We operate in an evolving environment. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of important factors, including, without limitation, the important risk factors set forth in Item 3.D. “Risk Factors” of this Annual Report.
The forward-looking statements made in this Annual Report relate only to events or information as of the date on which the statements are made in this Annual Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this Annual Report and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results or performance may be materially different from what we expect.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
as a foreign private issuer we are exempt from a number of reporting requirements under the Exchange Act and are permitted to file less information with the SEC than a domestic U.S. reporting company.
| • | Global economic conditions – changes in global economic conditions may have a material adverse impact on our results.
we may be classified as a passive foreign investment company, the market price of our ADSs has been, and may continue to be, highly volatile. we expect we will need additional capital in the future. the conversion of our outstanding employee share options, any new employee share options and existing warrants would dilute the ownership interest of existing shareholders. it could be difficult for U.S. holders of our ADSs to enforce any securities laws claims against us, our officers or directors in Irish Courts. we have no plans to pay dividends on our ADSs, and you may not receive funds without selling the ADSs. the terms of the deposit agreement limit the voting rights of holders of ADSs.
Risks Related to our Business and Industry
Our ability to sell products could be adversely affected by competition from new and existing diagnostic products. |
| • | Pandemic impact - the Covid-19 outbreak could significantly disrupt our operations and adversely affect our results of operations.We have invested in research and development but there can be no guarantees that our R&D programmes will not be rendered technologically obsolete or financially non-viable by the technological advances of our competitors, which would also adversely affect our existing product lines and inventory. Our main competitors (and their principal products with which we compete) include: Premier (First response™), Chembio (Stat-Pak™, DPP HIV-Syphilis), Abbott (Determine™, SD BioLine™, Abon™, Acon™, Afinion™, Architect™, FreeStyle Libre™), SD Biosensor (Standard Q), Bejing Wantai Biological Pharmacy (Wantai), Roche (Cobas, TinaQuant 3™), Bio-Rad (Variant 2™, Variant 2 Turbo™, D 100™, BioPlex 2200) Tosoh ( G8™ and G11™), Arkray 8180™, Siemens DCA™, Sebia (Capyllaris 2™ and Capyllaris 3™), Shanghai Kehua Bio-Engineering (KHB), Euroimmun™, Guangzhou Wondfo Biotech Co., Ltd (Wondfo), Aesku™, Werfen, Copan™, Becton Dickenson™, Pointe Scientific, Dexcom ™ (G6, G7, Dexcom One, Stelo) and DiaSorin Liaison. |
| • | People - we are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees or the inability to attract and retain qualified personnel as necessary could adversely affect our operations.The diagnostics Industry is focused on the testing of biological specimens in a laboratory or at the point-of-care and is highly competitive and rapidly changing. As new products enter the market, our products may become obsolete or a competitor’s products may be more effective or more effectively marketed and sold than ours. If we fail to maintain and enhance our competitive position, our customers may decide to use products developed by competitors which could result in a loss of revenues and adversely affect our results of operations, cash flow and business. |
| • | Supply chains - significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities would adversely affect our business and operating results. We are dependent on third-party suppliers for certain critical components and the primary raw materials required for our test kits. Our inability to manufacture products in accordance with applicable specifications, performance standards or quality requirements could adversely affect our business.We may in certain instances also face competition from products that are sold at a lower price. Where this occurs, customers may choose to buy lower cost products from third parties or we may be forced to sell our products at a lower price, both of which could result in a loss of revenues or a lower gross margin contribution from the sale of our products. We may also be required to increase our marketing efforts in order to compete effectively, which would increase our costs. |
| • | Distributor network - our revenues are highly dependent on a network of distributors worldwide. Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners.Our tests compete with products made by our competitors. Multiple competitors are making investments in competing technologies and products, and a number of our competitors have significantly greater financial, technical, research and other resources. Some competitors offer broader product lines and may have greater market presence or name recognition than we have. If we receive FDA or other regulatory clearance, and in order to achieve market acceptance, we and/or our distributors will likely be required to undertake substantial marketing efforts and spend significant funds to inform potential customers and the public of the existence and perceived benefits of our products. Our marketing efforts for these products may not be successful. As such, there can be no assurance that these products will obtain significant market acceptance and fill the market needs that are perceived to exist on a timely basis, or at all. |
| • | Cyber security - our ability to protect our information systems and electronic transmissions of sensitive data from data corruption, cyber-based attacks, security breaches or privacy violations is critical to the success of our business.
|
| • | Foreign exchange - our sales and operations are subject to the risks of fluctuations in currency exchange rates.
|
| • | Financial impairment - the large amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future.
|
| • | Taxation - tax matters, including disagreements with taxing authorities, the changes in corporate tax rates and imposition of new taxes could impact our results of operations and financial condition.
|
| • | Acquisitions - future acquisitions may be less successful than expected, not generate the expected benefits, disrupt our ongoing business, distract our management, increase our expenses and adversely affect our business, and therefore, growth may be limited.
|
| • | Brexit - the United Kingdom’s withdrawal from the European Union could potentially impact our supply chains and the market for our products in the United Kingdom.
|
| • | Environmental, Social and Governance - increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks.
|
We have a history of losses from operations and negative cash flows from operating activities, which may continue in the future.
We have incurred net losses and negative cash flows from operating activities in the past two years and we may not be able to achieve or maintain profitability or positive cash flow in the future. We have incurred losses of US$24.0 million and US$41.0 million in the years ended December 31, 2023 and 2022, respectively and had negative cash flows from operating activities of US$11.6 million and US$921 thousand, respectively.
We expect to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate cash flows from operations and to conduct adequate financing activities. We believe that we have access to sufficient cash reserves for our operating needs for at least the next twelve months from the date of this Annual Report. However, if negative cash flow from operating activities persists in the long run, cash resources may become insufficient to satisfy our on-going cash requirements.
Additional funding may not be available on acceptable terms, or at all. In addition, we may not be able to access a portion of our existing cash, cash equivalents and investments due to market conditions. Further, as a result of geopolitical and macroeconomic events, including the Israel-Hamas and Russia-Ukraine wars, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly or more dilutive.
Expansion into new businesses may present operating and marketing challenges different from those we currently encounter, and we cannot assure that new business initiatives will be successful enough to justify the time, effort, and resources that we devote to them or ultimately achieve profitability.
Any of the above events could significantly harm our business, prospects, financial condition, and results of operations and cause the price of the ADSs to decline.
We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position.
As of December 31, 2023, we had total indebtedness with a carrying value of approximately US$68.0 million, consisting of a senior secured term loan (“Term Loan”) from Perceptive, a convertible note, a derivative liability related to warrants issued to Perceptive, lease liabilities and a residual amount owing for an exchangeable note which was almost completely retired in 2022. The Term Loan, which is repayable in January 2026, had a nominal outstanding amount of US$41.7 million at December 31, 2023. In January 2024, we entered into a second amended and restated senior secured term loan credit agreement (the “Credit Agreement”) which allowed for an immediate US$22 million increase to our outstanding Term Loan, bringing the nominal outstanding amount to US$63.7 million. The Credit Agreement also provided for a further US$6.5 million facility that may be drawn down by the Company between April and December 2024 and can be used for general corporate purposes. In April 2024 the Company drew down the additional funding of US$6.5 million as prescribed in the Amended Term Loan agreement. This funding will be used for general corporate purposes, including the further development of our CGM offering.
The convertible note, which was issued to MiCo and has a nominal outstanding amount of US$20 million, mandatorily converts into ADSs if the volume weighted average price of the Company’s ADSs is at or above US$16.20 for any five consecutive trading days. The convertible note shall become immediately repayable at par together with any accrued interest, if the Company or any of its material subsidiaries ceases or threatens to cease carrying on its business or a part of its business which is material to the Group, however, subject to the terms of an Investor Subordination Agreement between Perceptive and MiCo, MiCo shall not, without the prior written consent of Perceptive, take any enforcement action with respect to the convertible note. Such enforcement actions include, inter alia, any MiCo action to enforce payment of or to collect the whole or any part of the convertible note.
As a result of the debt we have incurred, we may need to raise capital in one or more debt or equity offerings to fund our operations and obligations. There can be no assurance, however, that we will be successful in raising the necessary capital or that any such offering will be available to us on terms acceptable to us, or at all. If we are unable to raise additional capital that may be needed on terms in sufficient amounts or on terms acceptable to us, it could have a material adverse effect on our company and we may have to significantly delay, scale back or discontinue our deliveries under our outstanding customer purchase orders or the development or commercialization of one or more of our products or one or more of our other research and development initiatives, sell assets and/or cease trading.
Our debt may:
require us to use a substantial portion of our cash flow from operations to make debt service payments;
limit our ability to use our cash flow or obtain additional financing for working capital, capital expenditures, acquisitions or other general business purposes;
limit our flexibility to plan for, or react to, changes in our business and industry;
result in dilution to our existing shareholders in the event we issue equity to fund our debt obligations;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
To the extent we are unable to repay our debt as it becomes due with cash on hand or from other sources, we will need to refinance our debt, sell assets or repay the debt with the proceeds from equity offerings in order to continue in business. Additional indebtedness or equity financing may not be available to us in the future for the refinancing or repayment of existing debt, or if available, such additional debt or equity financing may not be available on a timely basis, or on terms acceptable to us and within the limitations specified in our then existing debt instruments. In addition, in the event we decide to sell additional assets, we can provide no assurance as to the timing of any asset sales or the proceeds that could be realized by us from any such asset sale. Our ability to obtain additional funding may determine our ability to continue as a going concern.
The failure to comply with the terms of the Credit Agreement could result in a default under its terms and, if uncured, could result in action against our pledged assets and dilution of our stockholders.
The Term Loan is secured by substantially all of our property and assets, including our equity interests in our subsidiaries. The Credit Agreement governing the Term Loan contains financial covenants requiring that we (a) maintain aggregate unrestricted cash after January 31, 2024 of not less than US$3,000,000 at all times, which must be held in one or more accounts subject to the security interests of the lenders under the Credit Agreement, and (b) achieve specified minimum total revenue requirements for the twelve months preceding each quarter end. In addition, the Credit Agreement contains covenants that restrict our ability to finance future operations or capital needs or to engage in other business activities.
The Credit Agreement restricts the ability of our company and the restricted subsidiaries to, among other things:
incur, assume or guarantee additional indebtedness; or
repurchase capital stock;
make other restricted payments, including paying dividends and making investments;
sell or otherwise dispose of assets, including capital stock of subsidiaries;
enter into agreements that restrict dividends from subsidiaries;
acquire another company or business or enter into mergers or consolidations;
enter into certain inbound and outbound licenses of intellectual property, subject to certain exceptions; and
enter into transactions with affiliates.
A breach of the minimum total revenue covenant or any other covenant in the Credit Agreement would result in a default under the Credit Agreement. Upon an event of default under the Credit Agreement, the lender could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. In such an event, there can be no assurance that we would have sufficient liquidity to fund payment of the amounts that would be due under the Credit Agreement or that, if such liquidity were not available, we would be successful in raising additional capital on acceptable terms, or at all, or in completing any other endeavor to continue to be financially viable and continue as a going concern. If we were unable to pay such amounts due under the Credit Agreement, the lenders could proceed against the collateral securing the loan. Our inability to raise additional capital on acceptable terms in the near future, whether for purposes of funding payments required under the Credit Agreement or providing additional liquidity needed for our operations, could have a material adverse effect on our business, prospects, results of operations, liquidity and financial condition.
We expect we will require future additional capital.
Our future liquidity and ability to meet our future capital requirements will depend on numerous factors, including, but not limited to, the following:
The success of our research and product development efforts, in particular the significant development effort required to develop and commercialise the biosensor technology, including the glucose monitoring technology acquired in January 2024;
The time, cost and degree of success of conducting clinical trials and obtaining regulatory approvals;
The costs and timing of expansion of sales and marketing activities;
The timing and size of any repayment requirements for existing debt obligations;
The timing and success of the commercial launch of new products;
The extent to which we gain or expand market acceptance for existing, new or enhanced products;
The costs and timing of the expansion of our manufacturing capacity;
The magnitude of capital expenditures;
Changes in existing and potential relationships with distributors and other business partners;
The costs involved in obtaining and enforcing patents, proprietary rights and necessary licences;
The costs and liability associated with patent infringement or other types of litigation;
The costs related to, and the success of, our operational efficiency focused activities;
Competing technological and market developments; and
The scope and timing of strategic acquisitions.
If additional financing is needed, we may seek to raise funds through the sale of equity or other securities or through bank borrowings. There can be no assurance that financing through the sale of securities, bank borrowings or otherwise will be available to us on satisfactory terms, or at all.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under our senior secured Term Loan are at a variable rate of interest and expose us to interest rate risk. On January 30, 2024, we entered into a second amended and restated senior secured term loan credit agreement which reduced the base rate of interest by 2.5% to 8.75%. Since January 30, 2024, the Term Loan accrues interest at an annual rate equal to 8.75% plus the greater of (a) the Term SOFR Reference Rate and (b) one percent per annum. If interest rates continue to increase, our debt service obligations on the variable rate indebtedness will increase and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. As of December 31, 2023, the nominal amount of our variable rate debt was US$41.7 million. The indebtedness increased by US$22 million to US$63.7 million in January 2024, following a second amendment to the Term Loan credit agreement. Our anticipated annual cash interest expense on US$63.7 million variable rate debt at the current rate of approximately 14 percent would be approximately US$9.0 million. Every one percent increase in the interest rate results in additional annual interest payable of US$0.6 million, based on the current amount of indebtedness.
Our business could be adversely affected by changing conditions in the diagnostic market.
The diagnostics industry is in transition, with a number of changes that affect the market for diagnostic test products. The diagnostics industry has experienced considerable consolidation through mergers and acquisitions in the past several years. For example, major consolidation among reference laboratories and the formation of multi-hospital alliances, reducing the number of institutional customers for diagnostic test products. There can be no assurance that we will be able to enter into and/or sustain contractual or other marketing or distribution arrangements on a satisfactory commercial basis with these institutional customers. Further, this consolidation trend may result in the remaining companies having greater financial resources and technological capabilities, thereby intensifying competition in the industry, which could have a material adverse effect on our business.
Our sales of point-of-care HIV tests in Africa are dependent on our inclusion in national HIV testing algorithms and our exclusion from one or more HIV testing algorithms, or a delay in the implementation of a HIV testing algorithm, could adversely affect our business and financial results. National HIV testing algorithms can be subject to legal challenges from competitors or other stakeholders which can result in delays in the algorithm being implemented or the algorithm being revised with the incumbent provider being then excluded.
Most countries in Africa have an established national HIV testing algorithm. The algorithm determines what provider’s HIV point-of-care test will be used. The World Health Organisation has indicated that national HIV algorithms should contain a HIV screening test (A1) and two HIV confirmatory tests (A2 and A3). Our inclusion on a national HIV testing algorithm determines whether we will be able to sell HIV tests in that country. HIV testing algorithms are not updated annually and typically run for between five and seven years. Our Uni-gold HIV confirmatory test is included on many HIV testing algorithms throughout Africa and our newly launched HIV screening test, TrinScreen, succeeded in being added to Kenya’s algorithm in 2023. In Kenya, the update to the HIV testing algorithm was challenged through the courts by a competitor and this legal challenge caused a delay in purchase orders being placed by the Kenyan health authorities under their revised algorithm. In 2024, another competitor has begun a court challenge in Kenya to the adopted HIV testing algorithm and although we are not party to this court case, it could have an adverse impact for us if the purchase of HIV tests under the testing algorithm in Kenya is suspended while the case is ongoing or if the competitor succeeds in revising the current HIV testing algorithm. Legal challenges from competitors, or other stakeholders, in any country in which we sell HIV tests could adversely affect our business and financial results.
Reductions in government funding to agencies and organizations we work with could adversely affect our business and financial results.
We sell our products into the public health market, which consists of state, county and other governmental public health agencies, community-based organizations, service organizations and similar entities. Many of these customers depend to a significant degree on grants or funding provided by governments or governmental agencies to run their operations, including programs that use our products, such as our HIV testing products. In international markets, we often sell our products to parties funded by such agencies. The level of available government grants or funding is unpredictable, and certain organizations may not have their contracts renewed for funding. Available funding may be affected by various factors including future economic conditions, legislative and regulatory developments, political changes, civil unrest, changing public health priorities and changing priorities for research and development activities. Any reduction or delay in government funding or change in organizational contracts could cause our customers to delay, reduce or forego purchases of our products or cause short-term or long-term fluctuations in our product revenues through these channels.
The acquisition of the biosensor technology, including the CGM assets, of Waveform in January 2024 may be less successful than expected.
In January 2024, the Company acquired the biosensor technology, including the CGM assets, of Waveform for an initial consideration of US$12.5 million in cash and 1.8 million ADSs of the Company plus contingent consideration.
The Company intends to initially design an updated CGM sensor using the acquired Waveform assets together with a related data driven health and wellness insights platform and to further evolve the platform technology acquired through the acquisition of the Waveform assets to measure and analyse other valuable biomarkers and related datapoints. These activities, and their impact on our business, are subject to many risks, including the following:
The acquisition of the CGM assets and the related integration activities may require greater capital and other resources than originally anticipated at the time of acquisition;
The benefits expected to be derived from the acquisition of the CGM assets may not materialize and could be affected by numerous factors, such as the failure to complete planned research and development objectives, regulatory developments, general economic conditions and increased competition;
We may be unable to successfully integrate the CGM assets, products and technology into our business;
Worse than expected performance of the acquired assets may result in the impairment of intangible assets;
The acquisition will require substantial expense and management time and this could disrupt our business;
The biosensor industry, including the CGM industry, is a highly innovative area with several industry participants developing intellectual property portfolios over many years. As such there can be no assurance that the technology acquired from Waveform or further developed by us, will not infringe on other parties’ existing IP portfolios. We could incur significant costs and management time in defending against IP infringement claims.
We may not be able to accurately forecast the performance or ultimate impact of an acquired CGM business; and
The acquisition may result in the incurrence of unexpected expenses, the dilution of our earnings or our existing stockholders’ percentage ownership, or potential losses from undiscovered liabilities not covered by an indemnification from the seller(s) of the acquired business;
The occurrence of one or more of the above or other factors may prevent us from achieving all or a significant part of the benefits expected from the acquisition of the CGM assets. This may adversely affect our financial condition, results of operations and ability to grow our business or otherwise achieve our financial and strategic objectives.
Future acquisitions and investments may be less successful than expected, not generate the expected benefits, disrupt our ongoing business, distract our management, increase our expenses and adversely affect our business, and therefore, growth may be limited.
We have historically grown organically and through the acquisition of, and investment in, other companies, product lines and technologies. We may enter into strategic acquisitions or investments as a way to expand our business. These activities, and their impact on our business, are subject to many risks, including the following:
Suitable acquisitions or investments may not be found or consummated on terms or schedules that are satisfactory to us or consistent with our objectives;
The benefits expected to be derived from an acquisition may not materialize and could be affected by numerous factors, such as regulatory developments, insurance reimbursement, general economic conditions and increased competition;
We may be unable to successfully integrate an acquired company’s personnel, assets, management systems, products and/or technology into our business;
Worse than expected performance of an acquired business may result in the impairment of intangible assets;
Acquisitions may require substantial expense and management time and could disrupt our business;
We may not be able to accurately forecast the performance or ultimate impact of an acquired business;
An acquisition and subsequent integration activities may require greater capital and other resources than originally anticipated at the time of acquisition;
An acquisition may result in the incurrence of unexpected expenses, the dilution of our earnings or our existing stockholders’ percentage ownership, or potential losses from undiscovered liabilities not covered by an indemnification from the seller(s) of the acquired business;
An acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers;
An acquisition of a foreign business may involve additional risks, including, but not limited to, foreign currency exposure, liability or restrictions under foreign laws or regulations, and our inability to successfully assimilate differences in foreign business practices or overcome language or cultural barriers; and
Our ability to integrate future acquisitions may be adversely affected by inexperience in dealing with new technologies.
The occurrence of one or more of the above or other factors may prevent us from achieving all or a significant part of the benefits expected from an acquisition or investment. This may adversely affect our financial condition, results of operations and ability to grow our business or otherwise achieve our financial and strategic objectives.
Our long-term success depends upon the successful development and commercialization of new products.
Our long-term viability and growth will depend upon the successful discovery, development and commercialization of new and enhanced products from our research and development (“R&D”) activities. In order to remain competitive, we are committed to significant expenditures on R&D and the commercialization of new or enhanced products. The R&D process generally takes a significant amount of time from product inception to commercial launch. However, there is no certainty that this investment in research and development will yield technically feasible or commercially viable products. We may have to abandon a new or enhanced product during its development phase after our investment of substantial time and money. During the fiscal years ended December 31, 2023, 2022 and 2021, we incurred US$1.8 million, US$4.5 million and US$6.8 million, respectively, in capitalised R&D expenses. Due to the acquisition of the biosensor technology of Waveform in January 2024, we expect to incur significantly higher costs related to our research and development activities in the next 24 months.
Successful products require significant development and investment, including testing to demonstrate their performance capabilities, cost-effectiveness or other benefits prior to commercialization. In addition, unless exempt, regulatory clearance or approval must be obtained before our medical device products may be sold. Additional development efforts on these products may be required before we are ready to submit applications for marketing authorisation to any regulatory authority. Regulatory authorities may not clear or approve these products for commercial sale or may substantially delay or condition clearance or approval. In addition, even if a product is successfully developed and all applicable regulatory clearances or approvals are obtained, there may be little or no market for the product. Accordingly, if we fail to develop and gain commercial acceptance for our products, or if we have to abandon a new product during its development phase, or if competitors develop more effective products or a greater number of successful new products, customers may decide to use products developed by our competitors. This would result in a loss of revenues and adversely affect our results of operations, cash flow and business.
Our future growth in the U.S. is dependent in part on the U.S. Food and Drug Administration (“FDA”) clearance of products. If FDA clearance is delayed or not achieved for these products, it could have a material impact on the future growth of our business.
Similarly, future growth outside of U.S. is dependent on clearance of products by the relevant regulatory authorities in those countries.
Consolidation of our customers or the formation of group purchasing organisations could result in increased pricing pressure that could adversely affect our operating results.
The health care industry has undergone significant consolidation resulting in increased purchasing leverage for customers and consequently increased pricing pressures on our business. Additionally, some of our customers have become affiliated with group purchasing organisations. Group purchasing organisations typically offer members price discounts on laboratory supplies and equipment if they purchase a bundled group of one supplier’s products, which results in a reduction in the number of manufacturers selected to supply products to the group purchasing organization and increases the group purchasing organization’s ability to influence its members’ buying decisions. Further consolidation among customers or their continued affiliation with group purchasing organizations may result in significant pricing pressures and correspondingly reduce the gross margins of our business or may cause our customers to reduce their purchases of our products, thereby adversely affecting our business, prospects, operating results or financial condition.
The trend towards managed care, together with healthcare reform of the delivery system in the U.S. and efforts to reform in Europe, has resulted in increased pressure on healthcare providers and other participants in the healthcare industry to reduce selling prices. Consolidation among healthcare providers and consolidation among other participants in the healthcare industry has resulted in fewer, more powerful groups, whose purchasing power gives them cost containment leverage. In particular, there has been a consolidation of laboratories. These industry trends and competitive forces place constraints on the levels of overall pricing, and thus could have a material adverse effect on our gross margins for products we sell in clinical diagnostic markets.
We are dependent on third-party suppliers for certain critical components and the primary raw materials required for our test kits.
The primary raw materials required for Trinity Biotech’s test kits consist of antibodies, antigens or other reagents, glass fibre and packaging materials which are acquired from third parties. Our biosensor business and our HB A1C business, both rely on a supply of raw materials to manufacture polymers, electronics and specialist engineered components. If our third-party suppliers are unable or unwilling to supply or manufacture a required component or product or if they make changes to a component, product or manufacturing process or do not supply materials meeting our specifications, we may need to find another source and/or manufacturer. This could require that we perform additional development work.
Some of our products, which we acquire from third parties, are highly technical and are required to meet exacting specifications, and any quality control problems that we experience with respect to the products supplied by third-party vendors could adversely and materially affect our reputation, our attempts to complete our clinical trials or commercialization of our products and adversely and materially affect our business, operating results and prospects. We may also need to obtain FDA or other regulatory authorisations for the use of an alternative component or for certain changes to our products or manufacturing process. We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or foreign regulatory authorities and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including, warning letters, product recalls, termination of distribution, product seizures, or civil penalties. Completing that development and obtaining such authorisations could require significant time and expense and we may not obtain such authorisations on a timely basis, or at all. The availability of critical components and products from other third parties could also reduce our control over pricing, quality and timely delivery. These events could either disrupt our ability to manufacture and sell certain of our products into one or more markets or completely prevent us from doing so and could increase our costs. Any such event could have a material adverse effect on our results of operations, cash flow and business. Furthermore, since some of these suppliers are located outside of the United States, we are subject to foreign export laws and United States import and customs regulations, which complicate and could delay shipments of components to us. In 2022, we experienced significant disruption to our international supply chain which caused some disruption to operations. There can be no assurance that these disruptions will not continue or intensify in the future which may create significant challenges in fulfilling customer orders that we may not be able to overcome.
Although typically we do not plan to be dependent upon any one source for these critical components or raw materials, alternative sources of such raw materials or components with the characteristics and quality desired by us may not be available or commercially viable. Such unavailability could affect the quality of our products and our ability to meet orders for specific products.
If our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.
We are also required to comply with the FDA’s Medical Device Reporting (“MDR”) requirements in the United States and comparable regulations worldwide, such as the Health Products Regulatory Authority (“HPRA”). For example, under the FDA’s MDR regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in European Union markets are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the competent authority in whose jurisdiction the incident occurred.
Were this to happen to us, the relevant competent authority would file an initial report, and there would then be a further inspection or assessment if there are particular issues. This would be carried out either by the competent authority or it could require that our Notified Body, carry out the inspection or assessment.
We have reported MDRs in the past, and we anticipate that in the future it is likely that we may experience events that would require reporting to the FDA pursuant to the MDR regulations. Any adverse event involving our products could result in future voluntary corrective actions, or agency actions, such as inspection, mandatory recall or other enforcement action.
Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.
We may be subject to liability resulting from our products or services.
We may be subject to claims for personal injuries or other damages if any of our products, services, or any product which is made with the use or incorporation of any of our technologies, causes injury of any type or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or usage. There is no assurance that we would be successful in defending any product liability lawsuits brought against us. Regardless of merit or eventual outcome, product liability claims could result in:
Decreased demand for our products;
Damage to our image or reputation;
Costs related to litigation; and
Diversion of management time and attention;
We have global product liability insurance in place for our manufacturing subsidiaries up to a maximum of €6,500,000 (US$7,178,000) for any one accident, limited to a maximum of €6,500,000 (US$7,178,000) in any one-year period of insurance and is subject to a deductible. We also have professional indemnity insurance for the laboratory services business up to a maximum of US$5,000,000 for each claim and a US$7,000,000 aggregate limit. There can be no assurance that our product liability insurance is sufficient to protect us against liability that could have a material adverse effect on our business. In addition, although we believe that we will be able to continue to obtain adequate coverage in the future, there is no assurance that we will be able to do so at acceptable costs.
Our products may be subject to product recalls that could harm our reputation, business and financial results.
Manufacturers may, on their own initiative, initiate actions, including a non-reportable market withdrawal, a correction, a safety alert or a reportable product recall, for the purpose of correcting a material deficiency, improving device performance, or for other reasons. Additionally, the FDA and similar foreign health or governmental authorities have the authority to require an involuntary recall of commercialized products in the event of material deficiencies or defects in design, manufacturing or labelling or in the event that a product poses an unacceptable risk to health. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that a device intended for human use would cause serious, adverse health consequences or death. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, modifications, design or labelling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within 10 working days after the recall is initiated.
Companies are required to maintain certain records of post-market actions, even if they determine such actions are not reportable to the FDA. If we determine that certain actions do not require notification of the FDA, the FDA may disagree with our determinations and require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted or failing to timely report or initiate a reportable product action. Further, depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner.
The large amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future.
We regularly review our long-lived assets, including identifiable intangible assets and goodwill, for impairment. Goodwill and acquired indefinite life intangible assets are subject to impairment review on a periodic basis and whenever potential impairment indicators are present. Other long-lived assets are reviewed when there is an indication that an impairment may have occurred. The amount of goodwill and identifiable intangible assets on our consolidated balance sheet as of December 31, 2023, was US$16 million (December 31, 2022: US$35 million) (December 31, 2021: US$36 million). In January 2024, we acquired the biosensor technology, including the continuous glucose monitoring assets of Waveform for an initial consideration of US$12.5 million in cash and 1.8 million ADSs of the Company plus contingent consideration. This acquisition significantly increases the Company’s long-lived assets, which will be assessed for impairment. In the year ended December 31, 2023, we recorded total impairment charges of intangible assets of US$6 million (Year 2022: US$5 million) (Year 2021: US$4 million) as a result of our periodic impairment review. We may record further significant impairment charges in the future if there are changes in market conditions, a significant reduction in share price or other changes in the future outlook. In addition, we may from time to time sell assets that we determine are not critical to our strategy or execution. Future events or decisions may lead to asset impairments and/or related charges. Certain impairments may result from a change in our strategic goals, business direction or other factors relating to the overall business environment. Any significant impairment charges could have a material adverse effect on our results of operations.
Failure to achieve our financial and strategic objectives could have a material adverse impact on our business prospects.
As a result of any number of risk factors identified herein, no assurance can be given that we will be successful in implementing our financial and strategic objectives. In addition, the funds for research, clinical development and other projects have in the past come partly from our business operations. If our business slows and we have less money available to fund research and development and clinical programs, we will have to decide at that time which programs to cut, and by how much. Similarly, if adequate financial, personnel, equipment or other resources are not available, we may be required to delay or scale back our business. Our operations will be adversely affected if our total revenue and gross profits do not correspondingly increase or if our technology, product, clinical and market development efforts are unsuccessful or delayed. Furthermore, our failure to successfully introduce new or enhanced products and develop new markets could have a material adverse effect on our business and prospects.
Global economic conditions may have a material adverse impact on our results.
Uncertainty in global economic conditions may continue for the foreseeable future and intensify. The invasion of Ukraine by Russia and the Israel – Hamas war have destabilised markets, increased volatility and created uncertainty, particularly in energy supply and energy prices. This uncertainty poses a risk to the overall economy that could impact demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers and creditors, including financial institutions. Volatile economic conditions have adversely affected and could continue to adversely affect our financial performance and condition or those of our customers and suppliers. These circumstances could adversely affect our access to liquidity needed to conduct or expand our business or conduct future acquisitions, refinance existing debts, or make other discretionary investments. Many of our customers rely on public funding provided by federal, state and local governments, and this funding may be reduced or deferred as a result of economic conditions.
If global economic conditions deteriorate significantly, our business could be negatively impacted, including such areas as reduced demand for our products from a slow-down in the general economy, supplier or customer disruptions resulting from tighter credit markets and/or temporary interruptions in our ability to conduct day-to-day transactions through our financial intermediaries involving the payment to or collection of funds from our customers, vendors and suppliers. These circumstances may adversely impact our customers and suppliers, which, in turn, could adversely affect their ability to purchase our products or supply us with necessary equipment, raw materials or components. Even with the improvement of economic conditions, it may take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery.
We are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees or the inability to attract and retain qualified personnel as necessary could adversely affect our operations.
Our success is dependent to a large extent upon the contributions of our key employees. In December 2023, our then CFO, John Gillard, was appointed CEO & President with our then Chairman and CEO, Aris Kekedjian resigning as CEO, Chairman and director. Des Fitzgerald was appointed as Interim CFO in December 2023. The effectiveness of our senior leadership team generally, and any further transition as a result of these changes, could have a significant impact on our results of operations. Management transition is often difficult and inherently causes some loss of institutional knowledge, which could negatively affect our results of operations and financial condition. Our ability to execute our business strategies may be adversely affected by the uncertainty associated with these transitions. We may not be able to attract or retain a sufficient number of qualified employees in the future due to the intense competition for qualified personnel among medical products and other life science businesses.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will adversely affect our ability to effectively manufacture, sell and market our products, to meet the demands of our strategic partners in a timely fashion, or to support research, development and clinical programs. Although we believe we will be successful in attracting and retaining qualified personnel, competition for experienced scientists and other personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms.
Significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities would adversely affect our business and operating results.
Products manufactured at our facilities in Bray, Ireland, Jamestown and Buffalo, New York and Kansas City, Missouri accounted for the majority of our revenues during the fiscal year ended December 31, 2023. Our global supply of these products and services is dependent on the uninterrupted and efficient operation of these facilities. In addition, we currently rely on a small number of third-party manufacturers to produce certain of our diagnostic products and product components. 2023 continued to see significant interruptions to international supply chains which may continue for some time to come. If we do not negotiate long-term contracts, our suppliers will likely not be required to provide us with any guaranteed minimum production levels. As a result, we cannot assure you that we will be able to obtain sufficient quantities of product in the future. In addition, our reliance on third-party suppliers involves a number of risks, including, among other things:
contract manufacturers or suppliers may fail to comply with regulatory requirements or make errors in manufacturing that could negatively affect the efficacy or safety of our products or cause delays in shipments of our products;
we or our contract manufacturers and suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, we or our suppliers may have excess or inadequate inventory of materials and components;
we or our contract manufacturers and suppliers may be subject to price fluctuations due to a lack of long-term supply arrangements for key components;
we or our contract manufacturers and suppliers may lose access to critical services and components, resulting in an interruption in the manufacture, assembly and shipment of our systems;
we may experience delays in delivery by our contract manufacturers and suppliers due to changes in demand from us or their other customers;
fluctuations in demand for products that our contract manufacturers and suppliers manufacture for others may affect their ability or willingness to deliver components to us in a timely manner;
our suppliers or those of our contract manufacturer may wish to discontinue supplying components or services to us for risk management reasons;
we may not be able to find new or alternative components or reconfigure our system and manufacturing processes in a timely manner if the necessary components become unavailable; and
our contract manufacturers and suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfil our orders and meet our requirements.
The operations of our facilities or these third-party manufacturing facilities could be adversely affected by fire, power failures, natural or other disasters, such as earthquakes, floods, pandemics, or terrorist threats. Although we carry insurance to protect against certain business interruptions at our facilities, some pieces of manufacturing equipment are difficult to replace and could require substantial replacement lead-time. There can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all.
If any of these risks materialize, it could significantly increase our costs and impact our ability to meet demand for our products and/or services. If we are unable to satisfy commercial demand for our products in a timely manner, our ability to generate revenue would be impaired, market acceptance of our products could be adversely affected, and customers may instead purchase or use our competitors’ products. In addition, we could be forced to secure new or alternative contract manufacturers or suppliers. Securing a replacement contract manufacturer or supplier could be difficult. The introduction of new or alternative manufacturers or suppliers also may require design changes to our products that are subject to FDA and/or other regulatory clearances or approvals.
We may also be required to assess the new manufacturer’s compliance with all applicable regulations and guidelines, which could further impede our ability to manufacture our products in a timely manner. As a result, we could incur increased production costs, experience delays in deliveries of our products, suffer damage to our reputation, and experience an adverse effect on our business and financial results. Any significant interruption in our or third-party manufacturing capabilities could materially and adversely affect our operating results.
Our inability to manufacture products in accordance with applicable specifications, performance standards or quality requirements could adversely affect our business.
The materials and processes used to manufacture our products must meet detailed specifications, performance standards and quality requirements to ensure our products will perform in accordance with their label claims, our customers’ expectations and applicable regulatory requirements.
As a result, our products and the materials used in their manufacture or assembly undergo regular inspections and quality testing. Factors such as defective materials or processes, mechanical failures, human errors, environmental conditions, changes in materials or production methods by our vendors, and other events or conditions could cause our products or the materials used to produce or assemble our products to fail inspections and quality testing or otherwise not perform in accordance with our label claims or the expectations of our customers.
Any failure or delay in our ability to meet the applicable specifications, performance standards, quality requirements or customer expectations could adversely affect our ability to manufacture and sell our products or comply with regulatory requirements. These events could, in turn, adversely affect our revenues and results of operations.
Our revenues are highly dependent on a network of distributors worldwide.
We currently distribute our product portfolio through distributors in approximately 100 countries worldwide. Our continuing economic success and financial security is dependent on our ability to secure effective channels of distribution on favourable trading terms with suitable distributors.
The loss or termination of our relationship with these key distributors could significantly disrupt our existing business unless suitable alternatives were quickly found or lost sales to one distributor are absorbed by another distributor. Finding a suitable alternative to a lost or terminated distributor may pose challenges in our industry’s competitive environment, and another suitable distributor may not be found on satisfactory terms, if at all. For instance, some distributors already have exclusive arrangements with our competitors, and others do not have the same level of penetration into our target markets as our existing distributors. If total revenue from these or any of our other significant distributors were to decrease in any material amount in the future or we are not successful in timely transitioning business to new distributors, our business, operating results and financial condition could be materially and adversely affected.
Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners.
To the extent that we or our strategic partners fail to maintain a high-quality level of service and support for diagnostic products, there is a risk that the perceived quality of our products will be diminished in the marketplace. Likewise, we may fail to provide the level, quantity or quality of service expected by the marketplace. This could result in slower adoption rates and lower than anticipated utilisation of our products which could have a material adverse effect on our business, financial condition and results of operations.
Our ability to protect our information systems and electronic transmissions of sensitive data from data corruption, cyber-based attacks, security breaches or privacy violations is critical to the success of our business.
We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store electronic information, including personal information of our customers. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, malware attacks by hackers and similar breaches, can cause all or portions of our websites to be unavailable, create system disruptions, shutdowns, erasure of critical data and software or unauthorised disclosure of confidential information. We invest in security technology to protect our data against risks of data security breaches and cyber-attacks and we have implemented solutions, processes, and procedures to help mitigate these risks, such as encryption, virus protection, security firewalls and comprehensive information security and privacy policies. However, despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. We have been the victim of cyber-attacks but these have had no material impact on our operations. The age of our information technology systems, as well as the level of our protection and business continuity or disaster recovery capability, varies from site to site, and there can be no guarantee that any such plans, to the extent they are in place, will be effective. In addition, a security breach or privacy violation that leads to disclosure of personal information, including but not limited to employee or consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state breach notification laws and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent further security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, we may be subject to legal claims or proceedings, or we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data, which could have a material adverse impact on our business, financial condition and results of operations. While we currently expend resources to protect against cyber-attacks and security breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques, and we may need to expend additional resources to continue to protect against potential security breaches or to address problems caused by such attacks or any breach of our safeguards. In addition, a data security breach could distract management or other key personnel from performing their primary operational duties.
In addition, the interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, this could result in government-imposed fines or orders requiring that we change our data practices, which could have an adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
Section 3305 of FDORA (Food and Drug Omnibus Reform Act of 2022) aims to ensure cybersecurity of medical devices and requires manufacturers of cyber devices, when making a premarket submission to FDA, to provide a plan to monitor and address any post-market cybersecurity vulnerabilities; create and maintain procedures to ensure the device and related systems are cybersecure; provide a software bill of materials; and comply with any other requirements FDA may develop to ensure the device and related systems are cybersecure. This provision makes a failure to comply with these requirements a prohibited act. We have carried out the appropriate cybersecurity assessments for any of our relevant products in accordance with FDA, AAMI and ANSI requirements and standards in place at time of approval.
Our sales and operations are subject to the risks of fluctuations in currency exchange rates.
A substantial portion of our operations are based in Ireland and Europe is one of our main sales territories. As a result, changes in the exchange rate between the U.S. Dollar and the Euro can have significant effects on our results of operations. In addition, in markets where we invoice in U.S. Dollars but where the local currency has weakened, we have been required to reduce our pricing in order to preserve our competitiveness. We have an exposure to the Canadian Dollar through our Canadian operations and to the Brazilian Real through our Brazilian subsidiary. We also have revenues and costs denominated in British Sterling.
The ongoing geopolitical uncertainty, inflation and central bank actions may lead to greater volatility in currency exchange rates globally. In the future, we may enter into hedging instruments to manage our currency exchange rate risk. However, our attempts to hedge against these risks may not be successful. If we are unable to successfully hedge against unfavourable foreign currency exchange rate movements, our consolidated financial results may be adversely impacted.
Tax matters, including disagreements with taxing authorities, the changes in corporate tax rates and imposition of new taxes could impact our results of operations and financial condition.
We are subject to regular reviews, examinations, and audits by tax authorities in a number of jurisdictions across the world with respect to our taxes. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liability, including interest and penalties. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and financial position.
A significant portion of our business is located in the U.S. and is subject to income and other taxes in the U.S. and our operations, plans and results are affected by tax and other initiatives. Changes to the US tax code could have a significant impact on our profitability. Changes to the tax code could also affect our valuation of deferred tax assets and liabilities. Any such change in valuation would have a material impact on our income tax expense and deferred tax balances.
Public health emergencies, epidemics or pandemics, such as the emergence and spread of the Covid‑19 pandemic, have the potential to significantly impact our operations through a decrease in demand for our products, interruption to business and a reduction in staff availability.
The Covid‑19 pandemic has had a material impact on the healthcare industry and specifically the medical diagnostics sector in which we operate. The reduced but continuing uncertainty around the global pandemic could have an adverse effect on our operating results, cash flows, financial condition and/or prospects. The situation with the Covid-19 pandemic remains fluid and uncertain.
The global spread of Covid‑19 and the public healthcare measures implemented by governments, such as quarantines and the temporary closure of businesses led and could again in the future lead to fewer patients presenting themselves for medical check-ups resulting in a fall in demand for certain of our products which may or may not be offset by increased demand within our Covid-19 related portfolio of products. Furthermore, funding allocated to combatting Covid-19 may result in a reduction or a postponement in the funding available for other diseases, conditions and disorders that our products are used to diagnose.
We operate in a labour‑intensive industry where employees’, contractors’ and customers’ activities can be adversely impacted by the availability of people to produce, manufacture or install our products. Covid-19 lead to the temporary closure of our manufacturing sites and associated furloughing of some staff. Furthermore, Covid-19 reduced our ability to visits customers and suppliers and required some of our staff to work from home in line with public health measures. Any significant loss of employee resources for a sustained period of time due to lockdown restrictions, self‑isolation or sickness as a result of a public health emergency could impact our ability to produce, manufacture and deliver goods. Similarly, our customer facing activities could be adversely impacted by similar employee availability issues.
Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investors, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG may hinder our access to capital, as investors and lenders may reconsider their capital investment allocation as a result of their assessment of our ESG practices. If we do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and the business, financial condition and the price of our company’s ADS’s could be materially and adversely affected.
Risks Related to Government Regulations
| • | Clinical trials - clinical trials necessary to support future premarket submissions will be expensive and will require enrolment of suitable patients who may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any modified or new products and will adversely affect our business, operating results and prospects. If the third parties on whom we rely to conduct our pre-clinical studies and clinical trials and to assist in pre-clinical development do not perform as contractually required or expected, we may not be able to obtain regulatory approval or commercialize our products. The results of our clinical trials may not support our product candidate claims.
|
| • | Regulatory compliance - we may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products for unapproved or “off-label” uses. If the FDA were to modify its policy of enforcement discretion with respect to our laboratory developed tests, we could incur substantial costs and delays associated with trying to obtain premarket clearance or other approvals.
|
| • | Product approvals - if we fail to maintain regulatory approvals and clearances our ability to commercially distribute and market these products could suffer. Failure to comply with FDA or other regulatory requirements may require us to suspend production of our products or institute a recall which could result in higher costs and a loss of revenues. Modifications to our products may require new 510(k) clearances or pre-market approvals, or may require us to cease marketing or recall the modified products until clearances or approvals are obtained. Our laboratory business could be harmed from the loss or suspension of a licence or imposition of a fine or penalties under, or future changes in, the law or regulations of the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), or those of other state or local agencies.
|
| • | International regulations - we face risks relating to our international sales and business operations, including regulatory risks, which could impact our current business operations and growth strategy.
|
| • | Healthcare industry laws - we are subject to various laws targeting fraud and abuse in the healthcare industry. Changes in healthcare regulation could affect our revenues, costs and financial condition.
|
| • | Public company regulations - compliance with regulations governing public company corporate governance and reporting is complex and expensive.
|
Risks Related to Our Intellectual Property
| • | Proprietary rights - we may be unable to protect or obtain proprietary rights that we utilise or intend to utilise.
|
| • | Patent protection – our patent protection may not be sufficiently broad to compete effectively, the existing patents could be challenged; and trade secrets and confidential know-how could be obtained by competitors. Our patent protection could be reduced or eliminated for non-compliance with various procedural requirements or due to changes in patent law. We may be involved in lawsuits to enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful. Product infringement claims by other companies could result in costly disputes and could limit our ability to sell our products.
|
Risks Related to Ownership of our American Depository Shares (ADSs)
| • | Information - as a foreign private issuer we are exempt from a number of reporting requirements under the Exchange Act and are permitted to file less information with the SEC than a domestic U.S. reporting company.
|
| • | Passive foreign investment company - we may be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules.
|
| • | Volatility - the market price of our ADSs has been, and may continue to be, highly volatile. Future sales of our ADSs could reduce the market price of the ADSs.
|
| • | Capital - we expect we will need additional capital in the future.
|
| • | Dilution - the conversion of our outstanding employee share options, any new employee share options and existing warrants would dilute the ownership interest of existing shareholders.
|
| • | Governed by Irish law - it could be difficult for U.S. holders of ADSs to enforce any securities laws claims against Trinity Biotech, its officers or directors in Irish Courts.
|
| • | Dividends - we have no plans to pay dividends on our ADSs, and you may not receive funds without selling the ADSs.
|
| • | Voting rights of holders of ADSs – the terms of the deposit agreement limit the voting rights of holders of ADSs.
|
| • | NASDAQ listing standards - our securities could be delisted from Nasdaq if we do not comply with Nasdaq’s listing standards.
|
Risks Related to our Business & Industry
Our ability to sell products could be adversely affected by competition from new and existing diagnostic products.
We have invested in research and development but there can be no guarantees that our R&D programmes will not be rendered technologically obsolete or financially non-viable by the technological advances of our competitors, which would also adversely affect our existing product lines and inventory. Our main competitors (and their principal products with which we compete) include: Premier (1st response™), Chembio (Stat-Pak™), Abbott (Determine™, SD BioLine™, Abon™, Acon™), SD Biosensor, Wondf, Bejing Wanta, Abbott Architec, Roche TinaQuant 3™, Bio_Rad (Variant 2 Turbo™, D 100™) Tosoh ( G8™ & G11™) Arkray 8180™, Allere Affinion™, Siemens DCA ™, Sebia Capyllaris 2&3™, Bio-Rad Variant 2™,Sebia Capyllaris 2, Euroimmun™, Bio-Rad™, Aesku™, Inova™, Copan™, Becton Dickenson™.
The diagnostics industry is focused on the testing of biological specimens in a laboratory or at the point-of-care and is highly competitive and rapidly changing. As new products enter the market, our products may become obsolete or a competitor’s products may be more effective or more effectively marketed and sold than ours. If we fail to maintain and enhance our competitive position, our customers may decide to use products developed by competitors which could result in a loss of revenues and adversely affect our results of operations, cash flow and business.
We may in certain instances also face competition from products that are sold at a lower price. Where this occurs, customers may choose to buy lower cost products from third parties or we may be forced to sell our products at a lower price, both of which could result in a loss of revenues or a lower gross margin contribution from the sale of our products. We may also be required to increase our marketing efforts in order to compete effectively, which would increase our costs.
Our tests compete with products made by our competitors. Multiple competitors are making investments in competing technologies and products, and a number of our competitors have significantly greater financial, technical, research and other resources. Some competitors offer broader product lines and may have greater market presence or name recognition than we have. If we receive FDA or other regulatory clearance, and in order to achieve market acceptance, we and/or our distributors will likely be required to undertake substantial marketing efforts and spend significant funds to inform potential customers and the public of the existence and perceived benefits of our products. Our marketing efforts for these products may not be successful. As such, there can be no assurance that these products will obtain significant market acceptance and fill the market needs that are perceived to exist on a timely basis, or at all.
We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position.
As of December 31, 2021, we had total indebtedness with a carrying value of approximately US$99.2 million, which included US$83.3 million of outstanding indebtedness under our 4% exchangeable notes due in 2045. The exchangeable notes have a nominal amount of US$99.9 million and include a number of put and call options. The earliest date on which holders can require Trinity Biotech to repurchase their notes at par is April 1, 2022. In January 2022, the Company retired exchangeable notes with a nominal value of US$99.7 million mainly using funds from a term loan from Perceptive Advisors of US$81.25 million which is repayable in 2026. The credit agreement with Perceptive Advisors (the “Credit Agreement”) was signed in December 2021.
We may face further liquidity challenges if we are unable to meet obligations set forth in the Credit Agreement, including a financial covenant requiring that we achieve specified minimum total revenue amounts measured as of the end of each quarter. A breach of the minimum total revenue covenant or any other covenant in the Credit Agreement would result in a default under the Credit Agreement, which could enable the lender to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. We cannot assure you that, in such an event, we would have sufficient assets to pay amounts due under the Credit Agreement.
