On August 25, 2020, Trinity Biotech reported Q2 2020 revenues of $16.02M, beating expectations by $3.02M or 20%.
• The company guided for revenues of $28M for 3Q 2020. This is the highest revenue level in the last 12 quarters, even when TRIB traded in double digits back in 2017.
• CFO Kevin Tansley sounded very confident regarding the $28M revenue guidance for 3Q ending September 30, 2020. He commented during the CC Q&A: "So again, that'd be five weeks to go to the end of the quarter, but I think we feel confident in that number." There are only 4 weeks left in the quarter and he should know better, right?
• CFO Tansley expects that 4Q 2020 "will accelerate" compared to the already significant 3Q 2020 revenue increase per comments made on August 25, 2020.   The increased revenues are expected to come from global COVID-19 antibody tests sales (both ELISA and 12-minute rapid tests), as well as continued strong sales of a myriad of other COVID-19 products.
• Revenue and net income projection for 4Q 2020 provided in this blog are based on comments made by CFO Tansley during the 2Q 2020 CC and historical financial data from Seekingalpha, 4Q revenues will be around $40M resulting in net income of 48c/share.
• Rest assured that the expected explosion in revenues (and net income) did not happen overnight. Trinity Biotech has a global distribution network in over 100 countries, and I am certain that they were being appraised of the progress of the company's tests. And as soon as the green light was lifted, the purchase orders started pouring in, and consequently, taking away market share from other test suppliers.
• On August 20, 2020, Trinity Biotech announced that it has filed its submission for an Emergency Use Authorization (EUA) for its COVID-19 IgG ELISA antibody test with the FDA.
• This new test has demonstrated specificity above 98% and sensitivity above 95%, in samples of 14 days or more from symptom onset. The test demonstrates both impressive specificity and sensitivity.
• CEO O'Caoimh believes that the ELISA testing platform with its excellent reputation for quality and widespread adoption makes it an ideal format for large scale antibody testing
• The company expects to gain CE Mark designation "within the next six weeks" (per 2Q 2020 cc comments). This designation will enable the company to sell these products in Europe.
• The new COVID-19 antibody test will be very high margin. Company CEO expects to sell these tests at about $8 compared to other tests it currently sells at about $2/test. This will elevate gross margins from the traditional 40 to 45% to the 50% to 60% range for the next few quarters.
• The new COVID-19 ELISA and 12-minute rapid antibody tests complements the company’s existing Vital Transport Media (VTM) product line which is used in the COVID-19 sample collection process for PCR molecular testing. The company has scaled up the manufacture of VTM to meet increased levels of demand over the past months and we expect demand to continue as COVID-19 testing remains critical to the management of the pandemic. As discussed before, there will be a huge demand for these products as the flu season hits in the next few weeks and months.
• The company is also seeing higher sales of some of our point-of-care respiratory products, such as Legionella disease and Strep pneumonia, given the increased testing for these conditions considering COVID. Regarding the company's life science supply subsidiary, Fitzgerald, they are also seeing some increased revenue in relation to COVID-19. Fitzgerald currently sells a range of COVID monoclonal antibodies.
• On August 20, 2020, the Company announced that it is developing a rapid point-of-care COVID-19 test to detect antibodies to the virus that can be run in 12 minutes using one drop of blood procured by finger prick.
• Once development and transfer to manufacturing of this rapid test is complete, the company intends to avail of the FDA’s EUA pathway to expedite its approval for sale in the USA.
• Company management anticipates significant global demand for this product.
• The company's obsession to producing high-quality and accurate testing products will ultimately pay off significant dividends as many tests that are currently being sold are yielding inaccurate results. This in turn will help the company gain market share away from inferior-quality test manufactures.
• The company listed several milestones in the conference call today that once accomplished will likely cause significant spikes on the upward trend towards double digit territory by the end of 2020.
• CFO Tansley stated that the recently filed shelf was to replace one that expired and that they have no intentions of using it in the foreseeable future. The company has not raised equity for several years and the number of shares changes yearly very little to the current 25M fully diluted shares.
• Trinity Biotech has a $98M debt that will come due in May 2022. But based in the 2Q 2020 comments from the CEO and CFO they do not seem to have an immediate concern about it. This makes sense if this COVID-19 windfall extends through 2021 at my projected 4Q 2020 run rate in terms of revenues and net income the debt could be repaid towards the end of 2021. But if needed, they could sell say 2M shares at $15/share in late 2021 and be done with this debt and continue building cash from that point forward
• The public float is estimated to be less than 10M shares when considering institutional and insider ownership.
• Trinity Biotech's current market cap is only $50M, and based on the significant profitable growth projections, TRIB stock is currently grossly undervalued. I believe that in a quarter or two it will exceed CODX valuation which is currently at least six times higher than TRIB's.
• The company listed several milestones in the August 25, 2020 conference call and once accomplished, will likely cause significant spikes on the upward trend towards my 2021 $10+/share price target. This equates to a potential appreciation of 500% or more in a quarter or two. We have seen that some COVID-19 companies have increased their market cap a few thousand % since the start of the year (NVAX, CODX, others). Therefore, projecting a potential 500% to TRIB stock is not totally unreasonable.
• I recommend that investors interested in TRIB stock read all the risks and uncertainties associated with this stock as detailed in the company's most recent filings with the SEC.