Trinity Biotech Announces Acquisition of Immco Diagnostics; Reports Earnings

Trinity Biotech TRIB, a leading developer and manufacturer of diagnostic products for the point-of-care and clinical laboratory markets, today announced results for the quarter ended June 30, 2013 and the acquisition of Immco Diagnostics Inc. Quarter 2 Results Total revenues for Q2, 2013 were $21.3m which compares to $20.8m in Q2, 2012, an increase of 2.4%. Point-of-Care revenues for Q2, 2013 increased by 4% when compared to Q2, 2012. This increase was mainly attributable to continued strong demand for HIV products in Africa. Clinical Laboratory revenues increased from $16.4m to $16.7m, which represents an increase of 2% compared to Q2, 2012. However, due to an unprecedented cold winter and late snowfalls in north-eastern USA, Lyme sales were approximately $750k lower year on year. Meanwhile, non-Lyme sales for the quarter increased by approximately 8%. Revenues for Q2, 2013 by key product area were as follows: 2012 2013 Quarter 2 Quarter 2 Increase US$'000 US$'000 % Point-of-Care 4,410 4,586 4.0% Clinical Laboratory 16,399 16,726 2.0% Total 20,809 21,312 2.4% Gross profit for Q2, 2013 amounted to $10.6m representing a gross margin of 49.8%, which is lower than the 51.6% achieved in Q2, 2012. This decrease is attributable primarily to the impact of lower margins on Premier instrument sales but also due to lower sales of higher margin Lyme products. Research and Development expenses have increased from $0.8m to $0.9m when compared to the equivalent quarter last year. Meanwhile, Selling, General and Administrative (SG&A) expenses have increased over the same period from $5.2m to $5.5m. This increase was due to the acquisition costs of $0.4m associated with the Immco acquisition. Operating profit has decreased from $4.3m to $3.8m for the quarter, again reflecting the impact of the Immco acquisition costs. If such costs were excluded, the operating margin in the quarter would have been 19%. Net financial income was approximately $0.4m and represents a decrease compared to Q2, 2012 due to lower prevailing deposit interest rates. The tax charge for Q2, 2013 was $0.3m which represents an effective tax rate of approximately 6.5%. Profit After Tax before the Medical Device Excise Tax (MDET) decreased from $4.3m to $4.0m. However, excluding the impact of the Immco acquisition costs, profits increased from $4.3m to $4.4m. EPS (excluding MDET) for the quarter was 18.5 cents. However, if the impact of the Immco acquisition costs were excluded, this would increase to 20.5 cents compared to 20 cents in Q2, 2012. Earnings before interest, tax, depreciation, amortisation and share option expense for the quarter was $5.1m. Recent Developments Cardiac Update The development of our new cardiac point-of-care tests is progressing very well and our projected launch dates remain on target. Last quarter, we announced that we had reached design freeze on our high sensitivity Troponin I test and that we were commencing the clinical trials necessary to obtain CE marking. As part of this process, our Troponin I test is currently participating in the FASTEST study currently being undertaken in Sweden. This study, under the sponsorship and guidance of Professor Bertil Lindal and Uppsala Clinical Research, is designed to measure Troponin I levels in serial early samples in patients with symptoms suggestive of ACS (Acute Coronary Syndrome). Six emergency rooms at major hospitals are participating in this multi-site study. In parallel, a study of normal subjects is being conducted by Scandinavian CRO AB. Consequently, we expect to obtain CE marking in December, 2013 at which point the product will be authorised for sale throughout the European Union. We are currently appointing distributors throughout the EU and expect first sales of the Troponin test in early 2014. In terms of the US market, protocols have now been completed for the FDA clinical trials for which Professor Fred Apple, Minneapolis, will be the Principal Investigator. Five nationwide sites have been selected and we are currently completing the necessary contractual and ethical approval processes in order for the US trials to commence. These trials will commence in October/November and will be completed by the end of quarter 1, 2014, with FDA approval anticipated by the end of 2014. Meanwhile, work on our BNP assay also continues to progress very well and the product is expected to be ready to commence CE trials later this year with a view to obtaining CE marking in Q1, 2014 with sales commencing shortly thereafter. Finally, during the quarter, the company hired Mr. Tom Parenteau to head up our Cardiovascular Sales Division. Tom, who has more than 20 years of commercial experience in the diagnostics industry, most recently worked with Alere/Biosite as Senior Director of Global Marketing, heading up Alere's Cardiovascular Products Division. Tom brings to the company the requisite knowledge and experience of the cardiovascular market required for a successful launch of Trinity's Troponin and BNP products. Premier sales Sales of our diabetes instrument, Premier, continue to perform strongly. During quarter 2, 80 instruments were sold compared to 67 instruments in quarter 1, 2013. This included the first sales of instruments to China following the receipt of Chinese regulatory approval. With total sales of 147 instruments for the first half of 2013, the Company is confident of meeting