As a result, we may need to raise capital in one or more debt or equity offerings to fund our operations and obligations. There can be no assurance, however, that we will be successful in raising the necessary capital or that any such offering will be available to us on terms acceptable to us, or at all. If we are unable to raise additional capital that may be needed on terms in sufficient amounts or on terms acceptable to us, it could have a material adverse effect on our company. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue our deliveries under our outstanding customer purchase orders or the development or commercialization of one or more of our products or one or more of our other research and development initiatives, sell assets and/or cease trading
Our debt may:
require us to use a substantial portion of our cash flow from operations to make debt service payments;
limit our ability to use our cash flow or obtain additional financing for working capital, capital expenditures, acquisitions or other general business purposes;
limit our flexibility to plan for, or react to, changes in our business and industry;
result in dilution to our existing shareholders in the event we issue equity to fund our debt obligations;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
To the extent we are unable to repay our debt as it becomes due with cash on hand or from other sources, we will need to refinance our debt, sell assets or repay the debt with the proceeds from equity offerings in order to continue in business. Additional indebtedness or equity financing may not be available to us in the future for the refinancing or repayment of existing debt, or if available, such additional debt or equity financing may not be available on a timely basis, or on terms acceptable to us and within the limitations specified in our then existing debt instruments. In addition, in the event we decide to sell additional assets, we can provide no assurance as to the timing of any asset sales or the proceeds that could be realized by us from any such asset sale. Our ability to obtain additional funding may determine our ability to continue as a going concern.
The failure to comply with the terms of the Credit Agreement could result in a default under its terms and, if uncured, could result in action against our pledged assets and dilution of our stockholders.
On December 15, 2021, the Company and certain of our subsidiaries, entered into the Credit Agreement, under which we obtained a US$81,250,000 senior secured term loan credit facility. The facility was conditioned on obtaining shareholder approval. Following shareholder approval in January 2022, the loan was drawn in full on January 27, 2022. The Credit Agreement is secured by substantially all of our property and assets, including our equity interests in our subsidiaries. See Item 18, Note 30 for further details.
The Credit Agreement also contains financial covenants requiring that we (a) maintain aggregate unrestricted cash of not less than US$5,000,000 at all times, which must be held in one or more accounts subject to the security interests of the lenders under the Credit Agreement, and (b) achieve specified minimum total revenue requirements for the twelve months preceding each quarter end. In addition, the Credit Agreement contains covenants that restrict our ability to finance future operations or capital needs or to engage in other business activities. The Credit Agreement restricts the ability of our company and the restricted subsidiaries to, among other things:
incur, assume or guarantee additional indebtedness; or
repurchase capital stock;
make other restricted payments, including paying dividends and making investments;
sell or otherwise dispose of assets, including capital stock of subsidiaries;
enter into agreements that restrict dividends from subsidiaries;
acquire another company or business or enter into mergers or consolidations;
enter into certain inbound and outbound licenses of intellectual property, subject to certain exceptions; and
enter into transactions with affiliates.
A breach of the minimum total revenue covenant or any other covenant in the Credit Agreement would result in a default under the Credit Agreement. Upon an event of default under the Credit Agreement, the lender could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. In such an event, there can be no assurance that we would have sufficient liquidity to fund payment of the amounts that would be due under the Credit Agreement or that, if such liquidity were not available, we would be successful in raising additional capital on acceptable terms, or at all, or in completing any other endeavor to continue to be financially viable and continue as a going concern. If we were unable to pay such amounts due under the Credit Agreement, the lenders could proceed against the collateral securing the loan. Our inability to raise additional capital on acceptable terms in the near future, whether for purposes of funding payments required under the Credit Agreement or providing additional liquidity needed for our operations, could have a material adverse effect on our business, prospects, results of operations, liquidity and financial condition.
Our business could be adversely affected by changing conditions in the diagnostic market.
The diagnostics industry is in transition with a number of changes that affect the market for diagnostic test products. The diagnostics industry has experienced considerable consolidation through mergers and acquisitions in the past several years. For example, major consolidation among reference laboratories and the formation of multi-hospital alliances, reducing the number of institutional customers for diagnostic test products. There can be no assurance that we will be able to enter into and/or sustain contractual or other marketing or distribution arrangements on a satisfactory commercial basis with these institutional customers. In the past, we have discontinued selling our Lyme Western Blot and HIV point-of-care tests in USA due to changing market conditions which made those sales uncommercial.
Further, this consolidation trend may result in the remaining companies having greater financial resources and technological capabilities, thereby intensifying competition in the industry, which could have a material adverse effect on our business.
Reductions in government funding to agencies and organizations we work with could adversely affect our business and financial results.
We sell our products into the public health market, which consists of state, county and other governmental public health agencies, community-based organizations, service organizations and similar entities. Many of these customers depend to a significant degree on grants or funding provided by governments or governmental agencies to run their operations, including programs that use our products, such as our HIV testing products. In international markets, we often sell our products to parties funded by such agencies. The level of available government grants or funding is unpredictable, and certain organizations may not have their contracts renewed for funding. Available funding may be affected by various factors including future economic conditions, legislative and regulatory developments, political changes, civil unrest, changing public health priorities and changing priorities for research and development activities. Any reduction or delay in government funding or change in organizational contracts could cause our customers to delay, reduce or forego purchases of our products or cause short-term or long-term fluctuations in our product revenues through these channels.
Consolidation of our customers or the formation of group purchasing organisations could result in increased pricing pressure that could adversely affect our operating results.
The health care industry has undergone significant consolidation resulting in increased purchasing leverage for customers and consequently increased pricing pressures on our business. Additionally, some of our customers have become affiliated with group purchasing organisations. Group purchasing organisations typically offer members price discounts on laboratory supplies and equipment if they purchase a bundled group of one supplier’s products, which results in a reduction in the number of manufacturers selected to supply products to the group purchasing organization and increases the group purchasing organization’s ability to influence its members’ buying decisions. Further consolidation among customers or their continued affiliation with group purchasing organizations may result in significant pricing pressures and correspondingly reduce the gross margins of our business or may cause our customers to reduce their purchases of our products, thereby adversely affecting our business, prospects, operating results or financial condition.
The trend towards managed care, together with healthcare reform of the delivery system in the U.S. and efforts to reform in Europe, has resulted in increased pressure on healthcare providers and other participants in the healthcare industry to reduce selling prices. Consolidation among healthcare providers and consolidation among other participants in the healthcare industry has resulted in fewer, more powerful groups, whose purchasing power gives them cost containment leverage. In particular, there has been a consolidation of laboratories. These industry trends and competitive forces place constraints on the levels of overall pricing, and thus could have a material adverse effect on our gross margins for products we sell in clinical diagnostic markets.
Our long-term success depends upon the successful development and commercialization of new products.
Our long-term viability and growth will depend upon the successful discovery, development and commercialization of new and enhanced products from our research and development (“R&D”) activities. In order to remain competitive, we are committed to significant expenditures on R&D and the commercialization of new or enhanced products. The R&D process generally takes a significant amount of time from product inception to commercial launch. However, there is no certainty that this investment in research and development will yield technically feasible or commercially viable products. We may have to abandon a new or enhanced product during its development phase after our investment of substantial time and money. During the fiscal years ended December 31, 2021, 2020 and 2019, we incurred US$6.8 million, US$6.9 million and US$9.6 million, respectively, in capitalised R&D expenses. We expect to continue to incur significant costs related to our research and development activities.
Successful products require significant development and investment, including testing to demonstrate their performance capabilities, cost-effectiveness or other benefits prior to commercialization. In addition, unless exempt, regulatory clearance or approval must be obtained before our medical device products may be sold. Additional development efforts on these products may be required before we are ready to submit applications for marketing authorisation to any regulatory authority. Regulatory authorities may not clear or approve these products for commercial sale or may substantially delay or condition clearance or approval. In addition, even if a product is successfully developed and all applicable regulatory clearances or approvals are obtained, there may be little or no market for the product. Accordingly, if we fail to develop and gain commercial acceptance for our products, or if we have to abandon a new product during its development phase, or if competitors develop more effective products or a greater number of successful new products, customers may decide to use products developed by our competitors. This would result in a loss of revenues and adversely affect our results of operations, cash flow and business.
Our future growth in the U.S. is dependent in part on Food and Drug Administration (“FDA”) clearance of products. If FDA clearance is delayed or not achieved for these products, it could have a material impact on the future growth of our business.
Similarly, future growth outside of U.S. is dependent on clearance of products by the relevant regulatory authorities in those countries.
We may require future additional capital.
Our future liquidity and ability to meet our future capital requirements will depend on numerous factors, including, but not limited to, the following:
The costs and timing of expansion of sales and marketing activities;
The timing and size of any repayment requirements for existing debt obligations;
The timing and success of the commercial launch of new products;
The extent to which we gain or expand market acceptance for existing, new or enhanced products;
The costs and timing of the expansion of our manufacturing capacity;
The success of our research and product development efforts;
The time, cost and degree of success of conducting clinical trials and obtaining regulatory approvals;
The magnitude of capital expenditures;
Changes in existing and potential relationships with distributors and other business partners;
The costs involved in obtaining and enforcing patents, proprietary rights and necessary licences;
The costs and liability associated with patent infringement or other types of litigation;
Competing technological and market developments; and
The scope and timing of strategic acquisitions.
If additional financing is needed, we may seek to raise funds through the sale of equity or other securities or through bank borrowings. There can be no assurance that financing through the sale of securities, bank borrowings or otherwise will be available to us on satisfactory terms, or at all.
If our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.
We are also required to comply with the FDA’s Medical Device Reporting (“MDR”) requirements in the United States and comparable regulations worldwide, such as the Health Products Regulatory Authority (“HPRA”). For example, under the FDA’s MDR regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in European Union markets are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the competent authority in whose jurisdiction the incident occurred.
Were this to happen to us, the relevant competent authority would file an initial report, and there would then be a further inspection or assessment if there are particular issues. This would be carried out either by the competent authority or it could require that our Notified Body, carry out the inspection or assessment.
We have reported MDRs in the past, and we anticipate that in the future it is likely that we may experience events that would require reporting to the FDA pursuant to the MDR regulations. Any adverse event involving our products could result in future voluntary corrective actions, or agency actions, such as inspection, mandatory recall or other enforcement action.
Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.
We may be subject to liability resulting from our products or services.
We may be subject to claims for personal injuries or other damages if any of our products, services, or any product which is made with the use or incorporation of any of our technologies, causes injury of any type or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or usage. There is no assurance that we would be successful in defending any product liability lawsuits brought against us. Regardless of merit or eventual outcome, product liability claims could result in:
Decreased demand for our products;
Damage to our image or reputation;
Costs related to litigation; and
Diversion of management time and attention;
We have global product liability insurance in place for our manufacturing subsidiaries up to a maximum of €6,500,000 (US$7,365,000) for any one accident, limited to a maximum of €6,500,000 (US$7,365,000) in any one-year period of insurance and is subject to a deductible. The Company also has professional indemnity insurance for its laboratory services business up to a maximum of US$5,000,000 for each claim and aggregate limit and is subject to a deductible. There can be no assurance that our product liability insurance is sufficient to protect us against liability that could have a material adverse effect on our business. In addition, although we believe that we will be able to continue to obtain adequate coverage in the future, there is no assurance that we will be able to do so at acceptable costs.
Our products may be subject to product recalls that could harm our reputation, business and financial results.
Manufacturers may, on their own initiative, initiate actions, including a non-reportable market withdrawal or a reportable product recall, for the purpose of correcting a material deficiency, improving device performance, or for other reasons. Additionally, the FDA and similar foreign health or governmental authorities have the authority to require an involuntary recall of commercialized products in the event of material deficiencies or defects in design, manufacturing or labelling or in the event that a product poses an unacceptable risk to health. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that a device intended for human use would cause serious, adverse health consequences or death. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, modifications, design or labelling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within 10 working days after the recall is initiated.
Companies are required to maintain certain records of post-market actions, even if they determine such actions are not reportable to the FDA. If we determine that certain actions do not require notification of the FDA, the FDA may disagree with our determinations and require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted or failing to timely report or initiate a reportable product action. Further, depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner.
Failure to achieve our financial and strategic objectives could have a material adverse impact on our business prospects.
As a result of any number of risk factors identified herein, no assurance can be given that we will be successful in implementing our financial and strategic objectives. In addition, the funds for research, clinical development and other projects have in the past come partly from our business operations. If our business slows and we have less money available to fund research and development and clinical programs, we will have to decide at that time which programs to cut, and by how much. Similarly, if adequate financial, personnel, equipment or other resources are not available, we may be required to delay or scale back our business. Our operations will be adversely affected if our total revenue and gross profits do not correspondingly increase or if our technology, product, clinical and market development efforts are unsuccessful or delayed. Furthermore, our failure to successfully introduce new or enhanced products and develop new markets could have a material adverse effect on our business and prospects.
Global economic conditions may have a material adverse impact on our results.
Uncertainty in global economic conditions may continue for the foreseeable future and intensify. The invasion of Ukraine by Russia has destabilised markets, increased volatility and created uncertainty, particularly in energy supply and energy prices. This uncertainty poses a risk to the overall economy that could impact demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers and creditors, including financial institutions. Volatile economic conditions have adversely affected and could continue to adversely affect our financial performance and condition or those of our customers and suppliers. These circumstances could adversely affect our access to liquidity needed to conduct or expand our business or conduct future acquisitions, refinance existing debts, or make other discretionary investments. Many of our customers rely on public funding provided by federal, state and local governments, and this funding may be reduced or deferred as a result of economic conditions.
If global economic conditions deteriorate significantly, our business could be negatively impacted, including such areas as reduced demand for our products from a slow-down in the general economy, supplier or customer disruptions resulting from tighter credit markets and/or temporary interruptions in our ability to conduct day-to-day transactions through our financial intermediaries involving the payment to or collection of funds from our customers, vendors and suppliers. These circumstances may adversely impact our customers and suppliers, which, in turn, could adversely affect their ability to purchase our products or supply us with necessary equipment, raw materials or components. Even with the improvement of economic conditions, it may take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery.
Public health emergencies, epidemics or pandemics, such as the emergence and spread of the Covid‑19 pandemic, have the potential to significantly impact our operations through a decrease in demand for our products, interruption to business and a reduction in staff availability.
The Covid‑19 pandemic has had a material impact on the healthcare industry and specifically the medical diagnostics sector in which we operate. The continued uncertainty around the global pandemic could have an adverse effect on our operating results, cash flows, financial condition and/or prospects.
The global spread of Covid‑19 and the public healthcare measures implemented by governments, such as quarantines and the temporary closure of businesses has led to and may continue to lead to fewer patients presenting themselves for medical check-ups resulting in a fall in demand for certain of our products which was offset by increased demand within our Covid-19 related portfolio of products. Furthermore, funding allocated to combatting Covid-19 may result in a reduction or a postponement in the funding available for other diseases, conditions and disorders that our products are used to diagnose.
We operate in a labour‑intensive industry where employees’, contractors’ and customers’ activities can be adversely impacted by the availability of people to produce, manufacture or install our products. Covid-19 lead to the temporary closure of our manufacturing sites and associated furloughing of some staff. Furthermore, Covid-19 has reduced our ability to visits customers and suppliers and has required some of our staff to work from home in line with public health measures. Any significant loss of employee resources for a sustained period of time due to lockdown restrictions, self‑isolation or sickness as a result of a public health emergency could impact our ability to produce, manufacture and deliver goods. Similarly, our customer facing activities could be adversely impacted by similar employee availability issues.
The situation with the Covid‑19 pandemic remains fluid and uncertain at this time. While it is not possible to predict the full extent and duration of any further impacts, there could be a period where demand for our Covid-19 related portfolio of products declines but the revenues for our other, non-Covid related products remain below historical levels due to the pandemic. There is no certainty that we will be successful in our efforts to mitigate against these risks posed by Covid-19.
We are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees or the inability to attract and retain qualified personnel as necessary could adversely affect our operations.
Our success is dependent to a large extent upon the contributions of our key employees who in 2021 were Ronan O’Caoimh, our CEO and Chairman, and John Gillard, our CFO/Executive Director. The effectiveness of our senior leadership team generally, and any further transition as a result of these changes, could have a significant impact on our results of operations. Management transition is often difficult and inherently causes some loss of institutional knowledge, which could negatively affect our results of operations and financial condition. Our ability to execute our business strategies may be adversely affected by the uncertainty associated with these transitions. We may not be able to attract or retain a sufficient number of qualified employees in the future due to the intense competition for qualified personnel among medical products and other life science businesses.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will adversely affect our ability to effectively manufacture, sell and market our products, to meet the demands of our strategic partners in a timely fashion, or to support research, development and clinical programs. Although we believe we will be successful in attracting and retaining qualified personnel, competition for experienced scientists and other personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms.
Significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities would adversely affect our business and operating results.
Products manufactured at our facilities in Bray, Ireland, Jamestown and Buffalo, New York and Kansas City, Missouri accounted for the majority of our revenues during the fiscal year ended December 31, 2021. Our global supply of these products and services is dependent on the uninterrupted and efficient operation of these facilities. In addition, we currently rely on a small number of third-party manufacturers to produce certain of our diagnostic products and product components. 2021 saw significant interruptions to international supply chains which look set to continue for some time to come.
If we do not negotiate long-term contracts, our suppliers will likely not be required to provide us with any guaranteed minimum production levels. As a result, we cannot assure you that we will be able to obtain sufficient quantities of product in the future. In addition, our reliance on third-party suppliers involves a number of risks, including, among other things:
contract manufacturers or suppliers may fail to comply with regulatory requirements or make errors in manufacturing that could negatively affect the efficacy or safety of our products or cause delays in shipments of our products;
we or our contract manufacturers and suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, we or our suppliers may have excess or inadequate inventory of materials and components;
we or our contract manufacturers and suppliers may be subject to price fluctuations due to a lack of long-term supply arrangements for key components;
we or our contract manufacturers and suppliers may lose access to critical services and components, resulting in an interruption in the manufacture, assembly and shipment of our systems;
we may experience delays in delivery by our contract manufacturers and suppliers due to changes in demand from us or their other customers;
fluctuations in demand for products that our contract manufacturers and suppliers manufacture for others may affect their ability or willingness to deliver components to us in a timely manner;
our suppliers or those of our contract manufacturer may wish to discontinue supplying components or services to us for risk management reasons;
we may not be able to find new or alternative components or reconfigure our system and manufacturing processes in a timely manner if the necessary components become unavailable; and
our contract manufacturers and suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.
The operations of our facilities or these third-party manufacturing facilities could be adversely affected by fire, power failures, natural or other disasters, such as earthquakes, floods, pandemics, or terrorist threats. Although we carry insurance to protect against certain business interruptions at our facilities, some pieces of manufacturing equipment are difficult to replace and could require substantial replacement lead-time. There can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all.
If any of these risks materialize, it could significantly increase our costs and impact our ability to meet demand for our products. If we are unable to satisfy commercial demand for our products in a timely manner, our ability to generate revenue would be impaired, market acceptance of our products could be adversely affected, and customers may instead purchase or use our competitors’ products. In addition, we could be forced to secure new or alternative contract manufacturers or suppliers. Securing a replacement contract manufacturer or supplier could be difficult. The introduction of new or alternative manufacturers or suppliers also may require design changes to our products that are subject to FDA and/or other regulatory clearances or approvals.
We may also be required to assess the new manufacturer’s compliance with all applicable regulations and guidelines, which could further impede our ability to manufacture our products in a timely manner. As a result, we could incur increased production costs, experience delays in deliveries of our products, suffer damage to our reputation, and experience an adverse effect on our business and financial results. Any significant interruption in our or third-party manufacturing capabilities could materially and adversely affect our operating results.
We are dependent on third-party suppliers for certain critical components and the primary raw materials required for our test kits.
The primary raw materials required for Trinity Biotech’s test kits consist of antibodies, antigens or other reagents, glass fibre and packaging materials which are acquired from third parties. If our third-party suppliers are unable or unwilling to supply or manufacture a required component or product or if they make changes to a component, product or manufacturing process or do not supply materials meeting our specifications, we may need to find another source and/or manufacturer. This could require that we perform additional development work.
Some of our products, which we acquire from third parties, are highly technical and are required to meet exacting specifications, and any quality control problems that we experience with respect to the products supplied by third-party vendors could adversely and materially affect our reputation, our attempts to complete our clinical trials or commercialization of our products and adversely and materially affect our business, operating results and prospects. We may also need to obtain FDA or other regulatory authorisations for the use of an alternative component or for certain changes to our products or manufacturing process. We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or foreign regulatory authorities and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including, warning letters, product recalls, termination of distribution, product seizures, or civil penalties. Completing that development and obtaining such authorisations could require significant time and expense and we may not obtain such authorisations on a timely basis, or at all. The availability of critical components and products from other third parties could also reduce our control over pricing, quality and timely delivery. These events could either disrupt our ability to manufacture and sell certain of our products into one or more markets or completely prevent us from doing so, and could increase our costs. Any such event could have a material adverse effect on our results of operations, cash flow and business. Furthermore, since some of these suppliers are located outside of the United States, we are subject to foreign export laws and United States import and customs regulations, which complicate and could delay shipments of components to us. In 2021, we experienced significant disruption to our international supply chain which caused some disruption to operations. There can be no assurance that these disruptions will not continue or intensify in the future which may create significant challenges in fulfilling customer orders that we may not be able to overcome.
Although we do not plan to be dependent upon any one source for these critical components or raw materials, alternative sources of such raw materials or components with the characteristics and quality desired by us may not be available. Such unavailability could affect the quality of our products and our ability to meet orders for specific products.
Our inability to manufacture products in accordance with applicable specifications, performance standards or quality requirements could adversely affect our business.
The materials and processes used to manufacture our products must meet detailed specifications, performance standards and quality requirements to ensure our products will perform in accordance with their label claims, our customers’ expectations and applicable regulatory requirements.
As a result, our products and the materials used in their manufacture or assembly undergo regular inspections and quality testing. Factors such as defective materials or processes, mechanical failures, human errors, environmental conditions, changes in materials or production methods by our vendors, and other events or conditions could cause our products or the materials used to produce or assemble our products to fail inspections and quality testing or otherwise not perform in accordance with our label claims or the expectations of our customers.
Any failure or delay in our ability to meet the applicable specifications, performance standards, quality requirements or customer expectations could adversely affect our ability to manufacture and sell our products or comply with regulatory requirements. These events could, in turn, adversely affect our revenues and results of operations.
Our revenues are highly dependent on a network of distributors worldwide.
We currently distribute our product portfolio through distributors in approximately 100 countries worldwide. Our continuing economic success and financial security is dependent on our ability to secure effective channels of distribution on favourable trading terms with suitable distributors.
The loss or termination of our relationship with these key distributors could significantly disrupt our existing business unless suitable alternatives were quickly found or lost sales to one distributor are absorbed by another distributor. Finding a suitable alternative to a lost or terminated distributor may pose challenges in our industry’s competitive environment, and another suitable distributor may not be found on satisfactory terms, if at all. For instance, some distributors already have exclusive arrangements with our competitors, and others do not have the same level of penetration into our target markets as our existing distributors. If total revenue from these or any of our other significant distributors were to decrease in any material amount in the future or we are not successful in timely transitioning business to new distributors, our business, operating results and financial condition could be materially and adversely affected.
Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners.
To the extent that we or our strategic partners fail to maintain a high-quality level of service and support for diagnostic products, there is a risk that the perceived quality of our products will be diminished in the marketplace. Likewise, we may fail to provide the level, quantity or quality of service expected by the marketplace. These risks have increased as a result of the public health restrictions put in place due to Covid-19. This could result in slower adoption rates and lower than anticipated utilisation of our products which could have a material adverse effect on our business, financial condition and results of operations.
Our ability to protect our information systems and electronic transmissions of sensitive data from data corruption, cyber-based attacks, security breaches or privacy violations is critical to the success of our business.
We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store electronic information, including personal information of our customers. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, malware attacks by hackers and similar breaches, can cause all or portions of our websites to be unavailable, create system disruptions, shutdowns, erasure of critical data and software or unauthorised disclosure of confidential information. We invest in security technology to protect our data against risks of data security breaches and cyber-attacks and we have implemented solutions, processes, and procedures to help mitigate these risks, such as encryption, virus protection, security firewalls and comprehensive information security and privacy policies. However, despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. We have been the victim of cyber-attacks but these have had no material impact on our operations. The age of our information technology systems, as well as the level of our protection and business continuity or disaster recovery capability, varies from site to site, and there can be no guarantee that any such plans, to the extent they are in place, will be effective. In addition, a security breach or privacy violation that leads to disclosure of personal information, including but not limited to employee or consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state breach notification laws and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent further security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, we may be subject to legal claims or proceedings, or we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data, which could have a material adverse impact on our business, financial condition and results of operations. While we currently expend resources to protect against cyber-attacks and security breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques, and we may need to expend additional resources to continue to protect against potential security breaches or to address problems caused by such attacks or any breach of our safeguards. In addition, a data security breach could distract management or other key personnel from performing their primary operational duties.
In addition, the interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, this could result in government-imposed fines or orders requiring that we change our data practices, which could have an adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
Our sales and operations are subject to the risks of fluctuations in currency exchange rates.
A substantial portion of our operations are based in Ireland and Europe is one of our main sales territories. As a result, changes in the exchange rate between the U.S. Dollar and the Euro can have significant effects on our results of operations. In addition, in markets where we invoice in U.S. Dollars but where the local currency has weakened, we have been required to reduce our pricing in order to preserve our competitiveness. We have an exposure to the Canadian Dollar through our two Canadian subsidiaries and to the Brazilian Real through our Brazilian subsidiary. We also have revenues and costs denominated in British Sterling.
The invasion of Ukraine by Russia and the resulting sanctions imposed on Russia may lead to greater volatility in currency exchange rates globally. In the future, we may enter into hedging instruments to manage our currency exchange rate risk. However, our attempts to hedge against these risks may not be successful. If we are unable to successfully hedge against unfavourable foreign currency exchange rate movements, our consolidated financial results may be adversely impacted.
The large amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future.
We regularly review our long-lived assets, including identifiable intangible assets and goodwill, for impairment. Goodwill and acquired indefinite life intangible assets are subject to impairment review on a periodic basis and whenever potential impairment indicators are present. Other long-lived assets are reviewed when there is an indication that an impairment may have occurred. The amount of goodwill and identifiable intangible assets on our consolidated balance sheet as of December 31, 2021 was US$36 million (2020: US$34 million) (2019: US$44 million). In 2021, we recorded total impairment charges of intangible assets of US$4 million (2020: US$15 million) (2019: US$17 million) as a result of our periodic impairment review. We may record further significant impairment charges in the future if there are changes in market conditions, a significant reduction in share price or other changes in the future outlook. In addition, we may from time to time sell assets that we determine are not critical to our strategy or execution. Future events or decisions may lead to asset impairments and/or related charges. Certain impairments may result from a change in our strategic goals, business direction or other factors relating to the overall business environment. Any significant impairment charges could have a material adverse effect on our results of operations.
Tax matters, including disagreements with taxing authorities, the changes in corporate tax rates and imposition of new taxes could impact our results of operations and financial condition.
We are subject to regular reviews, examinations, and audits by tax authorities in a number of jurisdictions across the world with respect to our taxes. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liability, including interest and penalties. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and financial position.
A significant portion of our business is located in the U.S. and is subject to income and other taxes in the U.S. and our operations, plans and results are affected by tax and other initiatives. Changes to the US tax code could have a significant impact on our profitability. For example, in December, 2017, the U.S. Government enacted comprehensive tax legislation known as the Tax Cuts and Jobs Act. This legislation made broad and complex changes to the U.S. tax code, including but not limited to reducing the corporate tax rate from 35% to 21%, requiring a one-time mandatory deemed repatriation of certain deferred foreign earnings tax on and accelerating first year expensing of certain capital expenditures. The legislation also introduced new tax laws affecting our taxable income, which included a new provision designed to tax global intangible low taxed income, limited deductibility of certain executive compensation, created a base erosion anti-abuse tax and modified many deductions and credits. Changes to the tax code could also affect our valuation of deferred tax assets and liabilities. Any such change in valuation would have a material impact on our income tax expense and deferred tax balances.
Future acquisitions may be less successful than expected, not generate the expected benefits, disrupt our ongoing business, distract our management, increase our expenses and adversely affect our business, and therefore, growth may be limited.
We have has historically grown organically and through the acquisition of, and investment in, other companies, product lines and technologies. We may enter into strategic acquisitions or investments as a way to expand our business. These activities, and their impact on our business, are subject to many risks, including the following:
Suitable acquisitions or investments may not be found or consummated on terms or schedules that are satisfactory to us or consistent with our objectives;
The benefits expected to be derived from an acquisition may not materialize and could be affected by numerous factors, such as regulatory developments, insurance reimbursement, general economic conditions and increased competition;
We may be unable to successfully integrate an acquired company’s personnel, assets, management systems, products and/or technology into our business;
Worse than expected performance of an acquired business may result in the impairment of intangible assets;
Acquisitions may require substantial expense and management time and could disrupt our business;
We may not be able to accurately forecast the performance or ultimate impact of an acquired business;
An acquisition and subsequent integration activities may require greater capital and other resources than originally anticipated at the time of acquisition;
An acquisition may result in the incurrence of unexpected expenses, the dilution of our earnings or our existing stockholders’ percentage ownership, or potential losses from undiscovered liabilities not covered by an indemnification from the seller(s) of the acquired business;
An acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers;
An acquisition of a foreign business may involve additional risks, including, but not limited to, foreign currency exposure, liability or restrictions under foreign laws or regulations, and our inability to successfully assimilate differences in foreign business practices or overcome language or cultural barriers; and
Our ability to integrate future acquisitions may be adversely affected by inexperience in dealing with new technologies.
The occurrence of one or more of the above or other factors may prevent us from achieving all or a significant part of the benefits expected from an acquisition or investment. This may adversely affect our financial condition, results of operations and ability to grow our business or otherwise achieve our financial and strategic objectives.
The United Kingdom’s withdrawal from the European Union could potentially impact our supply chains and the market for our products in the United Kingdom.
The United Kingdom (“UK”) formally left the European Union in January 2020 and entered a transition period, to December 31, 2020, during which time the UK remained bound to the rules and regulations of the EU. A Trade and Cooperation Agreement was ratified by the European Union in April 2021 and sets out the future trading relationship between the UK and the European Union covering areas such as trade in goods and services. Uncertainties, however, remain over the challenges which could be posed by the operation of the trading agreement with delays in the import and export of goods being experienced at UK ports as customs check and regulatory procedures are carried out. Such checks could impact the performance of supply chains extending timelines and delaying supplier and customer commitments, while imposing additional taxes and duties dependent on rules of origin. The uncertainty might continue to create volatility for the Pound Sterling.
Increasing scrutiny and changing expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance, or ESG, policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investors, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG may hinder our access to capital, as investors and lenders may reconsider their capital investment allocation as a result of their assessment of our ESG practices. If we do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and the business, financial condition and the price of our company’s ADS’s could be materially and adversely affected.
Risks Related to Government Regulations
Clinical trials necessary to support future premarket submissions will be expensive and will require enrolment of suitable patients who may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any modified or new products and will adversely affect our business, operating results and prospects.
Initiating and completing clinical trials necessary to support approval of future products under development, is time consuming and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical trials.
Conducting successful clinical studies will require the enrolment of patients who may be difficult to identify and recruit. Patient enrolment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, and the availability of appropriate clinical trial investigators. Patients may not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. Continuing public health measures against Covid-19 may increase the difficulty of conducting clinical trials.
Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop such protocols to support clearance and approval. Further, the FDA and/or other regulatory authorities may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Any challenges to patient enrolment may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in our clinical trials, FDA and/or other regulatory authorities may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.
Our facilities and our clinical investigational sites operate under procedures that govern the conduct and management of FDA-regulated clinical studies under 21 CFR Parts 50, 56 and 812, and Good Clinical Practices. Although the majority of our in-vitro diagnostic (“IVD”) clinical studies meet the definition of exempted investigations under 21 Part 812 and are exempt from the Investigational Device Exemption (“IDE”) regulations in 21 CFR Part 812, we are still required to meet the requirements of 21 CFR Parts 50 and 56 for informed consent and Institutional Review Board (“IRB”) approval. FDA may conduct Bioresearch Monitoring (“BiMo”) inspections of us and/or our clinical sites to assess compliance with FDA regulations, our procedures, and the clinical protocol. If the FDA were to find that we or our clinical investigators are not operating in compliance with applicable regulations, we could be subject to the above FDA enforcement action as well as refusal to accept all or part of our data in support of a 510(k) or PMA and/or we may need to conduct additional studies.
In relation to World Health Organisation (WHO) qualification, our IVD clinical studies are required to meet all the requirements of the TSS-1: Human Immunodeficiency Virus (HIV) rapid diagnostic tests for professional use. If we are not operating in compliance with this regulation, we could be subject to WHO enforcement action. In addition, our IVD clinical studies are required to meet the requirements of:
WMA Declaration of Helsinki – Ethical Principles for Medical Research Involving Human Subjects (2008)(2013);
ICH Harmonised Guidelines - Integrated Addendum to ICH E6 (R2) Guideline for Good Clinical Practice (Nov 2016);
ISO 20916:2019 In vitro diagnostic medical devices — Clinical performance studies using specimens from human subjects — Good study practice; and
ISO 14155:2011:2020: Clinical investigation of medical devices for human subjects – Good clinical practice.
If the third parties on whom we rely to conduct our pre-clinical studies and clinical trials and to assist in pre-clinical development do not perform as contractually required or expected, we may not be able to obtain regulatory approval or commercialize our products.
We may not have the ability to independently conduct our pre-clinical studies and clinical trials for our products and we may rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our pre-clinical or clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.
The results of our clinical trials may not support our product candidate claims.
Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims or that the FDA or other regulatory authorities will agree with our conclusions regarding them. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues.
We may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products for unapproved or “off-label” uses.
Our promotional materials must comply with FDA and other applicable laws and regulations. We believe that the specific uses for which our products are marketed fall within the scope of the indications for use that have been cleared or approved by the FDA or other relevant regulatory authorities. However, the FDA and/or the other relevant regulatory authorities could disagree and require us to stop promoting our products for those specific uses until we obtain clearance or approval for them. In addition, if the FDA or other relevant regulatory authorities determines that our promotional materials constitute promotion of an unapproved use, it could demand that we modify our promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties.
It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products would be impaired.
The FDA were to modifyrecently modified its policy of enforcement discretion with respect to our laboratory developed tests, wetests. We could incur substantial costs and delays associated with trying to obtain premarket clearance or other approvals.
Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses,Historically, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to laboratory developed tests (“LDTs”), although reagents, instruments, software or components provided by third parties and used to perform LDTs may be subject to FDA regulation. The FDA defines the term “laboratory developed test” as an IVDin vitro diagnostics (“IVD”) test that is intended for clinical use and designed, manufactured and used within a single laboratory. Until 2014, the FDA exercised enforcement discretion such that it did not enforce provisions of the Food, Drug, and Cosmetic Act, or FDA Act, with respect to LDTs. In July 2014, due to the increased proliferation of LDTs for complex diagnostic testing, and concerns with several high-risk LDTs related to lack of evidentiary support for claims and erroneous results, the FDA issued guidanceprovided notice that when finalized, would adopt a risk-based framework that would increase FDA oversight of LDTs. As part of this developing framework, FDA issuedit intended to issue draft guidance in October 2014, informing Congress and manufacturers of LDTs of its intent to collect information from laboratories regarding their current LDTs and newly developed LDTs through a notification process.
On September 29, 2023, the FDA proposed a new rule which was adopted on April 29, 2024, which amends the FDA’s regulations to make explicit that IVDs are devices under the Federal Food, Drug, and Cosmetic Act, including when the manufacturer of the IVD is a laboratory. Along with this amendment, the FDA has announced a policy under which it intends to provide greater oversight of LDTs, through a phaseout of its general enforcement discretion approach to LDTs. The FDA believes adoption will use this information to classifyalso advance responsible innovation by both laboratory and non-laboratory IVD manufacturers alike by better assuring the safety and effectiveness of IVDs offered as LDTs and removing a disincentive for non-laboratory manufacturers to prioritize enforcement ofdevelop novel tests. The new regulation subjects LDTs to a more stringent regulatory framework, including premarket reviewclearance or approval requirements, for categories of LDTs based on risk, using a public process. Specifically, thequality system regulations ("QSR”), and post-market surveillance obligations. Failure to comply with these and other FDA plans to use advisory panels to provide recommendations to the agency on LDT risks, classificationregulations could result in legal actions, including fines and prioritization of enforcement of applicable regulatory requirements on certain categories of LDTs, as appropriate.penalties.
We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for any of our LDTs, whether through additional guidance or regulations issued by the FDA, new enforcement policies adopted by the FDA or new legislation enacted by Congress. It is possible that legislation will be enacted into law, regulations could be promulgated or guidance could be issued by the FDA which may result in increased regulatory burdens for us to continue to offer our current LDTs or to develop and introduce new LDTs. We cannot predict the timing or content of future legislation enacted, regulations promulgated or guidance issued regarding LDTs, or how it will affect our business.
If FDA premarket review, including clearance or approval, is required for our current or future LDTs (either alone or together with sample collection devices), products or services we may develop, or if we decide to voluntarily pursue FDA clearance or approval, we may be forcedrequire us to stop selling our LDTs while we work to obtain such FDA clearance or approval. Our business would be negatively affected until such review was completed and clearance to market or approval was obtained. The regulatory process may involve, among other things, successfully completing additional clinical studies and submitting premarket notification or filing a premarket approval application with the FDA. If premarket review is required byFDA and the FDA or if we decide to voluntarily pursue FDA premarket review of our LDTs, thereprocess can be costly. There can be no assurance that any tests, products or services we may develop in the future will be cleared or approved on a timely basis, if at all, nor can there be assurance that labelling claims will be consistent with our current claims or adequate to support continued adoption of for our LDTs. If our LDTs are allowed to remain on the market but there is uncertainty in the marketplace about our tests, if we are required by the FDA to label them investigational and we cannot offer the LDTs for diagnostic purposes, or if labelling claims, the FDA allows us to make are limited, orders may decline and adversely affect our results of operations, cash flow and business.
Ongoing compliance with FDA regulations would increase the cost of conducting our business, and subject us to heightened regulation by the FDA and penalties for failure to comply with these requirements.
If we fail to maintain regulatory approvals and clearances, or are unable to obtain, or experience significant delays in obtaining, regulatory clearances or approvals for our future products or product enhancements, our ability to commercially distribute and market these products could suffer.
Our medical device products and operations are subject to rigorous government regulation in the United States by the FDA, and numerous other federal, state and foreign governmental authorities, as well as and by comparable regulatory authorities in other jurisdictions such as the HPRA in Ireland. In particular, we are subject to strict governmental controls on the development, manufacture, labelling, storage, testing, advertising, promotion, marketing, distribution and import and export of our products. In addition, we or our distributors are often required to register with and/or obtain clearances or approvals from foreign governments or regulatory bodies before we can import and sell our products in foreign countries. The clearance and approval process for our products, while variable across countries, is generally lengthy, time consuming, detailed and expensive.
The process of obtaining and maintaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits commercial distribution of a new medical device only after the device has received clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”), or is the subject of an approved premarket approval application (“PMA”) unless the device is specifically exempt from those requirements. The FDA will clear marketing of a lower risk medical device through the 510(k) process if the manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products. High risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalent to a previously cleared device, require the approval of a PMA.
The PMA process is more costly, lengthy and uncertain than the 510(k) clearance process. A PMA application must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labelling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. The 510(k) clearance process usually takes from three to 12 months, but it can take longer. The process of obtaining PMA approval is much more costly and uncertain than the 510(k) clearance process. It generally takes from one to three years, or even longer, from the time the PMA application is submitted to the FDA, until an approval is obtained. There is no assurance that we will be able to obtain FDA clearance or approval for any of our new products on a timely basis, or at all.
In the United States, many of our currently commercialized products have received pre-market clearance under Section 510(k) of the FDCA. If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, our product introductions or modifications could be delayed or cancelled, which could cause our sales to decline. In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain PMA process. Although we currently market only one device pursuant to an approved PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future products.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:
our inability to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended users;
insufficient data from our pre-clinical studies and clinical trials to support clearance or approval, where required; and
the failure of the manufacturing process or facilities we use to meet applicable requirements.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently cleared products on a timely basis. For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA initiated an evaluation of the program, and in January 2011, announced several proposed actions intended to reform the review process governing the clearance of medical devices. FDA’s review of its 510(k) clearance process could result in additional changes to regulatory requirements or guidance documents which could increase the costs of compliance, or restrict our ability to maintain current clearances. In addition, as part of the Food and Drug Administration Safety and Innovation Act (“FDASIA”), Congress reauthorised the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms which are further intended to clarify and improve medical device regulation both pre- and post-clearance and approval. Furthermore, regulatory authorities, including the FDA, may not agree with our interpretation of its policies and regulations which may lead to enforced modifications, restrictions, discontinuation, etc. of some of our products, even if they were previously approved.
Our continued success is dependent on our ability to develop and market new or updated products, some of which are currently awaiting clearance or approval from the applicable regulatory authorities. There is no certainty that such clearance or approval will be granted or, even once granted, will not be revoked during the continuing review and monitoring process. Further, regulatory authorities, including the FDA, may not approve or clear our future products for the indications that are necessary or desirable for successful commercialization. A regulatory authority may impose requirements as a condition to granting a marketing authorisation, may include significant restrictions or limitations as part of a marketing authorisation it grants and may delay or refuse to authorise a product for marketing, even though a product has been authorised for marketing without restrictions or limitations in another country or by another agency. Failure to receive clearance or approval for our new products, or commercially undesirable limitations on our clearances or approvals, would have an adverse effect on our ability to expand our business. Modifications made to our products may invalidate previously granted regulatory approvals which may lead to revised regulatory clearances, enforced modifications, restrictions, discontinuation, etc. of some of our products.
Additionally, changes in the FDA’s review of certain clinical diagnostic products referred to as laboratory developed tests, which are tests developed by a single laboratory for use only in that laboratory, could affect some of our customers who use our Life Science instruments for laboratory developed tests. In the past, the FDA has chosen to not enforce applicable regulations and has not reviewed such tests for approval. However, the FDA has issued draft guidance that it may begin enforcing its medical device requirements, including premarket submission requirements, to such tests. Any delay in, or failure to receive or maintain, clearance or approval for our products could prevent us from generating revenue from these products and adversely affect our business operations and financial results.
Failure to comply with FDA or other regulatory requirements may require us to suspend production of our products or institute a recall which could result in higher costs and a loss of revenues.
Even after we obtain clearance or approval for our medical devices, we are still subject to ongoing and extensive post market regulatory requirements. Regulation by the FDA and other federal, state and foreign regulatory agencies, such as the HPRA in E.U., impacts many aspects of our operations, and the operations of our suppliers and distributors, including manufacturing, labelling, packaging, adverse event reporting, storage, advertising, promotion, marketing, record keeping, import and export. For example, the manufacture of medical devices must comply with the FDA’s Quality System Regulation (“QSR”), which covers the methods and documentation of the design, testing, production, control, quality assurance, labelling, packaging, sterilization, storage and shipping of our products. Our manufacturing facilities and those of our suppliers and distributors are, or can be, subject to periodic regulatory inspections by the FDA to assess compliance with the QSR and other regulations, and by other comparable foreign regulatory authorities with respect to similar requirements in other jurisdictions. The FDA and foreign regulatory agencies may require post-marketing testing and surveillance to monitor the performance of approved products or place conditions on any product clearances or approvals that could restrict the commercial applications of those products. The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions:
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
unanticipated expenditures to address or defend such actions;
customer notifications for repair, replacement and refunds;
recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
withdrawing 510(k) clearances on PMA approvals that have already been granted;
refusal to grant export approval for our products; or
Other regulatory authorities have similar sanctions in their respective jurisdictions.
If any of these actions were to occur, they may harm our reputation and cause our product sales and profitability to suffer and may prevent us from generating revenue. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.
For example, in August 2020, our subsidiary received a Warning Letter from FDA following an inspection of our subsidiary’s Kansas City, Missouri manufacturing facility that took place in January and February 2020. We have taken voluntary remediation actions to correct the observations noted in the Warning Letter.
Even if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product. If the FDA determines that our promotional materials, labelling, training or other marketing or educational activities constitute promotion of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our training or other promotional materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.
In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products, and we must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products. Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labelling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.
In the ordinary course of business, we must frequently make subjective judgments with respect to compliance with applicable laws and regulations. If regulators subsequently disagree with the manner in which we have sought to comply with these regulations, we could be subjected to substantial civil and criminal penalties, as well as product recall, seizure or injunction with respect to the sale of our products. The assessment of any civil and criminal penalties against us could severely impair our reputation within the industry and any limitation on our ability to manufacture and market our products could have a material adverse effect on our business.
In addition to the FDA and other regulations described above, laws and regulations in some countries may restrict our ability to sell products in those countries. While we intend to comply with any applicable restrictions, there is no guarantee we will be successful in these efforts.
We must also comply with numerous laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, disposal of hazardous substances and labour or employment practices. Compliance with these laws or any new or changed laws regulating our business could result in substantial costs. Because of the number and extent of the laws and regulations affecting our industry, and the number of governmental agencies whose actions could affect our operations, it is impossible to reliably predict the full nature and impact of these requirements. To the extent the costs and procedures associated with complying with these laws and requirements are substantial or it is determined that we do not comply, our business and results of operations could be adversely affected.
Modifications to our products, may require new 510(k) clearances or pre-market approvals, or may require us to cease marketing or recall the modified products until clearances or approvals are obtained.
Any modification to a 510(k)-cleared device in the United States that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly, approval of a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to previously cleared products for which we conclude that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. Further, our products could be subject to recall if the FDA determines, for any reason, that our products are not safe or effective. Any recall or FDA requirement that we seek additional approvals or clearances could result in significant delays, fines, increased costs associated with modification of a product, loss of revenue and potential operating restrictions imposed by the FDA.
For example, we obtained 510(k) clearance for our Primus Variant System for the separation and quantification of normal and abnormal haemoglobin species as an aid in the diagnosis of haemoglobinopathies. The sample type used by this system was blood tubes. We subsequently introduced two systems based on the original Primus Variant System and they were named as ultra² GeneSys Variant System and ultra² Resolution Variant System. The primary focus of the GeneSys Variant System was on newborn screening using Dried Blood Spots as the sample type, while the Resolution was intended for confirmatory testing on the adult population using blood tubes as the sample type. We determined that these modifications to the indications for use to both systems were within our existing clearance and did not require the submission of a new 510(k) notification. The FDA stated that the use of Dried Blood Spots with the ultra² GeneSys Variant System was not part of the original submission and represented a new modified Intended Use. The FDA informed us that it disagreed with our decision not to seek new 510(k) clearances for these modifications, and we filed new 510(k) notifications to obtain clearance for these indications. The FDA rejected our filing on the basis that the predicate device chosen did not meet their requirements. Additionally, the FDA asked us to withdraw the ultra² GeneSys Variant System from the market. A recall was conducted and has since been closed.
Additionally, in August 2020, we received a Warning Letter from the FDA. In the Warning Letter, FDA stated that we had made additional changes to the ultra² Resolution Variant System not covered within our existing 510(k). Accordingly, we conducted a voluntary recall of the ultra² Resolution Variant System. We have developed the Premier Resolution as a successor instrument to the ultra² Resolution Variant System and this has already been launched in various jurisdictions outside the United States. We expect to submit a 510(k) application for this successor instrument in 2022 which, if approved, will allow us to market this instrument in the United States.
Furthermore, the FDA’s ongoing review of the 510(k) program may make it more difficult for us to make modifications to any products for which we obtain clearance, either by imposing more strict requirements on when a manufacturer must submit a new 510(k) notification for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions. For example, in accordance with FDASIA, the FDA was obligated to prepare a report for Congress on the FDA’s approach for determining when a new 510(k) clearance will be required for modifications or changes to a previously cleared device. The FDA issued this report and indicated that manufacturers should continue to adhere to the FDA’s 1997 Guidance on this topic when making a determination as to whether or not a new 510(k) clearance is required for a change or modification to a device. However, the practical impact of the FDA’s continuing scrutiny of the 510(k) program remains unclear.
We are subject to export controls and economic sanctions laws, and our customers and distributors are subject to import controls that could subject us to liability if we are not in full compliance with applicable laws.
Certain of our products are subject to U.S. export controls and sanctions regulations and we would be permitted to export such solutions to certain destinations outside the U.S. only by first obtaining an export license from the U.S. government, or by utilizing an existing export license exception/General License, or after clearing U.S. government agency review. Obtaining the necessary export license or accomplishing a U.S. government review for a particular export may be time-consuming and may result in the delay or loss of sales opportunities.
Although we take precautions to prevent our products from being provided in violation of U.S. export control and economic sanctions laws, our products may have been in the past, and could in the future be, provided inadvertently in violation of such laws. If we were to fail to comply with U.S. export law requirements, U.S. customs regulations, U.S. economic sanctions or other applicable U.S. laws, we could be subject to substantial civil and criminal penalties, including fines, incarceration for responsible employees and managers and the possible loss of export or import privileges. U.S. export controls, sanctions and regulations apply to our distributors as well as to us. Any failure by our distributors to comply with such laws, regulations or sanctions could have negative consequences, including reputational harm, government investigations and penalties.
Changes or new versions of our products or changes in export and import regulations may create delays in the introduction of our products into international markets, prevent our distributors from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. In addition, any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential international customers. Any decreased use of our principal products or limitation on our ability to export or sell such products would likely adversely affect our business, financial condition and operating results.
We are subject to anti-corruption, anti-bribery and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the Foreign Corrupt Practices Act, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010 and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, offering, soliciting, or accepting, directly or indirectly, improper payments or other improper benefits to or from any person whether in the public or private sector. As we increase our international sales and business, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage and other consequences. Any investigations, actions or sanctions could adversely affect our business, results of operations and financial condition.
