Trinity Biotech Announces Quarter 3 Financial Results And Temporary Suspension Of Meritas Troponin Trials

Trinity Biotech plc

, a leading developer and manufacturer of diagnostic products for the point-of-care and clinical laboratory markets, today announced results for the quarter ended September 30, 2014. In addition, it announced that it was temporarily suspending its FDA trials for its Meritas Troponin test. Quarter 3 Results Total revenues for Q3, 2014 were $27.2m which compares to $24.1m in Q3, 2013, an increase of 12.6%. Point-of-Care revenues for Q3, 2014 increased by 2.8% when compared to Q3, 2013. This increase was attributable to growth in HIV revenues in the USA. Clinical Laboratory revenues increased from $18.8m to $21.7m, which represents an increase of 15.4% compared to Q3, 2013. This increase was primarily attributable to continued growth in the Premier business plus the impact of acquisitions. Revenues for Q3, 2014 were as follows: 2013 2014 Quarter 3 Quarter 3 Increase US$'000 US$'000 % Point-of-Care 5,315 5,463 2.8% Clinical Laboratory 18,806 21,698 15.4% Total 24,121 27,161 12.6% Gross profit for Q3, 2014 amounted to $13.0m representing a gross margin of 47.9%, which is lower than the 49.7% achieved in Q3, 2013. This decrease is mainly due to the impact of lower margins on the higher level of Premier instrument sales coupled with a lower level of higher margin Lyme revenues. It was also impacted by final closure costs in relation to the blood bank screening manufacturing facilities in the United Kingdom. These costs included building restitution, disposal of hazardous waste and transport costs for production equipment and inventories. Research and Development expenses have increased to $1.1m from $0.9m when compared to the equivalent quarter last year. Meanwhile, Selling, General and Administrative (SG&A) expenses have increased from $5.9m to $7.0m over the same period. This is partly due to the impact of the Immco acquisition which was made during Q3 last year plus additional sales and marketing costs associated with the national roll-out of our new test for Sjögren's syndrome in addition to Meritas related sales and marketing expenses. Operating profit has decreased from $4.8m to $4.6m for the quarter. However, if UK related closure costs and Meritas sales and marketing expenses are excluded, operating profit would have increased from $4.8m in Q3, 2013 to $5.0m this quarter. Similar to Q2, 2014 financial income was broadly offset by financial expenses resulting in a negligible net expense for the quarter. This compares to net financial income of approximately $0.2m earned in Q3, 2013. This is due to lower funds being placed on deposit following the utilisation of funds for acquisitions and lower prevailing deposit interest rates. Profit before tax was $4.6m compared to $5.0m in the equivalent period last year. The tax charge for Q3, 2014 was $0.3m which represents an effective tax rate of 6.0% compared to 10.2% in Q3, 2013. Profit after tax for the period was $4.4m which, after excluding the impact of UK and Meritas costs, equates to approximately $4.8m – an increase of 7% compared to Q3, 2013. Earnings per ADR were 19 cents for the quarter. The abovementioned comparative numbers are before the impact of the once-off charges and related tax credits recognised in Q3, 2013. Earnings before interest, tax, depreciation, amortisation and share option expense for the quarter was $6.2m. Other Recent Developments Cardiac Update Today Trinity Biotech is announcing that it is temporarily suspending enrolment into its Troponin clinical trials. The reason for this temporary suspension is that in the past number of days, the company became aware of increased scatter (higher CV's) in whole blood data. Immediately, an investigation was initiated to determine the cause. The failure has now been positively identified as being attributable to a format change in a chemical raw material which is purchased from a third party supplier. This change caused instability in the product's performance, which only became apparent over a period of time. The offending version of the chemical was first introduced into manufacturing during the week of July 14, 2014. All clinical trial sites which have received batches of product manufactured since that date have been instructed to discontinue their use. Any clinical data generated using the impacted batches has now been identified and will be excluded from the clinical trial. Trial sites which did not receive the problem batches continue to recruit patients, although these sites will run out of product shortly. Meanwhile, having identified the source of the problem, we have now manufactured a pilot batch of product using the original format of the chemical. This pilot batch demonstrates performance characteristics identical to product batches previously made and successfully used in our CE marking trials and in the independent USA