its target of 320 instruments for the year as a whole. Dividend In June 2013, the company paid a dividend of 20 US cents per ADR, which represents an increase of 33% compared with 15 US cents per ADR paid in 2012. Acquisition of Immco Diagnostics Inc. Trinity Biotech is pleased to announce the acquisition of Immco Diagnostics Inc. (Immco) on July 26, 2013, for a consideration of $32.75m. Headquartered in Buffalo, New York, and employing 90 people, Immco is a diagnostic company specializing in the development, manufacture and sale of autoimmune test kits on a worldwide basis. This product line is complemented by specialized reference laboratory services in diagnostic immunology, pathology and immunogenetics, marketed to US-based reference laboratories and hospitals. Immco is currently generating revenues of $12.5m, ($8.5m of product revenues and $4m of laboratory revenues) and following acquisition and initial integration costs, will become immediately earnings accretive. It is Trinity Biotech's intention to retain Immco's existing management team which, led by Mr. Bill Maggio, has a proven track record and expertise in growing a successful autoimmune business. Currently, over 50 million Americans are affected by more than 80 different autoimmune diseases. Autoimmune diseases are now the second leading cause of chronic illness and the leading cause of death amongst women over 65. The autoimmune market is divided into two main segments, the first of which is the automated, high volume segment for standard analytes such as thyroid markers. This segment is dominated by the large diagnostic players such as Abbott, Roche and Beckman Coulter, is growing slowly and is one where Immco does not participate. Instead, Immco's position is in the $250m, high growth (over 10% p.a.), lower throughput, speciality autoimmune segment, where the competition is limited to a small number of key players, principally Bio-Rad, Werfen-Inova and Phadia. The principal autoimmune conditions in this segement are Rheumatoid Arthritis, Vasculitis, Lupus, Celiac and Crohn's disease, Ulcerative Colitis, Neuropathy, Hashimoto's and Graves disease. Meanwhile, the two key technologies employed are Immunoflourescence (IFA) and Immunoassay (EIA). Immco offers a comprehensive range of more than 120 products across all the main autoimmune segments with its EIA product range running on the DSX/DS2 Instrument platform while the IFA products are capable of being read manually or on Immco's proprietary IFA reading system, iSight. In terms of range, breadth and technical performance, the Immco IFA range is best on the market, while the EIA range is of the highest quality and very competitive with the market leaders. Immco currently sells its products through a network of distributors, mainly outside the USA. In Europe, Immco's main distribution partner is Menarini, a company with which Trinity already has deep distribution ties. The broadening of the relationship between Menarini and Trinity through the additional distribution of the Immco product is viewed very positively by all parties. To date Immco has had very low product sales in the USA due to a lack of FDA product approvals and sales force. However, over the past 24 months, Immco has been successful in harmonizing its complete IFA and EIA product ranges, virtually all of which have now been FDA 510K cleared. Through Trinity Biotech's existing US based sales force (which already sells approximately $2m of Trinity's own autoimmune products) and installed base of EIA instrumentation, Trinity expects to immediately launch Immco's products in the USA. Moreover, as the Immco autoimmune product range complements Trinity's existing infectious disease EIA range, we intend that our large range of installed DSX and DS2 instruments which currently run our infectious disease product line will now also run the entire Immco autoimmune EIA range. We believe that this in turn will help drive growth in both ranges of products due to the synergistic effect of a broader menu offering. Immco is further driving expansion with the development of a number of new diagnostic kits, such as the ImmuLisa™ Enhanced Cardiolipin Antibody ELISAs recently cleared by the FDA, and there is a robust pipeline of novel assays in development. Meanwhile, the Immco reference laboratory is in the process of launching exclusive panels of tests for Sjögren's Syndrome and Chronic Rhinosinusitus, both of which are significantly underdiagnosed conditions with high incidence. In summary, Trinity expects to grow Immco's revenues by harnessing the breadth, quality and uniqueness of Immco's product range, in the context of only recently having obtained FDA approval; leveraging Trinity's sales force and in particular, installed instrument base in the USA; leveraging Trinity's international distributor network; introducing new innovative autoimmune products which are now beginning to emerge from the development phase; and exploiting the synergies that exist between Trinity's existing infectious diseases and Immco's autoimmune product ranges. Based on these factors it is believed that this business can grow at a rate in excess of 20% per annum. Comments Commenting on the results, Kevin Tansley, Chief Financial Officer, said "On a like for like basis, profits for this quarter increased from $4.3m to $4.4m. This equates to an increase in EPS from 20 cents to 20.5 cents. This was achieved despite significantly lower sales of