Changes in healthcare regulation could affect our revenues, costs and financial condition.
In the United States in recent years, there have been numerous initiatives at the federal and state level for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services. These initiatives have ranged from proposals to fundamentally change federal and state healthcare reimbursement programs, including providing comprehensive healthcare coverage to the public under government-funded programs, to minor modifications to existing programs. One example is the Patient Protection and Affordable Care Act, the Federal healthcare reform law enacted in 2010 (the “Affordable Care Act”). Similar reforms may occur internationally.
Third party payors, such as Medicare and Medicaid in the United States, have reduced their reimbursements for certain medical products and services. Our business is impacted by the level of reimbursement available for clinical tests from third party payors. In the United States payment for many diagnostic tests furnished to Medicare fee-for-service beneficiaries is made based on the Medicare Clinical Laboratory Fee Schedule (CLFS), a fee schedule established and adjusted from time to time by the Centers for Medicare and Medicaid Services (CMS). Some commercial payors are guided by the CLFS in establishing their reimbursement rates. Laboratories and clinicians may decide not to order or perform certain clinical diagnostic tests if third party payments are inadequate, and we cannot predict whether third party payors will offer adequate reimbursement for tests utilizing our products to make them commercially attractive. Legislation, such as the Affordable Care Act, as amended by the Health Care and Education Reconciliation Act and the Middle Class Tax Relief and Job Creation Act of 2012, has reduced the payments for clinical laboratory services paid under the CLFS. In addition, the Protecting Access to Medicare for All Act of 2014 (PAMA)2021 (M4A) has made significant changes to the way Medicare will pay for clinical laboratory services, which has further reduced reimbursement rates.
Legislative and regulatory bodies are likely to continue to pursue healthcare reform initiatives in many forms and may continue to reduce funding in an effort to lower overall federal healthcare spending. The U.S. government recently enacted legislation that eliminated what is known as the “individual mandate” under the Affordable Care Act and may enact other changes in the future. The ultimate content and timing of any of these types of changes in other healthcare reform legislation and the resulting impact on us are impossible to predict. If significant reforms are made to the healthcare system in the U.S., or in other jurisdictions, those reforms may increase our costs or otherwise have an adverse effect on our financial condition and results of operations.
Our laboratory business could be harmed from the loss or suspension of a licence or imposition of a fine or penalties under, or future changes in, the law or regulations of the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), or those of other state or local agencies.
Our laboratory operated by our subsidiary Immco Diagnostics Inc. is subject to CLIA, which is administered by CMS and extends federal oversight to virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally-approved accreditation agency. CLIA is designed to ensure the quality and reliability of clinical laboratories by, among other things, mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. Laboratories must undergo on-site surveys at least every two years, which may be conducted by the Federal CLIA program or by a private CMS approved accrediting agency such as the College of American Pathologists, among others. The sanction for failure to comply with CLIA requirements may be suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties.
We are also subject to regulation of laboratory operations under state clinical laboratory laws of New York and of certain other states from where we accept specimens. State clinical laboratory laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality controls or require maintenance of certain records. For example, California requires that we maintain a licence to conduct testing in California, and California law establishes standards for our day-to-day laboratory operations, including the training and skill required of laboratory personnel and quality control.
In some respects, notably with respect to qualifications of testing personnel, California’s clinical laboratory laws impose more rigorous standards than does CLIA. Certain other states, including Florida, Maryland, New York and Pennsylvania, require that we hold licences to test specimens from patients residing in those states, and additional states may require similar licences in the future. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licences, certificates and authorisations, which could adversely affect our business and results of operations.
We are also subject to various federal and state laws targeting fraud and abuse in the healthcare industry.
If we fail to comply with federal and state health care laws, including fraud and abuse, false claims, physician payment transparency and privacy and security laws, we could face substantial penalties and our business, operations and financial condition could be adversely affected. We are subject to anti-kickback laws, self-referral laws, false claims laws, and laws constraining the sales, marketing and other promotional activities of manufacturers of medical devices by limiting the kinds of financial arrangements we may enter into with physicians, hospitals, laboratories and other potential purchasers of our products. The laws that may affect our ability to operate include, but are not limited to:
| • | the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and wilfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and wilfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
|
| • | the Physician Self-Referral Law, also known as the “Stark Law”, which provides for strict liability for referrals by physicians to entities with which they or their immediate family members have a financial arrangement for certain designated health services, including clinical laboratory services provided by our CLIA-certified laboratory owned and operated by our subsidiary Immco Diagnostics Inc., that are reimbursable by federal healthcare programs, unless an exception applies. Penalties for violating the Stark Law include denial of payment, civil monetary penalties of up to fifteen thousand dollars per claim submitted, and exclusion from federal health care programs, as well as a penalty of up to one-hundred thousand dollars for attempts to circumvent the law; |
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal third-party payers that are false or fraudulent. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers”, may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Often, to avoid the threat of treble damages and penalties under the False Claims Act, which in 2020 were $11,665 to $23,331 per false claim, companies will resolve allegations in a settlement without admitting liability to avoid the potential treble damages. Any such settlement could materially affect our business, financial operations, and reputation;
the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier;
federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the CMS, information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners. Manufacturers are required to submit reports to CMS by the 90th
| • | the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the CMS, information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners. Manufacturers are required to submit reports to CMS by the 90th day of each calendar year. We cannot assure you that we have and will successfully report all transfers of value by us, and any failure to comply could result in significant fines and penalties. Failure to submit the required information may result in civil monetary penalties up to an aggregate of $150,000 per year (and up to an aggregate of $1 million per year for “knowing failures”) for all payments, transfers of value or ownership or investment interests not reported in an annual submission, and may result in liability under other federal laws or regulations; |
federal and state laws governing the certification and licensing of clinical laboratories, including operational, personnel and quality requirements designed to ensure that testing services are accurate and timely, and federal and state laws governing the health and safety of clinical laboratory employees;
| • | the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations and individuals from paying, offering to pay or authorising the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity; the UK Bribery Act, which prohibits both domestic and international bribery, as well as bribery across both public and private sectors; and bribery provisions contained in the German Criminal Code, which makes the corruption and corruptibility of physicians in private practice and other healthcare professionals a criminal offense; and the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations and individuals from paying, offering to pay or authorising the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity; the UK Bribery Act, which prohibits both domestic and international bribery, as well as bribery across both public and private sectors; and bribery provisions contained in the German Criminal Code, which makes the corruption and corruptibility of physicians in private practice and other healthcare professionals a criminal offense; and
|
analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any payor, including commercial insurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbours available under such laws, it is possible that some of our business activities, including our relationships with physicians and other healthcare providers, some of whom may recommend, purchase and/or order our tests, our sales and marketing efforts and certain arrangements with customers, including those where we provide our instrumentation for free in exchange for minimum purchase requirements of our reagents, and our billing and claims processing practices, could be subject to challenge under one or more of such laws. By way of example, some of our consulting arrangements with physicians do not meet all of the criteria of the personal services safe harbour under the federal Anti-Kickback Statute. Accordingly, they do not qualify for safe harbour protection from government prosecution. A business arrangement that does not substantially comply with a safe harbour, however, is not necessarily illegal under the Anti-Kickback Statute, but may be subject to additional scrutiny by the government. We are also exposed to the risk that our employees, independent contractors, principal investigators, consultants, vendors and distributors may engage in fraudulent or other illegal activity. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
To enforce compliance with the federal laws, the U.S. Department of Justice (“DOJ”), has recently increased its scrutiny of interactions between health care companies and health care providers, which has led to a number of investigations, prosecutions, convictions and settlements in the health care industry. Dealing with investigations can be time and resource consuming and can divert management’s attention from the business. In addition, settlements with the DOJ or other law enforcement agencies have forced healthcare providers to agree to additional compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.
Many of the existing requirements are new and have not been definitively interpreted by state authorities or courts, and available guidance is limited. In addition, changes in or evolving interpretations of these laws, regulations, or administrative or judicial interpretations, may require us to change our business practices or subject our business practices to legal challenges, which could have a material adverse effect on our business, financial condition and results of operations.
We have not yet developed a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are or may become subject. Although the development and implementation of such compliance programs can mitigate the risk of investigation, prosecution, and penalties assessed for violations of these laws, or any other laws that may apply to us, the risks cannot be entirely eliminated.
If our operations are found to be in violation of any of the laws described above or any other laws and regulations that apply to us, we could receive adverse publicity, face enforcement action and be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our results of operations.
Compliance with regulations governing public company corporate governance and reporting is complex and expensive.
Many laws and regulations impose obligations on public companies, which have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices. Our implementation of certain aspects of these laws and regulations has required and will continue to require substantial management time and oversight and may require us to incur significant additional accounting and legal costs. We continually evaluate and monitor developments with respect to new and proposed rules and cannot predict or estimate the ultimate amount of additional costs we may incur or the timing of such costs. These laws and regulations are also subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Although we are committed to maintaining high standards of corporate governance and public disclosure, if we fail to comply with any of these requirements, legal proceedings may be initiated against us, which may adversely affect our business.
Risks Related to Our Intellectual Property
We may be unable to protect or obtain proprietary rights that we utilise or intend to utilise.
In developing and manufacturing our products, we employ a variety of proprietary and patented technologies. In addition, we have licenced, and expect to continue to licence, various complementary technologies and methods from academic institutions and public and private companies. We cannot provide any assurance that the technologies that we own or licence provide protection from competitive threats or from challenges to our intellectual property. In addition, we cannot provide any assurances that we will be successful in obtaining licences or proprietary or patented technologies in the future, or that licences granted to us by third parties will not be granted to other third parties who could potentially compete with us.
Filing, prosecuting and defending patents covering our current and future products throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licenced patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
The scope of the patent protection we obtain may not be sufficiently broad to compete effectively in our markets; our patent applications could be rejected or the existing patents could be challenged; and trade secrets and confidential know-how could be obtained by competitors.
Trinity Biotech currently owns a number of active patents, some with protection across multiple countries. These patents have remaining patent lives varyingranging from 6less than 1 year to 1317 years.
We may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent applications that we own, or in-licence, may fail to result in issued patents with claims that cover our current products or any future products in the United States or in other foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application.
We can provide no assurance that third parties will not challenge the validity, enforceability or scope of the patents Trinity Biotech may apply for, or obtain, which may result in such patents being narrowed, invalidated, or held unenforceable. Any successful opposition to these patents or any other patents owned by or licenced to us could deprive us of rights necessary for the successful commercialization of any products covered by those patents.
Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product under patent protection could be reduced. We can provide no assurance that our patents will continue to be commercially valuable.
Trade secrets and confidential know-how are important to our scientific and commercial success. Although we seek to protect our proprietary information through confidentiality agreements and other contracts, we can provide no assurance that others will not independently develop the same or similar information or gain access to our proprietary information.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the United States Patent and Trademark Organization (“USPTO”) and other foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on our international patent application, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalise and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our current or future products, our competitors might be able to enter the market, which would have an adverse effect on our business.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
Depending on actions by the U.S. Congress, the federal courts,Courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licenced or that we might obtain in the future. Similar changes could happen to patent laws outside of USAthe United States which would have the same consequences.
For example, the United States has enacted and implemented wide-ranging patent reform legislation, which could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defence of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The United States Patent Office developed regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defence of our issued patents, all of which could have an adverse effect on our business and financial condition.
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.
Product infringement claims by other companies could result in costly disputes and could limit our ability to sell our products.
Litigation over intellectual property rights is prevalent in the diagnostic industry, including patent infringement lawsuits, interferences, derivation and administrative law proceedings, inter party review, and post-grant review before the USPTO, as well as oppositions and similar processes in foreign jurisdictions.
As the market for diagnostics continues to grow and the number of participants in the market increases, we may increasingly be subject to patent infringement claims. It is possible that a third-party may claim infringement against us. For example, because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our products may infringe. The biosensor industry, including the CGM industry, is a highly innovative area with a number of industry participants developing intellectual property portfolios over many years. As such there can be no guarantee that the technology acquired from Waveform or further developed by us, will not infringe on other parties existing IP portfolios.
Defence of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of managerial and financial resources from our business. Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialise one or more of our products. The pendency of any litigation may cause our distributors and customers to reduce or terminate purchases of our products. If found to infringe, we may have to pay substantial damages, including treble damages and attorneys’ fees for willfulwilful infringement, obtain one or more licences from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. Any substantial loss resulting from such a claim could cause our revenues to decrease and have a material adverse effect on our profitability, and the damage to our reputation in the industry could have a material adverse effect on our business.
If we need to obtain a licence as a result of litigation, we cannot predict whether any such licence would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licences from third parties to advance our research or allow commercialisation of our products. We may fail to obtain any of these licences at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialise one or more of our products, which could harm our business significantly.
We may be involved in lawsuits to enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorised use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a courtCourt may decide that a patent of ours or our licensors is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defence proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte re-examinations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licenced, we may have limited or no right to participate in the defence of any licenced patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future products. Such a loss of patent protection could harm our business.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a licence on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our ADSs.
Risks Related to Ownership of our ADSs
MiCo and Perceptive own approximately 23.6% and 19.0% respectively of the voting share capital of our Company, which may give each of these shareholders a significant influence over our management and affairs and may deter a change in control or other transaction that may otherwise be favorable to our shareholders.
MiCo owns 2.2 million of our ADSs, which represents approximately 23.6% of the outstanding voting share capital of our Company (29.9% on a fully diluted basis, including shares issuable upon conversion of the Company’s Redeemable Unsecured Convertible Loan Note issued to MiCo (the “Convertible Note”)). Based on its public filings, we understand that on December 20, 2023, Mainstream Holdings Ltd. became the sole shareholder of MiCo as a result of a share purchase agreement with MiCo Co. Ltd. and MiCoBioMed Co. Ltd. Under the terms of the Convertible Note and the purchase agreement for those ADSs, MiCo is entitled to nominate a total of four individuals, three of whom must be independent of MiCo, for consideration by the nomination committee of the board of directors of the Company for appointment as directors for as long as MiCo continues to hold qualifying amounts of ADSs or principal value of the Convertible Note or converted ADSs, as applicable. Because of its ownership interest and right to nominate directors, MiCo may have significant influence over our management and affairs and over matters requiring shareholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our Company or our assets, for the foreseeable future. This concentration of ownership may also delay, deter or prevent a change in control, and may make some transactions more difficult or impossible to complete without the support of MiCo, regardless of the impact of such transactions on our other shareholders. The interests of MiCo may differ from the interests of other shareholders and thus result in corporate decisions that are disadvantageous to other shareholders.
On January 30, 2024, Perceptive, our principal lender, acquired 1.8 million of our ADSs which represents approximately 19.0% of the outstanding voting share capital of our Company. Perceptive also owns warrants to purchase an additional 1.0 million ADSs with an exercise price of US$2.20 per ADS. Because of its ownership interest and its position as the Company’s principal lender, Perceptive may have significant influence over our management and affairs for the foreseeable future. This concentration of ownership may also delay, deter or prevent a change in control, and may make some transactions more difficult or impossible to complete without the support of Perceptive, regardless of the impact of such transactions on our other shareholders.
Our failure to meet the continued listing requirements of Nasdaq could result in a de-listing of our ADSs and penny stock trading.
There can be no assurance that we will be able to continue to meet all of the criteria necessary for Nasdaq to allow us to remain listed. If we fail to satisfy the applicable continued listing requirement and be in non-compliance after notice and the applicable grace period ends, Nasdaq may commence delisting procedures against our Company (during which we may have additional time of up to six months to appeal and correct our non-compliance).
On April 19, 2023, we received a deficiency letter from the Listing Qualifications Department of Nasdaq notifying us that for the preceding 30 consecutive business days, our ADSs did not maintain a minimum closing bid price of $1.00 (“Minimum Bid Price Requirement”) per ADS as required by Nasdaq Listing Rule 5450(a)(1). We effected an ADS Ratio Change on February 23, 2024, pursuant to which the ADS to ordinary share ratio changed from one ADS representing four ordinary shares to one ADS representing 20 ordinary shares to enable the Company to regain compliance with the $1.00 Nasdaq minimum bid price requirement, and facilitate investment from a broader pool of potential investors. On March 8, 2024, the Listing Qualifications Department of Nasdaq notified us that we regained compliance with Listing Rule 5450(a)(1). However, there can be no assurance that our ADSs will continue to meet the Minimum Bid Price Requirement.
On November 21, 2023 the Company received a deficiency letter from the Listing Qualifications Department of Nasdaq notifying us that the Company was not in compliance with the minimum market value of its publicly held shares (“MVPHS”) requirement of the Nasdaq Listing Rules applicable to companies listing on the Nasdaq Global Select Market. For continued listing on the Nasdaq Global Select Market, registrants are required to maintain a minimum MVPHS of US$15 million. A failure to meet the minimum MVPHS requirement exists if the deficiency continues for a period of 30 consecutive business days. In accordance with Nasdaq Listing Rules, the Company has 180 calendar days from the date of the deficiency notice, or until May 20, 2024, to regain compliance with the minimum MVPHS requirement. To regain compliance, the Company’s MVPHS must exceed US$15 million for a minimum of 10 consecutive business days. If the Company does not regain compliance with the minimum MVPHS requirement by May 20, 2024, Nasdaq will provide written notification to the Company that the ADSs are subject to delisting. At that time, the Company may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq listing rules however, there can be no assurance that the Company will satisfy the minimum MVPHS requirement or that any such appeal would be successful.
If our ADSs are ultimately delisted from Nasdaq, our ADSs would likely then trade only in the over-the-counter market and the market liquidity of our ADSs could be adversely affected and their market price could decrease. If our ADSs were to trade on the over-the-counter market, selling our ADSs could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity with respect to our securities; a determination that our shares are a “penny stock,” which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; a reduced amount of news and analyst coverage for our Company; and a decreased ability to issue additional securities or obtain additional financing in the future. These factors could result in lower prices and larger spreads in the bid and ask prices for our ADSs and would substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us.
We are a foreign private issuer under the rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act and are permitted to file less information with the SEC than a domestic U.S. reporting company, which reduces the level and amount of disclosure that you receive.
As a foreign private issuer under the Exchange Act, we are exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered under the Exchange Act; and are not required to comply with Regulation FD, which imposes certain restrictions on the selective disclosure of material information. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our ADSs. Accordingly, you receive less information about our company than you would receive about a domestic U.S. company and are afforded less protection under the U.S. federal securities laws than you would be afforded in holding securities of a domestic U.S. company.
As a foreign private issuer whose ADSs are listed on the NASDAQ, Global Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of the NASDAQ Stock Market Rules.listing rules. Among other things, as a foreign private issuer we may also follow home country practice with regard to, the composition of the board of directors, director nomination procedure, compensation of officers and quorum at shareholders’ meetings. In addition, we may follow our home country law, instead of the NASDAQ Stock Market Rules,listing rules, which require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules. In addition, as foreign private issuer, we are not required to file quarterly reviewed financial statements. A foreign private issuer that elects to follow a home country practice instead of such requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws.
We may be classified as a passive foreign investment company, or PFIC, which would subject our U.S. investors to adverse tax rules.
U.S. holders of our ADSs may face income tax risks. Based on the composition of our income, assets (including the value of our goodwill, going-concern value or any other unbooked intangibles, which may be determined based on the price of the ordinary shares), and operations, we believe we will not be classified as a “passive foreign investment company”, or PFIC, for the 20202023 taxable year. However, because PFIC status is based on our income, assets and activities for the entire taxable year, it is not possible to determine whether we will be characterized as a PFIC for our current taxable year or future taxable years until after the close of the applicable taxable year. Moreover, we must determine our PFIC status annually based on tests that are factual in nature, and our status in the current year and future years will depend on our income, assets and activities in each of those years and, as a result, cannot be predicted with certainty as of the date hereof. Furthermore, fluctuations in the market price of our ordinary shares may cause our classification as a PFIC for the current or future taxable years to change because the aggregate value of our assets for purposes of the asset test, including the value of our goodwill and unbooked intangibles, generally will be determined by reference to the market price of our shares from time to time (which may be volatile). The IRS or a courtCourt may disagree with our determinations, including the manner in which we determine the value of our assets and the percentage of our assets that are passive assets under the PFIC rules. Therefore, there can be no assurance that we will not be a PFIC for the current taxable year or for any future taxable year. Our treatment as a PFIC could result in a reduction in the after-tax return to U.S. Holders (as defined below under Item 10E. “Additional Information – Taxation”) of our ADSs and would likely cause a reduction in the value of such shares. A foreign corporation will be treated as a PFIC for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income,” or (2) at least 50% of the average value of the corporation’s gross assets produce, or are held for the production of, such “passive income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. If we are treated as a PFIC, U.S. Holders of ADSs would be subject to a special adverse U.S. federal income tax regime with respect to the income derived by us, the distributions they receive from us, and the gain, if any, they derive from the sale or other disposition of their ADSs. U.S. Holders should carefully read Item 10E. “Additional Information – Taxation” for a more complete discussion of the U.S. federal income tax risks related to owning and disposing of ADSs.
The market price of our ADSs has been, and may continue to be, highly volatile, and such volatility could cause the market price of our ADSs to decrease and could cause you to lose some or all of your investment in our ADSs.
The stock market in general and the market prices of the ADSs on Nasdaq, in particular, are or will be subject to fluctuation, and changes in these prices may be unrelated to our operating performance. During the first quarter of 2022,2024, the market price of our ADSs fluctuated from a high of $1.44US$3.05 per ADS to a low of $0.92US$1.98 per ADS, and the price of our ADSs continues to fluctuate. We anticipate that the market prices of our securities will continue to be subject to wide fluctuations. The market price of our securities may be subject to a number of factors, including:
| ● | announcements of new products by us or others; |
| | |
| ● | announcements by us of significant acquisitions, strategic partnerships, in-licensing,announcements of new products by us or others; joint ventures or capital commitments;
|
| | |
| ● | the developments of the businesses and projects of our various subsidiaries; |
| | |
| ● | expiration or terminations of licences, research contracts or other collaboration agreements; |
| | |
| ● | public concern as to the safety of the products we sell; |
| | |
| ● | the volatility of market prices for shares of companies with whom we compete; |
| ● | developments concerning intellectual property rights or regulatory approvals; |
| | |
| ● | variations in our and our competitors’ results of operations; |
| | |
| ● | changes in revenues, gross profits and earnings announced by us; |
| | |
| ● | changes in estimates or recommendations by securities analysts, if the ADSs are covered by analysts; |
| | |
| ● | fluctuations in the share price of our publicly traded subsidiaries; |
| | |
| ● | changes in government regulations or patent decisions; and |
| | |
| ● | general market conditions and other factors, including factors unrelated to our operating performance. |
announcements by us of significant acquisitions, disposals, strategic partnerships, in-licensing,
joint ventures or capital commitments;
the developments of the businesses and projects of our various subsidiaries;
expiration or terminations of licences, research contracts or other collaboration agreements;
public concern as to the safety of the products we sell;
the volatility of market prices for shares of companies with whom we compete;
developments concerning intellectual property rights or regulatory approvals;
variations in our and our competitors’ results of operations;
changes in revenues, gross profits and earnings announced by us;
changes in estimates or recommendations by securities analysts, if the ADSs are covered by analysts;
fluctuations in the share price of our publicly traded subsidiaries;
changes in government regulations or patent decisions; and
general market conditions and other factors, including factors unrelated to our operating performance.
These factors may materially and adversely affect the market price of our securities and result in substantial losses by our investors.
We expect we will need additional capital in the future. If additional capital is not available, we may not be able to continue to operate our business pursuant to our business plan or we may have to discontinue our operations entirely.
We expect we will require additional capital in the future. If we continue to incur losses, we will need significant additional financing, which we may seek through a combination of private and public equity offerings, debt financings, and asset sales, etc. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licences on terms that are not favorable to us.
Future sales of our ADSs could reduce the market price of the ADSs.
Substantial sales of our ADSs may cause the market price of our ADSs to decline. Sales by us or our security holders of substantial amounts of our ADSs, or the perception that these sales may occur in the future, could cause a reduction in the market price of our ADSs.
The issuance of any additional ADSs, or any securities that are exercisable for or convertible into our ADSs, may have an adverse effect on the market price of our ADSs and will have a dilutive effect on our existing holders of ADSs.
The conversion of our outstanding share options and warrants would dilute the ownership interest of existing shareholders.
The total share options exercisable as at DecemberMarch 31, 2021, as described in Item 18, Note 21 to the consolidated financial statements,2024, are convertible into American Depository Shares (ADSs), 1 ADS representing 4 “A” Ordinary Shares.20 ordinary shares. The exercise of the outstanding share options will likely occur only when the conversion price is below the trading price of our ADSs and will dilute the ownership interests of existing shareholders. For instance, if all of the vested and exercisable options outstanding at April 15, 2022March 31, 2024 were exercised, the Company would have to issue 13,121,33818,035,505 additional “A” Ordinary Shares (3,280,335ordinary shares (901,775 ADSs). Similarly, at April 15, 2022, if all of the outstanding warrants to purchase “A” Ordinary Sharesordinary shares at March 31, 2024 were exercised, the Company would have to issue 10,000,000 “A” Ordinary Shares (2,500,00021,200,000 A ordinary shares (1,060,000 ADSs). On the basis of 107,670,894“A” Ordinary Shares189.3 million A ordinary shares outstanding at April 15, 2022,March 31, 2024, the exercise of both the share options and the warrants would effectively dilute the ownership interest of the existing shareholders by approximately 18%17%.
It could be difficult for USU.S. holders of ADSs to enforce any securities laws claims against Trinity Biotech, itsus, our officers or our directors in Irish Courts.
At present, no treaty exists between the United States and Ireland for the reciprocal enforcement of foreign judgments. TheTherefore, a final judgment for the payment of money rendered by any U.S. federal or state Court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be recognized or enforceable in Ireland. A judgment of the U.S. Courts will be enforced by the Irish Courts, by way of separate action in Ireland, if the following general requirements are met:
the debt is for a liquidated or defined sum;
the procedural rules of the U.S. Court must have been observed and the U.S. Court must have had jurisdiction in relation to the particular defendant according to Irish conflict of law rules (the submission to jurisdiction by the defendant would satisfy this rule); and
the judgment must be final and conclusive and the decree must be final and unalterable in the U.S. Court which pronounces it. A judgment can be final and conclusive even if it is subject to appeal or even if an appeal is pending. If the effect of lodging an appeal under the applicable law is to stay execution of the judgment, it is possible that, in the meantime, the judgment should not be actionable in Ireland. It remains to be determined whether final judgment given in default of appearance is final and conclusive.
However, the Irish Courts may, in certain circumstances refuse to enforce a judgment of the U.S. Courts which meets the above requirements for one of the following reasons:
if the judgment is not for a debt or a definite sum of money;
if the judgment was obtained or alleged to have been obtained by fraud;
if the process and decision of the U.S. Courts were contrary to natural or constitutional justice under the laws of Ireland do however, as a general rule, provide thatand if the judgmentsenforcement of the courts of the United States havejudgment in Ireland the same validity as if rendered by Irish Courts. Certain important requirements must be satisfied before the Irish Courts will recognise the United States judgment. The originating court must have been a court of competent jurisdiction, the judgment may not be recognised if it is based on public policy, was obtained by fraud or its recognition would be contrary to natural or constitutional justice;
if the judgment is contrary to Irish public policy. Any judgment obtained in contravention of the rules of natural justicepolicy or involves certain United States laws which will not be enforced in Ireland.Ireland or constitute the enforcement of a judgment of a penal or taxation nature;
if jurisdiction cannot be obtained by the Irish Courts over the judgment debtors in the enforcement proceedings by personal service in Ireland or outside Ireland under Order 11 of the Irish Superior Courts Rules;
there is no practical benefit to the party in whose favor the foreign judgment is made in seeking to have that judgment enforced in Ireland, or
if the judgment is not consistent with a judgment of an Irish Court in respect of the same matter.
We have no plans to pay dividends on our ADSs, and youADS holders may not receive funds without selling the ADSs.
We do not expect to pay any cash dividends on our ADSs for the foreseeable future. We currently intend to retain any additional future earnings to finance our operations and growth and, therefore, we have no plans to pay cash dividends at this time. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent on our earnings, financial condition, operating results, capital requirements, any contractual restrictions, and other factors that our board of directors deems relevant. Accordingly, youADS holders may have to sell some or all of the ADSs in order to generate cash from your investment. You may not receive a gain on your investment when you sell the ADSs and may lose the entire amount of your investment.
The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of your Class A ordinary shares underlying the ADSs.
Holders of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any direct right to attend general meetings of our shareholders, or to cast any votes at such meetings.meetings or otherwise exercise the rights of registered shareholders set out in our articles of association or in Irish law. You will only be able to exercise the voting rights which attach to the Class A ordinary shares underlying the ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement with the depositary, you may vote only by giving voting instructions to the depositary, as the registered holder of the Class A ordinary shares underlying the ADSs. If we askthe depositary asks for your instructions, then upon receipt of yoursuch voting instructions, the depositaryit will try to vote the underlying Class A ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise any right to vote with respect to the underlying Class A ordinary shares unless you withdraw the shares underlying your ADSs and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to enable you to withdraw the shares underlying the ADSs and become the registered holder of such shares prior to the record date for such general meeting to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. Where any matter is to be put to a vote at a general meeting, upon our instruction, the depositary will notify you of the upcoming vote and deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure you can direct the depositary to vote the Class A ordinary shares underlying your ADSs in accordance with your instructions. In addition, the depositary and its agents are not responsible for failing to carry out your voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the shares underlying the ADSs are voted and you may have no legal remedy if the shares underlying the ADSs are not voted as you instructed.
Our securities could be delisted from Nasdaq if we do not comply with Nasdaq’s listing standards.
Our ADSs are listed on the NASDAQ Capital Market under the symbol “TRIB29.” To continue to be listed on the NASDAQ Capital Market, we need to satisfy a number of conditions, including to maintain a minimum bid price of $1.00 per ADS and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. As of the date of this Annual Report on Form 20-F, we were in compliance with the Nasdaq continued listing requirements. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), if we fail to remain in compliance with the minimum bid price requirement we will be given 180 days to regain compliance. In the event that we do not regain compliance within this 180-day period, we may be eligible to seek an additional compliance period of 180 calendar days if we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and provide written notice to Nasdaq of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice to us that our ADSs will be subject to delisting.
If our ADSs become subject to delisting, they would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our ADSs. This would adversely affect the ability of investors to trade our ADSs and would adversely affect the value of our ADSs. Delisting could also impair our ability to raise capital.
Item 4. Information on the Company
| Item 4. | Information on the Company |
| A. | History and Development of the Company |
We were incorporated in Ireland in 1992 as a private limited company and re-registered as a public limited company (“plc”) registered in Ireland in 1992 and commenced operations in 1992.July of that year. In October 1992 we completed an initial public offering of our securities in the US and our ADS have traded on the Nasdaq Global Market since that time under the symbol “TRIB.”.
The principal offices of our company are located at IDA Business Park, Bray, Co.County Wicklow, Ireland. The Group has expanded its product base through internal development and acquisitions.
Our website address is https://www.trinitybiotech.com/ ... The information contained on, or that can be accessed from, our website does not form part of this Annual Report. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, such as we, that file electronically, with the SEC at www.sec.gov.
B. Business Overview
Overview
We and our subsidiaries (the “Group”) develop, acquire, manufacture and market medical diagnostic products for the clinical laboratory and point-of-care segments of the diagnostic market. These products are used to detect autoimmune, infectious and sexually transmitted diseases, diabetes and disorders of the liver and intestine. We are alsoIn January 2024, we entered into the biosensor industry, with the acquisition of the biosensor assets of Waveform Technologies Inc. (“Waveform”) and intend to develop a significant providerrange of raw materials to the life sciencesbiosensor devices and research industries globally.related services, starting with a continuous glucose monitoring (“CGM”) product.
We market our portfolio of several hundred products to customers in approximately 100 countries around the world through our own sales force and a network of international distributors and strategic partners.
Organisational Structure
While our executive offices are located at Bray, Ireland, our research and development, manufacturing and marketing activities are principally conducted atby the following:following subsidiaries:
Trinity Biotech Manufacturing Limited, based in Bray, Ireland;
Konamite Limited, based in Bray, Ireland;
Clark Laboratories Inc, based in Jamestown, New York;
Primus Corporation, based in Kansas City;
Biopool US Inc (trading as Trinity Biotech USA), based in Jamestown, New York;
Immco Diagnostics Inc, based in Amherst and Buffalo, New York;
Trib Biosensors Inc, based in Wilsonville, Oregon;
Nova Century Scientific Inc, based in Burlington, Canada; and
Trinity Biotech Brazil based in Sao Paulo, Brazil.
The Group’s distributor of raw materials for the life sciences industry, Benen Trading Ltd (trading as Fitzgerald Industries), is based in Bray, Ireland and Acton, Massachusetts.
Principal Markets
The brand names of the principal products of Trinity Biotech are listed below, organised first by point of use and second by application..application.
Point-Of-CarePoint-of-care | | Clinical Laboratory
|
| Infectious Diseases | | Infectious Diseases | | Haemoglobin | | Autoimmune | | Clinical Chemistry | | Blood Bank Screening
|
| UniGold | | MarDx | | Premier | | ImmuBlot | | EZ | | Captia |
| Recombigen | | FlexTrans | | | | ImmuGlo | | | | |
| Trinscreen | | | | | | ImmuLisa | | | | |
| | | | | | | OTOblot | | | | |
We also sell raw materials to the life sciences industry and research institutes globally through our wholly owned subsidiary, Benen Trading Ltd., trading as Fitzgerald Industries.30
We sell our products through our direct sales organisations in the United States, Brazil and to an extent in the United Kingdom, France and Germany and then through our network of principal distributors and non-governmental bodies into approximately 100 countries globally.
Point-of-CareIn January 2024, the Company acquired the biosensor and Continuous Glucose Monitoring (“POC”CGM”) assets of privately held Waveform Technologies, Inc. (“Waveform”). We intend to update the Waveform CGM device and optimize for broad adoption and then evolve this platform technology to measure and analyse other valuable biomarkers and related datapoints. Our vision is to develop a portfolio of technologies that can offer users and clinicians valuable actionable health and wellness insights.
Point-of-care
Point-of-care refers to diagnostic tests which are carried out in the presence of the patient.
Uni-Gold™ HIV
We believe that Trinity Biotech makes a very significant contribution to the global effort to meet the challenge of human immuno-deficiency virus, or HIV, with its principal product, Uni-Gold™ HIV. In Africa, Uni-Gold™ HIV has been used for many years in voluntary counselling and testing centers in the sub-Saharan region where it is a cornerstone to early detection and treatment intervention.
The Future of Point-Of Care at Trinity BiotechTrinscreen
In Africa, HIV testing typically involves using a point-of-care rapid test for screening followed by a different rapid test as the confirmatory test. Our Uni-Gold™ HIV product is a leading confirmatory HIV test in the African market.
Point-Of-CarePoint-of-care is key to the growth of Trinity Biotech. Central to this growth will be a newis our HIV screening test, TrinScreen, HIV, which received World Health Organisation approval in February 2022 .2022. Trinity Biotech has not previously competed in the larger screening market, which is estimated to be valued at approximately US$150 million p.a. The screening market is addressed by few companies. TrinScreen should not jeopardise our existing confirmatory business as it employs a different HIV antigenDuring December 2023, Trinity Biotech began commercial shipments of Trinscreen to the existing Uni-Gold™ HIV test. In other words, countries will be able to use both the TrinScreen HIV test and the Uni-Gold™ HIV testKenya as part of their testing algorithm. Our strategy is to leveragean initial purchase order the existing brand equity of Trinity Biotech in African markets to take market share in the screening market. This initiative will be supported by increased sales and marketing resources in the African market.Company received for 2.5 million tests. An additional purchase order for 2.0 million tests was received from USAID during April 2024. Market opportunities for the TrinScreen HIV product also exist in other territories, in particular in emerging countries.
We are developing a rapid Covid-19 antigen test with which we intendcountries, and the Company expects to leverage our existing infectious disease rapid test design to expedite the developmentreceive and validation timeframe and also generate scale efficiencies in manufacture and distribution.
These point-of-care products will be sold through Trinity Biotech’s sales and marketing organisation to a variety of customers including public health authorities, non-governmental organisations, clinical and reference laboratories directly in the United Kingdom, France and Germany and through independent distributors and strategic partners infulfil orders from other countries.
30
territories during 2024.
Clinical Laboratory
Trinity Biotech suppliesWe supply the clinical laboratory segment of the in-vitro diagnostic market with a range of diagnostic tests and instrumentation which detect:
Glycated haemoglobin (for diabetes monitoring and diagnosis) and haemoglobin variants for the detection of haemoglobinopathies (haemoglobin abnormalities); and
Autoimmune diseasesdiseases.
Trinity Biotech also supplies this market with other products through its clinical chemistry business.
Infectious Diseases
Trinity Biotech manufacturesWe manufacture kits for the detection of specialty and esoteric biomarkers of infectious diseases and other associated laboratory products. The products are used in processing patient samples whose results aid physicians in the diagnosis and clinical assessment of a broad range of infectious diseases. The key clinical laboratory disease areas that Trinity Biotech serveswe serve include:
Sexually transmitted diseases, including Syphilis and Herpes;
Markers for Epstein Barr, Measles, Mumps, Toxoplasmosis, Cytomegalovirus, Rubella, Varicella and other viral pathogens;
Lyme disease;pathogens, and
Trinity Biotech develops, manufacturesWe also develop, manufacture and distributesdistribute products predominantly in enzyme-linked immunosorbent assay (“ELISA”) format. As a complement to itsour product range, the companywe also offersoffer third party automated processors to its customers.
Many of the products in our Infectious Diseasesinfectious diseases product line are FDA cleared for sale in the United States and CE marked in Europe. Products are sold in approximately 100 countries in total, with the focus on the Americas, Europe and Asia. The infectious disease products are sold through theour sales and marketing organisation of Trinity Biotech to a variety of customers including public health authorities, clinical and reference laboratories directly in the U.S. and U.K.UK and through independent distributors and strategic partners in other countries.
Diabetes and Haemoglobinopathies
Trinity Biotech manufacturesWe manufacture products for in-vitro diagnostic measurement of haemoglobin A1c (“HbA1c”) used in the monitoring and diagnosis of diabetes, as well identifying those who are at a high risk of developing diabetes (pre-diabetic). The Premier Hb9210 uses patented boronate affinity technology to measure HbA1c which is a marker of a patient’s average blood sugar control over the last 100 to 120 days. It is a highly accurate biomarker available for the diagnosis of diabetes and is a strong indicator of a diabetic’s glycemic control. HbA1c is also used to identify those at risk of becoming diabetic; often referred to as impaired glucose tolerance. Additionally, HbA1c is used in the assessment of diabetes complications.
Trinity Biotech manufactures itsWe manufacture our own HbA1c instrument, the Premier Hb9210, which was launched in Europe and obtained FDA approval in late 2011. In Europe, Trinity Biotech distributes Premier Hb9210 through its partner Menarini Diagnostics. In the USA and Brazil, Trinity Biotech sellswe sell the Premier Hb9210 through itsour own direct sales organisations. In the rest of the world, Trinity sellswe sell the Premier Hb9210 through a network of distributors. The Premier’s unique features, cost structure and core technology enablesenable it to compete in most economies and settings.
Trinity BiotechWe also sellssell products for haemoglobin variants, through the Premier Resolution (CE cleared - meaning it can be sold in the EU). The Premier Resolution detects and identifies haemoglobinapothies. These are genetic defects that result in abnormal structure of the haemoglobin molecule. Haemoglobinapathies include sickle-cell diseases, alpha and beta thalassemia which are amongst the most common genetic disorders in the world.
Trinity Biotech hasWe have launched the Premier Resolution, itsour next generation Haemoglobinapothy Analyzer in Europe and the Middle East after undergoing rigorous and successful field trials. The Company expects to submitIn August 2023, the Premier Resolution towas approved by the FDA for approvalallowing the instrument to be sold in 2022. The submission has been significantly delayed due to the Covid-19 pandemic.U.S. The Premier Resolution uses an internally designed column as well as state of the art hardware and software.
The point-of-care segment of the HbA1c market is addressed by the Tri-stat system. The Tri-stat offers rapid, precise analysis in a simple and highly cost effective manner. Using boronate affinity technology and a two phase optical system, the instrument can process three samples simultaneously with the three results available in just 10 minutes. In 2018, a new, second generation Tri-stat analyser was launched in international markets outside of the USA. In 2020 an enhanced version of the Tri-stat analyser was launched which includes a dual detector for improved performance.
Autoimmune Diseases
Autoimmune diseases are diseases that involve an abnormal immune response in which the immune system attacks the body’s own cells and tissues.
In 2013, Trinity Biotechwe acquired Immco Diagnostics (“Immco”), an autoimmunity company known for novel assay development and high impact contributions to autoimmune disease diagnostic research. Immco develops, manufactures and sells products in the following formats for diagnosis of autoimmune diseases:
Immunofluorescence Assay (“IFA”);
Enzyme-linked immunosorbent (“ELISA”);
Line immunoassay (“LIA”).
The Immco products are a seamless fit for the instrument platforms that Trinity Biotech markets for its infectious diseases portfolio. Additionally, Trinity sells a complete line of IFA processors. Many of Immco’s products are FDA cleared for sale in the U.S. and CE marked in Europe.
The Immco product line addresses the high growth, lower throughput, specialty autoimmune segment, where competition is limited.segment. The principal autoimmune conditions in this segment are Rheumatoid Arthritis, Vasculitis, Lupus, Celiac and Crohn’s Disease, Ulcerative Colitis, Neuropathy, Hashimoto’s Disease and Grave’s Disease.
In addition, Immco markets a panel of proprietary early markers for Sjögrens disease often referred to as “dry eye disorder”.
The Immco products are sold through Trinity Biotech’sour sales and marketing organisation to clinical and reference laboratories directly in the USAUS and via distributors in other countries.
The diagnostic product line is complemented by Immco’s New York State Department of Health licenced reference laboratory offering specialised services in diagnostic immunology, pathology and immunogenetics, and is marketed to U.S.-based reference laboratories and hospitals.
In addition, Immco markets a panel of proprietary early markers for Sjögrens disease often referred to as “dry eye disorder”.
Clinical Chemistry
The speciality clinical chemistry business of Trinity Biotech includes reagent products such as ACE, bile acids, oxalate and glucose-6-phosphate dehydrogenase (“G6PDH”) that are clearly differentiated in the marketplace. These products are suitable for both manual and automated testing and have proven performance in the diagnosis of many disease states from liver and kidney disease to G6PDH deficiency which is an indicator of haemolytic anaemia.
Blood Bank Screening
Trinity Biotech manufacturesWe manufacture enzyme-linked immunosorbent assays, (“ELISA”), for the detection of Syphilissyphilis and Malaria.malaria. These products are sold through distributors and are manufactured under original equipment manufacturer agreements for other major third partythird-party diagnostic companies. The business is not currently operating in the United States.U.S.
Continuous Glucose Monitoring
In January 2024, we acquired the biosensor and CGM assets of privately held Waveform Technologies, Inc. (“Waveform”). We intend to update the Waveform CGM device and optimize for broad adoption and then evolve this platform technology to measure and analyse other valuable biomarkers and related datapoints. Our vision is to develop a portfolio of technologies that can offer users and clinicians valuable actionable health and wellness insights based upon what is happening in, on and around the body.
Waveform, a developer of novel and proprietary new technologies for diabetes care, received a CE Mark for its Cascade CGM in 2019, which has since been commercially available in Europe. The primary use of the device is to continuously monitor glucose in the human body. The Cascade CGM device and any subsequently developed sensor would be subject to regulatory oversight from the FDA and country specific regulatory authorities and would be subject to the same risks identified in the Government Regulation section of this Annual Report. Glucose in the blood diffuses from capillaries into the liquid between cells known as interstitial fluid. The Waveform CGM device is an electrochemical biosensor which detects the concentration of glucose in interstitial fluid by means of an enzyme immobilised at the surface of a sensor wire inserted into the skin. The action of the enzyme results in the generation of electrical current that is relayed to an attached transmitter where it is converted by a firmware algorithm into a blood glucose concentration. The transmitter then sends this blood glucose measurement to a smartphone or other device where the time within healthy range is tracked and the user alerted to risks of hypo- or hyperglycaemic episodes.
The Waveform CGM technology contains innovative and proprietary aspects with what we believe are important benefits. Significantly, the special composition of the sensor wire and the unique formulation of its protective outer membrane contribute to the ability to achieve needle-free insertion. Needle free insertion has numerous benefits including a reuseable applicator as no needle needs to be safely disposed. This, combined with a reusable transmitter which is also a feature of the acquired CGM technology, allows for two clear benefits. Firstly, it allows for a lower cost of production of the redesigned CGM product compared to the principal current CGM market players and secondly, it reduces the biological waste concerns associated with the currently marketed single-use disposable systems.
Additionally, we believe that this innovative platform technology will allow us to develop a broader suite of wearable biosensors to measure and analyse important health and wellness information. If successful, we intend to target other analytes and data points that represent markers of health and function and make these devices available more broadly around the globe.
The CGM technology acquired from Waveform was developed over many years and Waveform has granted a perpetual, worldwide, non-exclusive license to DexCom, Inc. and its affiliates, for some of the patents acquired us, but to which we retain the right to use and exploit.
Sales and Marketing
Trinity Biotech sells itsWe sell our products through itsour own direct sales force in the United States.U.S. Our sales team in the United StatesU.S. is responsible for marketing and selling the Trinity Biotech range of Point-Of-Care, Infectious Diseases, Haemoglobins, Autoimmunepoint-of-care, infectious diseases, haemoglobins, autoimmune and Clinical Chemistryclinical chemistry products. Meanwhile the direct sales force in Brazil sells the company’sCompany’s haemogloblins product range.
Through its international sales and marketing organisation, which is located in Ireland, Trinity Biotech sells:
Its Clinical Chemistryclinical chemistry product range directly to hospitals and laboratories in Germany and France;
Infectious Diseasesdiseases and Clinical Chemistryclinical chemistry product ranges directly to hospitals and laboratories in the UK; and
All product lines through independent distributors and strategic partners in a further approximately 100 countries.
Competition
The diagnostic industry is very competitive. There are many companies, both public and private, engaged in the sale of medical diagnostic products and diagnostics-related research and development, including a number ofseveral well-known pharmaceutical and chemical companies. Competition is based primarily on product reliability, customer service and price. This is a technology driven market with an emphasis on automation and emerging biomarkers. Trinity actively works on increasing automation for the clinical laboratory. Trinity seeks to bring novel biomarkers to market by licensing agreements with universities and innovative companies.
The Group’s competition includes several large companies such as, but not limited to: Abbott Diagnostics, Arkray, Becton Dickenson, Bio-Rad, Copan, DexCom Inc., Diasorin Inc., Johnson & Johnson, Roche Diagnostics, Sebia, Siemens (from the combined acquisitions of Bayer, Dade-Behring and DPC), Thermo Fisher, Copan, Becton DickensonTosoh and Tosoh.Werfen.
Research and Development
Research &and Development (“R&D”) carried out by third parties
Certain R&D activities of the Group have beenare outsourced to third parties.parties as required. These activities are carried out in the normal course of business with these companies. During 2021, a number of third party2023, we used third-party consultants and contractors were engaged to assist with the Premier instruments development projects, working principally on the Autoimmune Smart Reader project and the Covid antigen projects.project. The total amount paid to these R&D consultants and contractors in 20212023 was US$807,000 (2020:226,000 (2022: US$658,000)707,000).
R&D activities carried out by third parties grew in the first quarter of 2024 as the Company engaged with external consultants regarding the development of our newly acquired CGM biosensor technology.
Research and Products under Development
Trinity Biotech has research and development groups focusing separately on haemoglobin,product development in haemoglobins, infectious diseases and autoimmune products. During 2021, thesesince January 2024, CGM. These groups wereare located in Ireland and the USAU.S. and largely mirror the production capability at each production site. In addition to in-house activities, Trinity Biotech sub-contracts some research and development from time to time to independent researchers based in the USAU.S. and Europe.
Principal Development Projects
The following table sets forth for each of Trinity Biotech’s main development projects,project, the costs incurred during each period presented and the cumulative costs (before amortization and impairment) incurred as at 31 December 2021:2023:
| | | 2023 | | | 2022 | | | Total project
costs to
December 31,
20231 | |
| Product Name | | US$’000 | | | US$’000 | | | US$’000 | |
| Premier Instruments for A1c and haemoglobinopathies testing | | | 1,669 | | | | 1,904 | | | | 39,497 | |
| | | 2021 | | | 2020 | | | Total project
costs to
December 31,
2021¹ | |
Product Name
| | US$’000 | | | US$’000 | | | US$’000 | |
| Premier Instrument for Haemoglobin A1c testing | | | 2,538 | | | | 1,359 | | | | 35,924 | |
| HIV screening rapid test | | | 1,488 | | | | 2,278 | | | | 12,240 | |
| Covid tests | | | 1,320 | | | | 467 | | | | 1,787 | |
| Autoimmune Smart Reader | | | 550 | | | | 666 | | | | 3,287 | |
| Mid-tier haemoglobins instrument | | | 303 | | | | 243 | | | | 609 | |
| Tri-stat Point-of-Care instrument | | | 245 | | | | 203 | | | | 9,477 | |
| Uni-Gold antigen improvement | | | - | | | | 556 | | | | 2,918 | |
| Syphilis point-of-care test | | | -
| | | | 618 | | | | 1,942 | |
¹2021 are2023 is shown before deduction of amortization and impairment losses.