study presented at AACC last July. The supplier has now committed to supplying new batches of the chemical in its original format. This material will be received in four weeks time, upon which, new batches of the Meritas Troponin product will be manufactured. The production cycle for the new batches will then take eight weeks to complete. Enrolment to the trials will then recommence in mid-February, 2015. The clinical trials will be conducted at multiple US hospital sites during the months of February, March, April and May. Data compilation and cardiologist adjudication will be completed during the months of June and July and it is anticipated that a final submission will be made in August, 2015. We confidently believe that the product will receive FDA clearance thereafter. Premier Sales Sales of Trinity's diabetes instrument, Premier, continued to perform strongly during Q3 when 120 instruments were sold or placed with customers. This compares to 106 in Q2, 2014 and 81 in Q3, 2013. Whilst all markets performed well, Brazil was exceptionally strong with 41 instruments being placed during the quarter. On a cumulative basis, sales of Premier instruments for the year to date are 327 which is 43% higher than the 228 instruments sold in the same period last year. Management remains confident of meeting its target of 460 instruments for the year as a whole. Immco Update One of the principal rationales underpinning the Immco acquisition was its access to its own reference laboratory in Buffalo. As well as the extensive range of autoimmune testing being carried out in the facility, it was also identified as an ideal platform for launching laboratory-developed tests in the autoimmune field. The first such test to be launched is for Sjögren's syndrome, a very prevalent though widely under-diagnosed debilitating condition, of which dry eye is one of the primary symptoms. This test is being sold under the name Sjö™ and marketed in conjunction with our partner, Nicox, a French-based ophthalmic specialist. Following a successful partial launch in a number of test markets earlier this year, it received its nationwide launch late in June, 2014 thus making Q3, 2014 effectively the first full quarter of sales. To date the test has been well received in the market and revenues to date have been exceeding expectations. Comments Commenting on the results, Kevin Tansley, Chief Financial Officer, said "Profits this quarter were $4.4m which equates to an EPS of 19 cents. These profits were impacted by two principal factors. Firstly, we closed two manufacturing facilities in the UK associated with our blood bank screening business at the end of July. As a direct result, we incurred premises restitution fees, transportation costs for production equipment and inventories as well as disposal costs for hazardous and other unusable production materials. Secondly, we recorded an increase in sales and marketing expenses as we continue to build up our sales and marketing function for Meritas and incur expenses for our new test for Sjögren's syndrome which has recently been fully launched on a nationwide basis in the USA. The impact of these factors during the quarter was approximately $0.4m, which if they were to be excluded would have resulted in profits of $4.8m and EPS of 21 cents". Ronan O'Caoimh, CEO of Trinity said "From an operations point of view we had a very solid quarter. We shipped a record number of Premier instruments (120) this quarter and remain on course to meet our target of 460 units for 2014. We closed our two blood bank screening facilities in the UK and transferred production to our other facilities in Jamestown, New York and Bray, Ireland on schedule. We will benefit from the resultant operating efficiencies from next quarter onwards. Meanwhile, in conjunction with our partner, Nicox, we have now rolled-out our test for Sjögren's syndrome nationwide in the USA. Prior to this, it had only been sold in a limited number of test markets and already revenues are exceeding expectations. While we are disappointed at the temporary suspension of our Troponin trials, the positive is that we caught the problem early, identified the source of the problem and fixed it. The trials will recommence in mid-February and we will submit to the FDA in August, 2015. At the point-of-care, our product has unrivalled precision and unrivalled time-zero high sensitivity (with attaching very high specificity) – thereby giving the product great clinical utility". Litigation Reform Act of 1995. 