Lyme test kits in the USA due to weather related conditions." Ronan O'Caoimh, CEO, stated "'Firstly, we are pleased to have completed the acquisition of Immco which has a truly excellent and complete range of autoimmune products with, in our opinion, the best IFA range in the world and an ELISA range that matches the quality of the market leaders. In addition, it also has a very exciting and innovative product development pipeline. The autoimmune market is currently growing at a rate well above the overall diagnostics market and this product range fits very well with our existing infectious diseases product offering. Trinity already has a large installed base of DSX instruments which run our infectious diseases product range and it is expected that these instruments will now also run the Immco range of autoimmune products. Further synergies will be achieved by leveraging Trinity's existing US sales force and international distributor network. Due to these factors we expect the Immco product line to be a significant driver of growth for Trinity, both from a revenue and profitability point of view. I would also like to point out that this quarter the Company has made excellent progress in its key strategic areas. Our high sensitivity Troponin I test is currently participating in CE marking trials in Europe, with a view to obtaining its CE mark in December this year. Our BNP test will follow closely after, with its CE marking trials expected to commence in Q4, 2013. Meanwhile, from a diabetes perspective, we were successful in placing 80 new Premier instruments during the quarter including our first sales to China." 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$000's except share data) Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012 (unaudited) (unaudited) (unaudited) (unaudited) Revenues 21,312 20,809 41,640 40,835 Cost of sales (10,691) (10,071) (20,681) (19,754) Gross profit 10,621 10,738 20,959 21,081 Gross profit % 49.8% 51.6% 50.3% 51.6% Other operating income 85 114 195 289 Research & development expenses (924) (753) (1,779) (1,598) Selling, general and administrative expenses (5,502) (5,240) (10,535) (10,444) Indirect share based payments (440) (563) (938) (900) Operating profit 3,840 4,296 7,902 8,428 Financial income 466 605 943 1,151 Financial expenses (26) (35) (52) (36) Net financing income 440 570 891 1,115 Profit before tax 4,280 4,866 8,793 9,543 Income tax expense (278) (564) (452) (1,131) Profit for the period before MDET 4,002 4,302 8,341 8,412 Medical device excise tax (MDET) (174) -- (345) -- Profit for the period after MDET 3,828 4,302 7,996 8,412 Earnings per ADR (US cents) 17.7 20.0 36.8 39.4 Diluted earnings per ADR (US cents) 16.9 19.2 34.9 37.7 Earnings per ADR excluding MDET (US cents) 18.5 20.0 38.4 39.4 Diluted earnings per ADR excluding MDET (US cents) 17.6 19.2 36.4 37.7 Weighted average no. of ADRs used in computing basic earnings per ADR 21,665,259 21,465,047 21,732,983 21,341,365 Weighted average no. of ADRs used in computing diluted earnings per ADR 22,711,752 22,439,332 22,935,565 22,307,429 The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company's accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). Trinity Biotech plc Consolidated Balance Sheets June 30, March 31, Dec 31, 2013 2013 2012 US$ '000 US$ '000 US$ '000 (unaudited) (unaudited) (audited) ASSETS Non-current assets Property, plant and equipment 10,189 9,331 8,883 Goodwill and intangible assets 80,489 76,748 73,046 Deferred tax assets 4,872 4,533 4,073 Other assets 1,065 945 908 Total non-current assets 96,615 91,557 86,910 Current assets Inventories 22,923 23,110 20,757 Trade and other receivables 17,426 15,299 14,457 Income tax receivable 315 322 336 Cash and cash equivalents 66,164 73,095 74,947 Total current assets 106,828 111,826 110,497 TOTAL ASSETS 203,443 203,383 197,407 EQUITY AND LIABILITIES Equity attributable to the equity holders of the parent Share capital 1,158 1,143 1,134 Share premium 5,858 5,449 5,138 Accumulated surplus 163,338 163,886 158,973 Other reserves 4,463 4,128 4,135 Total equity 174,817 174,606 169,380 Current liabilities Income tax payable 1,234 1,261 1,092 Trade and other payables 13,344 12,955 11,824 Provisions 50 50 50 Total current liabilities 14,628 14,266 12,966 Non-current liabilities Other payables 2,325 3,344 4,318 Deferred tax liabilities 11,673 11,167 10,743 Total non-current liabilities 13,998 14,511 15,061 TOTAL LIABILITIES 28,626 28,777 28,027 TOTAL EQUITY AND LIABILITIES 203,443 203,383 197,407 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 Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012 (unaudited) (unaudited) (unaudited) (unaudited) Cash and cash equivalents at beginning of period 73,095 65,499 74,947 71,085 Operating cash flows before changes in working capital 4,887 5,610 10,064 10,725 Changes in working capital (2,793) (770) (5,344) (2,591) Cash generated from operations 2,094 4,840 4,720 8,134 Net Interest and Income taxes received 367 26 799 501 Capital Expenditure & Financing (net) (5,019) (2,770) (9,929) (5,157) Free cash flow (2,558) 2,096 (4,410) 3,478 Proceeds from sale of Coagulation product line -- 11,250 -- 11,250 Cash paid to acquire Fiomi Diagnostics -- -- -- (5,624) Cash paid to acquire Phoenix Bio-tech -- -- -- (333) Dividend payment (4,373) (3,223) (4,373) (3,223) Repurchase of own company shares -- (2,017) -- (3,028) Cash and cash equivalents at end of period 66,164 73,605 66,164 73,605