2 Syphilis point-of-care test – there was no capital expenditure on this development project in 2021 as other projects were prioritized. It is expected this project will resume within the next twelve months.
The costs in the foregoingpreceding table mainly comprise the cost of internal resources, such as the payroll costs for the development teams and attributable overheads. The remainder mainly comprises materials, consumables, regulatory trial and third party consultants’third-party consultant costs.
There are inherent risks and uncertainties associated with completing development projects on schedule. In the experience of Trinity Biotech, the main risks to the achievement of a project’s planned completion date occur primarily during the product’s verification and validation phase. During these phases the product must attain successful results from in-house product testing and from third partythird-party clinical trials. Obtaining regulatory approval on a timely basis is another variable in achieving a project’s planned completion date.
Some aspects of the development of a new product are outside of the control of Trinity Biotech. Notwithstanding the uncertainty surrounding these external factors, Trinity Biotech believes the planned completion dates of these projects are realistic and achievable. As the manufacturing lead time for these new products is relatively short, it is anticipated that material cash inflows will commence shortly after each of the project’s planned completion date.
The following is a description of the principal projects which are currently being undertaken by the research and development groups within Trinity Biotech:
Haemoglobin Development Group
Premier Hb9210 Instrument for Haemoglobin A1c Testing
This project entailsA product development plan focused on improvements in our flagship Premier 9210 instrument is ongoing. The package of changes aims to expand the target market, reduce instrument downtime and service cost, and significantly expand operating margins.
Our program to develop an improved, backward compatible column Diabetes HbA1c column system is now complete. The results of this development program have exceeded expectations, with our new column system now delivering up to four times the number of ainjections compared to the existing product. We are now executing on the commercial launch of these new HPLC instrument for testingHbA1c. Development was initiatedproducts.
Our revised in-house manufacturing process of our key Diabetes HbA1c consumable began in late 2007, and was launched outside of the United States in 2011Q4, 2023, and in the United States in early 2012.Q1, 2024 we ceased to order any further product from our outsourced supplier.
As part of our continuous improvement a new monitor, keyboard and frit housing have been customised and validated. These improvements maintain the competitiveness of the instruments.
34
Premier Resolution Instrument for Haemoglobin Variant Testing
We have developed the Premier Resolution instrument which is utilised for haemoglobin variant testing and is currently being rolled outtesting. The instrument achieved 510(k) approval from the FDA in August 2023. The instrument has been sold in certain international markets outside of the USA. We intend to submit it to the FDAU.S. for clearance in 2022. Meanwhile,many years. Premier Resolution continues to be enhanced with unique features such as lot specific gradients, an optimised internally designed column with extended column life, and a rapidly expanding on-board variant library.
Tri-stat 2.0
Tri-stat 2.0 represents a new HbA1c device that offers rapid, precise analysis in a simple and highly cost effective manner. Using boronate affinity technology and a two phase optical system, three samples can be analysed simultaneously. This instrument though often characterised as point-of-care is targeted at very low volume laboratories and governmental outreach programs. The ability to perform three samples simultaneously enables the instrument to address these segments. Taking advantage of the latest technology the instrument features a colour touchscreen, multiple language capability, modern connectivity, increased storage capacity as well as replaceable diodes for state-of-the-art performance. Whilst the product has been launched in international markets, the company continues to make enhancements to further improve its operational efficiency and accuracy. In 2020 an enhanced version of the Tri-stat analyser was launched which includes a dual detector for improved performance.
Low to Medium throughput Haemoglobin instrument for A1c Testing
We are developing a low to medium throughput Haemoglobin A1c instrument with a view to targeting the market segment for testing volumes which lie between the Tri-stat 2.0 and Premier Hb9210. We are targeting a launch date in 2022.
Point-of-CarePoint-of-care Development Group
We are developing a rapid Covid-19 antigen test, which we expect to have CE marked for professional use only in the second quarter of 2022.
A syphiliscombination HIV/Syphilis point-of-care rapid test is also being developed using our existing lateral flow format. In 2021, other projects were prioritized, but it is expectedformat, we expect this project will resume withinto restart in 2024.
Continuous Glucose Monitoring Development
In January 2024, we acquired the next twelvebiosensor and CGM assets of Waveform. It is our intention to further develop these assets with our research and development activities including optimising sensor design and manufacture, reanalysing user data from Waveform’s clinical trial data sets, software improvements including algorithm and app development, and performing new pre-pivotal and pivotal clinical trials,
In tandem with the acquisition of the Waveform CGM assets, we have also hired a number of the key research and development personal that previously worked on developing the Waveform CGM. Additionally, we have engaged an internationally recognised and reputable technical development consulting house to work on some key development activities. We plan to further augment the CGM development function with further hires in the coming months.
Autoimmunity Development Group
IFA Smart Reader Project
We are developing two devices which will enable cell based Immunofluorescence Assays (IFA) to be read in a more automated manner. The first device, ScopeSmart will be an automated IFA reader capable of performing image capture, pattern recognition and analysis on IFA slides. This will then be followed by SlideSmart which will fully automate this entire testing process by integrating the sample preparation.
Patents and Licences
Patents
Many of Trinity Biotech’s tests are not protected by specific patents, dueDue to the significant cost of putting patents in place for Trinity Biotech’sour wide range of products.products, many of our tests are not protected by specific patents. However, Trinity Biotech believeswe believe that substantially all of itsour tests are protected by proprietary know-how, manufacturing techniques and trade secrets.
34
As part of the Waveform asset acquisition, we acquired a CGM patent portfolio that includes numerous issued and pending patent applications in the U.S. and other parts of the world. We believe these patents to be of significant importance in establishing and protecting our proprietary rights in relation to our CGM business.
From time-to-time, certain companies have asserted exclusive patent, copyright and other intellectual property rights to technologies that are important to the industry in which Trinity Biotech operates. In the event thatwe operate. If any of such claims relate to itsour planned products, Trinity Biotech intendswe intend to evaluate such claims and, if appropriate, seek a licence to use the protected technology. There can be no assurance that Trinity Biotechwe would firstly, be able to obtain licences to use such technology or, secondly, obtain such licences on satisfactory commercial terms. If Trinity Biotechwe or itsour suppliers are unable to obtain or maintain a licence to any such protected technology that might be used in Trinity Biotech’sour products, Trinity Biotechwe could be prohibited from marketing such products. ItWe could also incur substantial costs to redesign its products or to defend any legal action taken against it. If Trinity Biotech’s products should be found to infringe protected technology, Trinity Biotechwe could also be required to pay damages to the infringed party.
Licences
Trinity Biotech hasWe have entered into a number of licensing arrangements including the following:
Immco entered into a licence agreement on January 19, 2012, and subsequently an amended licence agreement on June 14, 2018. The licence pertains to any product or service relating to identifying indicators of Sjogren’s disease. The agreement is effective through January 21, 2036 and is worldwide in scope. Royalties are payable based on agreement in place.
In 2013, Trinity Biotechwe entered into a licence agreement with a leading market participant, giving the Groupus a non-exclusive, worldwide licence to access to a significant HIV-2 patent portfolio for the purpose of making, using and selling a HIV test kit, subject to certain limitations.
On December 19, 1999, Trinity Biotechwe obtained a non-exclusive commercial licence from the National InstituteInstitutes of Health (“NIH”) in the United States for NIH patents relating to the general method of producing HIV-1 in cell culture and methods of serological detection of antibodies to HIV-1.
Each of the licensing arrangements disclosed under this subheading terminates on the date expiration or adjudication of invalidity or unenforceability of the last of the particular licenced patents covered by the respective agreement. Each licensor has the right to terminate the arrangement in the event of non-performance by Trinity Biotech.our non-performance. The key licensing arrangements, with the exception ofapart from the agreement entered into in 2013 which provides for the payment of a lump sum licence fee, require the Groupus to pay a royalty to the licence holder which is based on sales of the products which utilise the relevant technology being licenced. The total amount paid by Trinity Biotechus under key licensing arrangements in 20212023 was US$540,000 (2020:210,000 (2022: US$470,000)360,000).
We acquired CGM technology from Waveform in January 2024. This technology has been developed over many years and Waveform has granted a perpetual, worldwide, non-exclusive license to DexCom, Inc. and its affiliates, for some of the patents acquired by us, but to which we retain the right to use and exploit.
In connection with the acquisition, we entered into a transition agreement with Bayer Healthcare LLC (“Bayer”). As a portion of the acquired intellectual property was developed originally by Bayer, the transition agreement provides that the Company will pay Bayer a royalty on net sales of the CGM products.
Government Regulation
The research, development, preclinical and clinical testing, as well as the manufacture, labelling, marketing, sales, record-keeping, advertising, distribution, and promotion of Trinity Biotech’sour products are subject to extensive and rigorous government regulation in the United States and in other countries in which Trinity Biotech’s products are soughtwe seek to be marketed.market our products.
The process of obtaining authorisation to market our products varies, depending on the product categorisation and the country, from merely notifying the authorities of intent to sell, to lengthy formal approval procedures which often require detailed laboratory and clinical testing and other costly and time-consuming processes. The main regulatory bodies which require extensive clinical testing are the FDA in the United States, the Health Products Regulatory Authority (as the authority over Trinity Biotech in Europe), the Medicines and Healthcare products Regulatory Agency (MHRA) in the United Kingdom and Health Canada.
The process in each country varies considerably depending on the nature of the test, the perceived risk to the user and patient, the facility at which the test is to be used and other factors. As 62%57% of Trinity Biotech’s 2021our 2023 revenues were generated in the Americas (with a large concentration of this in the United States) and as the United States represents a substantial proportion of the worldwide diagnostics market, an overview of FDA regulation has been included below.
Food and Drug Administration
Many of our products that are sold in the United States are medical devices subject to the Federal Food, Drug, and Cosmetic Act (“FDCA”), as implemented and enforced by the U.S. Food and Drug Administration (“FDA”). Certain products sold in the United States require FDA clearance to market under Section 510(k) of the FDCA. Other products sold in the United States require premarket approval (“PMA”) to market.
Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions including, but not limited to:
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
unanticipated expenditures to address or defend such actionsactions;
customer notifications for repair, replacement, refunds;
recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
withdrawing 510(k) clearances or PMA approvals that have already been granted;
refusal to grant export approval for our products; or
The FDA governs the following activities that we perform or that are performed on our behalf, to ensure that medical products distributed domestically or exported internationally are safe and effective for their intended uses:
product design, development and manufacture;
product safety, testing, labelling and storage;
record keeping procedures;
product marketing, sales and distribution; and
post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or device malfunctions and repair or recall of products.
FDA premarket clearance and approval requirements
Access to U.S. Market. Each medical device that Trinity Biotechwe may wish to commercially distribute in the U.S. will require either pre-market notification (more commonly known as 510(k)) clearance or approval of a pre-market approval (“PMA”) application prior to commercial distribution, unless specifically exempt. Under the FDCA, medical devices are classified into one of three classes -- Class I, Class II or Class III -- depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness.
Class I devices are those for which safety and effectiveness can be assured by adherence to FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA's Quality System Regulation ("QSR"), facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labelling, advertising, and promotional materials (the “General Controls”). Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.
Class II devices are subject to FDA’s general controls, and any other special controls as deemed necessary by FDA to ensure the safety and effectiveness of the device. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees.
Devices deemed by the FDA to pose the greatest risk, such as life sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously 510(k)-cleared device are categorised as Class III, requiring approval of a PMA.
510(k) Clearance Pathway. When a 510(k) clearance is required, Trinity Biotech must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device, a device that was in commercial distribution before May 28, 1976 for which the U.S. Food and Drug AdministrationFDA has not yet called for the submission of pre-market approval applications, or is a device that has been reclassified from Class III to either Class II or I. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As a practical matter, clearance may take longer. As a practical matter, the FDA’s 510(k) clearance pathway usually takes from 3 to 12 months, but it can take longer, and clearance is never assured. Although many 510(k) pre-market notifications are cleared without clinical data, in some cases, the U.S. Food and Drug AdministrationFDA requires significant clinical data to support substantial equivalence.
In reviewing a pre-market notification, the FDA may request additional information, including clinical data, which may significantly prolong the review process.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance or could even require a PMA approval, if the change raises complex or novel scientific issues or the product has a new intended use. The FDA requires each manufacturer to make this determination initially, but the FDA may review any such decision and may disagree with a manufacturer’s determination.
If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or pre-market approval is obtained. We have modified aspects of some of our devices since receiving regulatory clearance. Some of those modifications we believe could not significantly affect the safety or efficacy of the device, and therefore, we believe new 510(k) clearances or pre-market approvals are not required. We have also obtained new 510(k) clearances from the FDA for other modifications to our devices.
In the future, we may make additional modifications to our products after they have received FDA clearance or approval, and in appropriate circumstances, determine that new clearance or approval is unnecessary.
However, the FDA may disagree with our determination and if the FDA requires us to seek 510(k) clearance or pre-market approval for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain the required clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other penalties. In addition, the FDA continues to evaluate the 510(k) process and may make substantial changes to industry requirements, including which devices are eligible for 510(k) clearance, the ability to rescind previously granted 510(k)s and additional requirements that may significantly impact the process.
PMA Approval Pathway. A device that does not qualify for 510(k) clearance generally will be placed in classClass III and required to obtain PMA approval, which requires proof of the safety and effectiveness of the device to the FDA’s satisfaction for its intended use. A PMA application must provide extensive technical, preclinical and clinical trial data and also information about the device and its components regarding, among other things, device design, manufacturing and labelling. In addition, an advisory panel made up of clinicians and/or other appropriate experts from outside the FDA is typically convened to evaluate the application and make recommendations to the FDA as to whether the device should be approved.
Although the FDA is not bound by the advisory panel decision, the panel’s recommendation is important to the FDA’s overall decision making process. The PMA approval pathway is more costly, lengthy and uncertain than the 510(k) clearance process. After a premarket approval application is sufficiently complete, the FDA will accept the application and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to review the “accepted application”, although, generally, review of the application can take between one and three years, but it may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility to ensure compliance with Quality System Regulation, which imposes elaborate design development, testing, control, documentation and other quality assurance procedures in the design and manufacturing process. In February 2020,2022, FDA published proposed regulation to update the Quality System Regulation to incorporate the international standard specific for medical device quality management systems (ISO 13485). If finalized, the quality management system requirements for FDA-regulated devices would be harmonized with the ISO 13485 standards.
After approval of a PMA, a new PMA or PMA supplement is required in the event of a modification to the device, its labelling or its manufacturing process. The FDA imposes substantial user fees for the submission and review of PMA applications. The FDA may approve a PMA application with post-approval conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labelling, promotion, sale and distribution and collection of long-term follow-up data from patients in the clinical study that supported approval. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including the loss or withdrawal of the approval. New PMA applications or PMA supplements are required for significant modifications to the manufacturing process, labelling of the product and design of a device that is approved through the PMA process. PMA supplements often require submission of the same type of information as the original PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA application and may not require as extensive clinical data or the convening of an advisory panel.
Clinical Studies
Devices that have not received FDA approval or clearance and are used in clinical trials are considered to be and must be labeledlabelled as investigational devices. FDA regulates these products under the IDE regulations.regulations (See 21 C.F.R. § 812.)812).
Per the IDE regulations, clinical studies that involve investigational devices are divided into two categories, based on the type of device. Studies of devices considered by the agency to present a significant risk require prior approval by an Institutional Review Board (“IRB”), informed consent of patients, and FDA approval of an IDE application, which details in part the clinical study protocol, pursuant to 21 C.F.R. § 812. A significant risk device study is defined as a study of a device that presents a potential for serious risk to the health, safety, or welfare of a subject and falls into at least one of the following categories: (1) it is intended as an implant; (2) it is used in supporting or sustaining human life; (3) it is of substantial importance in diagnosing, curing, mitigating or treating a disease, or otherwise prevents impairment of human health; or (4) it otherwise presents a potential for serious risk to the health, safety, or welfare of a subject. See 21 C.F.R. 812.3(m). Studies of non-significant risk investigational devices require IRB approval and informed consent; however, the sponsor of the study does not have to obtain FDA approval of an IDE application before beginning the study.
Most clinical studies of IVDs (all of which technically involve investigational use only (“IUO”) devices) are exempted from the IDE regulation, so long as the IUO device and the study meet certain regulatory criteria. Specifically, devices are exempt from IDE requirements if they are intended for IUO and:
Do not require an invasive sampling procedure that poses a significant risk;
Do not introduce energy into a subject by design or intention;
Are not to be used as a diagnostic procedure without confirmation of the diagnosis by another medically established diagnostic product or procedure; and
Comply with the labelling requirements for IUO devices, as outlined in 21 C.F.R. § 812.2(c)(3).
If an IUO device does not meet all the requirements for exemption, studies involving that IUO device would be subject to the IDE regulations. The majority of our products are exempt from the IDE regulation. However, we are required to have IRB approval prior to and during our clinical trials and must obtain informed consent from study participants.
Post-market Regulation
After the FDA permits a device to enter commercial distribution, numerous regulatory requirements apply. These include:
product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
Quality System Regulation, (“QSR”), which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
labelling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices;
approval of product modifications that affect the safety or effectiveness of one of our approved devices;
medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;
post-approval restrictions or conditions, including post-approval study commitments;
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;
the FDA's recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations;
regulations pertaining to voluntary recalls; and
notices of corrections or removals.
We have registered certain of our facilities with the FDA as medical device manufacturers. The FDA has broad post-market and regulatory enforcement powers. We are subject to announced and unannounced inspections by the FDA to determine our compliance with the QSR and other regulations and these inspections may include the manufacturing facilities of our suppliers. In 2017, the FDA closed its pilot program for MDSAP (Medical Device Single Audit Program) and began accepting third party inspection reports from approved Auditing Organizations in lieu of conducting its own routine surveillance inspections. MDSAP audits are paid by the manufacturer and conducted annually. The FDA receives and reviews the MDSAP report and may respond to the manufacturer with its own inspection if it deems the facility is not in control. If the FDA finds any failure to comply, the agency can institute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions such as fines, injunctions, and civil penalties; recall or seizure of products; the issuance of public notices or warnings; operating restrictions, partial suspension or total shutdown of production; refusing requests for 510(k) clearance or PMA approval of new products; withdrawing 510(k) clearance or PMA approvals already granted; and criminal prosecution.
Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission (the “FTC”) and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products would be impaired.
Furthermore, our products could be subject to voluntary recall if we or the FDA determine, for any reason, that our products pose a risk of injury or are otherwise defective. Moreover, the FDA can order a mandatory recall if there is a reasonable probability that our device would cause serious adverse health consequences or death.
Unanticipated changes in existing regulatory requirements or adoption of new requirements could have a material adverse effect on the Group. Any failure to comply with applicable QSR or other regulatory requirements could have a material adverse effect on the Group’s revenues, earnings and financial standing.
There can be no assurances that the Group will not be required to incur significant costs to comply with laws and regulations in the future or that laws or regulations will not have a material adverse effect upon the Group’s revenues, earnings and financial standing.
Clinical Laboratory Improvement Amendments of 1988 (“CLIA”)
Purchasers of Trinity Biotech’sour clinical diagnostic products and our reference laboratory in the United States may be regulated under The Clinical Laboratory Improvements Amendments of 1988 and related federal and state regulations. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA established three levels of diagnostic tests (“waived”, “moderately complex” and “highly complex”) and the standards applicable to a clinical laboratory depend on the level of the tests it performs. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, we and our customers are required to meet certain laboratory licensing requirements for states with regulations beyond CLIA. For more information on state licensing requirements, see the sections entitled “Government Regulation – New York Laboratory Licensing” and “Government Regulation – Other States’ Laboratory Licensing.”
Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
CLIA requires that a laboratory hold a certificate applicable to the type of laboratory examinations it performs and that it complies with, among other things, standards covering operations, personnel, facilities administration, quality systems and proficiency testing, which are intended to ensure that clinical laboratory testing services are accurate, reliable and timely. Laboratories must register and list their tests with the CMS, the agency that oversees CLIA.
CLIA compliance and certification is also a prerequisite to be eligible to bill for services provided to governmental payor program beneficiaries and for many private payors. CLIA is user-fee funded. Therefore, all costs of administering the program must be covered by regulated facilities, including certification and survey costs.
To renew the CLIA certificate for our Autoimmune Reference Laboratory, we are subject to survey and inspection every two years to assess compliance with program standards. We also may be subject to additional unannounced inspections. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. CLIA requires full validation including accuracy, precision, specificity, sensitivity and establishment of a reference range for any test used in clinical testing. The regulatory and compliance standards applicable to the testing we perform may change over time and any such changes could have a material effect on our business.
Federal Oversight of Laboratory Developed Tests and Research Use Only Products
Trinity Biotech suppliesWe supply clinical laboratories with raw materials, such as reagent products, that may be used by clinical laboratories in clinical laboratory tests, which are regulated under CLIA, as well as by applicable state laws. Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to laboratory developed tests, or LDTs. The FDA defines the term “laboratory developed test” as an in vitro diagnostic test that is intended for clinical use and designed, manufactured and used within a single laboratory. Until 2014, the FDA exercised enforcement discretion such that it did not enforce provisions of the Food, Drug and Cosmetic Act with respect to LDTs. In July 2014, due to the increased proliferation of LDTs for complex diagnostic testing, and concerns with several high-risk LDTs related to lack of evidentiary support for claims and erroneous results, the FDA issued guidanceprovided notice that when finalized, would adopt a risk based framework that would increase FDA oversight of LDTs. As part of this developing framework, FDA issuedit intended to issue draft guidance in October 2014, informing Congress and manufacturers of LDTs of its intent to collect information from laboratories regarding their current LDTs and newly developed LDTs through a notification process. As part of developing this framework, the FDA issued draft guidance in October 2014 that, when finalized, would adopt a risk-based framework that would increase FDA oversight of LDTs. The FDA will use this information to classify LDTs and to prioritize enforcement of premarket review requirements for categories of LDTs based on risk, using a public process. Specifically, FDA plans to use advisory panels to provide recommendations to the agency on LDT risks, classification and prioritization of enforcement of applicable regulatory requirements on certain categories of LDTs, as appropriate.process FDA issued a discussion paper on LDTs in January 2017 discussing possible approaches to oversight of LDTs. On September 29, 2023, the FDA proposed a new rule which was adopted on April 29, 2024, which amends the FDA’s regulations to make explicit that IVDs are devices under the Federal Food, Drug, and Cosmetic Act, including when the manufacturer of the IVD is a laboratory. Along with this amendment, the FDA has adopted a policy under which it intends to provide greater oversight of LDTs, through a phaseout of its general enforcement discretion approach to LDTs. The FDA believes that this will also advance responsible innovation by both laboratory and non-laboratory IVD manufacturers alike by better assuring the safety and effectiveness of IVDs offered as LDTs and removing a disincentive for non-laboratory manufacturers to develop novel tests. The regulation will subject LDTs to a more stringent regulatory framework, including premarket clearance or approval requirements, quality system regulations ("QSR”), and post-market surveillance obligations. Failure to comply with these and other FDA regulations could result in legal actions, including fines and penalties.
Some of our products are for research use only (“RUO”), or for IUO.investigational use only (‘’IUO’’). RUO and IUO products are not intended for human clinical use and must be properly labeledlabelled in accordance with FDA guidance. Claims for RUOs and IUOs related to safety, effectiveness, or diagnostic utility or that it areis intended for human clinical diagnostic or prognostic use are prohibited. In November 2013, the FDA issued guidance titled “Distribution of In Vitro Diagnostic Products LabeledLabelled for Research Use Only or Investigational Use Only - Guidance for Industry and Food and Drug Administration Staff.” This guidance sets forth the requirements to utilize such designations, labelling requirements and acceptable distribution practices, among other requirements. Mere placement of an RUO or IUO label on an in vitro diagnostic product does not render the device exempt from otherwise applicable clearance, approval or other requirements. The FDA may determine that the device is intended for use in clinical diagnosis based on other evidence, including how the device is marketed.
We cannot predict the potential effect the FDA’s current and forthcoming guidancerule change on LDTs andor policy guidance for IUOs/RUOs will have on our reagents, or materials that we market to the life sciences industry, and that we may use in the development of assays in our reference laboratory. We cannot be certain that the FDA might not promulgate rules or issue guidance documents that could affect our ability to sell these materials to the market. Should any of the reagents marketed by us to the life sciences industry and used in conducting diagnostic services be affected by future regulatory actions, our business could be adversely affected by those actions.
We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for LDTs that rely on our reagents or through our reference laboratory, whether through additional guidance or regulations issued by the FDA, new enforcement policies adopted by the FDA or new legislation enacted by Congress.
Legislative proposals addressing oversight of LDTs were introduced in recent years and weWe expect that new legislative proposals will be introduced from time to time. It is possible that legislation could be enacted into law or regulations, or guidance could be issued by the FDA which may result in new or increased regulatory requirements.
Product Imports/Exports
Products for export from the United StatesU.S. are subject to foreign countries’ import requirements and the exporting requirements of the FDA, as applicable. In particular, international sales of medical devices manufactured in the United States that are not approved or cleared by the FDA for use in the United States, or are banned or deviate from lawful performance standards, are subject to FDA export requirements.
Foreign countries often require, among other things, an FDA certificate for products for export, also called a Certificate for Foreign Government (“CFG”). To obtain this certificate from the FDA, the device manufacturer must apply to the FDA. The FDA certifies that the product has been granted clearance or approval in the United States and that the manufacturing facilities were in compliance with QSR regulations at the time of the last FDA inspection. If the FDA determines that our facilities or procedures do not comply with the QSR regulations, it may refuse to provide such certificates until we resolve the issues to the FDA’s satisfaction. Failure to obtain a CFG could inhibit our ability to export our products to countries that require such certificates.
Export of products subject to 510(k) notification requirements, but not yet cleared to market, are permitted without FDA export approval, if statutory requirements are met. Unapproved products subject to PMA requirements can be exported to any country without prior FDA approval provided, among other things, they are not contrary to the laws of the destination country, they are manufactured in substantial compliance with the QSR, and have been granted valid marketing authorisation in Australia, Canada, Israel, Japan, New Zealand, Switzerland, South Africa or member countries of the European Union or of the European Economic Area (“EEA”). FDA approval must be obtained for exports of unapproved products subject to PMA requirements if these export conditions are not met.
There can be no assurance that Trinity Biotechwe will meet statutory requirements and/or receive required export approval on a timely basis, if at all, for the marketing of its products outside the United States.U.S.
Foreign Corrupt Practices Act and Other Anti-Corruption Laws
The U.S. Foreign Corrupt Practices Act (“FCPA”), to which we are subject, prohibits corporations and individuals from engaging in bribery and corruption when dealing with foreign government officials and foreign political parties. It is illegal to corruptly offer, pay, promise, or authorize the giving of anything of value to any officer or employee of a foreign government or public international organization, political party, political party official, or political candidate, in an attempt to obtain or retain business or to otherwise improperly influence a person working in an official capacity on behalf of a foreign government or public international organization. Our present and future business has and will continue to be subject to the FCPA and various other laws, rules and/or regulations applicable to us as a result of our international sales. We also are subject to the FCPA’s accounting provisions, which require us to keep accurate books and records and to maintain a system of internal accounting controls sufficient to assure management’s control, authority, and responsibility over the company'sCompany's assets. The failure to comply with the FCPA and similar laws could result in civil or criminal sanctions or other adverse consequences.
The laws to which we are subject as a result of our international sales also include the U.K. Bribery Act (the “Bribery Act”), which proscribes giving and receiving bribes in the public and private sectors, bribing a foreign public official, and failing to have adequate procedures to prevent employees and other agents from giving bribes. U.S. companies that conduct business in the United Kingdom generally will be subject to the Bribery Act. Penalties under the Bribery Act include potentially unlimited fines for companies and criminal sanctions for corporate officers under certain circumstances.
Healthcare Reform
The Protecting Access to Medicare Act of 2014 (“PAMA”), which was signed into law on April 1, 2014, significantly alters the current payment methodology under the Medicare Clinical Laboratory Fee Schedule, or CLFS. Under PAMA, beginning January 1, 2016, clinical laboratories must report laboratory test contracted payment data for each Medicare-covered clinical diagnostic laboratory test that it furnishes during a time period to be defined by future regulations, which we expect will cover the previous 12 months. The reported data must include the payment rate (reflecting all discounts, rebates, coupons and other price concessions) and the volume of each test that was paid by each contracted private payor (including health insurance issuers, group health plans, Medicare Advantage plans and Medicaid managed care organisations). Beginning in 2017, the Medicare payment rate for each clinical diagnostic lab test will be equal to the weighted median amount for the test from the most recent data collection period.
Other recent laws make changes impacting clinical laboratories, many of which have already gone into effect. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the Affordable Care Act (“ACA”), enacted in March 2010, among other things:
includes a reduction in the annual update factor used to adjust payments under the CLFS for inflation. This update factor reflects the consumer price index for all urban consumers, or CPI-U, and the ACA reduces the CPI-U by 1.75% for the years 2011 through 2015. The Affordable Care Act also imposes a multifactor productivity adjustment in addition to the CPI-U, which may further reduce payment rates;
requires certain medical device manufacturers to pay an excise tax in an amount equal to 2.3% of the price for which such manufacturer sells its medical devices that are listed with the FDA; and
requires the coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and clinicians and initiatives to promote quality indicators in payment methodologies.
The Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction (known as sequestration) to several government programs. This included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2024 unless additional Congressional action is taken.
Further, in February 2012, the Middle Class Tax Relief and Job Creation Act of 2012 was passed, which, among other things, reduced by 2% the 2013 Medicare CLFS and rebased payments at the reduced rate for subsequent years. Overall, when adding this 2% reduction to the ACA’s 1.75% reduction to the update factor and the productivity adjustment, the payment rates under the CLFS declined by 2.95% and 0.75% for 2013 and 2014, respectively.
This reduction does not include the additional sequestration adjustment. Lastly, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
State and Federal Privacy and Security Laws
Under the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or collectively, HIPAA, the U.S. Department of Health and Human Services (“HHS”), has issued regulations to protect the privacy and security of individually identifiable health information, also known as protected health information (“PHI”), held, used or disclosed by health care providers, such as our reference laboratory, and other covered entities.
HIPAA also regulates standardisation of data content, codes and formats used in certain electronic health care transactions and standardisation of identifiers for health plans and providers. HIPAA also governs patient access to laboratory test reports. Effective October 6, 2014, individuals (or their personal representatives, as applicable) have the right to access test reports directly from laboratories and to direct that copies of those reports be transmitted to persons or entities designated by the individual. Penalties
HIPAA’s Security Rule and certain provisions of the HIPAA Privacy Rule and Breach Notification Rule apply to business associates of covered entities (i.e., entities that provide services to covered entities that may require access and use of protected health information on behalf of covered entities), and business associates are subject to direct liability for violation of these rules. In addition, a covered entity may be subject to criminal and civil penalties as a result of a business associate violating HIPAA, if the business associate is found to be an agent of the covered entity. Covered entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay and notification must also be made to the U.S. Department of Health & Human Services, Office for Civil Rights (OCR) and, in certain situations involving large breaches, to the media. The OCR enforces the HIPAA Rules and performs compliance audits and investigations. In addition to enforcement by OCR, HIPAA authorizes state attorneys general to bring civil actions seeking either injunction or damages in response to HIPAA violations of HIPAA regulations include civil and criminal penalties.that impact state residents.
In addition to federal privacy regulations, there are a number of state laws governing the privacy, confidentiality and security of individually identifiable health information and other personal information that are applicable to our business. Where these state laws are stricter than the requirements imposed by HIPAA or impose different or additional requirements than HIPAA, we may be subject to additional restrictions and liability above and beyond HIPAA’s requirements.
There are numerous other laws, regulations and legislative and regulatory initiatives at the federal and state levels addressing privacy and security of personal information. We also remain subject to federal and state privacy-related laws that may be more restrictive or contain different requirements than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties. For example, the FTC uses its consumer protection authority to initiate enforcement actions against companies relating to their use and disclosure of personally identifiable information. Specifically, FTC has asserted authority and issued enforcement actions in response to actual or perceived unfair or deceptive practices by a company in the handling of consumer information. The FTC has also pursued enforcement actions against companies for violations of its Health Breach Notification Rule and the Children’s Online Privacy Protection Act. Our use of personal information is also subject to our published privacy policies and notices.
The laws governing privacy and security of health information and other personal information are rapidly changing and new laws governing privacy and security may be adopted in the future as well. We can provide no assurance that we are or will remain in compliance with diverse privacy and security requirements in all of the jurisdictions in which we do business or process personal information, or in which our patients reside, or that we will be able to keep up with the cost of complying with new or additional requirements. Failure to comply with privacy and security requirements could result in damage to our reputation, adversely affect customer or investor confidence in us and reduce the demand for our services from existing and potential customers. In addition, we could face litigation, penalties and regulatory actions including civil or criminal penalties and significant costs for compliance with new or changing requirements, all of which could generate negative publicity and which could have a materially adverse effect on our business.
Federal and State Anti-Kickback Laws
The Federal Anti-Kickback Statute makes it a felony for a person or entity, including a laboratory, to knowingly and wilfully offer, pay, solicit or receive any remuneration, directly or indirectly, to induce or in return for either the referral of an individual or the purchase, lease or order, or arranging for the purchase, lease or order, of items, services or other business that is reimbursable under any federal health care program, including Medicare and Medicaid. Courts have stated that an arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal health care program business, regardless of whether there are other legitimate purposes for the arrangement. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The definition of "remuneration" has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.
Recognising that the Anti-Kickback Statute may technically prohibit innocuous or beneficial arrangements within the healthcare industry, HHS has issued a series of regulatory safe harbours. Although full compliance with these safe harbours protects health care providers and other parties against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbour does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Penalties for the Federal Anti-Kickback Statute violations are severe and include imprisonment, criminal fines, civil money penalties and exclusion from participation in federal health care programs.
Federal and state law enforcement authorities scrutinise arrangements between health care entities or providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to induce patient care referrals or induce the purchase or prescribing of particular products or services.
The law enforcement authorities, the courts and Congress have also demonstrated a willingness to look behind the formalities of a transaction to determine the underlying purpose of payments between health care providers or entities and actual or potential referral sources.
Many states have also adopted statutes similar to the federal Anti-Kickback Statute, some of which apply to payments in connection with the referral of patients for healthcare items or services reimbursed by any source, not only governmental payor programs. There can be no assurance that our relationships with physicians, hospitals, clinical laboratories and other customers will not be subject to investigation or challenge under such laws.
Physician Self-Referral Prohibitions
In addition to the Anti-Kickback Statute, a federal law directed at physician "self-referral," commonly known as the Stark Law, prohibits, among other things, physicians who personally or through an immediate family member, have a financial relationship, including an investment, ownership or compensation relationship with an entity, including clinical laboratories, from referring Medicare patients to that entity for designated health services, which include clinical laboratory services, unless an exception applies. In addition, the clinical laboratory is prohibited from billing for any tests performed pursuant to a prohibited referral. Recent courtCourt cases have extended the Stark law's prohibition to referral of Medicaid patients as well. A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to US$100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law is subject to civil monetary penalties of up to US$15,000 per bill submission, an assessment of up to three times the amount claimed and possible exclusion from participation in federal governmental payor programs. Bills submitted in violation of the Stark Law may not be paid by Medicare or Medicaid and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states also have anti- "self-referral" and other laws that are not limited to Medicare and Medicaid referrals.
Like the Anti-Kickback Statute, the Stark Law is broad in its application to health care transactions and arrangements. Accordingly, the Stark Law contains many exceptions, which protect certain arrangements and transactions from the Stark Law penalties. The Stark Law is a strict liability statute, however, so intent is irrelevant, i.e., a physician's financial relationship with a laboratory must meet an exception under the Stark Law, or the referrals are prohibited. Thus, unlike the Anti-Kickback Statute's safe harbours, if a laboratory's financial relationship with a referring physician does not meet the requirements of a Stark Law exception, then the physician is prohibited from making Medicare and Medicaid referrals to the laboratory and any such referrals will result in overpayments to the laboratory and subject the laboratory to the Stark Law's penalties. Many states have also adopted statutes similar to the Stark Law, some of which apply to payments in connection with the referral of patients for healthcare items or services reimbursed by any source, not only governmental payor programs.
Civil Monetary Penalties Law
The federal Civil Monetary Penalties Law, among other things, prohibits the offering or giving of remuneration, including the provision of free items and services, to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary's selection of a particular supplier of items or services reimbursable by a federal or state governmental program. Violations could lead to civil money penalties of up to $10,000 for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal healthcare programs.
Federal Physician Payment Sunshine Act
The U.S. Physician Payment Sunshine Act requires certain manufacturers of drugs, biologics, devise and medical supplies to record any transfers of value to certain U.S. healthcare providers and U.S. teaching hospitals. These payments and transfers of value must be reported annually to CMS Open Payments. Sunshine Act reporting requirements were expanded in 2021 to include any payments and transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anaesthetists, and certified nurse-midwives. Failure to comply with Sunshine Act reporting requirements may result in civil monetary penalties of up to $100,000 for each knowing violation.
43
In addition, certain states also have laws and regulations related to payments and other transfers of value provided to healthcare professionals and entities. Similar to the federal law, certain states have adopted marketing and/or transparency laws relevant to device manufacturers, some of which are broader in scope. Certain states also mandate that device manufacturers implement compliance programs. Other states impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation, and other remuneration to healthcare professionals and entities. The need to build and maintain a robust compliance program with different compliance and/or reporting requirements increases the possibility that a company may violate one or more of the requirements, resulting in fines and penalties.
Other Federal and State Fraud and Abuse Laws
In addition to the requirements discussed above, several other health care fraud and abuse laws apply to our business. For example, provisions of the Social Security Act permit Medicare and Medicaid to exclude an entity that charges the federal health care programs substantially in excess of its usual charges for its services. The terms "usual charge"“usual charge” and "substantially“substantially in excess"excess” are ambiguous and subject to varying interpretations.
HIPAA also created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation.
A violation of each of these statutes is a felony and may result in fines, imprisonment or exclusion from governmental payor programs. Many states have similar statutes that may carry significant penalties.
The Federal False Claims Act prohibits a person from knowingly submitting a claim, making a false record or statement in order to secure payment or retaining an overpayment by the federal government. Actions which violate the Anti-Kickback Statute or Stark Law also incur liability under the False Claims Act. In addition to actions initiated by the government itself, the statute’s “qui tam” provisions authorise actions to be brought on behalf of the federal government by a private party having knowledge of the alleged fraud.
Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the action. If the government is ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress without the government's involvement, then the plaintiff will receive a percentage of the recovery.
When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each separate false claim, exclusion from participation in federal health care programs and criminal penalties. Several states have also adopted comparable state false claims act, some of which apply to all payors.
The ACA, among other things, also imposed new reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.
New York Laboratory Licensing
Because our reference laboratory located in New York receives specimens from New York State, our clinical reference laboratory is required to be licenced under New York laws and regulations, which establish standards for, among other things:
day-to-day operation of a clinical laboratory, including training and skill levels required of laboratory personnel;
physical requirements of a facility;
validation and quality control.
New York law also mandates proficiency testing for laboratories licenced under New York state law, regardless of whether such laboratories are located in New York. If a laboratory is out of compliance with New York statutory or regulatory standards, the state regulatory agency may suspend, limit, revoke or annul the laboratory's New York licence, censure the holder of the licence or assess civil money penalties. Statutory or regulatory noncompliance may result in a laboratory's operator being found guilty of a misdemeanormisdemeanour under New York law. The state regulatory agency also must approve any LDT before the test is offered in New York. Should we be found out of compliance with New York laboratory requirements, we could be subject to such sanctions, which could harm our business. We cannot provide assurance that the state will at all times find us to be in compliance with applicable laws.
Other States' Laboratory Licensing
In addition to New York, other states including California, Florida, Maryland, Pennsylvania and Rhode Island, require licensing of out-of-state laboratories under certain circumstances. From time to time, we may become aware of other states that require out-of-state laboratories to obtain licensure in order to accept specimens from the state and it is possible that other states do have such requirements or will have such requirements in the future.
Regulation outside the United States
Distribution of Trinity Biotech’sour products outside of the United StatesU.S. is also subject to foreign regulation. Each country’s regulatory requirements for product approval and distribution are unique and may require the expenditure of substantial time, money, and effort. We are also subject to regulations in foreign countries governing products, human clinical trials and marketing, and may need to obtain approval (or pre-qualification or endorsement) from local regulators in such countries or international public health agencies, such as the World Health Organization, in order to sell products in certain countries. Approval processes vary from country to country, and the length of time required for approval or to obtain other clearances may in some cases be longer than that required for U.S. governmental approvals. We generally pursue approval only in those countries that we believe have a significant market opportunity.
The International Organization for Standardization (“ISO”) is a worldwide federation of national standards bodies from some 130 countries, established in 1947. The mission of the ISO is to promote the development of standardization and related activities in the world with a view to facilitating the international exchange of goods and services. ISO 13485 certification indicates that our quality system complies with standards applicable to activities ranging from initial product design and development through production and distribution.
In the European Union (EU), diagnostic products are also categorized into differentfour risk categories and the regulatory process, which has beenis governed by the European In Vitro Diagnostic Medical Device Directive, depends uponRegulation (Regulation (EU) 2017/746) with 3 of the category, with certain product categories requiring review and approval by an independent company, known as a Notified Body, before the manufacturer can affix a CE mark to the product to declare conformity to the Directive. Other productsRegulation. The remaining product category, where - low patient and public health risk is presented, only require a self-certification process. In the second quarter of 2017, the EU adopted the new In Vitro Diagnostic Regulation (IVDR) which replaces the existing directive in the EU for in vitro diagnostic products. The IVDR will apply after a five-year transition period and imposes additional premarket and post market regulatory requirements on manufacturers of such products. The EU has recently announced updated transition periods for certain classes of in vitro medical devices.
In the medical devices segment, the research and development process begins with research on a specific technology that is evaluated for feasibility and commercial viability. If the research program passes that hurdle, it moves forward into development. The development process includes evaluation, selection and qualification of a product design, completion of applicable clinical trials to test the product’s safety and efficacy, and validation of the manufacturing process to demonstrate its repeatability and ability to consistently meet pre-determined specifications.
In the EU, medical devices are also categorized into different classes and the regulatory process, which has beenis governed by the European Medical Device Directive and the Active Implantable Medical Device Directive, varies by class. EachRegulation (Regulation (EU) 2017/745), requires each product mustto bear a CE mark to show compliance with the Directive. In the second quarter of 2017, the EU adopted the new Medical Devices Regulation (MDR) which replaces the existing directives in the EU for medical devices and imposes additional premarket and post market regulatory requirements on manufacturers of such products. While the MDR was previously adopted to apply after a three year transition period, in 2020 the European Parliament postponed the date of application by one year. The MDR is officially effective as of May 26, 2021.Regulation.
Some products require submission of a design dossier to the appropriate regulatory authority for review and approval prior to CE marking of the device. For other products, the company is required to prepare a technical file which includes testing results and clinical evaluations but can self-certify its ability to apply the CE mark to the product. Outside the U.S. and the EU, the regulatory requirements vary across different countries and regions.
There can be no assurance that new laws or regulations will not have a material adverse effect on Trinity Biotech’sour business, financial condition, and results of operation. The time required to obtain needed product approval by particular foreign governments may be longer or shorter than that required for FDA clearance or approval. There can be no assurance that Trinity Biotechwe will receive on a timely basis, if at all, any foreign government approval necessary for marketing its products.
In the EU, the General Data Protection Regulation (GDPR) protects the rights of individuals regarding their personal data, including the right to access, correct, and erase their data. It also places a strong emphasis on data security and breach notification. Trinity Biotech has appointed a Data Protection Office (DPO) to lead and co-ordinate data compliance efforts. Organizations found violating GDPR can face fines up to 4% of their global annual revenue or €20 million, whichever is higher. Violations of the GDPR can arise from non-compliance with: data processing being lawful, fair, and transparent to the data subject; processing data for explicitly stated purposes; only collecting data that is absolutely necessary, accurate and contemporaneous; only storing data for as long as is required; any data processing ensures appropriate security, integrity, and confidentiality; and that the DPO is responsible to demonstrate GDPR compliance at all times.
Environmental Regulation
The process of designing, developing and manufacturing our products can involve the use of harmful and dangerous chemicals and materials. The use and handling of these dangerous substances is subject to federal, state and local laws and regulations in all the countries in which we operate. In the U.S., Trinity is subject to the Toxic Substances Act (TSCA) and Pollution Prevention Act (PCA) under the auspices of the Environmental Protection Agency (EPA). In Europe, the key environmental policy is written into Articles 11 and 191 to 193 of the Treaty on the Functioning of the European Union (TFEU) and specifically the Regulation on the Registration, Evaluation, Authorisation and restriction of Chemicals (REACH) is the main EU law to protect human health and the environment from the risks that can be posed by chemicals. Failure to comply with these laws and regulations can result in financial penalties, restriction of operation and adverse publicity. The Trinity facility in Bray, Ireland is certified to ISO 14001. This is an internationally recognized standard for environmental management systems (EMS). This provides an externally assessed framework for improving resource usage, waste management and monitoring of environmental performance. Trinity uses their EMS to minimize environmental footprint and ensure compliance with relevant legal requirements.
C. Organizational Structure
Please refer to Note 3231 to our audited consolidated financial statements (“Group Undertakings”) included elsewhere in this Annual Report for a listing of our significant subsidiaries, including name, country of incorporation, and proportion of ownership interest.
D. Property, Plants and Equipment
Our headquarters, manufacturing and research and development facilities as well as our sales offices are located in Bray Ireland. We have entered into a number of related party transactions with JRJ Investments (“JRJ”), a partnership currently owned by Mr Ronan O’Caoimh and Dr Walsh, directors of the Company, and directly with Mr O’Caoimh, to provide current and potential future needs for the Group’s manufacturing and research and development facilitiespremises in Bray, Ireland. We have entered into an agreement for a 25 year25-year lease with JRJ effective from December 2003 for 15,780 square feet of offices at an annual rent of €381,000 (US$432,000), which expires in 2027 and have421,000). In 2007 we entered into a 25-year lease agreementsagreement with Mr. O’CaoimhJRJ for a 43,860 square foot manufacturing facility in Bray, Ireland andwith an adjacent warehouse of 16,000 square feet. The annual rent forof €787,605 (US$869,000). Subsequent to the manufacturing facility is €787,605 (US$891,000) andsigning of this lease, the annual rent forownership of the warehouse is €144,000 (US$163,000). These two leases expire in 2028 and 2026 respectively. Towards the end of 2020, the Group occupied some additional space adjoining the warehouse. This is a short-term arrangement, and no payments were made for the additional space during 2020 and 2021. A sum of US$90,000 was accrued for rent payablebuilding transferred from JRJ to Mr O’Caoimh solely. In 2016, we entered into a 10-year lease with Mr. O’Caoimh for a warehouse adjacent to our leased manufacturing facility in relation to this additional space.Bray, Ireland. The warehouse is 16,000 square feet with an annual rent of €144,000 (US$159,000). See Item 7 – Major Shareholders and Related Party Transactions.
We have six main manufacturing sites worldwide, five in the Americas (Amherst, Williamsville(Buffalo and Jamestown, NY, Kansas City, MO, Wilsonville, OR and Extrema, Brazil), and one in Bray, Ireland. An additional facility is owned in Burlington, Canada which serves as a distribution centre and also carries out some research and development activities.
The U.S. and Irish facilities are each FDA registered and ISO certified facilities. As part of our ongoing commitment to quality, each Trinity Biotech facility was granted the latest ISO 13485 certification. This certification was granted by internationally recognised notified bodies. This serves as external verification that Trinity Biotech has established an effective quality system in accordance with an internationally recognised standard. By having an established quality system there is a presumption that we will consistently manufacture products in a controlled manner. To achieve this certification, each Trinity Biotech facility performed an extensive review of the existing quality system and implemented any additional regulatory requirements.
The facilities at Jamestown, NY, Kansas City, MO and Bray, Ireland also achieved certification to the requirements of the Medical Device Single Audit Programme (MDSAP). The Medical Device Single Audit Program allows an MDSAP recognized Auditing Organization to conduct a single regulatory audit of a medical device manufacturer that satisfies the relevant requirements of the regulatory authorities participating in the program. International regulatory authorities that are participating in the MDSAP include, US Food and Drug Administration, Therapeutic Goods Administration of Australia, Brazil’s Agência Nacional de Vigilância Sanitária, Health Canada, Japan’s Ministry of Health, Labour and Welfare, and the Japanese Pharmaceuticals and Medical Devices Agency The World Health Organization (WHO) Prequalification of In Vitro Diagnostics (IVDs) Programme and the European Union (EU) are Official Observers.
Trinity Biotech USA operates from a 25,610 square foot FDA registered facility in Jamestown, New York. The facility was purchased in 1994. Additional warehousing space is also leasedrented in Jamestown, New York at an annual rental charge of US$183,000.203,000. This lease expired in 2022 and is currently rented on a rolling month-to-month basis.
TRIB Biosensors Inc. operates from a 25,000 square foot facility in Wilsonville, Oregon. We took over the lease for this facility in January 2024 as part of the Waveform transaction. The lease expires in December 2024 and the annual rent is US$363,000.
Primus Corp. operates from a 39,000 square foot facility in Kansas City, Missouri and an adjacent 13,500 square foot facility mainly used for warehousing. The leases on these properties run until 20222025 and 2025 respectively and2027 with annual rents areof US$108,000137,000 and US$44,00061,000 respectively.