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 commercialisation and technological difficulties, and other risks detailed in the Company's periodic reports filed with the Securities and Exchange Commission. Trinity Biotech develops, acquires, manufactures and markets diagnostic systems, including both reagents and instrumentation, for the point-of-care and clinical laboratory segments of the diagnostic market. The products are used to detect infectious diseases and to quantify the level of Haemoglobin A1c and other chemistry parameters in serum, plasma and whole blood. Trinity Biotech sells direct in the United States, Germany, France and the U.K. and through a network of international distributors and strategic partners in over 75 countries worldwide. For further information please see the Company's website: www.trinitybiotech.com. Trinity Biotech plc Consolidated Income Statements (US$000's except share data) Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2014 2013 2014 2013 (unaudited) (unaudited) (unaudited) (unaudited) Revenues 27,161 24,121 78,191 65,761 Cost of sales (14,150) (12,143) (40,510) (33,169) Gross profit 13,011 11,978 37,681 32,592 Gross profit % 47.9% 49.7% 48.2% 49.6% Other operating income 91 90 339 285 Research & development expenses (1,138) (876) (3,329) (2,655) Selling, general and administrative expenses (6,995) (5,885) (19,726) (16,420) Indirect share based payments (326) (519) (1,223) (1,457) Operating profit 4,643 4,788 13,742 12,345 Financial income 9 226 93 1,169 Financial expenses (15) (23) (79) (75) Net financing income (6) 203 14 1,094 Profit before tax 4,637 4,991 13,756 13,439 Income tax expense (276) (509) (667) (961) Profit for the period before once off charges 4,361 4,482 13,089 12,478 Once off charges -- (8,187) -- (8,187) Tax credit on once off charges -- 716 -- 716 Profit/(loss) for the period after once off charges 4,361 (2,989) 13,089 5,007 Earnings per ADR (US cents) 19.0 (13.6) 57.7 22.9 Diluted earnings per ADR (US cents) 18.4 (12.8) 55.2 21.8 Earnings per ADR excluding once off charges (US cents) 19.0 20.4 57.7 57.2 Diluted earnings per ADR excluding once off charges (US cents) 18.4 19.2 55.2 54.2 Weighted average no. of ADRs used in computing basic earnings per ADR 22,907,333 22,012,412 22,693,552 21,827,150 Weighted average no. of ADRs used in computing diluted earnings per ADR 23,674,859 23,369,678 23,719,930 23,007,085 The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company's accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). Trinity Biotech plc Consolidated Balance Sheets September 30, June 30, March 31, Dec 31, 2014 2014 2014 2013 US$ '000 US$ '000 US$ '000 US$ '000 (unaudited) (unaudited) (unaudited) (audited) ASSETS Non-current assets Property, plant and equipment 15,782 14,784 13,841 12,991 Goodwill and intangible assets 141,815 137,848 133,881 128,547 Deferred tax assets 10,066 9,082 7,570 7,044 Other assets 1,276 1,222 1,131 1,162 Total non-current assets 168,939 162,936 156,423 149,744 Current assets Inventories 33,779 33,109 30,864 29,670 Trade and other receivables 25,190 27,163 24,130 24,268 Income tax receivable 139 88 493 487 Cash and cash equivalents 8,949 15,153 17,008 22,317 Total current assets 68,057 75,513 72,495 76,742 TOTAL ASSETS 236,996 238,449 228,918 226,486 EQUITY AND LIABILITIES Equity attributable to the equity holders of the parent Share capital 1,203 1,202 1,187 1,170 Share premium 12,295 12,097 9,731 8,842 Accumulated surplus 178,960 179,137 174,023 168,670 Other reserves 2,321 3,672 4,073 4,329 Total equity 194,779 196,108 189,014 183,011 Current liabilities Income tax payable 555 1,036 998 770 Trade and other payables 15,151 16,106 15,679 20,131 Provisions 75 75 75 75 Total current liabilities 15,781 17,217 16,752 20,976 Non-current liabilities Other payables 4,676 4,665 4,634 4,596 Deferred tax liabilities 21,760 20,459 18,518 17,903 Total non-current liabilities 26,436 25,124 23,152 22,499 TOTAL LIABILITIES 42,217 42,341 39,904 43,475 TOTAL EQUITY AND LIABILITIES 236,996 238,449 228,918 226,486 The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company's accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). Trinity Biotech plc Consolidated Statement of Cash Flows (US$000's) Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2014 2013 2014 2013 (unaudited) (unaudited) (unaudited) (unaudited) Cash and cash equivalents at beginning of period 15,153 66,164 22,317 74,947 Operating cash flows before changes in working capital 6,068 5,823 16,979 15,887 Changes in working capital (538) (2,290) (10,108) (7,634) Cash generated from operations 5,530 3,533 6,871 8,253 Net Interest and Income taxes received/(paid) (324) (125) 290 673 Capital Expenditure & Financing (net) (6,380) (4,641) (15,499) (14,569) Free cash flow (1,174) (1,233) (8,338) (5,643) Cash paid to acquire Immco and Blood Bank Screening Business -- (39,217) -- (39,217) Net cash acquired on acquisition -- 1,092 -- 1,092 Dividend payment (5,030) -- (5,030) (4,373) Cash and cash equivalents at end of period 8,949 26,806 8,949 26,806 The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company's accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). CONTACT: Trinity Biotech plc Kevin Tansley (353)-1-2769800 E-mail: kevin.tansley@trinitybiotech.com Lytham Partners LLC Joe Diaz, Joe Dorame & Robert Blum 602-889-9700