Immco Diagnostics Inc. operates from a 20,520 square foot facility in Amherst, New York and a 31,731 square foot facility in Williamsville,Buffalo, New York, subject to leases expiringYork. The lease for the site expires in 2022 and 2033 respectively.2034. The annual rent for the Amherst facility is US$259,000. The Williamsville facility’s annual rent is currently US$416,000, rising to US$452,000 by 2029.405,000. An additional 5,120 square foot facility is owned by Trinity Biotech in Burlington, Canada.
A leased office and factory space in Acton, Massachusetts ceased to be part of Group operations in April 2023 as part of the sale of the Fitzgerald Industries life sciences supply business. The annual rent of this facility amounted to US$104,000.
Additional
Trinity Biotech Brazil operates from office and factory space is leased by the Group in Acton, Massachusetts, Sao Paulo, Brazil and Extrema, Brazil atBrazil. The leases on these properties run have an annual cost of US$96,000, US$8,00011,000 and US$41,00057,000 respectively.
At present, we have sufficient productive capacity to cover demand for our product range. We continue to review our level of capacity in the context of future revenue forecasts. In the event that these forecasts indicate capacity constraints, we will either obtain new facilities, or expand our existing facilities.facilities or outsource operations.
In relation to products revenuesThe following are directly related to our ability to identify significant revenue-generating products while they are still in development and to bring them to market quickly produced at ourthe facilities – these are as follows:where the Group currently manufactures products:
Bray, Ireland – Point-of-Care/HIV, Clinical Chemistry and Viral Transport Media products are manufactured at this site.
Jamestown, New York – this site specializes in the production of Microtitre Plate EIA products for infectious diseases and auto-immunity. Viral Transport Media products are also manufactured at this facility.
Carlsbad, California – this facility specialises in the development and manufacture of products utilising Western Blot and lateral flow technology. Our suite of Lyme products were manufactured at this facility and our new Infectious Diseases Point-of-Care range were manufactured at this site. In 2020, management made the decision to close this facility permanently (see above).
Kansas City, Missouri – this site, where we intend to cease manufacturing in the next twelve months, is presently responsible for the manufacture of the Group’s haemoglobin and Viral Transport Media range of products. It also carries out all of the Group’s haemoglobin R&D activities.
Buffalo, New York – these two sites arethis site is responsible for the manufacture of autoimmune test kits Viral Transport Media products and the majority of R&D activities for Immco Diagnostics, along with its reference laboratory business.
Extrema, Brazil - this site is responsible for the manufacture of some of the haemoglobin range of products sold in Brazil.
We are in material compliance with all environmental legislation, regulations and rules applicable in each jurisdiction in which we operate.
Principal Capital Expenditure and Divestitures
Our principal capital expenditure in the last three financial years has been on developing new products internally. The amount capitalized for development projects has been US$6,771,000,1.8 million, US$6,896,000,4.5 million, US$9,569,0006.8 million, for years ended December 31, 2021, 20202023, 2022 and 20192021 respectively. In 2022,2024, we expect the capital expenditure on development projects will be in the range US$6,500,0008 million to US$7,500,000.
10 million, primarily driven by the advancement of our CGM and biosensor technologies and the ongoing development of our haemoglobins product line.
Item 4A.4A. | Unresolved Staff Comments |
Not applicable.
Item 5. | Item 5.Operating and Financial Review and Prospects
|
A. Operating Results
Overview
We are commercial stage biotechnology company focused on diabetes management solutions and human diagnostics, including wearable biosensors. We develop, acquire, manufacture and market diagnostic test kits usedsystems, including both reagents and instrumentation, for the point-of-care and clinical laboratory and Point-of-Care (“POC”) segments of the diagnostic market. These test kitsmarket and has recently entered the wearable biosensor industry, with the acquisition of the biosensor assets of Waveform Technologies Inc. and intend to develop a range of biosensor devices and related services, starting with a continuous glucose monitoring product. Our products are used to detect infectious diseases sexually transmitted diseases, blood disorders and autoimmune disorders, as well as monitoringto quantify the level of Haemoglobin A1c and diagnosing diabetesother chemistry parameters in serum, plasma and haemoglobin variants. The Group markets hundredswhole blood. We sell our products directly in the United States, Germany, France and the U.K. and through a network of different diagnostic productsinternational distributors and strategic partners in approximately 100 countries. In addition, the Group manufactures its own and distributes third party infectious disease diagnostic instrumentation. Through our Fitzgerald subsidiary, we are a provider of raw materials to the life sciences industry.
Our consolidated financial statements include the attributable results of Trinity Biotech plc and all its subsidiaries.countries worldwide. This discussion covers the years ended December 31, 20212023 and December 31, 20202022 and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 20-F. The financial statements have been prepared in accordance with IFRS both as issued by the International Accounting Standards Board (“IASB”) and as subsequently adopted by the European Union (“EU”) (together “IFRS”). Consolidated financial statements are required by Irish law to comply with IFRS as adopted by the EU which differ in certain respects from IFRS as issued by the IASB. These differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of the differences are relevant in the context of Trinity Biotech, the consolidated financial statements for the periods presented comply with IFRS both as issued by the IASB and as adopted by the EU.
We have relied on an exemption under the SEC’s rules to prepare consolidated financial statements without a reconciliation to U.S. generally accepted accounting principles (“U.S. GAAP”) as at and for the three yearthree-year period ended December 31, 20212023 as Trinity Biotech is a foreign private issuer and the financial statements have been prepared in accordance with IFRS as issued by the IASB.
Factors affecting our results
The global diagnosticshealthcare market is growing due to, among other reasons, lifestyle changes, the ageing populationgrowing incidences of diabetes and theother autoimmune and infectious diseases and as a consequence there is an increasing demand for rapid and continuous monitoring tests in a clinical and consumer environment.
Our revenues are directly related to our ability to identify significant revenue-generating products, carry out the necessary development work and to bring them to market quickly and effectively. Efficient and productive research and development is crucial in this environment as we, like our competitors, search for effective and cost-efficient solutions to diagnostic problems. The growth in new technology will almost certainly have a fundamental effect on the diagnostics industry as a whole and upon our future development.
The comparability of our financial results for the years ended December 31, 20212023 and 20202022 were impacted by impairment losses as a result of impairment reviews during the years ended December 31, 20202023 and 20212022 (See Item 18, Note 14)12).
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information on the Company”.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Companywe will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying consolidated financial statements, for the years ended December 31, 20212023 and 2020,2022, we recorded a profitloss of US$0.924.0 million and a loss of US$6.441.0 million, respectively. In addition, for the years ended December 31, 2023 and 2022, we reported cash outflowoutflows of US$1.52.8 million for the year ended December 31, 2021 and a cash inflow of US$10.919.2 million, for the year ended December 31, 2020.respectively. As of December 31, 2021,2023, we had net current assets of US$24.0 million but had an accumulated deficit in equity attributable to the equity holders of the Company of US$0.323.9 million.
As part of the Waveform acquisition in January 2024, we entered into an amended credit agreement (“Amended Term Loan”) with Perceptive, our existing principal lender. Under this agreement, an additional US$22 million of funding has been made available to us, with US$12.5 million being used to acquire the Waveform assets. The remaining US$9.5 million was made available for general corporate purposes including for the further development of the CGM and biosensor technologies. The Amended Term Loan also provides for additional liquidity of up to US$6.5 million, that may be drawn down between April and December 2024, and can be used for general corporate purposes. The Amended Term Loan also immediately reduced the annual rate of interest on the loan by 2.5% with a further rate reduction once the outstanding principal under the Amended Term Loan falls below US$35 million. The Amended Term Loan matures in January 2026. This additional funding and access to additional liquidity, as required, allows the Group to expand on commercial opportunities, and fund ongoing corporate requirements. In April 2024 the Company drew down additional funding of US$6.5 million as prescribed in the Amended Term Loan agreement. This funding will be used for general corporate purposes, including the further development of our CGM offering.
The directors have considered the Group’s current financial position and cash flow projections, taking into account all known events and developments including the closingamendment and restatement of the financingterm loan with Perceptive, Advisersthe acquisition of Waveform assets, the divestiture of the Fitzgerald Industries life sciences supply business, and the Covid-19 pandemic. Thesuccess of the commercial launch of the Trinscreen HIV product in December 2023. Additionally, we have undertaken a number of initiatives aimed at improving the financial performance of the existing business by building on our existing revenue base and eliminating unnecessary overhead and complexity. There are no material debt maturities until 2026. Our directors believe that the Group will be able to continue its operations for at least the next 12 months from the date of this report, and that it is appropriate to continue to prepare the consolidated financial statements on a going concern basis.
At the date of this report the Group’s financial position has substantially improved following the successful re-financing of the Group’s debt in early 2022. This has significantly improved the Group’s capital structure by reducing gross debt by approximately US$19 million and there are no material debt maturities until 2026. Furthermore, the pending investment by MiCo IVD Holdings LLC, a subsidiary of the MiCo Group, will facilitate our exploring lower cost debt funding options, in the short-term, with the aim of further reducing our interest expense through refinancing the balance of the Group’s term loan at substantially lower interest rates. In April 2022, the Company announced a US$45 million strategic investment and partnership with the MiCo Group, a KOSDAQ-listed company. The investment is subject to customary Korean central bank approvals. The investment consists of an equity investment of approximately US$25.2 million and a seven-year, unsecured junior convertible note issued by Trinity Biotech of US$20 million, with a fixed interest rate of 1.5% and an ADS conversion price of US$3.24 per ADS.
Impact of Currency Fluctuation
Trinity Biotech’s revenue and expenses are affected by fluctuations in currency exchange rates especially the exchange rate between the US Dollar and the Euro, the Brazilian Real and Canadian Dollar. Trinity Biotech’s revenues are primarily denominated in US Dollars and its expenses are incurred principally in US Dollars, Euro and Brazilian Real. The weakening of the US Dollar could have an adverse impact on future profitability.
Trinity Biotech holds most of its cash assets in US Dollars. As Trinity Biotech reports in US Dollars, fluctuations in exchange rates do not result in exchange differences on these cash assets. Fluctuations in the exchange rate between the Euro or Brazilian Real and the US Dollar may impact on the Group’s Euro or Real monetary assets and liabilities and on Euro, Swedish Krona or Real expenses and consequently the Group’s earnings.
Impact of Covid-19 Pandemic
Sales volumes for PCR VTM products continued to decrease in 2023, down 58% on 2022 revenues due to a significant scaling down of PCR testing programs for COVID-19. The impact of COVID-19 in 2023 was otherwise insignificant on Group operations as quarantine restrictions were removed in most countries. Employees who worked remotely during large parts of the pandemic have returned to their respective offices, withs some hybrid working arrangements maintained. Health and safety policies implemented during the pandemic were relaxed where appropriate to allow for greater flexibility of Group operations without impacting employee health and safety.
Our revenues decreased by 8.8% in 2021 compared to 2020. This was mainly due to lower demand and selling pricesAs widespread public testing programmes for COVID-19 using PCR Viral Transport Media (“VTM”) products compared to 2020 when there was exceptional demand due to limited worldwide manufacturing capacity. Astests have largely been discontinued, we expect the pandemic has persisted, manufacturing capacity has ramped up significantly with a consequent negative impact on selling prices in 2021.
In 2020, mostamount of our product lines were negatively impacted by the Covid-19 pandemic. Our business relies on people attending hospitals and clinics with ailments that needCOVID-19 portfolio of products as a percentage of total Group revenues to be diagnosed through testing. Due to quarantine restrictions and peoples’ fear of catching Covid-19, there was a marked decreasereduce further in 2020 in people attending hospitals and clinics. Haemoglobins revenues reduced for both instruments and consumables with the impact being greater on diabetes (A1c) rather than on haemoglobin variant revenues. In autoimmunity, testing volumes were particularly impacted at our reference laboratory in Buffalo, New York but there were also lower product sales in all major markets. HIV revenues in Africa were negatively impacted by logistical and testing constraints arising from COVID-19.2024.
In 2021, there was an easing of quarantine restrictions and vaccination programs gave patients the confidence to visit their doctors again. For this reason, on a product-for-product basis, revenues outside of our Covid-19 product portfolio returned to near pre-pandemic levels in 2021.
Covid-19 products
When the pandemic started, we were was well-positioned to respond with our established expertise in infectious disease products including our existing Viral Transport Media product which could be used to transport testing samples for Covid-19 PCR tests. Since the start of the pandemic to the end of 2021, VTM revenues have been in excess of US$50 million.
Beginning in 2020, we undertook development of three different Covid-19 diagnostic tests. A Covid-19 antibody test using an ELISA platform, a Covid-19 rapid antibody test and a rapid Covid-19 antigen test, with which we intend will leverage our existing rapid infectious disease test design.
Operations and Employee Safety
Many governments have implemented restrictive lockdowns requiring non-essential businesses to shut down operations. Our business is typically deemed “essential” and we continued to operate, manufacture and distribute products to customers throughout most of 2020 with no closures in 2021. We furloughed many of our work forces in the USA, Ireland and Canada in April 2020 but the majority of employees returned the following month.
We have implemented health and safety policies to help safeguard our on-site employees and maintain business continuity. We have also enhanced cleaning procedures, provided additional personal hygiene supplies and protective equipment to employees, limited access to our facilities to visitors, trained employees on social distancing and mask wearing. Where practical, we have facilitated many employees to work remotely. These measures have created additional challenges from our work methods and on our infrastructure and I.T. systems which may have resulted in decreased productivity and some increased operating costs. However, the various responses we have put in place have to date resulted in limited disruption to our normal business operations. To date, we have been able to maintain our operations without significant interruption and have been able to develop and quickly scale manufacturing capacity for new products related to the Covid-19 pandemic.
We have availed of governmental supports. This included the receipt of forgivable loans under the U.S. government’s Paycheck Protection Program (“PPP”). In Ireland, the company also availed of economic support mechanisms in 2020 being provided by the Irish Government mainly in the form of wage subsidies.
Supply Chains
The pandemic has caused delays in deliveries of certain raw materials and components for our products, particularly those related to our Viral Transport Media product. Such delays can result in disruption to our business operations. We are continuously evaluating our supply chain to identify potential gaps and take steps intended to ensure continuity. Our inventory levels continue to fluctuate due to the change in our sales mix and the increased size of customer orders for Covid-19 related products. We successfully increased our production capacity for our viral transport media product, with the workforce mainly comprising of temporary staff.
Outlook
Management continues to monitor the pandemic situation closely and seeks to minimise the negative impacts on the business, while at the same time, optimising the opportunities presented to us as a medical diagnostic company. We sell our products in approximately 100 countries and there can be a large variance globally in the impact of the virus, the virus infection rates and public healthcare measures from country to country. It is therefore difficult to generalise about the recovery of demand for our products given the number of variables.
While the outlook is subject to significant uncertainty, we expect demand for our non-Covid related products to further increase in 2022 compared to 2021 as vaccination rollout allows for more patients to return to their doctors, which is what mainly drives our business. The extent to which demand for our Covid-19 portfolio of products is sustained into 2022 and beyond is highly uncertain and very difficult to predict. The launch of our rapid Covid-19 antigen test during 2022 is expected to drive growth as the market for that type of product is exceptionally large. Generally, demand for the Covid-19 tests depends on new information that may emerge concerning the severity of the coronavirus, the incidence of Covid-19 variants and the vaccination programmes plus competition from competing products.
Year ended December 31, 20212023 compared to the year ended December 31, 20202022
Revenues – continuing operations
In 2021,Our revenues decreased by 8.8% from continuing operations for the year ended December 31, 2023 were US$102.056.8 million in 2020compared to revenues of US$93.0 million. 62.5 million for the year ended December 31, 2022, which represents a decrease of US$5.7 million or 9.1%.
The decrease is mainly due to lower sales of our PCR VTM products. In 2020, demandViral Transport Media (“VTM”) products (US$1.8 million), lower laboratory services revenue (US$1.8 million) following the loss of our transplant testing service contract and haemoglobins revenues were 8% lower due to the continued decrease in revenues for VTMour legacy haemoglobinopathies product, the Ultra II instrument and due to the deferral of year end shipments of products was exceptional while there was limited worldwide manufacturing capacity. As the pandemic has persisted, manufacturing capacity has ramped up significantlyat sub-optimal pricing as we renegotiated contract terms with a consequent negative impactkey customer in line with the new management team’s focus on selling prices in 2021.profitability.
Trinity Biotech’s revenues for the year ended December 31, 2021 were US$93.0 million compared to revenues of US$102.0 million for the year ended December 31, 2020, which represents a decrease of US$9.0 million or 8.8%. The following table sets forth selected sales data for each of the periods indicated.
| | | Year ended December 31, | | | | | | Year ended December 31, | | | | |
| | |
| 2021 US$’000 | | |
| 2020 | | | % Change | | |
| 2023 US$’000 | | | | 2022 US$’000 | | | % Change | |
| Revenues | | | | | | | | | | | | |
| Revenues – continuing operations | | | | | | | | | | | | |
| Clinical laboratory goods | | | 74,700 | | | | 84,280 | | | | (11.4 | )% | | | 42,288 | | | | 46,036 | | | | (8.1 | )% |
| Clinical laboratory services | | | 7,928 | | | | 8,485 | | | | (6.6 | )% | | | 5,453 | | | | 7,272 | | | | (25.0 | )% |
| Point-of-Care | | | 10,337 | | | | 9,215 | | | | 12.2 | % | | | 9,091 | | | | 9,213 | | | | (1.3 | )% |
| | | | 92,965 | | | | 101,980 | | | | (8.8 | )% | | | | | | | | | | | | |
| | | | | 56,832 | | | | 62,521 | | | | (9.1 | )% |
Clinical Laboratory Goods
Clinical Laboratory goods revenues decreased by US$9.63.7 million in 2021,2023, which represents a decrease of 11.4%8.1%. The decrease is mainly due to lowera decrease of US$1.8 million in sales offor our PCR VTM. In 2020, demand forCOVID-19 VTM products was exceptional while there was limited worldwide manufacturing capacity. As the pandemic has persisted, manufacturing capacity has ramped up significantly with a consequent negative impact on selling prices.
There was a significant reduction in demandas public health PCR testing programs for new orders of VTM from early 2021 as COVID-19 testing volumes dropped and customers utilised stockpiled product. While the situation relating to COVID-19 products remains very fluid, with the evolving impact of the new variants the Company has seen increased customer interest in VTM products over recent months and has resumed manufacturing VTM products, albeit in lower volumes compared to late 2020. The Company hashave largely been discontinued. We have retained the capability to flex manufacturingmanufacture volumes should market conditions warrant it.
In 2021, there was a partial return towards more normalised level The remainder of Haemoglobins testing. While COVID-19 public health restrictions remainedthe decrease in place in 2021 in many markets, these restrictions were not as severe as in 2020. As a result, diabetic related testingclinical laboratory goods revenues increasedis largely due to our haemoglobin business, sales of which declined by approximately 20% in 2021 and we are continuing to see increasing demand for these instruments and consumables as diabetic testing programmes continue their return to normalisation. Offsetting this increase was lower sales in our haemoglobinopathies products8% due to the recall ofcontinued downward trend in revenues for our legacy haemoglobinopathies product, the Ultra II instrument in U.S.and due to the deferral of shipments in the early partfourth quarter of 2021.
Fitzgerald Industries, our life science raw materials business and our clinical chemistry product line both recorded single digit revenue growth2023 of products at sub-optimal pricing as we renegotiated contract terms with a key customer. In Q1, 2024, we agreed upon revised terms. Our replacement for the Ultra II instrument, the Premier Resolution, obtained FDA approval in 2021. Similarly, autoimmune product revenues in 2021 recorded single digit revenue growth compared to 2020, mainly due to a lessening of the impact of the Covid-19 pandemic.August 2023.
Clinical Laboratory Services
Our New York reference laboratory offers laboratory-testing services for autoimmune disorders, such as Sjogren’s syndrome, hearing loss, celiac disease, lupus, rheumatoid arthritis and systemic sclerosis. Revenues for the laboratory decreased by 6.6%25.0% to US$5.5 million. The laboratory had provided transplant testing services to a local healthcare provider for a number of years, however in early 2023 that healthcare provider informed us that it was moving to a different service provider and this resulted in lost revenues for the laboratory beginning in the second quarter of 2023. This decrease was partly offset by higher services revenue for our proprietary Sjogren’s syndrome test which increased by 3% in 2023 compared to 2022.
Point-of-Care
Point-of-Care revenues decreased 1.3% from US$9.2 million in 2022 to US$9.1 million in 2023. There was a slight decrease in sales of HIV tests in Africa which was largely offset by an increase in revenues for the syphilis point-of-care test in U.S. Included in our HIV point-of-care revenues is US$0.4m for our new Trinscreen test, which commenced its first shipments in December 2023.
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
| | | Year ended December 31, | | | | |
| | | | 2023 US$‘000 | | |
| 2022 US$‘000 | | | % Change | |
| Revenues for continuing operations | | | | | | | | | | | |
| Americas | | | 32,282 | | | | 35,557 | | | | (9.2 | )% |
| Asia/Africa | | | 18,909 | | | | 20,401 | | | | (7.3 | )% |
| Europe | | | 5,641 | | | | 6,563 | | | | (14.0 | )% |
| | | | | | | | | | | | | |
| Total | | | 56,832 | | | | 62,521 | | | | (9.1 | )% |
In the Americas, revenues decreased US$3.3 million or 9.2%, mainly due to a US$1.8 million decrease in sales of our VTM products which were used in the COVID-19 testing programs in U.S. and Canada. The other main contributor to the drop in revenues in Americas was a US$1.8 million decrease in revenues for our New York laboratory due to the loss of a transplant testing service contract. Offsetting these decreases was strong growth in our haemoglobins business, particularly in Brazil, where revenues increased by 13% in 2023 compared to 2022.
In Asia/Africa, revenues decreased by 7.3%, or US$1.5 million compared to 2022. The decrease was primarily due to lower haemoglobins revenues in Asia. In 2022, there was particularly strong demand for our diabetes products in Asia with year-on-year revenue growth in 2022 of 36%, boosted by high instrument sales. Haemoglobins revenues in Asia decreased in 2023 compared to 2022 due to lower number of instruments sold and due to the deferral of year end shipments of haemoglobins products at sub-optimal pricing as we renegotiated contract terms with a key customer in line with our new management team’s focus on profitability.
In Europe, revenues decreased by US$0.9 million, or 14.0% compared to 2022. The decrease was mainly caused by lower demand from our main European haemoglobins distributor due to customer attrition in their installed base following tendering processes in Western Europe.
Cost of sales, gross profit and gross margin
Total cost of sales decreased by US$7.9 million from US$45.3 million for the year ended December 31, 2022 to US$37.4 million, for the year ended December 31, 2023, a decrease of 17.4%. This resulted in a gross profit for 2023 of US$19.5 million compared to a gross profit for 2022 of US$17.3 million. The gross margin of 34.2% in 2023 compares to a gross margin of 27.6% in 2022.
The gross profit for the year ended December 31, 2022 reflected significant excess inventory and obsolescence charges of US$4.7 million recorded in Q3 2022, consisting of VTM inventory write down (US$3.5 million) Tri-stat inventory write down (US$0.3 million) and other inventory write downs (US$0.9 million). The remainder of the reduction in gross margin in the year ended December 31, 2023 compared to year ended December 31, 2022 is largely due to sales mix changes, inflationary increases in the price of raw materials which cannot always be passed onto customers in the form of higher prices due to contract terms.
Other operating income
Other operating income decreased from US$0.3 million for the year ended December 31, 2022 to US$0.1 million for the year ended December 31, 2023. The other operating income for 2023 relates to a transition services agreement with the acquirer of Fitzgerald Industries. The income for 2022 consisted of government grants in relation to R&D activities and there was no equivalent in 2023.
Research and development expenses
Research and development expenses increased from US$4.1 million for the year ended December 31, 2022 to US$4.4 million for the year ended December 31, 2023, an increase of 6% mainly due to lower capitalisation of payroll costs into product development intangible assets.
Selling, general and administrative expenses
Selling, general and administrative expenses increased for the year ended December 31, 2023 by US$4.2 million to US$31.2 million when compared to the year ended December 31, 2022, representing an increase of 15.5%. A significant element of the US$4.2 million increase relates to:
| i) | technical advisory, legal and professional fees were higher in 2023 compared to 2022 by US$1.6 million primarily due to costs associated with the acquisition of the biosensor assets of Waveform (which closed in January 2024) and other corporate development and corporate finance activities as we continue to assess strategic opportunities for inorganic growth and balance sheet optimization, |
| ii) | an increase of US$1.5 million in foreign exchange losses largely relating to the accounting requirement to mark to market euro-denominated lease liabilities for right-of-use assets, and |
| iii) | higher non-cash share-based payments expense of US$0.3 million mainly due to the full year effect of options granted in 2022. |
Impairment charges
Impairment charges increased from US$5.8 million for the year ended December 31, 2022 to US$11.1 million for the year ended December 31, 2023. There are a number of factors taken into account in calculating the impairment, including the Company’s period-end share price, calculation of the cost of capital, and future projected cash flows for individual cash-generating units in the business. In addition, the Group examines individual development project assets for indicators of impairment.
The impairment charges for the year ended December 31, 2023 relate to Immco Diagnostics Inc (US$10.8 million) and Trinity Biotech Do Brasil (US$0.3 million). As the Company has previously reported, Immco’s laboratory had for a number of years provided transplant testing services to a local healthcare provider. However, in early 2023 that healthcare provider informed Immco that it was moving to a different service provider, and this resulted in lost revenues for the laboratory beginning in the second quarter of 2023. Additionally, the expected level of laboratory services revenue arising from its proposed partnership with imaware, Inc (“imaware”) did not materialise. As a result, Immco’s value in use, defined as the present value of its future cash flows, fell below the value of the carrying amount of its assets, other than inventories, accounts receivable, cash and cash equivalents and deferred tax assets as at June 30, 2023 (US$10.7 million) and at December 31, 2023 (US$0.1 million).
Included within the Immco impairment is a full impairment of the financial assets associated with the Group’s investment in imaware. To date the Group has paid US$0.7 million of a proposed US$1.5 million investment to imaware. As the investment agreement provided for a total investment of US$1.5 million, this amount was recognised in the balance sheet as at March 31, 2023. Given the uncertainty over the future of imaware’s performance and thus the value of this investment, management decided to impair the entire US$1.5 million at June 30, 2023. The Group has not to date paid the additional US$0.8 million to imaware which remains on our balance sheet as an accrued payable.
Similarly, Trinity Biotech do Brasil’s value in use was below the value of its relevant assets, and an impairment was provided for as at June 30, 2023 (US$0.1 million) and as at December 31, 2023 (US$0.2 million).
The impairment charges for the year ended December 31, 2022 related to impaired intangible assets relating to R&D projects (US$4.6 million) and impairment losses identified for three cash generating units, namely Trinity Biotech Do Brasil (US$0.5 million), Clark Laboratories Inc. (US$0.4 million) and Biopool US Inc (US$0.4 million). For further details, see Item 18, Notes 11, 12, 13 and 17.
Operating Loss
Operating loss for the year ended December 31, 2023 was US$27.0 million, compared to an operating loss of US$19.3 million in the year ended December 31, 2022. The higher loss was mainly attributable to decreased revenues, lower other operating income, higher impairment charges and higher indirect costs, partly offset by a higher gross margin.
Financial expenses
Financial expenses in the year ended December 31, 2023 were US$11.1 million compared to US$24.7 million in the year ended December 31, 2022, a decrease of US$13.6 million, broken down as follows:
| | | Year ended December 31, 2023 | | | Year ended December 31, 2022 | |
| | | US$m | | | US$m | |
| Interest on senior secured term loan | | | 8.4 | | | | 9.8 | |
| Interest on convertible note | | | 1.1 | | | | 0.7 | |
| Penalty for early partial settlement of term loan | | | 0.9 | | | | 3.5 | |
| Lease interest | | | 0.6 | | | | 0.7 | |
| Loss on disposal of exchangeable notes | | | 0.0 | | | | 9.7 | |
| Interest on exchangeable notes | | | 0.0 | | | | 0.4 | |
| Other non-cash financial expense | | | 0.0 | | | | 0.1 | |
| Total | | | 11.1 | | | | 24.7 | |
Note: table above contains rounded numbers
The decrease of US$13.6 million in 2023 compared to 2022 is mainly due to two material expenses incurred in the year ended December 31, 2022, which were a loss of US$9.7 million on the disposal of the Exchangeable Notes and an early repayment penalty of just under US$3.5 million.
Interest on the senior secured term loan, comprising cash and non-cash interest, decreased from US$9.8 million in 2022 to US$8.4 million for 2023 mainly due to a lower term loan balance, although this was partly offset by the impact of higher prevailing interest rates during 2023. Interest on the convertible note, comprising cash and non-cash interest, increased from US$0.7 million in 2022 to US$1.1 million in 2023 due to the full year effect (the convertible note was issued in Q2 2022). An early repayment penalty of US$0.9 million was incurred in Q2, 2023 because of an early partial settlement of the term loan of US$10.1 million. Interest on the exchangeable notes decreased from US$0.4 million in 2022 to US$8,000 in 2023 because 99.7% of the exchangeable notes were retired during Q1, 2022.
Financial income
Financial income for the year ended December 31, 2023 was US$1.2 million compared to US$0.3 million for the year ended December 31, 2022. In both years, the financial income related to a fair value adjustment for the derivative liability related to warrants granted to the Group’s principal lender.
Income tax credit
The Company recorded a tax credit on continuing operations of US$59,000 for the year ended December 31, 2023 compared to a tax credit of US$0.2 million for the year ended December 31, 2022. The 2023 tax credit consists of approximately US$264,000 of current tax charge and US$323,000 of a deferred tax credit. The 2022 tax credit consists of US$280,000 of current tax credit and US$86,000 of a deferred tax charge. For further details on the Group’s tax charge please refer to Item 18, Note 7 and Note 14 to the consolidated financial statements.
Loss before tax from continuing operations
The loss before tax for continuing operations for the year ended December 31, 2023 was US$36.9 million, in comparison to US$43.8 million for the year ended December 31, 2022.
Profit from discontinued operations
The discontinued operations comprise Fitzgerald Industries which was divested in April 2023 and the discontinued cardiac point-of-care business on the Meritas platform. Profit for the period from discontinued operations totalled US$12.9 million, largely attributable to the gain of US$12.7 million on the divesture of Fitzgerald Industries. The gain comprises proceeds of approximately US$30 million offset by transaction costs of US$1.3 million with net assets eliminated on disposal of US$16.3 million. For further details, see Item 18, Note 8.
Year ended December 31, 2022 compared to the year ended December 31, 2021
Revenues
Our revenues from continuing operations for the year ended December 31, 2022 were US$62.5 million compared to revenues of US$81.1 million for the year ended December 31, 2021, which represents a decrease of US$18.6 million or 23.0%.
The decrease is mainly due to lower sales of our PCR Viral Transport Media (“VTM”) products. In 2020-21, demand for VTM products was very strong with demand exceeding supply due to a limited worldwide manufacturing capacity. As the pandemic persisted, manufacturing capacity ramped up significantly with a consequent negative impact on selling prices.
The following table sets forth selected sales data for each of the periods indicated.
| | | Year ended December 31, | | | | |
| | | | 2022 US$’000 | | |
| 2021 US$’000 | | | % Change | |
| Revenues – continuing operations | | | | | | | | | | | |
| Clinical laboratory goods | | | 46,036 | | | | 62,884 | | | | (26.8 | )% |
| Clinical laboratory services | | | 7,272 | | | | 7,928 | | | | (8.3 | )% |
| Point-of-Care | | | 9,213 | | | | 10,337 | | | | (10.9 | )% |
| | | | | | | | | | | | | |
| | | | 62,521 | | | | 81,149 | | | | (23.0 | )% |
Clinical Laboratory Goods
Clinical Laboratory goods revenues decreased by US$16.8 million in 2022, which represents a decrease of 26.8%. The decrease is mainly due to lower sales of our PCR VTM product. While the outlook relating to COVID-19 products remains unpredictable, the Company has retained the capability to flex manufacturing volumes should market conditions warrant it.
Partly offsetting the reduction in revenues from our PCR VTM products was a continued strong performance in our haemoglobins product line, particularly for our diabetes products which recorded a year-on-year revenue increase of 26.6%. The growth driver in this product line is the higher instrument installed base and continuing high incidence of diabetes, particularly in Asia and Latin America.
Autoimmune product revenues in 2022 recorded a slight decrease of US$0.2 million compared to 2021, mainly due to lower sales in Europe.
Clinical Laboratory Services
Revenues for the laboratory decreased by 8.3% to US$7.3 million. While revenues for our proprietary Sjogren’s syndrome test increased by 46%11% compared to 2020 these were2021 this was offset by a reduction in testing for other disorders due to fewer patients visiting their physicians for pandemic reasons and due to the ending of certain testing that was carried out for a high-volume customer.
Point-of-Care
Point-of-Care revenues increaseddecreased from US$9.2 million in 2020 to US$10.3 million in 2021 an increaseto US$9.2 million in 2022, a decrease of US$1.1 million or 12.0%10.9%. This was driven by higherdecrease reflected significant non-recurring bulk orders of HIV salestests from Nigeria in Africa. In 2020, HIV revenues were negatively impacted by logistical and testing constraints arising from COVID-19. Non-HIV point-of-care revenues, which mainly comprise a syphilis test sold in U.S., were broadly unchanged year on year.2021.
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
| | | Year ended December 31, | | | | | | Year ended December 31, | | | | |
| | |
| 2021 US$‘000 | | |
| 2020 | | | % Change | | |
| 2022 US$‘000 | | | | 2021 US$‘000 | | | % Change | |
| Revenues | | | | | | | | | | | | |
| Revenues – continuing operations | | | | | | | | | | | | |
| Americas | | | 57,799 | | | | 70,408 | | | | (17.9 | )% | | | 35,557 | | | | 52,779 | | | | (32.6 | )% |
| Asia/Africa | | | 25,504 | | | | 22,567 | | | | 13.0 | % | | | 20,401 | | | | 21,402 | | | | (4.7 | )% |
| Europe | | | 9,662 | | | | 9,005 | | | | 7.3 | % | | | 6,563 | | | | 6,968 | | | | (5.8 | )% |
| | | | | | | | | | | | | | |
| Total | | | 92,965 | | | | 101,980 | | | | (8.8 | )% | | | 62,521 | | | | 81,149 | | | | (23.0 | )% |
In the Americas, revenues decreased by US$12.617.2 million or 17.9%32.6% mainly due to decreased sales of our VTM products which were used in the Covid-19COVID-19 testing programs in U.S. and Canada. To a lesser extent, haemoglobin revenues were impacted by the recall of the Ultra II instrument in U.S. in the early part of 2021, following a FDA warning letter in the prior year.
In Asia/Africa, revenues increaseddecreased by 13.0%4.7%, or US$2.91.0 million compared to 2020.2021. The increasedecrease is mainly due i) to higherlower Point-of-Care revenues in Africa where logisticalreflecting significant non-recurring bulk orders of HIV tests from Nigeria in 2021 and testing constraints arose in 2020lower sales of infectious diseases products to China due to Covid-19strict public health quarantines which limited patients’ ability to visit hospitals and ii)clinics to get tested for diseases. This was largely offset by an increase in haemoglobins revenues as therein Asia. There was a returnparticularly strong demand for our diabetes products in Asia with year-on-year revenue growth of 36%. We continue to more normalscale our commercial coverage in these markets where the increase in the incidence of diabetes testing schedules in Chinaand propensity for haemoglobin variants was at some of its highest rates and our other Asian markets, in contrast to the disruptions that were seen in 2020 due to the pandemic.boronate affinity technology has a particular competitive advantage.
In Europe, revenues increaseddecreased by 7.3%US$0.4 million, or US$0.7 million,5.8% compared to 2020. The increase was due to higher haemoglobin A1c2021. There were decreased revenues for autoimmune and infectious diseases revenues inclinical chemistry products, with the territory, mainly due to more patients attending their doctorslatter being caused by supply chain issues for heath checks following the easinga key raw material which limited our production output of the public healthcare emergency. Similar to Asia/Africa, there was an increase inoxalate and G6PDH products. These decreases were largely offset by strong European demand for our haemoglobins instrument sales in Europe as customers that had postponed their instrument purchases in 2020 due to uncertainty created by the pandemic, returned to the market.products.
Cost of sales, gross profit and gross margin
Total cost of sales increaseddecreased by US$1.52.4 million from US$53.4 million for the year ended December 31, 2020 to US$54.947.7 million for the year ended December 31, 2021 an increaseto US$45.3 million, for the year ended December 31, 2022, a decrease of 2.8%5.1%. This resulted in a gross profit for 20212022 of US$38.117.3 million compared to a gross profit for 20202021 of US$48.633.5 million. TheOur gross margin of 41.0%was 27.6% in 2021 compares2022 compared to a gross margin of 47.6%41.2% in 2020. Gross margin remains susceptible to product mix changes, geographic spread, currency fluctuations2021.
The gross profit for the year ended December 31, 2022 reflects significant excess inventory and product level variation. obsolescence charges of US$4.7m recorded in Q3 2022, consisting of the following:
| i. | VTM inventory write down (US$3.5 million) – as disclosed previously, we did not see any evidence during the winter season of 2022-23 of significant peaks in demand for VTM products. This led management to revisit our strategy of maintaining significant levels of raw materials inventory to meet demand peaks. Consequently, the value of inventory was written down in Q3, 2022 to our estimate of its net realisable value. |
| ii. | Other inventory write down (US$0.9 million) - the value of certain excess raw materials and work in progress was written down in Q3, 2022 following a review and an update to our relevant quality assurance policy. |
| iii. | Tri-stat inventory write down (US$0.3 million) - as disclosed previously, we undertook a strategic review of our Tri-stat instrument line as part of a broader review of our haemoglobins product portfolio. Management decided to limit sales of Tri-stat to certain targeted partnerships and as a consequence the value of this inventory was written down to reflect the revised outlook. |
The remainder of the reduction in the gross margin in 2021the year ended December 31, 2022 compared to 2020year ended December 31, 2021 is mainlylargely due to comparativelysales mix changes, particularly the reduction in higher margin PCR VTM, inflationary increases in the price of raw materials and an under recovery of labour and overhead costs at three of our manufacturing facilities due to reduced production activity, partially driven by limited VTM production. To mitigate the impact of rising input costs, management implemented sales prices for VTM in 2020 caused by exceptionally high demand with prices and consequently gross margin reducing progressively during 2021. Lower margins were also recorded in our Fitzgerald life sciences supply business in 2021 compared to 2020 as we made a strategic decision to pursue larger volume orders that typically have lower pricing but are expected to add to overall profitability. Additionally, the receipt of government payroll supports in 2020 related to COVID-19 helped to increase the gross margin in 2020 and these supports were not claimed in 2021.price increases where appropriate.
Other operating income
Other operating income increaseddecreased from US$1.94.4 million in 2020the year ended December 31, 2021 to US$4.70.3 million in the year ended December 31, 2022. Other operating income in 2022 consist of government grants for R&D activities. In 2021, the US$4.4 million of Other operating income related to loan funding received in 2020 and 2021 under the U.S. government’s Paycheck Protection Program (“PPP”). Five PPP loans received by the Company in 2020-21, totalling US$4.4 million, were forgiven during year ended December 31, 2021 and were therefore recognised as income in 2021. In both years, this income almost entirely comprises incomeNo funding was received under the U.S. government’s Cares Act, principally its PPP and its Provider Relief Fund. All PPP loans receivedprogram in 2020 and in 2021 have now been 100% forgiven by the U.S. government. Four PPP loans received in 2020, but not forgiven until 2021, totalling US$2.9m, were treated as short-term liabilities atyear ended December 31, 2020.2022.
Research and development expenses
Research and development (“R&D”) expenditures decreasedexpenses declined from US$5.1 million in 2020 to US$4.5 million in 2021. Thethe year ended December 31, 2021 to US$4.1 million when compared to the year ended December 31, 2022, a decrease in costs in 2021 isof 8.0% mainly due to the closure of an R&D centre located in Carlsbad, California in June 2020. For details of the Company’s various R&D projects see “Research and Products under Development” below.our lower headcount.
Selling, general and administrative expenses
Selling, general and administrative (SG&A) expenses (excluding impairment charges, closure costs, recognition of contingent asset and tax settlement) decreasedincreased from US$26.4 million in 2020 to US$24.7 million in 2021, which represents a decrease of 6.5%. In 2020, selling, general and administrative expenses were unusually low due to certain non-recurring savings, principally the furloughing of employees because of the pandemic and government payroll supports related to COVID-19. Despite neither of these savings occurring in 2021, a reduction in costs was recorded due to a cost saving program which saw headcount reduced by 7%, as well as lower performance-related pay due to lower revenues. Additionally, in 2021 a foreign currency gain was recorded on Euro-denominated lease liabilities while the equivalent foreign currency movement in 2020 was a loss.
The Group recorded a total share-based payments charge of US$1.1 million in 2021 compared to US$0.8 million in 2020. The increase of US$0.322.5 million in the total share-based payments expense is mainly dueyear ended December 31, 2021 to a higher numberUS$27.0 million in the year ended December 31, 2022, an increase of options beingUS$4.5 million or 19.9%. The main reasons for this increase are as follows:
| o | The share-based payments expense was US$0.7m higher in 2022 compared to 2021, mainly due to share options granted during 2022. The majority of the options granted in 2022 are performance options and are structured such that they are exercisable only if the market price for Company’s ADSs exceeds certain levels ($15.00, $20.00 and $25.00 per ADS) during the life of the option. These performance share options align the goals of our team and our shareholders in the creation of shareholder value. |
| o | With the lifting of COVID-related travel restrictions, we tasked our sales and marketing teams to increase travel to customers and trade shows as we continued to revitalise our sales activities. Similarly, some key functional leaders based in Ireland resumed visits to our overseas facilities as we sought to drive operational efficiencies. All of this led to an approximately US$1.1 million increase in travel and promotional costs in 2022. |
| o | Due diligence and other legal and professional fees increased by approximately US$0.8 million in 2022 as we took an active, but disciplined, approach to pursuing a pipeline of attractive M&A opportunities. |
| o | Non-recurring professional fees, primarily associated with the debt refinancing, of US$0.6 million were expensed in 2022. |
| o | Increased expected credit loss on trade receivables, with the majority of the increase due to one distributor. |
| o | Higher recruitment fees in 2022 due to the hiring of senior management personnel. |
Impairment charges
We recognised impairment charges of US$5.8 million in their vesting period in 2021the year ended December 31, 2022, compared to 2020 due to options granted in prior years. Share based payments included in selling, general and administrative expenses was US$1.1 million in 2021 and US$0.8 million in 2020. For further details, refer to Item 18, Note 21 to the consolidated financial statements.
Amortisation decreased from US$1.46.9 million for the year ended December 31, 20202021.
It was determined that four internally developed products had a recoverable amount of zero and the total impairment charge for these was US$4.6 million. They comprise the following:
| o | Autoimmune smart reader (impairment charge US$1.3 million) - there is significant uncertainty whether the Company will complete the project to develop its own in-house autoimmune smart reader. While we may re-visit this decision in the future, in the interests of prudence we impaired the project’s carrying value. |
| o | Tri-stat instrument (impairment charge US$1.0 million) - following a strategic review of the Tri-stat instrument, it was decided that Tri-stat sales would be restricted to certain targeted partnerships, and this led to an impairment in the carrying value of the Tri-stat intangible asset. |
| o | COVID-19 antigen test on a rapid lateral flow format (impairment charge US$2.2 million) - this test was approved for professional use in the EU. However, the demand for our COVID-19 portfolio of products was highly uncertain and very difficult to predict and in our experience the market has moved to over the counter (“OTC”) rapid COVID-19 tests, for which this product was not approved. As such the Company’s efforts to commercialise this test were unsuccessful. In addition, pricing for rapid COVID-19 tests in the EU is relatively weak, with stronger pricing available in, for example, the U.S. market, for which this product is not yet approved. Given the market outlook for rapid COVID-19 testing products and continued uncertainty regarding regulatory approval pathways in key markets, including the U.S., management chose not to immediately pursue further regulatory approvals but does intend to monitor these markets and regulatory pathways with a view to potentially seeking additional regulatory approvals. As we have no imminent plans to pursue these regulatory approvals, under IFRS accounting rules these intangible assets were written down to zero. |
| o | COVID-19 test on an ELISA format (impairment charge US$0.1 million) – this development project was written off because the market changed and there was no demand for a test based on this format. |
The impairment test on our cash-generating units performed as at June 30, 2022, identified an impairment loss of US$0.5 million in two cash-generating units, namely Biopool US Inc and Trinity Biotech Do Brasil. The impairment test on our cash-generating units performed as at December 31, 2022 identified an impairment loss of US$0.7 million in two cash-generating units, namely Clark Laboratories Inc and Trinity Biotech Do Brasil. For further details, see Item 18, Notes 11, 12 and 17.
Operating Loss
Operating loss for the year ended December 31, 2022 was US$19.3 million, compared to an operating profit of US$0.93.9 million forin the year ended December 31, 2021. The decrease of US$0.5 million isreduction in profitability was mainly dueattributable to thedecreased revenues, lower gross margin, lower other operating income and higher indirect costs, partly offset by lower impairment recorded at December 31, 2020 which resulted in a lower carrying value for development projects and other intangible assets such as acquired technology, customer and supplier lists.charges.
Recognition of contingent asset56
Financial expenses
In 2019, we disclosed a contingent asset of US$1.2 million which had not been recognised. It wasFinancial expenses for current and comparative fiscal years are summarised in connection with the 2019 tax audit settlement and was payable by Darnick Company. This balance was settledtable below.
| | | | 2022 US$’000 | | | | 2021 US$’000 | |
| Loss on disposal of exchangeable notes | | | 9.7 | | | | - | |
| Penalty for early settlement of term loan | | | 3.5 | | | | - | |
| Term loan interest | | | 9.8 | | | | - | |
| Convertible note interest | | | 0.7 | | | | - | |
| Notional interest on lease liabilities for Right-of-use assets | | | 0.7 | | | | 0.8 | |
| Exchangeable note interest | | | 0.4 | | | | 4.6 | |
| Loan origination costs - term loan | | | - | | | | 1.6 | |
| Fair value movement for derivative asset | | | 0.1 | | | | - | |
| Total | | | 24.7 | | | | 7.1 | |
Note: table contains rounded numbers
Financial expenses in the year ended December 31, 20202022 were US$24.7 million compared to US$7.1 million in the year ended December 31, 2021, an increase of US$17.6 million. The increase is mainly due to two material non-recurring expenses incurred in 2022.
Firstly, we recorded a loss of US$9.7 million on the disposal of the exchangeable notes. In January 2022, we retired approximately US$99.7 million of the exchangeable notes. The accounting measure of total consideration for the retirement of the exchangeable Notes was US$92.9 million, consisting of cash consideration of US$86.7 million and was credited within selling, general and administrative expenses - recognitionthe issuance of contingent asset in 2020.ADSs with a market value at the date of issue of US$6.2 million. The underlying amount was denominated in Euro. Dueexchangeable notes were treated as a host debt instrument under IFRS with embedded derivatives attached. The embedded derivatives related to a depreciationnumber of put and call options which were measured at fair value in the US Dollar between 2019Consolidated statement of operations. On initial recognition in 2015, the host debt instrument was recognised at the residual value of the total net proceeds of the bond issue less fair value of the embedded derivatives. Subsequently, the host debt instrument was measured at amortised cost using the effective interest rate method. At date of disposal, the carrying value of the extinguished exchangeable notes was US$83.2 million. As the IFRS measure of consideration was higher by US$9.7 million, the resulting loss on disposal was recorded as a once-off charge in the consolidated statement of operations in the year ended December 31, 2022.
Secondly, the Company made an early partial settlement of the senior secured term loan of US$34.5 million and 2020,in accordance with the US Dollar equivalent amount increased fromTerm Loan’s credit agreement, there was an early repayment penalty of US$1.2 million to US$1.33.45 million.
Closure costs
In 2020, management decidedThe remaining increase in financial expenses is due to close a production facility in Carlsbad, Californiathe debt re-financing which specialised in Western Blot manufacturing. The last number of years had seen a steady migration of customers away from using the Western Blot testing format for diagnosing Lyme Disease in favour of alternative testing platforms. Production volumes declined steadilytook place at the plantend of January 2022. Exchangeable notes with a fixed coupon rate of 4.0% were replaced by a senior secured term loan with a variable interest rate, which averaged 13% in the year. Cash interest payable on the term loan in the year ended December 31, 2022 was US$7.0 million, compared to US$4.0 million for the extent that it no longer made economic sense to continue.exchangeable notes in the year ended December 31, 2021. The plant was closedaccretion interest on June 30, 2020. Production of remaining products was transferred to other locations. The charge for closing the facility in 2020senior secured term loan was US$2.42.8 million in the year ended December 31, 2022 and this includes a one-off charge of US$2.1 million because the Company made an early partial settlement of the Term Loan, which largely comprised redundancy costs,resulted in an acceleration of the write-off of inventoryaccretion interest expense. Additionally, there was a new convertible note issued in the second quarter and the cost of exiting lease obligations.
Impairment chargesfinancial expense for this instrument totaled US$0.7 million in 2022.
The Company recognized impairment charges ofFinancial income
Financial income for the year ended December 31, 2022 was US$6.9 million in 2021. In 2020, the impairment charges were US$17.8 million. In accordance with the provisions of accounting standards under IFRS, a company is required to carry out impairment reviews in order to determine the appropriate carrying value of its net assets. A number of factors impacted this calculation including cash flow projections and net asset values across each of the Group’s cash generating units, the Company’s share price at the date on which the impairment test is performed (in 2021, two tests were performed, one at June 30 and one at December 31) and the cost of capital. The impairment loss of US$5.0 million for Immco Diagnostics Inc. mainly comprised a write down of intangible assets. Trinity Biotech Do Brasil incurred an impairment loss of almost US$1.0 million (mainly comprising property, plant and equipment assets) in 2021 as this CGU continues to be impacted by the weakness of the Brazilian Real. Trinity Biotech Manufacturing Limited recorded an impairment loss of US$0.80.3 million, relating to one development project intangible asset. Biopool US Inc. incurred an impairment lossfair value adjustments of US$0.1 million in 2021, with a downward trend in non-Covid-19 related infectious disease revenues in U.S. being a major factor. For further details, see Item 18, Notes 13, 14 and 18.
Operating profit
The operating profit for continuing operations was US$6.6 million forderivative financial instruments. In the year which compares to an operating profit of US$0.1 million for 2020.
Net financing expenses
Net financing expense was US$5.9 million for the year-endended December 31, 2021, compared to US$6.7 million in 2020.
Financial income increased by US$1.2 million from US$0.04 million for the year-end December 31, 2020 to US$1.2 million in 2021. Thereof financial income was a decrease of US$33,000 in bank deposit interest mainly due to lower interest rates and an increase of US$1.2 million in the income arising from the revaluation of embedded derivatives at fair value.
Financial expenses increased by US$0.3 million to US$7.1 million during 2021 due to loan origination costs of US$1.7 million incurred in 2021recorded relating to the new term loan from Perceptive Advisors which was drawn downdecrease in 2022. Offsetting this an expensethe fair value of US$1.2 million which arose in 2020 from revaluation ofthe embedded derivatives at fair value. The equivalent revaluation in 2021 is a gainliability related to the exchangeable notes, the vast majority of which is recorded in financial income.has since been retired.
Income tax credit
The GroupCompany recorded a tax credit on continuing operations of US$0.2 million for the year ended December 31, 20212022 compared to a tax credit of US$0.60.1 million for the year ended December 31, 2020.2021. The 2022 tax credit consists of US$0.3 million of current tax credit and US$0.1 million of a deferred tax charge. The 2021 tax credit consists of US$0.20.1 million of current tax credit and US$0.04 million of a deferred tax charge. In 2020, the tax credit comprised US$0.4 million of current tax credit and US$0.2 million of a deferred tax credit. For further details on the Group’s tax charge please refer to Item 18, Note 97 and Note 1514 to the consolidated financial statements.
ProfitLoss from continuing operations
The profitloss for the year from continuing operations was US$0.943.6 million in 2022 compared to a loss of US$6.01.9 million in 2020.2021.
LossProfit from discontinued operations
The Cardiac Point-of-Care operation was discontinued during the year ended December 31, 2016. Expenses, gains and losses relating to the discontinuation of the CardiacFitzgerald Industries business (disposed in 2023) and the cardiac point-of-care tests operation (ceased in 2016) have been eliminated from profit or loss from the Group’s continuing operations and are shown as a single line item in the Statement of Operations. The lossprofit on discontinued operations iswas US$0.052.6 million in the year ended December 31, 2021, which is mainly due to administrative expenses. The loss on discontinued operations is2022 (2021: US$0.4 million in year ended December 31, 2020, which is mainly due to the unwinding of closure provisions and a change of estimate in relation to a tax receivable balance.2.7 million). For further details, see Item 18, Note 10.
Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
Revenues
Revenues by Product Line
Trinity Biotech’s revenues for the year ended December 31, 2020 were US$102.0 million compared to revenues of US$90.4 million for the year ended December 31, 2019, which represents an increase of US$11.6 million or 12.8%. The following table sets forth selected sales data for each of the periods indicated.
| | | Year ended December 31, | | | | |
| | |
| 2020 US$’000 | | | $ | 2019 | | | % Change | |
| Revenues | | | | | | | | | | | |
| Clinical laboratory goods | | | 84,280 | | | | 68,127 | | | | 23.7 | % |
| Clinical laboratory services | | | 8,485 | | | | 10,915 | | | | (22.3 | )% |
| Point-of-Care | | | 9,215 | | | | 11,393 | | | | (19.1 | )% |
| | | | 101,980 | | | | 90,435 | | | | 12.8 | % |
Clinical Laboratory Goods
Clinical Laboratory goods revenues increased by US$16.2 million in 2020, which represents an increase of 23.7%. The increase is mainly due to strong sales within our Covid-19 related portfolio of products, with our VTM products being the most significant contributor to revenue within that portfolio. Due mainly to the impact of Covid-19, revenues for Haemoglobins and Autoimmune products recorded decreases in 2020 compared to 2019. In our Haemoglobins business, revenues were affected by the deferral of Diabetes instrument purchases as healthcare resources were stretched by the pandemic. Autoimmune revenues were affected by fewer patients attending their doctors for consultations. Infectious Diseases revenues increased significantly due to the aforementioned Viral Transport Media sales, but this was partly offset by lower Lyme sales attributable to the continued migration away from Western Blot to other testing formats.
Clinical Laboratory Services
Our New York reference laboratory offers laboratory-testing services for autoimmune disorders, such as Sjogren’s syndrome, hearing loss, celiac disease, lupus, rheumatoid arthritis and systemic sclerosis. Revenues for the laboratory decreased by 22.3% to US$8.5 million due to lower testing volumes mainly on account of the pandemic.
Point-of-Care
Point-of-Care revenues decreased from US$11.4 million in 2019 to US$9.2 million in 2020, which is a decrease of US$2.2 million (-19.1%). This was driven by lower HIV sales in both the U.S. and Rest of World. The decline in the U.S. was attributable to the decision to exit this market in 2019, which had been in decline for a number of years, whilst Rest of World sales were lower due to logistical and testing constraints arising from Covid-19 in the second and third quarters, with normal trading patterns only being restored in the fourth quarter of 2020.
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
| | | Year ended December 31, | | | | |
| | | | 2020 US$‘000 | | | | 2019 US$‘000 | | | % Change | |
| Revenues | | | | | | | | | | | |
| Americas | | | 70,408 | | | | 52,183 | | | | 34.9 | % |
| Asia/Africa | | | 22,567 | | | | 27,686 | | | | (18.5 | )% |
| Europe | | | 9,005 | | | | 10,566 | | | | (14.8 | )% |
| Total | | | 101,980 | | | | 90,435 | | | | 12.8 | % |
In the Americas, revenues increased US$18.2 million or 34.9% mainly due to increased sales of our Viral Transport Media product which was used in the Covid-19 testing programs in USA and Canada. This increase was partly offset by (i) the decision to exit the HIV point-of-care testing market in USA during 2019, (ii) the continued migration of Lyme confirmatory testing away from Western Blot to alternative testing platforms and (iii) lower haemoglobins revenues due to the negative impact of Covid-19 in USA and Brazil and also due to a marked weakness in the Brazilian currency.
Asia/Africa revenues decreased by 18.5%, or US$5.1 million compared to 2019. The decrease is due i) to lower Point-of-Care revenues in Africa where logistical and testing constraints arose due to Covid-19 particularly in the second and third quarters and ii) a decrease in haemoglobins revenues as patients’ scheduled diabetes tests in China and our other Asian markets were cancelled or postponed due to government quarantine enforcement in response to the pandemic. Our haemoglobins customers also deferred their instrument purchases as healthcare resources were stretched by the pandemic.
In Europe, revenues decreased by 14.8% or US$1.6 million, compared to 2019. The decrease was due to lower haemoglobin A1c and infectious diseases revenues in the territory, mainly due to the reduction in patients attending their doctors for heath checks on account of the public healthcare emergency. Similar to Asia/Africa, there was a drop in haemoglobins instrument sales in Europe as customers postponed their instrument purchases due to uncertainty created by the pandemic.
Cost of sales, gross profit and gross margin
Total cost of sales increased by US$1.1 million from US$52.3 million for the year ended December 31, 2019 to US$53.4 million, for the year ended December 31, 2020, an increase of 2.1%. This resulted in a gross profit of US$48.6 million for 2020 compared to a gross profit of US$38.1 million for 2019. The gross margin of 47.6% in 2020 compares to a gross margin of 42.2% in 2019. This increase was largely due to the impact of strong sales within our Covid-19 related portfolio of products, fewer instrument placements (which are lower than average margin), lower depreciation and a range of cost saving measures implemented during the year.
Other operating income
Other operating income increased from US$0.09 million in 2019 to US$1.9 million in 2020. In 2020, other operating income mainly relates to funding received under the U.S. government’s Cares Act, principally its PPP. Two out of six PPP loans received by the Company were forgiven during the year. The four loans which remained unforgiven at year end, totaling US$2,905,000, are treated as short term liabilities at December 31, 2020. In 2019, other operating income mainly comprised the provision of canteen services to third parties in Ireland. Due to Covid-19 restrictions, these services were suspended in the second quarter of 2020.
Research and development expenses
R&D expenditure recorded in the Statement of Operations decreased from US$5.3 million in 2019 to US$5.1 million in 2020. The decrease in 2020 is due to cost saving measures implemented during the year including the furloughing of employees. For details of the Company’s various R&D projects see “Research and Products under Development” below.
Selling, General & Administrative expenses
Total selling, general and administrative expenses decreased by US$1.3 million from US$27.7 million for the year ended December 31, 2019 to US$26.4 million for the year ended December 31, 2020.
Selling, general and administrative expenses excluding share-based payments and amortisation decreased from US$24.6 million for the year ended December 31, 2019 to US$24.2 million for the year ended December 31, 2020, which represents a decrease of 1.4%. The decrease of US$0.4 million is mainly attributable to:
A range of cost saving measures implemented in response to the Covid-19 pandemic including the furloughing of employees in the second quarter of 2020, the receipt of government payroll subsidies, significantly reduced travel costs and the cancellation of trade shows and other marketing activities.
8.
Partially offsetting these savings were increased foreign currency losses mainly due to the re-translation of Euro-denominated lease liabilities for right-of-use assets and increased performance-related pay due to higher revenues and profits.
The share-based payments expense represents the fair value of share options granted to directors, employees and contractors, which is charged to the statement of operations over the vesting period of the underlying options. The Group has used a trinomial valuation model for the purposes of valuing these share options with the key inputs to the model being the expected volatility over the life of the options, the expected life of the option, the option price, the dividend yield and the risk-free rate. The Group recorded a total share-based payments charge of US$0.79 million (2019: US$0.76 million). The increase of US$0.03 million in the total share-based payments expense is mainly due to a higher number of options being in their vesting period in 2020 compared to 2019 due to options granted in 2020. The total charge is shown in the following expense headings in the statement of operations: US$0.01 million (2019: US$0.02 million) was charged against cost of sales and US$0.8 million (2019: US$0.7 million) was charged against selling, general & administrative expenses.
Amortisation decreased from US$2.4 million for the year ended December 31, 2019 to US$1.4 million for the year ended December 31, 2020. The decrease of US$1.0 million is due to the impairment recorded at December 31, 2019 which resulted in a lower carrying value for development projects and other intangible assets such as acquired technology, customer and supplier lists.
Selling, general and administrative expenses – recognition of contingent asset
In our financial statements for the year ended December 31, 2019, we disclosed a contingent asset of USD$1.2 million which had not been recognised. It was in connection with the 2019 tax audit settlement and was payable by Darnick Company. This balance was settled in the year ended December 31, 2020 and has been credited to the Statement of Operations within Selling, General and Administrative Expenses - recognition of contingent asset. The underlying amount was denominated in Euro. Due to a depreciation in the US Dollar since 2019, the US Dollar equivalent amount increased from US$1.2 million to US$1.3 million.
Selling, general and administrative expenses – tax audit settlement
In the year end December 31, 2019, a tax audit settlement of US$6.4 million arising in one of the jurisdictions in which the company operates was reached. The settlement consisted of US$3.9 million in relation to a patent dividend scheme, which had operated via Rayville Limited from 1995 to 2010, US$1.2 million in relation to payments for CEO Services made to Darnick Company (a company controlled by the family of Ronan O’Caoimh), and US$0.08 million in relation to R&D tax credits. Penalties were US$0.3 million. Interest charges were US$1.0 million and this is shown as a financial expense. The total settlement excluding interest of US$1.0 million was US$5.4 million and this was partially offset by an existing provision of US$0.4 million, resulting in an expense of US$5.0 million. There was no tax audit settlement charge recorded in the year end December 31, 2020.
Selling, general and administrative expenses – closure costs
In 2020, management decided to close a production facility in Carlsbad, California facility which specialised in Western Blot manufacturing. The last number of years had seen a steady migration of customers away from using the Western Blot testing format for diagnosing Lyme in favour of alternative testing platforms. Production volumes declined steadily at the plant to the extent that it no longer made economic sense to continue. The plant was closed on June 30, 2020. Production of remaining products was transferred to other locations in the Group. The charge for closing the facility was US$2.4 million which largely comprised redundancy costs, the write-off of inventory and the cost of exiting lease obligations.
Selling, general and administrative expenses - impairment charges
Impairment charges of US$17.8 million for the year ended December 31, 2020 are included in selling, general and administrative expenses. In 2019, the impairment charges were US$24.3 million. In accordance with the provisions of accounting standards under IFRS, a company is required to carry out annual impairment reviews in order to determine the appropriate carrying value of its net assets. A number of factors impacted this calculation including cash flow projections and net asset values across each of the Company’s cash generating units, the Company’s share price at December 31, 2020 and the cost of capital. Primus Corporation, which recorded an impairment loss of US$16.7 million in 2020, has been particularly impacted by the pandemic and changes to its product offering. Trinity Biotech Do Brasil also incurred a significant impairment loss in 2020 as this CGU continues to be impacted by the weakness of the Brazilian Real.
Net Financing Expense
Net financing expense was US$6.7 million for the year-end December 31, 2020 compared to US$5.9 million in 2019. Financial income decreased by US$0.7 million from US$0.7 million for the year-end December 31, 2019 to US$0.04 million in 2020. There was a decrease of US$0.4 million in bank deposit interest due to the lower cash deposits and lower interest rates and a decrease of US$0.2 million in the income arising from the revaluation of embedded derivatives at fair value.
Financial expenses increased by US$0.2 million to US$6.8 million during 2020 mainly due to an expense of US$1.2 million arising from revaluation of embedded derivatives at fair value, partly offset by non-recurring interest of US$1.0 million arising on a tax audit settlement in 2019.
Taxation
The Group recorded a tax credit on continuing operations of US$0.6 million for the year ended December 31, 2020 compared to a tax credit of US$1.0 million for the year ended December 31, 2019. The 2020 tax credit comprises US$0.5 million of current tax credit and US$0.2 million of a deferred tax credit. For further details on the Group’s tax charge please refer to Item 18, Note 9 and Note 15 to the consolidated financial statements.
Loss for the year from continuing operations
The loss for the year ended December 31, 2020 amounted to US$6.0 million, compared to a loss of US$29.0 million in 2019.
Discontinued operations
The Cardiac Point-of-Care operation was discontinued during the year ended December 31, 2016. Expenses, gains and losses relating to the discontinuation of the Cardiac point-of-care tests operation have been eliminated from profit or loss from the Group’s continuing operations and are shown as a single line item on the face of the Consolidated Statement of Operations.
The loss on discontinued operations was US$0.4 million in year ended December 31, 2020, which is mainly due to the unwinding of closure provisions and a change of estimate in relation to a tax receivable balance. The profit on discontinued operations was US$0.1 million in year ended December 31, 2019, which was mainly due to the release of Fiomi Diagnostic’s accumulated foreign currency translation reserve.
| B. | Liquidity and Capital Resources |
In 2021, the Group financed its operations mainly from internal sources in the form of existing cash resources and cash generated from operations. The only new external financing received in 2021 came from government-backed Covid-19 loans received by our U.S. subsidiaries.
The Group’s capital structure is a mixture of debt and equity. The Group maintains a relationship with a number of lending banks. In 2021,February 2023, we announced that we had entered into an amended and restated senior secured term loan credit facility to allow for an immediate US$5 million increase to the outstanding term loan. In April 2023, we announced that we had closed the sale of our Fitzgerald Industries life sciences supply business, for cash proceeds of approximately US$30 million subject to customary adjustments. We used approximately US$11 million of the proceeds of this sale to repay approximately US$10.1 million of the senior secured debt consisted of exchangeable notes, finance leases and government-backed Covid-19 loans.held by Perceptive plus we incurred an approximately US$0.9 million early repayment penalty.
Exchangeable Notesnotes
The Group originally issued US$115.0 million of 30-year exchangeable senior notes in 2015. The notes are senior unsecured obligations and accrue interest at an annual rate of 4%, payable semi-annually in arrears. In August 2018, the Group purchased US$15.1 million of the exchangeable notes. The nominal amount of the debt since this purchase hashad been US$99.9 million. The notes are convertible into ordinary shares of the parent entity at the applicable exchange rate, at any time prior to the close of business on the second business day immediately preceding the maturity date, at the option of the holder, or repayable on April 1, 2045. The conversion rate is 47.1129.422 ADSs per $1,000US$1,000 principal amount of notes, equivalent to an exchange price of approximately $21.88US$109.40 per ADS. In February 2024, the Company adjusted its ADS ratio from 1 ADS: 4 ordinary shares to 1 ADS: 20 ordinary shares. The ADS amounts in this paragraph reflect this change. The notes include a number of non-financial covenants, all of which were complied with at December 31, 2021.2023.
In December 2021, Trinity Biotechwe entered into agreements with five holders of the exchangeable notes for the repurchase of approximately 99.7% of the outstanding notes. The agreements were conditioned on certain lending conditions being met and required shareholder approval, which was obtained in January 2022. In January 2022, the Companywe paid approximately US$86.7 million to the five note holders, using funds from a new term loan from Perceptive Advisors and the Company’sour own cash resources. ItWe also issued a total of 5.31.06 million ADSs to the five note holders as partial consideration for the exchange of the notes. The remaining outstanding amount owing for exchangeable notes at December 31, 2023 was US$210,000.
Term loan with Perceptive Advisors
In December 2021, the Company and its subsidiarieswe entered into a US$81.3 million senior secured term loan credit facility (the “Term Loan”) with Perceptive Advisors (“Perceptive”), an investment manager with an expertise in healthcare.Perceptive. The Term Loanterm loan was drawn down in January 2022, when the necessary shareholder approvals were obtained.
2022. The 48-month term loan will mature in January 2026 and accruesinitially accrued interest at an annual rate equal to 11.25% plus the greater of (a) one-month LIBOR (later changed to the Term SOFR Reference Rate effective from October 28, 2022) and (b) one percent per annum, and interest is payable monthly in arrears in cash. The term loan does not require any amortization, and the entire unpaid balance will be payable upon maturity. The term loan can be repaid, in part or in full, at a premium before the end of the four-year term.
In connection with the Term Loan the Companyterm loan, we agreed to issue warrants to Perceptive for 2.5 million500,000 of the Company’sour ADSs. The per ADS exercise price of the Warrants iswas US$1.30.6.50 (subsequently amended in 2023 and again in 2024). The warrants are exercisable, in whole or part, until the seventh anniversary of the date of drawdown of the funding under the Term Loan.term loan.
The re-financingCompany made an early partial settlement of the exchangeable notes in early 2022 improved the Group’s capital structure by reducing gross debt by approximately US$19 million with the Group having no material debt maturities until 2026. In addition, the fact that the term loan can be repaid,of US$34.5 million in part orMay 2022 and in full, beforeaccordance with the endterm loan’s credit agreement, there was an early repayment penalty of US$3.45 million. In February 2023, we announced that we had entered into an amended and restated senior secured term loan credit facility to allow for an immediate US$5 million increase to the outstanding Term Loan. In April 27, 2023, we used approximately US$11 million of the four-year term should allowproceeds of the Group increased optionality regarding its future capital structure.sale of Fitzgerald Industries to repay approximately US$10.1 million of the senior secured debt held by Perceptive plus an approximately US$0.9 million early repayment penalty.
Government-backed Covid-19 loans
To mitigateThe outstanding amount owing for the financial impact of the Covid-19 outbreak, the Company has availed of governmental supports. In 2020, the Company received US$4.5 million of Paycheck Protection Program (“PPP”) loans and in 2021, a further US$1.8 million of PPP loans were received. All of the loans received under the program have been forgiven by the U.S. government before December 31, 2021 and therefore no liability for these loans existsterm loan at December 31, 2021.2023 is US$41.7 million.
In 2020,January 2024, we closed the acquisition of the Waveform CGM assets and liabilities and in connection with that acquisition, we drew down additional funding from Perceptive of US$22 million under an amended Credit Agreement. The amended Credit Agreement also provided for a further US$6.5 million facility that may be drawn down by the Company received an interest-freebetween April and December 2024. In April 2024 the Company drew down the additional funding of US$6.5 million as prescribed in the Amended Term Loan agreement. This funding will be used for general corporate purposes, including the further development of our CGM offering.
The amended agreement also immediately reduced the annual rate of interest on the loan by 2.5% to 8.75% (the “Base Rate”) plus the greater of CAD$0.04 million (US$0.03 million)(a) Term Secured Overnight Financing Rate (SOFR) or (b) 4.0% per annum, and allows for a further 2.5% reduction in the Base Rate to 6.25% once the outstanding principal under the Canada Emergency Business Account (“CEBA”). The CEBA loans were provided byAmended Term Loan falls below $35 million. Additionally, the Canadian Governmentearly repayment penalty was reduced from a range of 8% to mitigate7% to 4.0% to 3.5%, dependent on timing of early repayment, and reduces the financial impact of the Covid-19 outbreak. This interest-free loan is repayable by December 31, 2022.revenue covenants.
Investment from MiCo IVD Holdings, LLC
In May 2022, the Company announced a US$45.2 million investment from MiCo IVD Holdings, LLC. The investment consisted of an equity investment of US$25.2 million and a seven-year, unsecured junior convertible note of US$20.0 million. The convertible note has an interest rate of 1.5% and interest is payable quarterly. The convertible note mandatorily converts into ADSs if the volume weighted average price of our ADSs is at or above US$12.96 for any five consecutive NASDAQ trading days.
Leases
The Group entered into sale and leaseback arrangements in 2018 with Allied Irish Bank and Wells Fargo. At December 31, 2021,In January 2022, the amount owed under saleGroup settled its outstanding lease liability with Allied Irish Bank. During 2023, the lease term on the Wells Fargo agreement came to an end and leaseback arrangementsthe lease was US$0.2 million.not renewed. The Group also has lease liabilities relating to right-of-use assets with lease maturities between 1 and 1210 years.
Cash and cash equivalents
At December 31, 2021,2023, the cash and cash equivalents balance was US$25.93.7 million. In the future, the amount of cash generated from operations will depend on a number of factors which include the following:
The ability of the Group to continue to generate revenue growth from its existing product lines and from new products following the successful completion of its development projects;
The ability of the Group to mitigate the negative impacts of the Covid-19 pandemic and maximize the opportunities to sell our Covid-19 related portfolio of products;
The extent to which capital expenditure is incurred on additional property plant and equipment;
The level of investment required to undertake both new and existing development projects; and
• Successful working capital management in the context of a growing business.
Liquidity
In the Directors’our directors’ opinion, the Groupwe will have access to sufficient funds to support its existing operations for at least the next 12 months by utilising existing cash resources and cash generated from operations and external financing. The directors have considered the Group’s current financial position and cash flow projections, taking into account all known events and developments includingdevelopments.
We have incurred net losses and negative cash flows from operating activities in the Covid-19 pandemicpast two years and we may not be able to achieve or maintain profitability or positive cash flow in the pendingfuture. We have incurred losses of US$24.0 million and US$41.0 million in the years ended December 31, 2023 and 2022, respectively and had negative cash flows from operating activities of US$11.6 million and US$921 thousand, respectively.
We expect to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate cash flows from operations and to conduct adequate financing activities. We believe that we have access to sufficient cash reserves for our operating needs for at least the next twelve months from the MiCo Group.date of this Annual Report. However, if negative cash flow from operating activities persists in the long run, cash resources may become insufficient to satisfy our on-going cash requirements.
Additional funding may not be available on acceptable terms, or at all. In April 2022, the Company announced a US$45.0 million strategic investment and partnership with the MiCo Group, a KOSDAQ-listed company. The investment is subjectaddition, we may not be able to customary Korean central bank approvals. The investment consists of an equity investment of approximately US$25.2 million (11.2 million ADSs at a price of US$2.25 per ADS) and a seven-year, unsecured junior convertible note issued by Trinity Biotech of US$20 million, with a fixed interest rate of 1.5% and an ADS conversion price of US$3.24 per ADS. The convertible note mandatorily converts into ADS if the volume weighted average price of the Company’s ADSs is at or above US$3.24 for any five consecutive NASDAQ trading days.
It is intended that the Company will use these funds primarily to repayaccess a portion of our existing cash, cash equivalents and investments due to market conditions. Further, as a result of geopolitical and macroeconomic events, including the Group’s US$81.25 million term loan. The Company also expectsIsrael-Hamas and Russia-Ukraine wars, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly or more dilutive.
Expansion into new businesses may present operating and marketing challenges different from those we currently encounter, and we cannot assure that this investmentnew business initiatives will facilitate it exploring lower cost debt funding options, inbe successful enough to justify the short-term, with the aim of further reducing the company’s interest expense through refinancing the balance of the Company’s term loan at substantially lower interest rates.time, effort, and resources that we devote to them or ultimately achieve profitability.
Cash Flows
As at December 31, 2021,2023, our consolidated cash and cash equivalents were US$25.93.7 million. Our cash and cash equivalents consist primarily of cash in bank accounts and short-term deposits.
The following table presents the major components of net cash flows used in and provided by operating, investing and financing activities.
| | | Year ended December 31, | |
| | | | 2021 US$‘000 | | | | 2020 US$‘000 | |
| Net cash inflow from operating activities | | | 13,238 | | | | 23,755 | |
| Net cash outflow from investing activities | | | (8,691 | ) | | | (10,198 | ) |
| Net cash outflow from financing activities | | | (6,019 | ) | | | (2,716 | ) |
| Net (decrease)/increase in cash and cash equivalents and short-term investments | | | (1,472 | ) | | | 10,841 | |
| | | Year ended December 31, | |
| | | | 2023 US$‘000 | | |
| 2022 US$‘000 | |
| Net cash used in operating activities | | | (11,557 | ) | | | (921 | ) |
| Net cash inflow / (outflow) from investing activities | | | 24,756 | | | | (5,977 | ) |
| Net cash outflow from financing activities | | | (16,042 | ) | | | (12,322 | ) |
| | | | | | | | | |
| Net decrease in cash and cash equivalents and short-term investments | | | (2,843 | ) | | | (19,220 | ) |
Operating Activities
Net cash generated fromused in operating activities for the year ended December 31, 20212023 amounted to US$13.211.6 million (2020:(2022: US$23.80.9 million), a decrease in cash generated of US$10.510.6 million. The decrease in net cash generated from operating activities of US$10.510.6 million is attributable to an increase in working capital outflows of US$4.8 million and a decrease in operating cash flows before changes in working capital of US$8.29.9 million and an increase in working capital outflows of US$1.0 million, partially offset by a decreasean increase in interest and taxes paidreceived of US$2.50.3 million. The decrease in operating cash flows before changes in working capital is primarily driven by a lowerhigher operating profit before impairment losses during the current financial year compared with an operating loss before impairment losses during the prior year. The working capital outflow increase, when compared to the prior year, is due to an increase outflow in trade and other payables of US$12.5 million partially offset by an increase in cash inflows for trade and other receivables of US$8.7 million and increase in cash outflows for inventories of US$1.0 million.year.
Investing Activities
Net cash outflowsinflows from investing activities for the year ended December 31, 20212023 amounted to US$8.724.8 million (2020:(2022: US$10.26.0 million) which were principally made up as follows:
Payments to acquire intangible assets of US$6.91.9 million (2020:(2022: US$7.04.9 million), which principally related to development expenditure capitalised as part of the Group’s on-going product development activities; and
Payments to acquire financial assets of US$0.7 million (2022: Nil), which relates to an investment in imaware Inc, which was subsequently fully impaired;
Acquisition of property, plant and equipment of US$1.80.8 million (2020:(2022: US$3.21.1 million) incurred as part of the Group’s investment programme for its manufacturing and distributing activities,activities; and, placement
Proceeds from the sale of instruments.a business of US$28.2 million (2022: Nil), which solely relates to the proceeds (net of transactions costs) from the sale of Fitzgerald Industries.
Financing Activities
Net cash outflows from financing activities for the year ended December 31, 20212023 amounted to US$6.016.0 million (2020: outflows of(2022: US$2.712.3 million). This outflow is due to the partial early repayment of the term loan US$10.1 million, plus early payment penalty of US$0.9 million, payments for lease liabilities (US$3.0 million) and anof US$2.3 million, interest payment on the exchangeable notes (US$4.0 million), refinancing costs (US$0.8m) partiallypayments of US$7.6 million, partly offset by the receiptdraw down of loans in 2021 under the U.S. government’s PPP (US$1.8 million).term loan of US$5.0 million. In 2020,2022 the net outflow was duerelated to the payment of lease liabilities (US$3.2 million), an interest payment onUS$86.7 million for the retirement of the exchangeable notes, (US$4.0 million) and partiallythe partial early settlement of the term loan plus a penalty of US$38.0 million, payments for lease liabilities of US$2.8 million, interest payments of US$7.9 million, refinancing costs US$2.4 million, partly offset by proceeds of issuance of shares of US$25.3 million and the receiptdraw down of loans in 2020 under the U.S. government’s PPP (US$4.5 million).term loan of US$80.0 million (net of associated costs) and proceeds of US$20 million from the convertible note issued to MiCo.
C. Research and Development, Patents and Licences, etc.
| C. | Research and Development, Patents and Licences, etc. |
For information on research and development, patents and licences see “Item 4. Information on the Company—Item 4.B Business overview.”
D.
For a discussion of trends, see Item 4.B—Business Overview, Item 5.A—Operating Results and Item 5.B—Liquidity and Capital Resources.
The Group’s revenues decreased in 2021 mainly due to lower demand and selling prices for PCR VTM products compared to 2020 when there was exceptional demand due to limited worldwide manufacturing capacity. As the pandemic has persisted, manufacturing capacity has ramped up significantly with a consequent negative impact on selling prices in 2021.
| E. | Critical Accounting Policies and Estimates |
In 2020, most of our product lines were negatively impacted by the Covid-19 pandemic. Our business relies on people attending hospitals and clinics with ailments that need to be diagnosed through testing. Due to quarantine restrictions and peoples’ fear of catching Covid-19, there was a marked decrease in 2020 in people attending hospitals and clinics. Haemoglobins revenues reduced for both instruments and consumables with the impact being greater on diabetes (A1c) rather than on haemoglobin variant revenues. In autoimmunity, testing volumes were particularly impacted at our reference laboratory in Buffalo, New York but there were also lower product sales in all major markets. HIV revenues in Africa were negatively impacted by logistical and testing constraints arising from COVID-19.
In 2021, there was an easing of quarantine restrictions and vaccination programs gave patients the confidence to visit their doctors again. For this reason, on a product-for-product basis, revenues outside of our Covid-19 product portfolio returned to near pre-pandemic levels in 2021.
The outlook for our Covid-19 related portfolio of products is unpredictable and will depend on numerous factors, including but not limited to, the future duration and extent of the pandemic and public health policies regarding Covid-19 testing protocols. Outside of our Covid-19 related portfolio of products, there has been a partial recovery since the second half of 2020 and this continued into 2021. We have seen some growth in other products beyond pre-pandemic levels, in particular our Sjögrens laboratory test and we expect this to continue. Overall, our business remains susceptible to the impact of COVID-19 and associated public health measures which makes it difficult to predict the future trends at this point.
E. Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with IFRS. The preparation of these financial statements requires us to make estimates and judgements that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, we evaluate our estimates, including those related to intangible assets, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the critical accounting policies described below reflect our more significant judgements and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
The Group recognises revenue when it transfers control over a good or service to a customer. Revenue is recognised to the extent that it is probable that economic benefit will flow to the Group and the revenue can be measured. No revenue is recognised if there is uncertainty regarding recovery of the consideration due at the outset of the transaction. Revenue, including any amounts invoiced for shipping and handling costs, represents the value of goods and services supplied to external customers, net of discounts and rebates and excluding sales taxes.
The core principle in IFRS 15 is a five-step model framework: 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract and 5) recognise revenue when (or as) the entity satisfies a performance obligation.
Revenue from products is generally recorded as of the date of shipment, consistent with typical ex-works shipment terms. Where the shipment terms do not permit revenue to be recognised as of the date of shipment, revenue is recognised when the Group has satisfied all of its performance obligations to the customer in accordance with the shipping terms.
Some contracts oblige the Group to ship product to the customer ahead of the agreed payment schedule. For these shipments, a contract asset is recognised when control over the goods has transferred to the customer. The financing component is insignificant as invoicing for these shipments occurs within a short period of time after shipment has occurred and typically standard 30 day30-day credit terms apply. Some contracts could be regarded as offering the customer a right of return. Due to the uncertainty of the magnitude and likelihood of product returns, there is a level of estimation involved in assessing the amount of revenue to be recognized for these typetypes of contracts. In accordance with IFRS 15, when estimating the effect of an uncertainty on an amount of variable consideration to which the Group will be entitled, all information that is reasonably available, including historical, current and forecast, is considered.
The Group operates a licenced referenced laboratory in the US,U.S. which provides testing services to institutional customers and insurance companies. In the US,U.S., there are rules requiring all insurance companies to be billed the same amount per test. However, the amount that each insurance company pays for a particular test varies according to their own internal policies and this can typically be considerably less than the amount invoiced. We recognise lab services revenue for insurance companies by taking the invoiced amount and reducing it by an estimated percentage based on historical payment data. We review the percentage reduction annually based on the latest data. As a practical expedient, and in accordance with IFRS, we apply a portfolio approach to the insurance companies as they have similar characteristics. We judge that the effect on the financial statements of using a portfolio approach for the insurance companies will not differ materially from applying IFRS 15 to the individual contracts within that portfolio.
Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the transaction at the balance sheet date.
The Group leases instruments to customers typically as part of a bundled package. Where a contract has multiple performance obligations and its duration is greater than one year, the transaction price is allocated to the performance obligations in the contract by reference to their relative standalone selling prices. For contracts where control of the instrument is transferred to the customer, the fair value of the instrument is recognised as revenue at the commencement of the lease and is matched by the related cost of sale. Fair value is determined on the basis of standalone selling price. In the case where control of the instrument does not transfer to the customer, revenue is recognised on the basis of customer usage of the instrument. See also Note 1(v).
In obtaining these contracts, the Group incurs a number of incremental costs, such as sales bonus paid to sales staff, commissions paid to distributors and royalty payments. As the amortisation period of these costs, if capitalised, would be less than one year, the Group makes use of the practical expedient in IFRS 15.94 and expenses them as they incur.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision, see Note 2322 for details.
Research and development expenditures -capitalized– capitalized development costs
Under IFRS as issued by IASB, we write-off research and development expenditures as incurred, with the exception of expenditures on projects whose outcome has been assessed with reasonable certainty as to technical feasibility, commercial viability and recovery of costs through future revenues. Such expenditure is capitalised at cost within intangible assets and amortised over its expected useful life of 15 years, which commences when the product is launched.
Acquired in-process research and development (IPR&D) is valued at its fair value at acquisition date in accordance with IFRS 3. The Company determines this fair value by adopting the income approach valuation technique. Once the fair value has been determined, the Company will recognise the IPR&D as an intangible asset when it: (a) meets the definition of an asset and (b) is identifiable (i.e., is separable or arises from contractual or other legal rights). IPR&D is tested for impairment on an annual basis, in the fourth quarter, or more frequently if impairment indicators are present, using projected discounted cash flow models. If IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is written down to its revised fair value with the related impairment charge recognised in the period in which the impairment occurs. If the fair value of the asset becomes impaired as the result of unfavourable data from any ongoing or future clinical trial, changes in assumptions that negatively impact projected cash flows, or because of any other information regarding the prospects of successfully developing or commercialising our programs, we could incur significant charges in the period in which the impairment occurs. The valuation techniques utilised in performing impairment tests incorporate significant assumptions and judgments to estimate the fair value, as described above. The use of different valuation techniques or different assumptions could result in materially different fair value estimates.
Factors which impact our judgement to capitalise certain research and development expenditure include the degree of regulatory approval for products and the results of any market research to determine the likely future commercial success of products being developed. We review these factors each year to determine whether our previous estimates as to feasibility, viability and recovery should be changed. At December 31, 20212023 the carrying value of capitalised development costs was US$17.715.1 million (2020:(2022: US$13.417.0 million) (see Item 18, Note 1412 to the consolidated financial statements). The increasedecrease in 20212023 was mainly due to impairment charges of US$2.9 million and amortization of US$0.8 million partly offset by additions of US$6.81.8 million.
Impairment of intangible assets and goodwill
Definite lived intangible assets are reviewed for indicators of impairment periodically while goodwill and indefinite lived assets are tested for impairment periodically, either individually or at the cash generatingcash-generating unit level. Factors considered important, as part of an impairment review, include the following:
Significant underperformance relative to expected, historical or projected future operating results;
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
Obsolescence of products;
Significant decline in our stock price for a sustained period; and
Our market capitalisation relative to net book value.
When we determine that the carrying value of intangibles, non-current assets and related goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, any impairment is measured based on our estimates of projected net discounted cash flows expected to result from that asset, including eventual disposition. Our estimated impairment could prove insufficient if our analysis overestimated the cash flows or conditions change in the future.
Goodwill and other intangibles are subject to impairment testing on a periodic basis. The recoverable amount of our seven cash generatingcash-generating units (“CGUs”) is determined based on a value-in-use computation. Among other macroeconomic considerations, the impact of the COVID-19 pandemic has been factored into our impairment testing.
The value-in-use calculations use cash flow projections based on the 20222024 projections for each CGU and a further four years projections using estimated revenue and cost average growth rates of between 0% and 5%. At the end of the five yearfive-year forecast period, terminal values for each CGU, based on a long term growth rate of 2%, are used in the value-in-use calculations. The value-in-use represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to each CGU. The pre-tax discount rates used range from 15% to 22% (2022: 16% to 25% (2020: 16% to 44%24%). Refer to Item 18, Note 1412 for further information.
The cash flows have been arrived at taking into account the Group’s financial position, its recent financial results and cash flow generation and the nature of the medical diagnostic industry, where product obsolescence can be a feature. However, expected future cash flows are inherently uncertain and are therefore liable to material change over time. The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing are subjective and include projected EBITDA margins, net cash flows, discount rates used and the duration of the discounted cash flow model. Significant under-performance in any of the Group’s major CGUs may give rise to a material impairment which would have a substantial impact on the Group’s income and equity.
The impairment testing performed duringImpairment charges increased from US$5.8 million for the year ended December 31, 2021 identified an2022 to US$11.1 million for the year ended December 31, 2023. The impairment loss in four CGUs, namely Trinity Biotech Manufacturing Limited, Biopool US Inc,charges for the year ended December 31, 2023 relate to Immco Diagnostics,(US$10.8 million) and Trinity Biotech Do Brasil totalling US$6.9 million.
The impairment loss(US$0.3 million). Immco’s laboratory has for a number of US$5.0 millionyears provided transplant testing services to a local healthcare provider. However, in early 2023 that healthcare provider informed Immco that it was moving to a different service provider, and this resulted in lost revenues for Immco Diagnostics Inc. mainly comprised a write downthe laboratory beginning in the second quarter of intangible assets. Trinity Biotech Do Brasil incurred an impairment loss of almost US$1.0 million (mainly comprising property, plant and equipment assets) in 2021 as this CGU continues to be impacted by the weakness of the Brazilian Real. Trinity Biotech Manufacturing Limited recorded an impairment loss of US$0.8 million relating to one development project intangible asset. Biopool US Inc. incurred an impairment loss of US$0.1 million in 2021, and as in 2020 a downward trend in non-Covid-19 related infectious disease revenues in U.S. was a major factor in this impairment. For further details, see Item 18, Notes 13, 14 and 18.
In 2020, Primus Corporation, which recorded an impairment loss of US$16.7 million in 2020, was significantly impacted by the pandemic and changes to its product offering.2023. The impairment loss for Primus mainly comprisedthe financial asset of US$1.5 million also relates to Immco’s laboratory. The Group invested US$1.5 million in a write downstrategic partnership with imaware Inc (“imaware”) that aimed to combine their built-to-partner digital health platform with Trinity Biotech’s advanced reference laboratory facilities to power the Digital Health Industry with at-home and remote testing programs. Given the uncertainty over the future of intangible product developments assets. Trinity Biotech Do Brasil incurredimaware’s performance and the value of this investment, the Group recognised an impairment loss for the investment of US$0.91.5 million (mainly comprising property, plantin the year ended December 31, 2023 and equipment assets)this impairment loss was recorded in 2020Trinity Biotech Manufacturing Ltd as this was the CGU continues to be impacted bythat made the weakness of the Brazilian Real. Biopool US Inc. incurred an impairment loss of US$0.2 million in 2020, with a downward trend in non Covid-19 related infectious disease revenues in U.S. being a major factor.investment.
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements and the following sensitivity analysis has been performed:
In the event that there was a reduction of 10% in the assumed level of future growth in revenue growth rate, which would represent a reasonably likely range of outcomes, there would be no additional impairment loss recorded at December 31, 2021.2023.
In the event there was a 10% increase in the discount rate used to calculate the potential impairment of the carrying values, which would represent a reasonably likely range of outcomes, there would be no additional impairment loss recorded at December 31, 2021.2023.
62In year ended December 31, 2022, impairment loss was identified for three CGUs and, there were also specific impairment charges recorded to write down the carrying value of four development projects to zero. These were recorded in intangible assets. The four impairments related to the Tri-stat instrument (US$1.0 million impairment charge), autoimmune smart reader (US$1.3 million), COVID-19 ELISA format assay (US$0.1 million) and COVID-19 rapid antigen test (US$2.2 million). Refer to Item 18, Note 12 for further information.
Allowance for slow-moving and obsolete inventory
We evaluate the realisability of our inventory on a case-by-case basis and make adjustments toadjust our inventory provision based on our estimates of expected losses. We write off inventory that is approaching its “use-by” date and for which no further re-processing can be performed. We also consider recent trends in revenues for various inventory items and instances where the realisable value of inventory is likely to be less than its carrying value. Given the allowance is calculated on the basis of the actual inventory on hand at the particular balance sheet date, there were no material changes in estimates made during 2021, 20202023, 2022 or 20192021 which would have an impact on the carrying values of inventory during those periods, except as discussed below. At December 31, 20212023 our allowance for slow moving and obsolete inventory was US$12.111.3 million which represents approximately 29.29%36.3% of gross inventory value. This compares with US$9.8 million, or approximately 24.45% of gross inventory value, atAt December 31, 2020 and US$6.7 million, or approximately 17.33% of gross inventory value, at December 31, 2019 (see Item 18, Note 17 to the consolidated financial statements). The estimated2022 our allowance for slow moving and obsolete inventory as a percentagewas US$16.3 million, which represented approximately 42.0% of gross inventory value and at December 31, 2021 the provision was US$12.1 million, or approximately 29.3% of gross inventory value (see Item 18, Note 16 to the consolidated financial statements).
The allowance for slow moving and obsolete inventory has increaseddecreased by US$5 million between 20212022 and 20202023 primarily due to declining demand for old and discontinued products and some Covid-19 specific products, andthe disposal of Fitzgerald Industries, with slight off-set as a result of an increase in the obsolescence rateprovision for product inventoryVTM products due to a reductionfall-off in demand, for certain products which has been partly impacted by Covid-19. In the case of raw materials and workdue to additional provisioning in progress, the size of the provision has been based on expected future production of these products. relation to Tri-stat inventory.
Management is satisfied that the assumptions made with respect to future sales and production levels of these products are reasonable to ensure the adequacy of this provision. In the event that the estimate of the provision required for slow moving and obsolete inventory was to increase or decrease by 2% of gross inventory, which would represent a reasonably likely range of outcomes, then a change in allowance of US$0.80.6 million at December 31, 2021 (2020:2023 (2022: US$0.8 million) (2019:(2021: US$0.8 million) would result.
Allowance for impairment of receivables
We make judgements as to our ability to collect outstanding receivables and where necessary make allowances for impairment. Such impairments are made based upon a specific review of all significant outstanding receivables. In determining the allowance, we analyse our historical collection experience and current economic trends in assessing the expected credit loss. If the historical data we use to calculate the allowance for impairment of receivables does not reflect the future ability to collect outstanding receivables, additional allowances for impairment of receivables may be needed and the future results of operations could be materially affected. Given the specific manner in which the allowance is calculated, there were no material changes in estimates made during 2021, 2020 or 2019 which would have an impact on the carrying values of receivables in these periods. At December 31, 2021, the allowance was US$3.0 million which represents approximately 3.2% of Group revenues. This compares with US$3.9 million at December 31, 2020 which represented approximately 3.8% of Group revenues and to US$5.4 million at December 31, 2019 which represented approximately 6.0% of Group revenues. The decrease in the allowance for impairment of receivables in the year ended December 31, 2021 was due to the write off of old receivable balances for which we had previously fully provided. In the event that the estimate of impairment was to increase or decrease by 0.5% of Group revenues, which would represent a reasonably likely range of outcomes, then a change in the allowance of US$0.5 million at December 31, 2021 (2020: US$0.5 million) (2019: US$0.5 million) would result.
Accounting for income taxes
Significant judgement is required in determining our worldwide income tax expense provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain.
Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities, the process of identifying items of revenue and expense that qualify for preferential tax treatment and segregation of foreign and domestic income and expense to avoid double taxation. In addition, we operate within multiple taxing jurisdictions and are subject to audits in these jurisdictions. These audits can involve complex issues that may require an extended period of time for resolution. Although we believe that our estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and profit in the period in which such determination is made. Deferred tax assets and liabilities are determined using enacted or substantively enacted tax rates for the effects of net operating losses and temporary differences between the book and tax bases of assets and liabilities.
While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing whether deferred tax assets can be recognised, there is no assurance that these deferred tax assets may be realisable. The extent to which recognised deferred tax assets are not realisable could have a material adverse impact on our income tax provision and net income in the period in which such determination is made. In addition, we operate within multiple taxing jurisdictions and are subject to audits in these jurisdictions. These audits can involve complex issues that may require an extended period of time for resolution. In management’s opinion, adequate provisions for income taxes have been made.
Item 18, Note 15 to the consolidated financial statements outlines the basis for the deferred tax assets and liabilities and includes details of the unrecognised deferred tax assets at year end. The Group does not recognise deferred tax assets arising on unused tax losses except to the extent that there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity which will result in taxable amounts against which the unused tax losses can be utilised before they expire.
Share-based payments
For equity-settled share-based payments (share options), the Group measures the services received and the corresponding increase in equity at fair value at the measurement date (which is the grant date) using a trinomial model. Given that the share options granted do not vest until the completion of a specified period of service, the fair value, which is assessed at the grant date, is recognised on the basis that the services to be rendered by employees as consideration for the granting of share options will be received over the vesting period.
TheCertain share options issued byhave been granted for which there is a condition that the Group areoptions only become exercisable into ADSs when the market price of an ADS reaches a certain level. This is deemed to be a non-vesting condition. The term ‘non-vesting condition’ is not subject to market-based vesting conditions asexplicitly defined in IFRS 2, Share-basedShare based Payment,. Non-market but is inferred to be any condition that does not meet the definition of a vesting condition. The only condition for these options to vest is that the option holder continues service and there were no other conditions which would be considered non-vesting conditions. Non-vesting conditions are not taken into account when estimatingreflected in measuring the grant-date fair value of share options as at the grant date; such conditions are taken into account through adjusting the number of equity instruments includedshare-based payment and there is no true-up in the measurement of the transaction amount so that, ultimately,share-based payment for differences between the amount recognised equatesexpected and the actual outcome of non-vesting conditions. If all service conditions are met, then the share-based payment cost will be recognized even if the option holder does not receive the share-based payment due to a failure to meet the number of equity instruments that actually vest. non-vesting condition.
The expense in the statement of operations in relation to share options represents the product of the total number of options anticipated to vest and the fair value of those options; this amount is allocated to accounting periods on a straight-line basis over the vesting period.
Given that the performance conditions underlying the Group’s share options are non-market in nature, the cumulative charge to the statement of operations is only reversed where the performance condition is not met or where an employee in receipt of share options relinquishes service prior to completion of the expected vesting period. Share based payments, to the extent they relate to direct labour involved in development activities, are capitalised.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The Group does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as defined in IFRS 2.
Exchangeable notesSenior secured term loan and related derivative balances
In 2022, we completed the drawdown of a senior secured term loan credit facility with Perceptive. The term loan is represented by three separate balances in our balance sheet. Firstly, included in long term liabilities is a senior secured term loan balance, which, at initial recognition, comprised the principal loan amount of US$81.3 million less loan origination costs of US$3.6 million, less two derivative financial instruments
The exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the host debt instrument is recognised at the residual valuebalances totalling US$1.7 million. This balance was reduced by an early partial payment of the total net proceedsloan of US$34.5 million in early 2022. In early 2023, we completed a drawdown of US$5 million of additional funding on the term loan, and subsequently, in quarter two of 2023, repaid US$10 million against the loan on the back of the bond issue less fair valuesale of the embedded derivatives. Subsequently, the host debt instrument is measured at amortised cost using the effective interest rate method.
Fitzgerald Industries. The embedded derivativesother two balances are a derivative financial asset and a derivative financial liability, and these were initially recognised at fair value under IFRS 9. The derivative financial asset is valued at US$0.2 million at December 31, 2023 (2022: US$0.1 million and are restatedrepresents an estimate of the value to the Company of being able to repay the term loan early and potentially refinance at theirlower interest rate. The derivative financial liability is valued at US$0.5 million at December 31, 2023 (2022: US$1.6 Million) and represents the fair value at each reporting date. The fair value changes of the embedded derivativeswarrants issued to Perceptive. As part of the Credit Agreement, the Company agreed to issue warrants to Perceptive for 500,000 of the Company’s ADSs. The initial per ADS exercise price of the warrants was US$6.50, this was revised to US$5.36 in 2023. The warrants are recognisedexercisable, in whole or part, until the seventh anniversary of the date of drawdown of the funding under the term loan.
In connection with the acquisition of the Waveform assets, the Company entered an amended credit agreement in January 2024 with Perceptive. Under the revised agreement, an additional US$22 million of funding drawn down, with US$12.5 million being used to acquire the Waveform assets. The remaining US$9.5 million is intended to be used for general corporate purposes including for the further development of the CGM and biosensor technologies. In addition, the amended agreement provides for additional liquidity of up to US$6.5 million, that may be drawn down between April and December 2024, and can be used for general corporate purposes, thereby providing further liquidity to fund the development of the CGM and biosensor technologies. In April 2024 the Company drew down the additional funding of US$6.5 million as prescribed in the statementAmended Term Loan agreement. This funding will be used for general corporate purposes, including the further development of operations. See Item 18, Note 24 to the consolidated financial statements for further information.our CGM offering.
The amended agreement also immediately reduced the annual rate of interest on the loan by 2.5% to 8.75% (the “Base Rate”) plus the greater of (a) Term Secured Overnight Financing Rate (SOFR) or (b) 4.0% per annum, and allows for a further 2.5% reduction in the Base Rate to 6.25% once the outstanding principal under the Amended Term Loan falls below $35 million. Additionally, the early repayment penalty was reduced from a range of 8% to 7% to 4.0% to 3.5%, dependent on timing of early repayment, and reduces the revenue covenants. The term loan matures in January 2026.
Litigation
From time to time we may be subject to various claims and contingencies in the ordinary course of business, including those related to litigation, business transactions, our intellectual property, regulatory compliance, employee-related matters and taxes, and others. When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. There is no assurance that such matters will not materially and adversely affect our business, financial position, and results of operations or cash flows.
Item 6. Directors, Senior Management and EmployeesItem 6. | Directors, Senior Management and Employees |
A. Directors and Senior Management
Executive Officers and Directors
We are managed by a board of directors, which is currently comprised of sixfive members, and our senior management. The following table presents information about our current executive officers, members of our Boardboard of Directorsdirectors and our senior management, including their ages. The term executive officer refers to any person in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the registrant. Executive officers of subsidiaries may be deemed executive officers of the registrant if they perform such policy making functions for the registrant.
Directors and Senior Management
| Name | Age | Title |
| Directors | | |
Ronan O’CaoimhJohn Gillard | 6643 | ChairmanDirector, President and Chief Executive Officer |
| Ronan O’Caoimh | 68 | Director, Founder & Executive Advisor |
| Jim Walsh, PhD | 6365 | Executive Director of Business Development |
John GillardTom Lindsay | 4166 | Chief Financial Officer, Company Secretary and ExecutiveIndependent Director |
Kevin TansleyAndrew Omidvar PhD,MBA | 5168 | ExecutiveIndependent Director |
Clint Severson | 73 | Non-Executive Director/Lead Director |
James D. Merselis | 68 | Non-Executive Director |
| Senior Management | | |
| Ian Wells, PhD | 55 | Vice President of Quality and Regulatory Affairs |
| Simon Dunne | 4850 | Chief Accounting Officer |
Fernando DeviaGary Keating, PhD | 5951 | Executive Vice President SalesChief Technology Officer |
Sanjiv SuriDes Fitzgerald | 6334 | Senior Vice President Global Sales and General Manager North America |
Terence Dunne, PhD | 41 | Business Development DirectorInterim Chief Financial Officer, |
| Eibhlín Kelly | 3840 | Chief Information Officer |
Dan GoldsandColm Molloy | 6653 | Group Director of Human Resources and Culture |
| John Mee | 60 | Global Supply Chain Director |
| Jacqueline O’Neill | 51 | Director of Operations |
| Mícheál Roche | 64 | Vice President of AutoimmunityGlobal Health |
On April 8, 2022 each of James Merselis, Clint SeversonChanges in Executive Officers and Kevin Tansley tendered their resignationsBoard composition
John Gillard succeeded Aris Kekedjian who resigned as directorsChief Executive Officer and as a member of the Trinity Board of Directors effective December 17, 2023. Des Fitzgerald, who has served as our Director of Corporate Development since October 2022, was promoted to Interim Chief Financial Officer, succeeding Mr. Gillard in that role. Andrew Omidvar joined the Board of Trinity Biotech in December 2023.
The executive officer Nick O’Hare, Vice President of Global Commercial Operations and International Sales, left the Company subject to, but with effect from, closing of the MiCo transaction. For more information on the MiCo transaction, refer to Item 10 – Material Contracts.during 2023.
Directors
John Gillard, Director, President and Chief Executive Officer, joined Trinity Biotech in November 2020 as Chief Financial Officer, Secretary to the Board of Directors and was appointed to the Board as Executive Director. Mr. Gillard assumed the role of CEO and President of Trinity Biotech in December 2023. Mr. Gillard is both a Chartered Accountant and Chartered Tax Advisor, having trained at PWC. Prior to joining Trinity Biotech, Mr. Gillard held a number of senior financial roles including from 2012 to 2016 at Alphabet Inc./Google, and from Nov 2016 to May 2020 at ION Investment Group. From June 2020 until November 2020, Mr. Gillard also acted as a business consultant. Mr. Gillard holds a Bachelor of Commerce degree from the National University of Ireland Galway and a Masters degree in Accounting from University College Dublin.
Ronan O’Caoimh, Chairman and ChiefDirector, Founder & Executive Officer,Advisor, co-founded Trinity Biotech in June 1992 and acted as Chief Financial Officer until March 1994 when he became Chief Executive Officer. He was also elected Chairman in May 1995. In November 2007, itOn May 3, 2022, Mr. O’Caoimh stepped down as Chairman and was decided to separate the role ofreplaced as Chairman by Seon Kyu Jeon. On October 3, 2022, Mr O’Caoimh stepped down as Chief Executive Officer and Chairman and Mr O’Caoimh assumed the role of Executive Chairman. In October 2008, following the resignation of the Chief Executive Officer, Mr O’Caoimh resumed the role of Chief Executive Officer and Chairman.Officer. Prior to joining Trinity Biotech, Mr O’Caoimh was Managing Director of Noctech Limited, an Irish diagnostics company. Mr O’Caoimh was Finance Director of Noctech Limited from 1988 until January 1991 when he became Managing Director. Mr O’Caoimh holds a Bachelor of Commerce degree from University College Dublin. On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by a management agreement with Darnick Company. This arrangement ceased with effect from December 31, 2018 with Ronan O’Caoimh returning as an employee of the company.Company.
Jim Walsh, PhD, Executive Director of Business Development,, initially joined Trinity Biotech in October 1995 as Chief Operations Officer. Dr Walsh resigned from the role of Chief Operations Officer in 2007 to become a Non- Executive Director of the Company. In October 2010, Dr Walsh rejoined the companyCompany as Chief Scientific Officer. Dr Walsh transferred from this position in 2015 and focusesnow provides strategic advice and technical diligence support, on Business Developmenta part time basis, with regards to the Company’s business development activities. Prior to joining Trinity Biotech, Dr Walsh was Managing Director of Cambridge Diagnostics Ireland Limited (“CDIL”). He was employed with CDIL since 1987. Before joining CDIL he worked with Fleming GmbH as Research & Development Manager. Dr. Walsh is a director of a number of private Irish companies in the biotechnology and diagnostics sector, including EPONA Biotech since 2016, AllWorth Diagnostics since 2019 and AbacusLabs since 2020. Dr Walsh holds a PhD degree in Chemistry from University College Galway.
John Gillard, Chief Financial Officer, Tom Lindsay, Independent Director, joined the Board as a non-executive director in October 2022. Mr. Lindsay has more than 35 years of sales and marketing leadership experience in the global medical diagnostics industry and was President of Alere Inc’s (now Abbotts’s) business in Africa for many years. Most recently, Mr Lindsay has provided consultancy services to several international in vitro diagnostics businesses. He currently serves as a non-executive director for Genedrive plc, a rapid, low-cost molecular diagnostics platform for the identification and treatment of a selection of infectious diseases.
Andrew Omidvar, Independent Director joined the Board of Trinity Biotech in November 2020October 2023. With over twenty-five years of experience leading cross-functional teams to deliver cutting edge technology solutions in a variety of industries. He brings experience in development and product support for data and AI based systems in the medical device industry. Most recently Dr. Omidvar served as Chief Financial Officer, Secretary to the BoardVice President of DirectorsGovernment R&D and was appointed to the BoardEnterprise for Philips.
Senior management
Ian Wells, Vice President of Quality and Regulatory Affairs, has served as Executive Director. Mr. Gillard is both a Chartered AccountantVice President of Quality and Chartered Tax Advisor, having trained at PWC.Regulatory Affairs since September 2022. Prior to joining Trinity Biotech Mr. GillardDr Wells held a numberthe position of senior financial roles includingVP Quality & Regulatory with Werfen OEM from 2012September 2019 to 2016 at Alphabet Inc./Google, and from Nov 2016 to May 2020 at ION Investment Group. Since June 2020 Mr. GillardSeptember 2022. Dr. Wells has also acted as a business consultant. Mr. Gillard holds a Bachelor of Commerce degree from the National University of Ireland Galway and a Masters degree in Accounting from University College Dublin.
Kevin Tansley, Executive Director, joined Trinity Biotech in March 2003 and was appointed Chief Financial Officer and Secretary to the Board of Directors in November 2007. Mr. Tansley was appointed to the board in September 2016 as Executive Director. In November 2020 it was announced that Mr. Tansley was stepping down as Chief Financial Officer and Company Secretary but remains a Director of the Company. Mr. Tansley trained as a chartered accountant in the Corporate Financial Services practice of Arthur Andersen & Co. Prior to joining Trinity Biotech in 2003, Mr. Tansley held a number of financial positions in the Irish electricity utility ESB. Mr. Tansley holds a Masters of Accounting degree from University College Dublin and is a Fellow of the Institute of Chartered Accountants in Ireland.
Clint Severson, Non-Executive director, joined the board of Trinity Biotech in November 2008 as a non-executive director. Mr. Severson served as Chairman and CEO of Abaxis Inc. from June, 1996 to August, 2018, a NASDAQ traded diagnostics company based in Union City, California. From February 1989 to May 1996, Mr. Severson served as President and Chief Executive Officer of MAST Immunosystems, Inc., a privately-held medical diagnostic company and to date he has accumulated over 40 years ofmore than 30 years’ experience in the medical diagnostics industry. Mr Severson is also on the boardhealth care sector having worked in R&D, Operations and Quality/Regulatory for Zeneca, Johnson & Johnson, Ortho Clinical Diagnostics and Werfen. Dr. Wells graduated from Plymouth University and Technical University of Cutera,Vienna with a provider of laser, lightBSc. in Chemistry (1993) and other energy-based aesthetic systems for medical practitioners worldwide.
James D. Merselis, Non-Executive director, joined the board of Trinity Biotecha PhD. in February 2009.Chemometrics and Molecular Spectroscopy (1996). He is currently a Co-Founder and Managing Directorthe co-author of Synchrony BioTransforming Quality Organisations (published by BEP LLC, a healthcare-focused venture investment fund based in St. Louis, MO. He is also a non-executive director for the following companies: Kypha Inc., a St. Louis, Missouri based diagnostic company focused on Complement assays in the diagnosis and management of patients with inflammatory diseases; Geneoscopy, a St. Louis, Missouri based company developing next generation diagnostics that leverage the power of RNA to better prevent, detect, and treat gastrointestinal disease. Mr. Merselis has more than forty years’ experience in healthcare, including twenty-two years at Boehringer Mannheim Diagnostics (now Roche Diagnostics)New York, April 2023). Mr. Merselis has led a number of healthcare diagnostic start-ups. From 2002 to 2007, he served as President and CEO of HemoSense, Inc., a point-of-care diagnostics company providing patients and physicians with rapid test results to help manage the risk of stroke with the use of Warfarin or Coumadin. During this time he successfully took the company public (AMEX:HEM) followed two years later by its acquisition by Alere (now Abbott) (NYSE:ABT). His leadership at other start-ups has included: Nexus Dx (now Samsung), Alverix, Inc. (now Becton Dickenson), and Micronics, Inc. (now SONY).
Simon Dunne, Chief Accounting Officer, has served as our chief accounting officer since November 2007, having previously been our European CFO from November 2006. Prior to joining us, Mr. Dunne held various finance leadership positions with Misys plc and worked in the auditing division of PWC. He graduated from University College Dublin with a Bachelor of Commerce degree and is a Fellow of the Institute of Chartered Accountants Ireland.
Fernando Devia, Executive Vice President Sales, Mr. Fernando Devia, has been executive vice president at Trinity Biotech since October 2014. Mr. Devia started with Trinity April 2011 and received several promotions prior to his current position. Before joining Trinity Mr. Devia held various positions of increasing responsibility at Bio-Rad Laboratories & Hemagen diagnostics. Mr. Devia received an MBA degree in international management and a BS degree in biochemistry both from the University of Dallas.
Sanjiv Suri, Senior Vice President Global Sales and General Manager North America, Gary Keating, Chief Technology Officerhas served as our Senior Vice President Global Sales and General Manager North America since 2019. Prior to joining, joined us in March 2018, Mr. Suri was an independent consultant between June 2017 and February 2018. Mr. Suri held various management leadership positions with Pharm-Olam; Erba Mannheim and Bio-Rad, companies doing business in the CRO and IVD Segments from 2004 to 2017. He was the Chief Executive Officer of Pharm-Olam USA from 2014 to 2017, President, Erba Mannheim, Germany from 2011 to 2014 and General Manager Emerging Markets, Bio-Rad (USA) from 2004 to 2010. Mr SuriOctober 2022. Dr Keating graduated from the University of TexasUlster at AustinJordanstown with a Master’s degreeBSc in Business AdministrationApplied Biochemical Sciences and also has a Master’s degreepursued his interest in Economics frombiosensors in Prof Richard O’Kennedy’s Applied Biochemistry group at DCU, where he worked on the Universitydevelopment of Bombay.
Terence Dunne, Business Development Director, has been employed by Trinity Biotech since 2016.antibody-based optical biosensors for the detection of small drug molecules. Dr Keating earned his PhD in 1998; the external examiner for his doctorate was Prof George Guilbault, who described the first amperometric glucose electrode. Prior to joining Trinity Biotech, Mr. DunneDr Keating held variousthe position of CTO with Hibergene Diagnostics Ltd. from October 2014 to August 2022. Previous to Hibergene, Dr Keating held a range of technical leadership roles in start-up and management rolesmultinational diagnostics companies, including Transfer Manager at EKFAbbott Diagnostics and a number of biotech start-ups. Mr. Dunne graduated from NUI Maynooth with a BSc. degree in Biotechnology in 2002, from University College Dublin with a PhD degree in Molecular Biology in 2008 and an MBA degree from UCD Smurfit Business School in 2017.R&D Manager at Diasorin Ireland.
Eibhlín Kelly, Chief Information Officer, has served as our Chief Information Officer of Trinity Biotech since September 2015. Previously, she served as Customer Services Manager at Lynq Limited between 2011 and 2015, and Service Delivery/Support Manager at Trinity Biotech between 2005 and 2011. She graduated with an honourshonour’s degree in Business Information Systems Development from Dublin Institute of Technology.
Dan Goldsand, Vice PresidentColm Molloy, Group Director of Autoimmunity, Human Resources and Culture, has over 30 years Human Resources and training experience and joined Trinity Biotech in February 2022 as Vice President of Autoimmunity.January 2021. Prior to joining Trinity Biotech, Mr. Goldsandhe served as Head of Human Resources with Nuritas, a biotechnology company from June 2019 to July 2020. His previous roles included HR Director at Storm Technology from March 2015 to June 2019 and Head of Human Resources at Grant Thornton Ireland from 2011 to 2015. He is a Fellow of the Chartered Institute of Personnel and Development (CIPD) and a Graduate of the Marketing Institute of Ireland.
John Mee, Global Supply Chain Director has served in this position since joining us in August 2022. Previous positions include Director of Supply Chain and Operations Consulting Services for EY from February 2021 to July 2022, Global Supply Planning Director for Grifols from June 2020 to October 2020 and Business Analytics Manager with Glanbia Ireland from January 2019 to June 2020.
Prior to that John has held a number ofsenior Supply Chain positions in Ireland and internationally. John holds an MSc in Supply Chain Management, an MSc in Manufacturing 4.0, a BSc in Data Analytics, is a qualified auditor (BS5750 Part 2), and a Certified Advanced Forecaster (Institute of Business Forecasting). John sits on the autoimmune industry. Mr GoldsandExecutive Board of The Irish Exporters Association.
Mícheál Roche, Vice President of Global Health, joined us in 2001. Prior to his current role as VP of Global Heath, he served as US AssociateVP of HIV, Infectious Disease and Clinical Chemistry since October 2013. Earlier in his career, he worked for AB Biodisk and B. Braun Biotech. He graduated from the National University of Ireland with a Bachelor of Science degree and a master’s degree in biotechnology.
Des Fitzgerald, Interim Chief Financial Officer, joined Trinity Biotech in October 2022 as Director – Automationof Corporate Development and US National Sales Manager, with EUROIMMUN US. Instrument Account Manager, with INOVA Diagnostics Inc, Regional Manager with Euro-Diagnostica Inc, Senior Account Executive, with Bio-Rad Laboratories,was promoted to Interim Chief Financial Officer in December 2023. Prior to joining Trinity Biotech, he worked at PwC Canada from August 2018 to August 2022 as a Director in their Consulting and District Sales Manager, with Fisher Healthcare.Deals Department, specialising in Life Sciences. Prior to PwC Canada, Des spent seven years in PwC Dublin where he qualified as a chartered accountant. Des completed a Bachelor of Science degree in Accounting at University College Cork in 2011 and is a member of Chartered Accountants Ireland.
66Jacqueline O’Neill, Director of Operations, joined us in 1997 as Production Biochemist and has held various technical and management roles throughout her 26-year career with us. Ms O’Neill has a Graduate Diploma in Food Science and Technology from Technological University Dublin, Applied Biology from South East Technological University Waterford and Lean Leadership from University of Limerick.
Additional Information
There are no family relationships between any of the directors or members of senior management named above.
Our articlesMemorandum and Articles of associationAssociation of the Company (the “Articles”) provide for a Boardboard of Directorsdirectors of not less than four and not more than ten members. members with the exact number of directors, from time, to time, determined solely by a resolution of our board of directors.
Our Boardboard of Directorsdirectors is currently composed of sixfive directors. Officers serve at the pleasure of the Boardboard of Directors,directors, subject to the terms of any agreement between the officer and us.
Pursuant to the terms of the Securities Purchase Agreement signed by Trinity Biotech plc and MiCo IVD Holdings LLC (“MiCo”) on April 11, 2022 and the Redeemeable Unsecured Convertible Loan Note issued by us on May 3, 2022, MiCo have the right to nominate up to four individuals for consideration by the Nomination Committee of the Board of Directors for appointment to the Board of Directors, subject to certain minimum holding requirements. Three of MiCo's four nominees are required to meet the independence standards set out in the NASDAQ stock Market Rules at all times and at least one of those nominees must have substantial experience at a diagnostics testing business having annualised revenues of greater than US$1 billion. In considering MiCo's nominees, the Nomination Committee of the Board of Directors is required to take into consideration the need for the Company to retain its Irish tax status and status as a foreign private issuer under applicable federal securities laws.
We are not aware of any other arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.
B. Compensation
The 20212023 remuneration scheme was approved by the Board of Directors.
Total directors and non-executiveindependent directors’ remuneration, excluding pension and share options, for the year ended December 31, 20212023 amounted to US$1,390,000.2,058,000. The pension charge for the year amounted to US$24,000.26,000. See Item 18, Note 119 to the consolidated financial statements. The split of directors’ remuneration set out by director is detailed in the table below:
| Director | | Title | | | Salary/ Benefits US$’000 | | | Performance related bonus US$’000 | | | Defined contribution pension US$’000 | | | Total 2021 US$’000 | | | Total 2020 US$’000 | |
| Ronan O’Caoimh | | Chairman and CEO | | | | 643 | | | | — | | | | — | | | | 643 | | | | 1,052 | |
| Jim Walsh | | Executive Director | | | | 20 | | | | — | | | | — | | | | 20 | | | | 38 | |
| John Gillard | | Chief Financial Officer | | | | 346 | | | | 227 | | | | 20 | | | | 593 | | | | 52 | |
| Kevin Tansley | | Executive Director | | | | 56 | | | | — | | | | 4 | | | | 60 | | | | 757 | |
| Denis R. Burger | | Non-Executive director | | | | — | | | | — | | | | — | | | | — | | | | 48 | |
| James Merselis | | Non-Executive director | | | | 49 | | | | — | | | | — | | | | 49 | | | | 57 | |
| Clint Severson | | Non-Executive director | | | | 49 | | | | — | | | | — | | | | 49 | | | | 57 | |
| | | | | | | 1,163 | | | | 227 | | | | 24 | | | | 1,414 | | | | 2,061 | |
| Director | | Title | | Salary/Other payments/ Benefits US$’000 | | | Performance related bonus US$’000 | | | Transaction related bonus US$’000 | | | Defined contribution pension US$’000 | | | Total 2023 US$’000 | | | Total 2022 US$’000 | |
Aris Kekedjian1 | | Former Chairman and Former Chief Executive Officer | | | 1,171 | | | | — | | | | — | | | | — | | | | 1,171 | | | | 387 | |
John Gillard 2 | | President and Chief Executive Officer | | | 473 | | | | — | | | | 211 | | | | 26 | | | | 710 | | | | 863 | |
| Ronan O’Caoimh | | Director, Founder & Executive Advisor | | | 80 | | | | — | | | | — | | | | — | | | | 80 | | | | 340 | |
| Jim Walsh | | Director of Business Development | | | 50 | | | | — | | | | — | | | | — | | | | 50 | | | | 20 | |
| Tom Lindsay | | Independent Director | | | 63 | | | | — | | | | — | | | | — | | | | 63 | | | | — | |
Andrew Omidvar 3 | | Independent Director | | | 10 | | | | — | | | | — | | | | — | | | | 10 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 1,847 | | | | — | | | | 211 | | | | 26 | | | | 2,084 | | | | 1,610 | |
1 Aris Kekedjian resigned as Chief Executive Officer and as a member of our Board of Directors effective December 17, 2023.
2 John Gillard was appointed to replace Aris Kekedjian as Chief Executive Officer on December 17, 2023.
3 Andrew Omidvar joined the Board in October 2023.
As at December 31, 20212023 there was no accrual by the CompanyUS$753,000 (2022 US$5,000) accrued to provide pay, pension, retirement or similar benefits for the directors (2020: NIL).directors.
In 2021, no2023, net options forfeited or expired by the directors to subscribe for ‘A’ shareordinary shares was 2,160,000 (equivalent to 108,000 ADSs), comprising forfeited or expired options wereto subscribe for 16,160,000 ‘A’ ordinary shares (equivalent to 808,000 ADSs) offset by options granted to the directors (2020: 8,480,000)subscribe for up to 14,000,000 ‘A’ ordinary shares (equivalent to 700,000 ADSs) (2022: 29,400,000).
In addition, see Item 7 - Major Shareholders and Related Party Transactions for further information on the compensation of Directors and Officers.
Compensation of Senior Management
Compensation of our executive officers is composed primarily of base salary and the payment of short-term and mid-term cash bonuses. Cash bonuses are generally tied to the achievement of financial performance indicators and strategic objectives, and they may vary as a percentage of base salary depending upon the level of responsibilities of the executive officer. Our executive compensation package is also complemented by long-term incentives in the form of stock options.
One of our key priorities is to build a performance culture and drive ownership and accountability in the Company. A share-based compensation model that ensures shareholder alignment is regarded as core to this transformation and is currently in the process being rolled out to staff and senior management across the Company. To facilitate this shareholder aligned share-based compensation model for employees and senior management, on December 15, 2022, our Board approved an amendment to the Trinity Biotech Employee Share Option Plan 2020 (with the updated plan being the Company’s 2023 Amended & Restated Plan) to increase the number of ordinary shares issuable under such plan by 30 million Class “A” ordinary shares (the equivalent to 1.5 million ADS). Performance share-based compensation awards are intended to closely align the goals of our broader team with those of our shareholders in the creation of shareholder value. The majority of Mr. Gillard’s options are performance share options and are structured such that they are exercisable only if the market price of the Company's ADSs increases to certain levels ($5.00, $7.50, $10.00, $15.00, $20.00 and $25.00 per ADS) during the term of the option.
For the financial year ended December 31, 2021,2023, our executive officers and directors, as a group (11(15 persons for 2021)2023), received aggregate compensation of US$2,675,0003,748,000 for services they rendered in all capacities during 2021,2023, which amount includes base salary, commissions, bonuses, ex gratia payments and benefits in kind, excluding share options. The Board has appointed Korn Ferry, an internationally recognised consulting firm, to advise the Board on recruitment and compensation matters for directors and senior management.
C. Board Practices
TheOur Articles of Association of Trinity Biotech provide that one third of the directors in office (otherfor the time being other than the Managing Director or a director holding an executive office with Trinity Biotech)us or, if their number is not three or a multiple of three, then the number nearest to, but not exceeding, one third shall retire from office at everyeach annual general meeting. Ifmeeting but if at any annual general meeting the number of directors who are subject to retirement by rotation is two, one of such directors shall retire and, if the number of such directors is one, that director shall retire. Retiring directors may offer themselves for re-election. The directors to retire at each annual general meeting shall be the directors who have been longest in office since their last appointment. As between directors of equal seniority the directors to retire shall, in the absence of agreement, be selected from among them by lot. Subject as aforesaid, a retiring director shall be eligible for re-appointment and shall act as a director throughout the meeting at which he retires.
The Board of Directors has typically established Audit, Remunerationaudit, remuneration and Compensation Committees.employee compensation committees. The Company typically has a Remuneration Committee consists of Mr Clint Severson (committee chairman and lead director) and Mr James Merselis. This Committeewhich is responsible for approving executive directors’ remuneration including bonuses and share option grants. The Board has appointed an internationally recognised independent consulting firm to advise the Board on recruitment and compensation matters for directors and senior management.
The Audit Committee reviews the Group’s annual and interim financial statements and reviews reports from management on the effectiveness of the Group’s internal controls. It also appoints the external auditors, reviews the scope and results of the external audit and monitors the relationship with the auditors. TheAs a transitional arrangement, the Audit Committee now comprises solely the two non-executive directors of the Group, Mr James Merselis (Committee Chairman) and Mr Clint Severson. The Compensation Committee currently comprises Mr Ronan O’Caoimh (Committee Chairman), Dr Jim Walsh and Mr Kevin Tansley. independent director, Tom Lindsay.
The Board of Directors administersformed an employee compensation committee consisting of the CEO and CFO. This committee has delegated authority from the Board to approve share-based compensation grants to employees of the Group, other than executive directors, pursuant to the terms of the Employee Share Option Plan.
The Board determines the exercise price and the term of the options. Individual option grants of less than 30,000 ‘A’ ordinary shares (7,500 ADRs) are approved by the CompensationCompany also typically operates a Nomination Committee and subsequently ratified by the Board. Options grantedfor appointments to the membersBoard of the Compensation Committee are approved by the Remuneration Committee and share options granted to non-executive directors are decided by the other members of the board.Directors.
Because Trinity Biotech iswe are a foreign private issuer, it is not required to comply with all of the corporate governance requirements set forth in NASDAQ Rule 5600 as they apply to U.S. domestic companies.
As part of the exchange agreements entered into with the five bondholders in December 2021, the Company agreed to update some of its corporate governance processes - for further details on the exchange agreements refer to Item 18, Note. 30
Indemnification of Directors and Officers and Limitations of Liability
Our currently effective memorandum and articlesSubject to exceptions, the Companies Act 2014 of associationIreland, (the “Companies Act 2014”) does not permit subjecta company to the Securities Act, indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud which may attach to such directors or officers.
Under our Constitution noexempt a director or other officer shall be liable for (i)certain officers from, or indemnify a director against, liability in connection with any acts, receipts, neglect or defaults of any other director or officer for joining in any receipt or other act for conformity; (ii) any loss or expense that may happen to us through the inefficiency or deficiency of title to any property acquired by order of the directors or on our behalf; (iii) the inefficiency or deficiency of any security in or upon which any of our monies shall be invested; (iv) any loss or damage arising from bankruptcy, insolvency or tortuous act of any person with whom any monies, securities or effects shall be deposited; (v) any loss occasioned by any error of judgment, omission, default or oversight on the persons part; or (vi) any other loss damage or misfortune whatsoever which shall happen in relation to those things unless the same shall happen through the persons own negligence, default, breach of duty or breach of trust or dishonesty.by a director in relation to the company.
In addition, our Constitution provides thatThe exceptions allow a company to: (a) purchase and maintain directors and officers insurance against any liability attaching in connection with any negligence, default, breach of duty or breach of trust owed to the extent permitted by law, we may pay,company; and (b) indemnify a director or agree to pay, a premiumsuch other officer against any liability incurred in defending proceedings, whether civil or criminal, (i) in which judgment is given in his or her favor or in which he or she is acquitted or (ii) in respect of which an Irish Court grants him or her relief from any such liability on the grounds that he or she acted honestly and reasonably and that, having regard to all the circumstances of the case, he or she ought fairly to be excused for the wrong concerned.
The Articles includes a contract insuring aprovision which, subject to the provisions of the Companies Act 2014 as aforesaid, entitles every present and former director and other officer of the Company to be indemnified out of the assets of the Company (other than any person who is or has been(whether an officer or not) engaged by the Company as auditor) against any loss or liability incurred by him or her for negligence, default, breach of our companyduty or onebreach of our subsidiaries against a liability:trust in relation to the affairs of the Company or otherwise incurred by him or her in the execution and discharge of his or her duties to the Company.
| - | incurred by the person in his or her capacity as an officer of our company or a subsidiary of our company provided that the liability does not arise out of a conduct involving a wilful breach of duty in relation to our company or a subsidiary of our company; or
|
| - | for costs and expenses incurred by that person defending proceedings, whatever their outcome.
|
68
The following table details certain data on the average workforce of Trinity Biotech and its consolidated subsidiaries:
| | | Year Ended December 31, | | | Year Ended December 31, 2023 | |
| | | 2021 | | | 2020 | | | 2019 | | | 2023 | | | 2022 | | | 2021 | |
| Numbers of employees by geographic location | | | | | | | | | | | | | | | | | | |
| United States | | | 237 | | | | 310 | | | | 334 | | | | 203 | | | | 203 | | | | 224 | |
| Ireland | | | 211 | | | | 199 | | | | 215 | | | | 143 | | | | 146 | | | | 211 | |
| United Kingdom | | | 2 | | | | 3 | | | | 2 | | | | - | | | | 1 | | | | - | |
| Brazil | | | 27 | | | | 31 | | | | 28 | | | | 34 | | | | 34 | | | | 27 | |
| Total workforce | | | 477 | | | | 543 | | | | 579 | | | | 380 | | | | 384 | | | | 462 | |
| Numbers of employees by category of activity | | | | | | | | | | | | | | | | | | | | | | | | |
| Research scientists & technicians | | | 41 | | | | 52 | | | | 57 | | | | 23 | | | | 26 | | | | 25 | |
| Manufacturing/Operations | | | 239 | | | | 280 | | | | 303 | | | | 207 | | | | 197 | | | | 255 | |
| Quality Assurance | | | 63 | | | | 63 | | | | 60 | | | | 51 | | | | 56 | | | | 63 | |
| Finance/Administration | | | 68 | | | | 65 | | | | 66 | | | | 73 | | | | 73 | | | | 67 | |
| Sales & Marketing | | | 66 | | | | 83 | | | | 93 | | | | 26 | | | | 32 | | | | 52 | |
| Total workforce | | | 477 | | | | 543 | | | | 579 | | | | 380 | | | | 384 | | | | 462 | |
We consider our employees the most valuable asset of our company. We offer competitive compensation and comprehensive benefits to attract and retain our employees. The remuneration and rewards include retention through share-based compensation and performance-based bonuses. We generally provide our employees with benefits and working conditions beyond the required minimums in each geographic and regulatory environment in which the Group operates.
We believe that an engaged workforce is key to maintaining our ability to innovate. We have been successful in integrating new employees into the business and keeping our employees engaged. Investing in our employees'employees’ career growth and development is an important focus for us. We offer learning opportunities and training programs including workshops, guest speakers and various conferences to enable our employees to advance in their chosen professional paths.
We are committed to providing a safe work environment for our employees. We have taken necessary precautions in response to the Covid-19 outbreak, including offering employees flexibility to work from home where practical, mandatory social distancing requirements in the workplace (such as adding more space between work spaces) and provision of hand sanitizer to all employees, and improvement and optimization of our telecommuting system to support remote work arrangements.
Beneficial Ownership of Executive Officers and Directors
Stock Option Plans
The Board of Directors have adopted the Employee Share Option Plans (the “Plans”); with the most recently adopted Share Option Plan being the 2020Company’s 2023 Amended & Restated Plan. The purpose of these Plans is to provide Trinity Biotech’s employees, consultants, officers and directors with additional incentives to improve Trinity Biotech’s ability to attract, retain and motivate individuals upon whom Trinity Biotech’s sustained growth and financial success depends. These Plans are administered by the Board of Directors. Options under the Plans may be awarded only to employees, officers, directors and consultants of Trinity Biotech.
The exercise price of options is determined by the Board of Directors.Directors, through its remuneration and employee compensation committees as the case may be. The term of an option will be determined by the Board, provided that the term may not exceed ten years from the date of grant. Option grants up to 30,000 ‘A’ ordinary shares (7,500 ADRs) are administered by the Compensation Committee and subsequently ratified by the Board. The Committee will also determine the exercise price and term of these options. All options will terminate 90 days after termination of the option holder’s employment, service or consultancy with Trinity Biotech (or one year after such termination because of death or disability) except where a longer period is approved by the board of directors.
Under certain circumstances involving a change in control of Trinity Biotech, the Board may accelerate the exercisability and termination of options.
As of April 15, 2022,March 31, 2024, our directors and executive officers as a group, then consisting of 1214 persons, held options to purchase an aggregate of 15,431,00038,827,337 ‘A’ Ordinary shares (3,858,000(1,941,367 ADS equivalent), having exercise prices ranging from US$0.190.12 per ‘A’ ordinary share (US$0.772.40 per ADS) to US$4.361.34 per ‘A’ ordinary share (US$17.4526.80 per ADS) and expiration dates ranging from 20222024 to 2027. Generally,2031. Any options granted prior to the optionsfourth quarter of 2022 vest over a threetwo to four year period.period and have no performance conditions. The options granted in and since the fourth quarter of 2022 are performance share options.
The following table sets forth certain information as of April 15, 2022,March 31, 2024, regarding the beneficial ownership by each of our directors and executive officers:
| Name | | Number of ‘A’ Ordinary Shares Beneficially Owned (1) | | | Percentage of Ownership (2) | |
| Ronan O’Caoimh (3) | | | 17,228,160 | | | | 15.0 | % |
| Jim Walsh (4) | | | 2,863,612 | | | | 2.6 | % |
| John Gillard (5) | | | 150,000 | | | | * | |
| Kevin Tansley (6) | | | 1,547,336 | | | | 1.4 | % |
| Clint Severson (7) | | | 878,000 | | | | * | |
| James Merselis (8) | | | 778,600 | | | | * | |
| Simon Dunne (9) | | | 210,000 | | | | * | |
| Fernando Devia (10) | | | 330,000 | | | | * | |
| Sanjiv Suri (11) | | | 280,000 | | | | * | |
| Terence Dunne (12) | | | 283,336 | | | | * | |
| Dan Goldsand | | | -
| | | | *
| |
| Eibhlín Kelly | | | - | | | | * | |
Executive officers and directors as a group (12 persons) | | | 24,549,044 | | | | 20.4 | % |
| Name | | Number of ‘A’ Ordinary Shares Beneficially Owned (1) | | | Percentage of Ownership (2) | |
| Ronan O’Caoimh (3) | | | 18,907,329 | | | | 9.5 | % |
| Jim Walsh (4) | | | 2,889,445 | | | | 1.5 | % |
| John Gillard (5) | | | 8,066,667 | | | | 4.1 | % |
| Tom Lindsay (6) | | | 145,833 | | | | * | |
| Andrew Omidvar (7) | | | 145,833 | | | | * | |
| Simon Dunne (8) | | | 240,000 | | | | * | |
| Des Fitzgerald (9) | | | 541,667 | | | | * | |
| Ian Wells | | | - | | | | - | |
| Eibhlín Kelly | | | - | | | | - | |
| Gary Keating | | | - | | | | - | |
| Colm Molloy | | | - | | | | - | |
| John Mee | | | - | | | | - | |
| Jacqueline O’Neill |
| | | - | | | | -
| |
| Mícheál Roche | | | - | | | | - | |
| Executive officers and directors as a group (14 persons) | | | 30,936,774 | | | | 14.8 | % |
| |
(1)
| Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary Shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Share options that have a performance condition related to the share price of the equity of the Company are deemed to be exercisable irrespective of whether the performance condition has been, or is expected to be, satisfied within 60 days of the date of this table. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. |
| |
(2)
| The percentages shown are based on 189,310,282 ‘A’ Ordinary Shares issued and outstanding as of April 15, 2022.March 31, 2024. |
| |
| (3) | Represents (a) 9,724,160 ‘A’ ordinary shares and (b) 7,504,0009,183,169 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022.March 31, 2024. Includes options issued to Darnick Company which in the past provided Trinity Biotech with the services of Mr. O’Caoimh as Chief Executive Officer. |
| |
| (4) | Represents (a) 1,393,612 ‘A’ ordinary shares and (b) 1,470,0001,495,833 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022.March 31, 2024. Note that 1,393,612 ‘A’ ordinary shares of Dr Walsh’s shares are held in trust for the benefit of Dr Walsh’s immediate family. |
| |
| (5) | Represents 150,0008,066,667 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022. |
(6 | |
| (6) | Represents (a) 150,000 ‘A’ ordinary shares and (b) 1,397,336145,833 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022.March 31, 2024. |
| |
| (7) | Represents (a) 288,000 ‘A’ ordinary shares and (b) 590,000145,833 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022.March 31, 2024. |
| |
| (8) | Represents (a) 188,600 ‘A’ ordinary shares and (b) 590,000240,000 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022.March 31, 2024. |
|
|
| (9) | Represents 210,000541,667 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022. |
(10) | Represents 330,000 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022. |
(11) | Represents 280,000 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022. |
(12) | Represents 283,336 ‘A’ ordinary shares underlying options that are currently vested and exercisable or that vest within sixty days of April 15, 2022.March 31, 2024. |
As of April 15, 2022, 14,071,336 (3,517,834March 31, 2024, 35,987,336 (1,799,367 ADS equivalent) of the options outstanding were held by the directors of Trinity Biotech as follows:
| Director/Company Secretary | | Number of
Options ‘A’
Shares | | | Number of
Options
ADS
Equivalent | | | Exercise
Price (Per
‘A’ Share) | | | Exercise Price
(Per ADS) | | Expiration Date of
Options
| | Number of
Options ‘A’
Shares | | | Number of
Options
ADS
Equivalent | | | Exercise
Price (Per
‘A’ Share) | | | Exercise Price
(Per ADS) | | | Hurdle Price 2 (Per ADS) | | Expiration Date of
Options |
| Ronan O’Caoimh* | | | 1,000,000 | | | | 250,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | |
| John Gillard | | | | 600,000 | | | | 30,000 | | | | 0.67 | | | | 13.40 | | | None | | 23/10/2027 |
| | | | | 1,400,000 | | | | 70,000 | | | | 0.27 | | | | 5.40 | | | None | | 25/03/2029 |
| | | | | 2,000,000 | | | | 100,000 | | | | 0.29 | | | | 5.80 | | | None | | 19/12/2029 |
| | | | | 666,667 | | | | 33,333 | | | | 0.29 | | | | 5.80 | | | $ | 15.00 | | 19/12/2029 |
| | | | | 666,667 | | | | 33,333 | | | | 0.29 | | | | 5.80 | | | $ | 20.00 | | 19/12/2029 |
| | | | | 666,667 | | | | 33,333 | | | | 0.29 | | | | 5.80 | | | $ | 25.00 | | 19/12/2029 |
| | | | | 7,000,000 | | | | 350,000 | | | | 0.12 | | | | 2.40 | | | None | | 18/12/2030 |
| | | | | 2,333,333 | | | | 116,667 | | | | 0.12 | | | | 2.40 | | | $ | 5.00 | | 18/12/2030 |
| | | | | 2,333,333 | | | | 116,667 | | | | 0.12 | | | | 2.40 | | | $ | 7.50 | | 18/12/2030 |
| | | | | 2,333,334 | | | | 116,667 | | | | 0.12 | | | | 2.40 | | | $ | 10.00 | | 18/12/2030 |
Ronan O’Caoimh 1 | | | | 2,244,000 | | | | 112,200 | | | | 1.34 | | | | 26.80 | | | None | | 07/09/2024 |
| | | | 1,000,000 | | | | 250,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 4,060,000 | | | | 203,000 | | | | 0.69 | | | | 13.80 | | | None | | 14/06/2026 |
| | | | 244,000 | | | | 61,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 333,336 | | | | 16,667 | | | | 0.19 | | | | 3.80 | | | None | | 20/03/2027 |
| | | | 2,030,000 | | | | 507,500 | | | | 0.69 | | | | 2.74 | | 14/06/2026 | | | 2,400,000 | | | | 120,000 | | | | 0.73 | | | | 14.60 | | | None | | 17/11/2027 |
| | | | 2,030,000 | | | | 507,500 | | | | 0.69 | | | | 2.74 | | 14/06/2026 | | | 700,000 | | | | 35,000 | | | | 0.14 | | | | 2.80 | | | None | | 28/01/2031 |
| | | | 333,336 | | | | 83,334 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 5.00 | | 28/01/2031 |
| | | | 1,200,000 | | | | 300,000 | | | | 0.73 | | | | 2.90 | | 17/11/2027 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 7.50 | | 28/01/2031 |
| | | | 1,200,000 | | | | 300,000 | | | | 0.73 | | | | 2.90 | | 17/11/2027 | | | 233,334 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 10.00 | | 28/01/2031 |
| Jim Walsh | | | 53,333 | | | | 13,333 | | | | 2.43 | | | | 9.73 | | 24/02/2023 | | | 750,000 | | | | 37,500 | | | | 1.34 | | | | 26.80 | | | None | | 07/09/2024 |
| | | | 53,333 | | | | 13,333 | | | | 2.43 | | | | 9.73 | | 24/02/2023 | | | 600,000 | | | | 30,000 | | | | 0.19 | | | | 3.80 | | | None | | 20/03/2027 |
| | | | 53,334 | | | | 13,334 | | | | 2.43 | | | | 9.73 | | 24/02/2023 | | | 700,000 | | | | 35,000 | | | | 0.14 | | | | 2.80 | | | None | | 28/01/2031 |
| | | | 360,000 | | | | 90,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 5.00 | | 28/01/2031 |
| | | | 360,000 | | | | 90,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 7.50 | | 28/01/2031 |
| | | | 30,000 | | | | 7,500 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 233,334 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 10.00 | | 28/01/2031 |
| Thomas Lindsay | | | | 700,000 | | | | 35,000 | | | | 0.14 | | | | 2.80 | | | None | | 28/01/2031 |
| | | | 280,000 | | | | 70,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 5.00 | | 28/01/2031 |
| | | | 280,000 | | | | 70,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 7.50 | | 28/01/2031 |
| | | | 40,000 | | | | 10,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | | | 233,334 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 10.00 | | 28/01/2031 |
| Kevin Tansley | | | 340,000 | | | | 85,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | |
| Andrew Omidvar | | | | 700,000 | | | | 35,000 | | | | 0.14 | | | | 2.80 | | | None | | 28/01/2031 |
| | | | 340,000 | | | | 85,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 5.00 | | 28/01/2031 |
| | | | 184,000 | | | | 46,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 | | | 233,333 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 7.50 | | 28/01/2031 |
| | | | 266,668 | | | | 66,667 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | | | 233,334 | | | | 11,667 | | | | 0.14 | | | | 2.80 | | | $ | 10.00 | | 28/01/2031 |
| | | | 266,668 | | | | 66,667 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | |
| | | | 266,664 | | | | 66,666 | | | | 0.19 | | | | 0.77 | | 20/03/2027 | |
Director/Company Secretary | | Number of
Options ‘A’
Shares
| | | Number of
Options
ADS
Equivalent
| | | Exercise
Price (Per
‘A’ Share)
| | | Exercise Price
(Per ADS)
| | Expiration Date of
Options
|
| | |
| | | |
| | | |
| | | |
| |
|
| Jim Merselis | | | 20,000 | | | | 5,000 | | | | 2.43 | | | | 9.73 | | 24/02/2023 |
| | | | 20,000 | | | | 5,000 | | | | 2.43 | | | | 9.73 | | 24/02/2023 |
| | | | 20,000 | | | | 5,000 | | | | 2.43 | | | | 9.73 | | 24/02/2023 |
| | | | 95,000 | | | | 23,750 | | | | 1.34 | | | | 5.35 | | 07/09/2024 |
| | | | 95,000 | | | | 23,750 | | | | 1.34 | | | | 5.35 | | 07/09/2024 |
| | | | 20,000 | | | | 5,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 |
| | | | 160,000 | | | | 40,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 |
| | | | 160,000 | | | | 40,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 |
| | | | 40,000 | | | | 10,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 |
| Clint Severson | | | 20,000 | | | | 5,000 | | | | 2.43 | | | | 9.73 | | 24/02/2023 |
| | | | 20,000 | | | | 5,000 | | | | 2.43 | | | | 9.73 | | 24/02/2023 |
| | | | 20,000 | | | | 5,000 | | | | 2.43 | | | | 9.73 | | 24/02/2023 |
| | | | 95,000 | | | | 23,750 | | | | 1.34 | | | | 5.35 | | 07/09/2024 |
| | | | 95,000 | | | | 23,750 | | | | 1.34 | | | | 5.35 | | 07/09/2024 |
| | | | 20,000 | | | | 5,000 | | | | 1.34 | | | | 5.35 | | 07/09/2024 |
| | | | 160,000 | | | | 40,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 |
| | | | 160,000 | | | | 40,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 |
| | | | 40,000 | | | | 10,000 | | | | 0.19 | | | | 0.77 | | 20/03/2027 |
| John Gillard | | | 150,000 | | | | 37,500 | | | | 0.67 | | | | 2.69 | | 23/10/2027 |
| | | | 150,000 | | | | 37,500 | | | | 0.67 | | | | 2.69 | | 23/10/2027 |
| | | | 150,000 | | | | 37,500 | | | | 0.67 | | | | 2.69 | | 23/10/2027 |
| | | | 150,000 | | | | 37,500 | | | | 0.67 | | | | 2.69 | | 23/10/2027 |
*1 Includes options issued to Darnick Company which in the past provided Trinity Biotechus with the services of Mr. O’Caoimh as Chief Executive Officer.
2 Share options with a hurdle price are structured such that they may only become exercisable into ADSs when the average closing price of our ADSs, for ten trading days out of the thirty previous trading days, is equal to or greater than the relevant hurdle price of US$5.00, US$7.50, US$10.00, $15.00, $20.00 and $25.00 per ADS (adjusted for any stock splits, reverse splits or equivalent reorganisations) during the life of the option. At March 31, 2024, none of the directors’ share options with a hurdle price were exercisable as the hurdle price condition has not been achieved.
As of April 15, 2022March 31, 2024 the following total options were outstanding:
| | | Number of ‘A’ Ordinary Shares Subject to OptionOptions | | | Range of Exercise Price per Ordinary Share | | | Range of Exercise Price per ADS | |
| Total options outstanding | | | 15,964,66251,014,672 | | |
| US$0.19-US$4.36US0.12-US$1.34 | | |
| US$0.76-US$17.44US2.40-US$26.80 | |
Item 7. Major Shareholders and Related Party TransactionsItem 7. | Major Shareholders and Related Party Transactions |
As of April 15, 2022, Trinity Biotech has outstanding 107,670,894 ‘A’March 31, 2024, there were 189,310,282‘A’ Ordinary shares (excluding treasury shares). outstanding. Such totals exclude 15,964,662total excludes 51,014,672 Ordinary shares issuable upon the exercise of outstanding options and 10,000,00021,200,000 Ordinary shares issuable upon the exercise of outstanding warrants.
The following table sets forth certain information regarding the beneficial ownership of our ordinary shares, as of April 15, 2022, the Trinity Biotech ‘A’ Ordinary Shares beneficially heldMarch 31, 2024, by each person believed by Trinity Biotech towho we believe beneficially holdowns 5% or more of such shares.
our outstanding ordinary shares and all of our directors and executive officers as a group. Except as otherwise noted, all of the persons and groups shown below have sole voting and investment power with respect to the shares indicated.
| | | Number of ‘A’
Ordinary Shares
Beneficially Owned | | | Number of
ADSs
Beneficially
Owned (1) | | | Percentage ‘A’ Ordinary
Shares (2) | | | Percentage
Total Voting
Power | |
| Renaissance Technologies LLC | | | 6,274,220 | (3) | | | 1,568,555 | | | | 5.8 | % | | | 5.8 | % |
| Paradice Investment Management, LLC | | | 6,172,460 | (4) | | | 1,543,115 | | | | 5.7 | % | | | 5.7 | % |
| Ronan O’Caoimh | | | 17,228,160 | (5) | | | 4,307,040 | | | | 15.0 | % | | | 15.0 | % |
| Stonehill Capital Management LLC | | | 9,272,872 | (6) | | | 2,318,218 | | | | 8.6 | % | | | 8.6 | % |
| Perceptive Credit Holdings III, LP | | | 10,000,000 | (7) | | | 2,500,000 | | | | 8.5 | % | | | 8.5 | % |
| Name | | Number of ‘A’
Ordinary Shares
Beneficially Owned | | | Number of
ADSs
Beneficially
Owned | | | Percentage ownership (2) | |
| MiCo IVD Holdings, LLC | | | 44,759,388 | (3) | | | 2,237,969 | (3) | | | 29.9 | %(3) |
| Perceptive Credit Holdings III, LP | | | 56,000,000 | (4) | | | 2,800,000 | (4) | | | 26.8 | % |
| All directors and officers as a group | | | 30,936,774 | (1) | | | 1,546,839 | (1) | | | 14.8 | % |
| (1)
| Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary Shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Share options that have a performance condition related to the share price of the equity of the Company are deemed to be exercisable irrespective of whether the performance condition has been, or is expected to be, satisfied within 60 days of the date of this table. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. |
|
|
(2)
| The percentages shown are based on 189,310,282 ‘A’ Ordinary Shares outstanding (excluding treasury shares). |
| |
|
| (3)
| Based onupon a Schedule 13G/A13D filed on February 11, 2022,January 2, 2024, by MiCo IVD Holdings, LLC with the SECSEC. The percentage ownership in the table above includes the conversion of the maximum number of ‘A’ Ordinary Shares as permitted by Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation.the conversion terns of the Convertible Note. The principal business address of each of these entitiesMiCo IVD Holdings, LLC is 800 Third Avenue,85 Orchard Road. Skillman, New York, NY 10022Jersey 08558 United States. |
| |
|
| (4)
| Based on aupon Schedule 13G/A13D filed on February 7, 20209, 2024, by Paradice Investment Management, LLC with the SEC.Perceptive Credit Holdings III, LP. The principal business address of Paradice Investment Management, LLC is 257 Fillmore Street, Suite 200, Denver, Colorado 80206 United States. |
| | |
| (5) | Based on information provided to the Company, the above total includes ‘A’ Ordinary shares issuable upon exercise of options issued to Darnick Company. The address of Mr. O’Caoimh is c/o Trinity Biotech plc, Bray, Co. Wicklow, Ireland. |
| | |
| (6) | Based on a Schedule 13G/A filed on February 4, 2022 by Stonehill Capital Management, LLC with the SEC. The principal business address of Stonehill Capital Management, LLC is 320 Park Ave., 26th Floor, New York, NY 10022 United States.
|
| | |
| (7) | Based upon warrant agreement issued to Perceptive Credit Holdings III, LP in January 2022 in respect of 10,000,000 ‘A’ Ordinary Shares (2,500,000 ADSs).is 51 Astor Place 10th Floor, New York, NY 10003. |
Significant Changes in the Ownership of Major Shareholders
To our knowledge, other than as disclosed in the tabletables below there has been no significant change in the percentage ownership held by any major shareholder since January 1, 2019.2021.
The following shareholders have disclosed ownership above 5% since January 1, 20192021 but their ownership is below 5% as at April 15, 2022March 31, 2024 according to their Schedule 13G filings, or Irish Companies Act notifications.
except as indicated otherwise.
| | | Number of ‘A’
Ordinary Shares
Beneficially Owned | | | Number of
ADSs
Beneficially
Owned (1) | | | Percentage ‘A’ Ordinary
Shares (2) | | | Percentage
Total Voting
Power | | Date of Filing | | Number of ‘A’
Ordinary Shares
Beneficially Owned | | | Number of
ADSs
Beneficially
Owned (1) | | | Percentage ‘A’ Ordinary
Shares | | | Percentage
Total Voting
Power | | Date of Filing |
| Whitefort Capital Master Fund, LP | | | 2,342,280 |
| | | 585,570 | | | | 2.2 | % | | | 2.2 | % | February 16, 2021 | |
| Highbridge Capital Management, LLC | | | 675,064 |
| | | 168,766 | | | | 0.6 | % | | | 0.6 | % | April 14, 2022 | | | 675,064 | | | | 33,753 | | | | 0.4 | % | | | 0.4 | % | April 14, 2022 (1) |
| Renaissance Technologies LLC | | | | 5,573,752 | | | | 278,688 | | | | 2.9 | % | | | 2.9 | % | February 13, 2023 |
| Stonehill Capital Management LLC | | | | 6,690,592 | | | | 334,530 | | | | 3.5 | % | | | 3.5 | % | February 13, 2023 |
| (1) | Based on information provided by Highbridge Capital Management, LLC to the Company in a letter dated April 14, 2022 |
The ownership for the following shareholders rose above 5% since January 1, 2021:
| | | Number of ‘A’
Ordinary Shares
Beneficially Owned | | | Number of
ADSs
Beneficially
Owned (1) | | | Percentage ‘A’ Ordinary
Shares | | | Percentage
Total Voting
Power | | Date of Filing |
| MiCo IVD Holdings, LLC | | | 44,759,388 | | | | 2,237,969 | | | | 29.9 | %(1) | | | 29.9 | %(1) | April 14, 2022 |
| Perceptive Credit Holdings III, LP | | | 56,000,000 | | | | 2,800,000 | | | | 26.8 | % | | | 26.8 | % | February 09, 2024 |
| (1) | The percentage ownership in the table above for MiCo IVD Holdings, LLC includes the conversion of the maximum number of ‘A’ Ordinary Shares as permitted by the conversion terns of the Convertible Note. |
Major Shareholders Voting Rights
Our major shareholders do not have different voting rights.
B. Related Party Transactions
The following is a description of our related party transactions since January 1, 2021.2023.
The Group has entered into various arrangements with JRJ Investments (“JRJ”), a partnership owned by Mr O’Caoimh and Dr Walsh, directors of Trinity Biotech, and directly with Mr O’Caoimh, to provide for current and potential future needs to extend its premises at IDA Business Park, Bray, Co. Wicklow, Ireland.
The Group has entered into an agreement for a 25-year lease with JRJ effective from December 2003 for offices that adjacent to its then premises at IDA Business Park, Bray, Co. Wicklow, Ireland. TheIreland with an annual rent ofis €381,000 (US$432,000) is payable from January 1, 2004.421,000). Upward-only rent reviews are carried out every five years and there have been no increases arising from these rent reviews.
TheIn 2007, the Group has also entered into 25-year lease agreements with RonanMr O’Caoimh and Dr Walsh for a 43,860 square foot manufacturing facility in Bray, Ireland and an adjacent warehouse of 16,000 square feet.Ireland. The annual rent for the manufacturing facility is €787,000 (US$891,000) and869,000). Subsequent to the signing of this lease, the ownership of the building transferred from JRJ to Mr O’Caoimh solely. In 2016 the Group also entered into 10-year lease agreement with Mr O’Caoimh for a warehouse of 16,000 square feet adjacent to the leased manufacturing facility in Bray, Ireland. The annual rent for the warehouse is €144,000 (US$163,000)159,000). These two leases expire in 2028 and 2026 respectively. At the time, independent valuers advised the Group that the rent in respect of each of the leases represents a fair market rent. Upward-only rent reviews are carried out every five years and there have been no increases to date arising from these rent reviews. A rent review of the 43,860 square foot facility and the warehouse is currently ongoing. The rent review for the 43,860 facility has been referred to an independent arbitrator for determination.
Beginning in Q4 2020,At the Group occupied some additional space adjoiningtime that the warehouse. A sum of €90,000 (US$102,000) was accrued for rent payable to Mr O’Caoimh in relation to this additional space as at 31 December 2021.
arrangements were entered into, Trinity Biotech and its directors (excepting Mr O’Caoimh and Dr Walsh who expressexpressed no opinion on this point) believe at the time that the arrangements entered into representbelieved they represented a fair and reasonable basis on which the Group cancould meet its ongoing requirements for premises. Dr Walsh has no ownership interest in the additional space adjoining the warehouse owned by Mr O’Caoimh and was therefore entitled to express an opinion on this arrangement.
Darnick Company is wholly-owned by members of Mr. O’Caoimh’s immediate family. In 2019, the relationship with Darnick was terminated and Mr O’Caoimh returned as an employee. All liabilities in relation to Darnick Company were extinguished as of December 31, 2021.
Rayville Limited, an Irish registered company, which was wholly owned by three executive directors and certain other former executives of the Group, owned all of the ‘B’ non-voting Ordinary Shares in Trinity Research Limited, one of the Group’s subsidiaries, and these ‘B’ shares were surrendered through Trinity Research Limited in 2021.
Indemnity Agreements
We have entered into customary agreements with each of our current directors and executive officers to indemnify them to the fullest extent permitted by law, subject to limited exceptions.
Related Person Transaction Policy
Our Board of Directors has adopted an interested party transaction policy, which governs the identification, reporting and approval of transactions with interested parties.
C. Interests of Experts and Counsel
Not applicable.
Item 8. Financial InformationItem 8. | Financial Information |
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements
See Item 18. “Financial Statements.”
Export Sales
In the year ended December 31, 2021,2023, the amount of our export sales (i.e., sales outside of Ireland) was approximately US$92,729,00056,714,206 which represents 99.75%99.8% of our total sales.
Legal and Arbitration Proceedings
From time to time, we may be involved in various claims and legal proceedings related to claims arising out of our operations. We are not currently a party to any material legal proceedings, including any such proceedings that are pending or threatened, of which we are aware.aware, other than as disclosed herein.
Dividend Policy
We have not paid a cash dividend on our ordinary shares or ADSs since 2015 and do not intend to pay cash dividends on our ADSs in the foreseeable future. Our earnings and other cash resources will be used to continue the development and expansion of our business. Any future dividend policy will be determined by our Board of Directors and will be based upon conditions then-existing, including our results of operations, financial condition, current and anticipated cash needs, contractual restrictions and other conditions.
B. Significant Changes
Except as otherwise disclosed in this Annual Report, no significant change has occurred since December 31, 2021.2023.
Item 9.The Offer and ListingItem 9. | The Offer and Listing |
A. Offer and Listing Details
Trinity Biotech’s ADSs are listed on the NASDAQ Global Market under the symbol “TRIB” and the depositary bank for the ADSs is The Bank of New York Mellon.
B. Plan of Distribution
Not applicable.
C. Markets
Trinity Biotech’s ADSs, each representing fourtwenty ordinary shares, are listed on the NASDAQ Global Market under the symbol “TRIB” and the depositary bank for the ADSs is The Bank of New York Mellon.
D. Selling Shareholders
Not Applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional InformationItem 10. | Additional Information |
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Copies of our amended and restated memorandum of association and our amended and restated articles of associationArticles are filed as Exhibit 1.1 to this Annual Report. The information called for by this Item 10.B. is included in Exhibit 2.1 to this Annual Report and is incorporated herein by reference.
Irish Law
Each of Trinity Biotech’s principal subsidiary undertakings incorporated in Ireland (refer to Item 18, Note 32)31) is registered as a private company limited by shares under the Companies Act 2014. Pursuant to Irish law, Trinity Biotech must maintain a register of its shareholders.members. This register is open to inspection by shareholdersmembers free of charge and to any member ofindividual on the public on payment of a small fee. The books containing the minutes of proceedings of anythe general meetingmeetings of Trinity Biotech are required to be kept in Ireland and are kept at the registered office of the Company and are open to the inspection of any member without charge. Minutes of meetings of the Boardboard of Directorsdirectors are not open to scrutiny by shareholders. Trinity Biotech is also obliged to keep proper accounting records. The shareholdersShareholders have no statutory right to inspect the accounting records.records of the Company. The only financial records, which are open to the shareholders,members, are the statutory financial statements, which are sent to shareholdersmembers together with the annual report. Irish law also obliges Trinity Biotech to file information regarding certain events relating to the Company (such as changes to share rights, changes to the Boardboard of Directorsdirectors etc). This information is filed with the Companies Registration Office in Ireland and is open to public inspection. The Articles of Association of Trinity Biotech permit ordinary shareholdersCompanies Act 2014 permits members to approve corporate matters in writing provided that the relevant resolution is signed by all the members for the time being entitled to vote and attend at general meeting. A general meeting can be convened by ordinary shareholdersmembers which hold not less than 50 per cent of the paid up share capital of the Company carrying the right of voting at general meetings of the Company. In addition, the directors of the Company are required to convene a general meeting forthwith upon the deposit of a requisition signed by ordinary shareholdersmembers holding not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company. Trinity Biotech is generally permitted, subject to Irish company law, to issue shares with preferential rights, including preferential rights as to voting, dividends or rights to a return of capital on a winding up of the Company. Any shareholdermember who complains that the affairs of the Company are being conducted or that the powers of the directors of the Company are being exercised in a manner oppressive to himthem or any of the shareholdersmembers (including himself)themselves), or in disregard of his or their interests as shareholders,members, may apply to the Irish courtsCourts for relief. Shareholders have no right to maintain proceedings in respect of wrongs done to the Company.
Directors have extensive and wide–ranging duties under Irish law. These arise from both common law and statute (principally the Companies Act 2014, which codified a number of key fiduciary duties). Our directors owe their duties individually and primarily to Trinity Biotech and not its shareholders (although there is a requirement that directors are requiredconsider the interests of employees in addition to those of the Company). Additionally, directors will also need to have regard to the interests of shareholderscreditors, where a director believes, or has reasonable cause to believe, that a company is, or is likely to be, unable to pay its debts, or becomes aware of the company’s insolvency. All of the directors have equal and employees)overall responsibility for the management of the Company (although directors who also serve as employees will have additional responsibilities and duties arising under their employment agreements and may be expected to exercise a greater degree of skill and diligence than non-executive directors). Those duties include duties to act in good faith in the interests of Trinity Biotech, act honestly and responsibly in the conduct of the Company’s affairs, act in accordance with the Company’s Constitution and exercise their powers only for purposes allowed by law, not use the Company’s property for their own or a third party's, benefit (unless duly authorised), not agree to restrict their power to exercise an independent judgment (subject to limited exceptions) and avoid conflicts of interests (unless they are properly released). A director must exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having the knowledge and experience that (a) may reasonably be expected of a person in the same position as the director and (b) which that particular director has. Other statutory duties include ensuring the maintenance of proper books of account, having annual accounts prepared, having an annual audit performed, maintaining certain registers and making certain filings as well as the disclosure of personal interests. When directors, as agents in transactions, make contracts on behalf of the Company, they generally incur no personal liability under these contracts. It is Trinity Biotech, as principal, which will be liable under them, as long as the directors have acted within Trinity Biotech’s objects and within their own authority. A director who commits a breach of histheir duties shall be liable to Trinity Biotech for any profit made by himthem or for any damage suffered by Trinity Biotech as a result of the breach. In addition to the above, a breach by a director of histheir duties may (where relevant) lead to the summary dismissal of the director, civil or criminal sanction from a Court, including penalties or imprisonment, and/or the imposition of orders restricting or disqualifying the director from acting as a director.
C. Material Contracts
Other than contracts entered into in the ordinary course of business, the following represents the material contracts entered into by the Group:
Term loan agreement with Perceptive Advisors
On December 15, 2021, the Company and its subsidiaries entered into a US$81.25 million senior secured term loan credit facility (the “Term Loan”) with Perceptive Advisors (“Perceptive”), an investment manager with an expertise in healthcare. Proceeds from the Term Loan, along with existing cash and the issuance of new American Depository Shares (“ADS”) in the Company, were used to retire the Exchangeable Notesexchangeable notes in January 2022. The Term Loan will mature on the fourth anniversary of the drawdown date and accrues interest at an annual rate equal to 11.25% plus the greater of (a) one-month LIBOR (later changed to the Term SOFR Reference Rate effective from October 28, 2022) and (b) one percent per annum, and interest will be payable monthly in arrears in cash. The Term Loan does not require any amortization, and the entire unpaid balance will be payable upon maturity. The Term Loan can be repaid, in part or in full, at a premium before the end of the four-year term.
The drawdown of the Term Loan by the Company was subject to a number of conditions precedent including the repayment of at least 99.7% of the Exchangeable Notesexchangeable notes and approval by the Company’s shareholders of the Term Loan, an increase in the authorized share capital of the Company and the issuance of the Warrants. At the Extraordinary General Meeting held on January 25, 2022, the Company’s shareholders approved all of the four resolutions put to the meeting, with each resolution being approved by at least 97% of votes cast. The term loan was drawn down on January 27, 2022.
In connection with the acquisition of the CGM assets of Waveform in January 2024, the Company entered into another amended and restated term loan. Under the Amended Term Loan, an additional US$22 million of funding has been made available to the Company, with US$12.5 million being used to acquire the CGM assets of Waveform. The remaining US$9.5 million is available for general corporate purposes including for the further development of the CGM and biosensor technologies. In addition, the Amended Term Loan provides for additional liquidity of up to US$6.5 million, that may be drawn down by the Company between April and December 2024, and can be used for general corporate purposes. In April 2024 the Company drew down the additional funding of US$6.5 million as prescribed in the Amended Term Loan agreement. This funding will be used for general corporate purposes, including the further development of our CGM offering.
The Amended Term Loan also immediately reduced the annual rate of interest on the loan by 2.5% to 8.75% (the “Base Rate”) plus the greater of (a) Term Secured Overnight Financing Rate (SOFR) or (b) 4.0% per annum, and allows for a further 2.5% reduction in the Base Rate to 6.25% once the outstanding principal under the Amended Term Loan falls below US$35 million. Additionally, the Amended Term Loan reduces the early repayment penalty from a range of 8% to 7% to 4.0% to 3.5%, dependent on timing of early repayment, and also reduces the revenue covenants. The Amended Term Loan matures in January 2026.
Warrant agreement with Perceptive Advisors
On December 15, 2021, the Company agreed, subject to drawdown of the Term Loan, to issue warrants exercisable for 2,500,000500,000 of the Company’s ADSs to Perceptive. The warrants were issued in January 2022 following the drawdown of the term loan. The per ADS exercise price of the Warrants is US$1.30,6.50, based on the lower of i) the 10-day volume weighted average price (“VWAP”) for the Company’s ADSs for the 10 business days prior to the Closing Date of the Credit Agreement for the Term Loan and ii) the 10-day VWAP for the Company’s ADSs for the 10 business days prior to the drawdown date of the funding under the Term Loan. The Warrants are exercisable, in whole or part, until the seventh anniversary of the date of drawdown of the funding under the Term Loan.
In February 2023, in connection with an increased Term Loan facility, the Company agreed to reprice the 500,000 warrants, originally issued to Perceptive, to a price of US$5.36 per ADS.
In connection with the Amendment to the Term Loan in January 2024, Perceptive received new warrants to purchase an additional 500,000 ADSs and the Company agreed to price these additional warrants and reprice the existing warrants to purchase 500,000 ADSs that were issued to Perceptive under the original term loan, with an exercise price of US$2.20 per ADS.
Exchange agreement with certain holders of the Exchangeable Notes
On December 15, 2021, the Company entered into exchange agreements (the “Exchange Agreements”) with five institutional investors that held approximately US$99,700,000 of the outstanding Exchangeable Notes,exchangeable notes, which are puttable by the holders to the Group, at par, in April 2022. Under the terms of this agreement each holder agreed to exchange their Notes at a discount to par with each holder receiving $0.87US$0.87 of cash and the equivalent of $0.08US$0.40 of the Company’s ADS (based upon the 5-day trailing VWAP of the ADSs on NASDAQ on December 9,10, 2021, discounted by 13%) per $1 nominal value of the Notes. The consummation of the Exchange Agreements was conditional upon (among other things) the approval by the Company’s shareholders of the issuance of ADSs pursuant to the Exchange Agreements and certain matters related to the drawdown of the Term Loan. At the Extraordinary General Meeting held on January 25, 2022, the Company’s shareholders approved all of the four resolutions put to the meeting, with each resolution being approved by at least 97% of votes cast. The Company retired the Notes owned by the five institutional investors on January 28,27, 2022.
StrategicSecurities Purchase Agreement and Convertible Note related to MiCo Investment and Partnership with The MiCo Group
In April 2022, the Company announced a US$45 million strategic investment and partnership withfrom MiCo a KOSDAQ-listed and Korea-based company.IVD Holdings LLP. The investment consistsconsisted of an equity investment of approximately US$25.2 million (11.2(2.24 million ADSs at a price of US$2.2511.25 per ADS) and a seven-year, unsecured US$20 million junior convertible note, issued by Trinity Biotech of US$20 million, with a fixed interest rate of 1.5% and an ADS conversion price of US$3.2416.20 per ADS. The convertible note mandatorily converts into ADS if the volume weighted average price of the Company’s ADSs is at or above US$3.2416.20 for any five consecutive NASDAQ trading days.
The investment isShare Purchase Agreement in respect of Benen Trading Limited and Fitzgerald Industries International Inc.
On April 27, 2023, the Company announced it had closed the sale of its Fitzgerald Industries life sciences supply business, consisting of Benen Trading Ltd and Fitzgerald Industries International, Inc, to Biosynth for cash proceeds of approximately US$30 million subject to customary Korean central bank approvals. It is intendedadjustments. The Fitzgerald life sciences supply business generated revenue of approximately US$12 million in the year ended December 31, 2022, and was EBITDA positive. The cash proceeds from Biosynth includes funding to Fitzgerald Industries to allow it repay intercompany loans owed to Trinity Biotech.
Asset and share Purchase Agreement for CGM assets of Waveform Technologies, Inc.
On January 30, 2024, the Company acquired the biosensor technology, including the CGM assets, of Waveform for an initial consideration of US$12.5 million in cash and 1.8 million ADSs of the Company plus contingent consideration. The Company intends to initially design an updated CGM sensor using the acquired Waveform assets together with a related data driven health and wellness insights platform and to further evolve the platform technology acquired through the acquisition of the Waveform assets to measure and analyse other valuable biomarkers and related datapoints.
Transition Agreement with Bayer Healthcare LLC
The transition agreement with Bayer Healthcare LLC (“Bayer”) derives from the acquisition of the CGM assets of Waveform Technologies, Inc in January 2024. As a portion of acquired intellectual property was developed originally by Bayer, the transition agreement provides that the Company will use these funds primarily to repaypay Bayer a portionroyalty on net sales of the Company’s US$81.25 million term loan. The Company also expects that this investment will facilitate it exploring lower cost debt funding options, in the short term, with the aim of further reducing the company’s interest expense through refinancing the balance of the Company’s term loan at substantially lower interest rates.CGM products.
The founder and chair of MiCo, Sun-Q Jeon, is set to become Chairperson of Trinity Biotech and Aris Kekedjian and Michael Sung Soo Kim are expected to join the Board once the investment has completed. Current directors Kevin Tansley, Clint Severson and James Merselis will retire from the Board on completion of the investment.
D. Exchange Controls
Except as indicated below, there are no restrictions on non-residents of Ireland dealing in Irish securities (including shares or depositary receipts of Irish companies such as the Company). Dividends and redemption proceeds also continue to be freely transferable to non-resident holders of such securities.
As an EU Member State, EU Council Regulations which implement EU and UN sanctions decisions automatically have direct effect in Irish law once they enter into force at EU level. Ireland does not currently operate an autonomous sanctions policy which departs from EU and UN sanctions decisions. At present EU Council Regulations prohibit financial transfers involving a number of persons, entities and bodies, which are subject to amendment on an ongoing, regular basis and currently include, but are not limited to: certain persons and activities in Afghanistan, Belarus, Bosnia & Herzegovina, Burundi, the Central African Republic, Democratic Republic of Congo, the Republic of Guinea, the Republic of Guinea-Bissau, Haiti, the Democratic People's Republic of Korea, Egypt, Eritrea, Iran, Iraq, Lebanon, Libya, Myanmar/Burma, Nicaragua, Russia, Syria, Somalia, South Sudan, Sudan, Tunisia, Turkey, Ukraine, Venezuela, Yemen, and Zimbabwe without the prior permission of the Central Bank of Ireland.
Under the Financial Transfers Act 1992 (the “1992 Act”), the Minister for Finance of Ireland may make provision for the restriction of financial transfers between Ireland and other countries. Financial transfers are broadly defined, and the acquisition or disposal of the ADRs, which represent shares issued by an Irish incorporated company, the acquisition or the disposal of Ordinary Shares and associated payments may fall within this definition. Dividends or payments on the redemption or purchase of shares and payments on the liquidation of an Irish-incorporated company would fall within this definition.
The Any orders made under the 1992 Act and underlying EU regulations prohibit financial transfers involving a number of persons, entities and bodies, which are subject to amendment on an ongoing, regular basis and currently include, but are not limited to: certain persons and activities in Sudan, South Sudan, the Central African Republic, Libya, Iraq, the Democratic People's Republic of Korea, Myanmar/Burma, Tunisia, Zimbabwe, Egypt, Venezuela, certain persons, entities and bodies in Syrian Arab Republic, the Republic of Guinea-Bissau, Nicaragua, Democratic Republic of Congo, Iran, Ukraine, associatedtypically align with the Taliban in Afghanistan; associated with ISIL (Da’esh)EU and Al-Qaeda; associated with Turkey’s unauthorized drilling activities in the Eastern Mediterranean and certain known terrorists and terrorist groups and countries that harbor certain terrorist groups, without the prior permission of the Central Bank of Ireland.UN sanctions decisions as Ireland does not operate an autonomous sanctions policy at present.
Any transfer of, or payment in respect of, an ADS involving the government of any country that is currently the subject of United NationsEU or UN sanctions, any person or body controlled by any of the foregoing, or any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such sanctions as implemented into Irish law. The Company does not anticipate that Irish exchange controls or orders made under the 1992 Act or United NationsEU or UN sanctions implemented into Irish law will have a material effect on its business.
E. Taxation
The following discussion is based on U.S. and Republic of Ireland tax law, statutes, treaties, regulations, rulings and decisions all as of the date of this annual report. Taxation laws are subject to change, from time to time, and no representation is or can be made as to whether such laws will change, or what impact, if any, such changes would have on the statements contained in this summary. No assurance can be given that proposed amendments will be enacted as proposed, or that legislative or judicial changes, or changes in administrative practice, will not modify or change the law as described herein.
This summary is of a general nature only. It does not constitute legal or tax advice nor does it discuss all aspects of Irish taxation that may be relevant to any particular Irish Holder or U.S. Holder of ordinary shares or ADSs.
This summary does not discuss all aspects of Irish and U.S. federal income taxation that may be relevant to a particular holder of Trinity Biotech ADSs in light of the holder’s own circumstances or to certain types of investors subject to special treatment under applicable tax laws (for example, financial institutions, life insurance companies, tax-exempt organisations, and non-U.S. taxpayers) and it does not discuss any tax consequences arising under the laws of taxing jurisdictions other than the Republic of Ireland and the U.S. federal government. The tax treatment of holders of Trinity Biotech ADSs may vary depending upon each holder’s own particular situation.
Prospective purchasers of Trinity Biotech ADSs are advised to consult their own tax advisors as to the US, Irish or other tax consequences of the purchase, ownership and disposition of such ADSs.
U.S. Federal Income Tax Consequences to U.S. Holders
The following is a summary of certain material U.S. federal income tax consequences that generally would apply with respect to the ownership and disposition of Trinity Biotech ADSs, in the case of a holder of such ADSs who is a U.S. Holder (as defined below) is and who holds the ADSs as capital assets. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect on the date hereof and all of which are subject to change either prospectively or retroactively. For the purposes of this summary, a U.S. Holder is: an individual who is a citizen or tax resident of the U.S.; a corporation created or organised in or under the laws of the U.S. or any political subdivision thereof; an estate whose income is subject to U.S. federal income tax regardless of its source; or a trust that (a) is subject to the primary supervision of a courtCourt within the U.S. and control by one or more U.S. persons or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
This summary does not address all tax considerations that may be relevant with respect to an investment in ADSs. This summary does not discuss all the tax consequences that may be relevant to a U.S. Holder in light of such Holder’s particular circumstances or to U.S. Holders or other persons subject to special rules, including persons that are not U.S. Holders, broker dealers, financial institutions, certain insurance companies, investors liable for alternative minimum tax, tax exempt organisations, regulated investment companies, non-resident aliens of the U.S. or taxpayers whose functional currency is not the U.S. Dollar, persons who hold ADSs through partnerships or other pass-through entities, persons who acquired their ADSs through the exercise or cancellation of employee stock options or otherwise as compensation for services, investors that actually or constructively own 10% or more of Trinity Biotech’s shares by vote or value, and investors holding ADSs as part of a straddle or appreciated financial position or as part of a hedging or conversion transaction.
If an entity treated as a partnership for U.S. federal income tax purposes owns ADSs, the U.S. federal income tax treatment of a partner in such a partnership will generally depend upon the status of the partner and the activities of the partnership. The partners in a partnership that owns ADSs should consult their tax advisors about the U.S. federal income tax consequences of holding and disposing of ADSs.
This summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation. In addition, this summary does not include any discussion of state, local or foreign taxation. You are urged to consult your tax advisors regarding the foreign and U.S. federal, state and local tax considerations of an investment in ADSs.
For U.S. federal income tax purposes, U.S. Holders of Trinity Biotech ADSs will be treated as owning the underlying Class ‘A’ Ordinary Shares represented by the ADSs held by them. This discussion assumes such treatment is respected.
Dividends and Other Distributions on ADSs
The gross amount of any distribution made by Trinity Biotech to U.S. Holders with respect to the underlying shares represented by the ADSs held by them, including the amount of any Irish taxes withheld from such distribution, will be treated for U.S. federal income tax purposes as a dividend to the extent of Trinity Biotech’s current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of any such distribution that exceeds Trinity Biotech’s current and accumulated earnings and profits will be applied against and reduce a U.S. Holder’s tax basis in the U.S. Holder’s ADSs, and any amount of the distribution remaining after the U.S. Holder’s tax basis has been reduced to zero will constitute capital gain. However, there can be no assurances we will calculate earnings and profits under U.S. federal income tax principles. Therefore, any distribution we make to you may be reported as a dividend. The capital gain will be treated as a long-term or short-term capital gain depending on whether or not the U.S. Holder’s ADSs have been held for more than one year as of the date of the distribution.
Dividends paid by Trinity Biotech generally will not qualify for the dividends received deduction otherwise available to U.S. corporate shareholders.
Subject to complex limitations, any Irish withholding tax imposed on dividends will be a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or, alternatively, for deduction against income in determining such tax liability) where certain conditions are satisfied. The limitations set out in the Code include computational rules under which foreign tax credits allowable with respect to specific classes of income, commonly referred to as “baskets,” cannot exceed the U.S. federal income taxes otherwise payable with respect to each such class of income. Dividends generally will be treated as foreign-source passive category income or, in the case of certain U.S. Holders, general category income for U.S. foreign tax credit purposes. Further, there are special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to a reduced tax, see discussion below.
A U.S. Holder will be denied a foreign tax credit with respect to Irish income tax withheld from dividends received on the ADSs to the extent such U.S. Holder has not held the ADSs for at least 16 days of the 31-day period beginning on the date which is 15 days before the ex-dividend date, or to the extent such U.S. Holder is under an obligation to make related payments with respect to substantially similar or related property. Any days during which a U.S. Holder has substantially diminished its risk of loss on the ADSs are not counted toward meeting the 16-day holding period required by the Code. If a refund of the tax withheld is available to you under the laws of Ireland or under the United States and Ireland income tax treaty (the “Treaty”), the amount of tax withheld that is refundable will not be eligible for such credit against your U.S. federal income tax liability (and will not be eligible for the deduction against your U.S. federal taxable income). The rules relating to the determination of the foreign tax credit are complex, and you should consult with your personal tax advisors to determine whether and to what extent you would be entitled to this credit against your U.S. federal income tax liability.
Subject to certain limitations, including the PFIC rules discussed below, “qualified dividend income” received by a noncorporate U.S. Holder will be subject to tax at lower rates. Distributions taxable as dividends paid on the ADSs should qualify as qualified dividend income provided that either: (i) we are entitled to benefits under the Treaty or (ii) the ADSs are readily tradable on an established securities market in the U.S. and certain other requirements are met. We believe that we are entitled to benefits under the Treaty and that the ADSs currently are readily tradable on an established securities market in the U.S. However, no assurance can be given that the ADSs will remain readily tradable. The rate reduction does not apply unless certain holding period requirements are satisfied. With respect to the ADSs, the U.S. Holder must have held such ADSs for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date. The rate reduction also does not apply to dividends received from passive foreign investment companies, see discussion below, or in respect of certain hedged positions or in certain other situations. The legislation enacting the reduced tax rate contains special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to the reduced tax rate. U.S. Holders of ADSs should consult their own tax advisors regarding the effect of these rules in their particular circumstances.
Dispositions of the ADSs
Upon a sale or exchange of ADSs, a U.S. Holder will recognise a gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realised on the sale or exchange and the U.S. Holder’s adjusted tax basis in the ADSs sold or exchanged. Such gain or loss generally will be capital gain or loss and will be long-term or short-term capital gain or loss depending on whether the U.S. Holder has held the ADSs sold or exchanged for more than one year at the time of the sale or exchange. If you are a non-corporate U.S. Holder, long-term capital gains may be eligible for reduced tax rates.
Passive Foreign Investment Company
For U.S. federal income tax purposes, a foreign corporation is treated as a “passive foreign investment company” (or “PFIC”) in any taxable year in which, after taking into account the income and assets of the corporation and certain of its subsidiaries pursuant to the applicable “look through” rules, either (1) at least 75% of the corporation’s gross income is passive income or (2) at least 50% of the average value of the corporation’s assets is attributable to assets that produce passive income or are held for the production of passive income. Based on the nature of its present business operations, assets and income, Trinity Biotech believes that for the year 2021,2023, it was not a PFIC. However, no assurance can be given that changes will not occur in Trinity Biotech’s business operations, assets and income that might cause it to be treated as a PFIC at some future time.
If Trinity Biotech were to become a PFIC, a U.S. Holder of ADSs would be required to allocate to each day in the holding period for such U.S. Holder’s ADSs a pro rata portion of any distribution received (or deemed to be received) by the U.S. Holder from Trinity Biotech, to the extent the distribution so received constitutes an “excess distribution,” as defined under U.S. federal income tax law. Generally, a distribution received during a taxable year by a U.S. Holder with respect to the underlying shares represented by any of the U.S. Holder’s ADSs would be treated as an “excess distribution” to the extent that the distribution so received, plus all other distributions received (or deemed to be received) by the U.S. Holder during the taxable year with respect to such underlying shares, is greater than 125% of the average annual distributions received by the U.S. Holder with respect to such underlying shares during the three preceding years (or during such shorter period as the U.S. Holder may have held the ADSs). Any portion of an excess distribution that is treated as allocable to one or more taxable years prior to the year of distribution during which Trinity Biotech was classified as a PFIC would be subject to U.S. federal income tax at the highest tax rate applicable to the U.S. Holder in the prior tax year or years to which it is allocated. The U.S. Holder also would be subject to an interest charge, in the year in which the excess distribution is made, on the amount of taxes deemed under the PFIC rules to have been deferred with respect to the excess distribution. In addition, any gain recognised on a sale or other disposition of a U.S. Holder’s ADSs, including any gain recognised on a liquidation of Trinity Biotech, would be treated in the same manner as an excess distribution. Any such gain would be treated as ordinary income rather than as capital gain.
If Trinity Biotech became a PFIC, a U.S. Holder may be eligible to make a “qualifying electing fund” (or “QEF”) election in the year Trinity Biotech first becomes a PFIC or in the year the U.S. Holder acquires the ADSs, whichever is later. This election provides for a current inclusion of Trinity Biotech’s ordinary income and capital gain income in the U.S. Holder’s U.S. taxable income. In return, any gain on sale or other disposition of a U.S. Holder’s ADSs in Trinity Biotech, if it were classified as a PFIC, would be treated as capital, and the interest penalty would not be imposed. This election is not made by Trinity Biotech, but by each U.S. Holder. In order for the U.S. Holder to maintain the election, Trinity Biotech must make available certain information, which Trinity Biotech may choose not to provide. U.S. Holders should contact their tax advisor for further information about the election.
Alternatively, if the ADSs are considered “marketable stock” a U.S. Holder may elect to “mark-to-market” its ADSs, and such U.S. Holder would not be subject to the PFIC rules described above. Instead, such U.S. Holder would generally include in income any excess of the fair market value of the ADSs at the close of each tax year over its adjusted basis in the ADSs. If the fair market value of the ADSs had fallen below the U.S. Holder’s adjusted basis at the close of the tax year, the U.S. Holder may generally deduct the excess of the adjusted basis of the ADSs over its fair market value at that time. However, such deductions generally would be limited to the net mark-to-market gains, if any, that the U.S. Holder included in income with respect to such ADSs in prior years. Income recognised and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of ADSs with respect to which the mark-to-market election is made, is treated as ordinary income or loss (except that loss is treated as capital loss to the extent the loss exceeds the net mark-to-market gains, if any, that a U.S. Holder included in income with respect to such ADSs in prior years). However, gain or loss from the disposition of ADSs (as to which a “mark-to-market” election was made) in a year in which Trinity Biotech is no longer a PFIC, will be capital gain or loss. The ADSs should be considered “marketable stock” if they traded at least 15 days during each calendar quarter of the relevant calendar year in more than de minimis quantities.
If a U.S. Holder owns ADSs during any year in which we are a PFIC, the U.S. Holder generally must file an IRS Form 8621 with respect to Trinity Biotech, generally with the U.S. Holder’s federal income tax return for that year.
Information Reporting and Backup Withholding
Distributions made with respect to underlying shares represented by ADSs and proceeds from the sale, exchange or other disposition of ADSs may be subject to information reporting to the IRS and to US backup withholding tax. Backup withholding will not apply, however, if the U.S. Holder (i) is a corporation or comes within certain exempt categories, and demonstrates its eligibility for exemption when so required, or (ii) furnishes a correct taxpayer identification number and makes any other required certification.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.
Information with Respect to Foreign Financial Assets
U.S. persons that hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess of certain thresholds are required to file with their U.S. federal income tax return Form 8938, on which information about the assets, including their value, is provided. Taxpayers who fail to file the form when required are subject to penalties. An exemption from reporting applies to foreign assets held through certain financial institutions. Investors are encouraged to consult with their own tax advisors regarding the possible application of this disclosure requirement to their investment in ADSs.
Medicare Contribution Tax
In addition to the income taxes described above, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds will be subject to a 3.8% Medicare contribution tax on net investment income, which includes dividends and capital gains.
U.S. Holders may be subject to state or local income and other taxes with respect to their purchase, ownership and disposition of ADSs. U.S. Holders of ADSs should consult their own tax advisers as to the applicability and effect of any such taxes.
Republic of IrelandIrish Taxation
For the purposes of this summary, an “Irish Holder” means a holder of ordinary shares or ADSs evidenced by ADSs that (i) beneficially owns the ordinary shares or ADSs registered in its name; (ii) in the case of individual holders, are resident, ordinarily resident and domiciled in Ireland under Irish taxation laws; (iii) in the case of holders that are companies, are resident in Ireland under Irish taxation laws; and (iv) are not also resident in any other country under any double taxation agreement entered into by Ireland.
For Irish taxation purposes, Irish Holders of ADSs will beare effectively treated as the owners of the underlying ordinary shares represented by such ADSs.
Solely for the purposes of this summary of Irish Tax considerations, a “U.S. Holder” means a holder of ordinary shares or ADSs evidenced by ADSs that (i) beneficially owns the ordinary shares or ADSs registered in its name; (ii) is resident in the United States for the purposes of the Republic of Ireland/United States Double Taxation Convention (the Treaty); (iii) in the case of an individual holder, is not also resident or ordinarily resident in Ireland for Irish tax purposes; (iv) in the case of a corporate holder, is not a resident in Ireland for Irish tax purposes and is not ultimately controlled by persons resident in Ireland; and (v) is not engaged in any trade or business in Ireland and does not perform independent personal services through a permanent establishment or fixed base in Ireland.
In 2011, the Board decided that it was an appropriate time to commence a dividend policy for the first time in the Company’s history but the payment of dividends has subsequently been suspended (see section below on Dividend Policy). Up to 31 December 2019, the payment of a dividend was generally subject to dividend withholding tax (“DWT”) at the standard rate of income tax in force at the time the dividend iswas paid (the applicable rate was 20% in 2019). However, the rate of DWT has increased to 25% in respect of dividends paid on or after 1 January 2020. Irish Revenue also plan to introduce a new “real time” collection system for DWT based on an individual’s marginal income tax rate, however the introduction of this proposed system has been postponed at present. Under current legislation, where DWT applies, Trinity Biotech will be responsible for withholding it at source.
DWT will not be withheld where an exemption applies and where Trinity Biotech has received all necessary documentation from the recipient prior to payment of the dividend.
Corporate Irish Holders will generally be entitled to claim an exemption from DWT by delivering a declaration which confirms that the company is resident in Ireland for tax purposes to Trinity Biotech in the form prescribed by the Irish Revenue Commissioners. Such corporate Irish Holders will generally not otherwise be subject to Irish tax in respect of dividends received.
Individual Irish Holders will be subject to income tax on the gross amount of any dividend (that is the amount of the dividend received plus any DWT withheld), at their marginal rate of income tax, currently either 20% or 40% depending on the individual’s circumstances, excluding Pay Related Social Insurance (“PRSI”) and the Universal Social Charge (“USC”). Individual Irish Holders will be able to claim a credit against their resulting income tax liability and USC liability in respect of DWT withheld. Individual Irish Holders may, depending on their circumstances, also be subject to the Irish USC of up to 8%, with a further 3% surcharge also arising on certain income in excess of €100,000 and a PRSI contribution of up to 4% in respect of their dividend income.
Under the Irish Taxes Consolidation Act 1997, dividends paid by Trinity Biotech to non-Irish shareholders will, unless exempted, be subject to DWT. Such non-Irish shareholders will not suffer DWT on dividends if the shareholder is:
an individual resident in the U.S. (or certain other countries with which Ireland has a double taxation treaty) and who is neither resident nor ordinarily resident in Ireland; or
a U.S. tax resident corporation (or a corporation resident in certain other countries, with which Ireland has a double taxation treaty) not under the control of Irish residents; or
a corporation that is not resident in Ireland and which is ultimately controlled by persons resident in the U.S. (or certain other countries with which Ireland has a double taxation treaty), with such person or persons not under the control of persons who are not so resident; or
a corporation that is not resident in Ireland and the principal class of whose shares (or its 75% parent’s principal class of shares) is substantially or regularly traded on a recognised stock exchange;exchange in Ireland or a country with which Ireland has a double taxation treaty; or
is otherwise entitled to an exemption from DWT.
In order to avail of the above exemption, certain declarations must be made in advance to the paying company.
A self-assessment system applies to a companyperson tax resident in a treaty jurisdiction receiving dividends, under which a non-resident company willperson must provide a declaration and certain information to the dividend paying company or intermediary to claim the exemption.
Special DWT arrangements are available in the case of shares in Irish companies held by U.S. resident holders through American depository banks using ADSs where such banks enter into intermediary agreements with the Irish Revenue Commissioners and are viewed as qualifying intermediaries under Irish Tax legislation. Under such agreements, American depository banks who receive dividends from Irish companies and pay the dividends on to the U.S. resident ADS holders are allowed to receive and pass on a dividend from the Irish company on a gross basis (without any withholding) if:
the recipient is the direct beneficial owner of the shares, and
the recipient is the direct beneficial owner of the ADSs, and the depository bank’s ADS register shows that the direct beneficial owner of the dividends has a U.S. address on the register, and
there is an intermediary between the depository bank and the beneficial shareholder beneficially entitled to the dividend and the depository bank receives confirmation from the intermediary that the beneficialsuch shareholder’s address in the intermediary’s records is in the U.S.
Where the above procedures have not been complied with and DWT is withheld from dividend payments to U.S. Holders of ordinary shares or ADSs evidenced by ADSs, such U.S. Holders can apply to the Irish Revenue Commissioners claiming a full refund of DWT paid by filing a declaration / claim in the form prescribed by the Irish Revenue Commissioners.Revenue. Certain accompanying information should also be included when making such claims.
The DWT rate applicable to U.S. Holders is reduced to 5% under the terms of the Treaty for corporate U.S. Holders holding 10% or more of voting shares and to 15% for other U.S. Holders. While this will, subject to the application of Article 23 of the Treaty, generally entitle U.S. Holders to claim a partial refund of DWT from the Irish Revenue Commissioners, U.S. Holders will, in most circumstances, likely prefer to seek a full refund of DWT under Irish domestic legislation (see above).
Disposals of Ordinary Shares or ADSs
Irish Holders that acquire ordinary shares or ADSs will generally be considered, for Irish tax purposes, to have acquired their ordinary shares or ADSs at a base cost equal to the amount paid for the ordinary shares or ADSs. On subsequent dispositions, ordinary shares or ADSs acquired at an earlier time will generally be deemed, for Irish tax purposes, to be disposed of on a “first in first out” basis before ordinary shares or ADSs acquired at a later time.time (unless the ordinary shares or ADSs were acquired within four weeks prior to the deposition). Irish Holders that dispose of their ordinary shares or ADSs will be subject to Irish capital gains tax (“CGT”) to the extent that the proceeds realised from such dispositiondispositions exceed the indexed base cost of the ordinary shares or ADSs disposed of and any incidental expenses. The current rate of CGT is 33% and this applies to disposals made on or after 6 December 2012. Indexation of the base cost of the ordinary shares or ADSs is available up to 31 December 2002, and only in respect of ordinary shares or ADSs held for more than 12 months prior to their disposal.
Irish Holders that have unutilised capital losses from other sources in the current, or any previous tax year, can generally apply such losses to reduce gains realised on the disposal of the ordinary shares or ADSs.
An annual exemption allows individuals to realise chargeable gains of up to €1,270 in each tax year without giving rise to CGT. This exemption is specific to the individual and cannot be transferred between spouses. Irish Holders are required, under Ireland’s self-assessment system, to file tax returns reporting any chargeable gains arising to them in a particular tax year.
Where disposal proceeds are received in a currency other than Euro they must be translated into Euro amounts to calculate the amount of any chargeable gain or loss. Similarly, acquisition costs denominated in a currency other than Euro must be translated at the date of acquisition ininto Euro amounts.
Irish Holders that realise a loss on the disposal of ordinary shares or ADSs will generally be entitled to offset such allowable losses against capital gains realised from other sources in determining their CGT liability in that year. Allowable losses which remain unrelieved in a year may generally be carried forward indefinitely for CGT purposes and applied against capital gains in future years.
Transfers between spouses who live together will not give rise to any chargeable gain or loss for CGT purposes with the acquiring spouse acquiring the same pro rata base cost and acquisition date as that of the transferring spouse.
U.S. Holders will not be subject to Irish CGT on the disposal of ordinary shares or ADSs provided that such ordinary shares or ADSs are quoted on a stock exchange at the time of disposition. The stock exchange for this purpose is the Nasdaq Global Market (“NASDAQ”). While it is our intention to continue the quotation of ADSs on NASDAQ, no assurances can be given in this regard.
If, for any reason, our ADSs cease to be quoted on the NASDAQ, U.S. Holders will not be subject to CGT on the disposal of their ordinary shares or ADSs provided that the ordinary shares or ADSs do not, at the time of the disposal, derive the greater part of their value from land, buildings, minerals, or mineral rights or exploration rights in Ireland.
A gift or inheritance of ordinary shares will be, or in the case of ADSs may be, within the charge to capital acquisitions tax, regardless of where the disponer or the donee/successor in relation to the gift/inheritance is domiciled, resident or ordinarily resident. Capital acquisitions tax is levied at a rate of 33% on the taxable value of the gift or inheritance above certain tax-free thresholds and this rate applies in respect of gifts and inheritances taken on or after 6 December 2012 (the rate was 30% between 7 December 2011 and 5 December 2012).2012. The tax-free threshold is determined by the amount of the current benefit and of previous benefits received within the group threshold since 5 December 1991, which are within the charge to capital acquisitions tax and the relationship between the former holder and the successor. Gifts and inheritances between spouses are not subject to the capital acquisitions tax. Gifts of up to €3,000 can be received each year from any given individual without triggering a charge to capital acquisitions tax. Where a charge to Irish CGT and capital acquisitions tax arises on the same event, capital acquisitions tax payable on the event can be reduced by the amount of the CGT payable. There should be no clawback of the same event credit of CGT offset against capital acquisitions tax provided the donee does not dispose of the ordinary shares or ADSs within two years from the date of gift.
The Estate Tax Convention between Ireland and the United States generally provides for Irish capital acquisitions tax paid on inheritances in Ireland to be credited, in whole or in part, against tax payable in the United States, in the case where an inheritance of ordinary shares or ADSs is subject to both Irish capital acquisitions tax and U.S. federal estate tax. The Estate Tax Convention does not apply to Irish capital acquisitions tax paid on gifts.
Irish stamp duty, which is a tax imposed on certain documents, is payable on all transfers of ordinary shares of an Irish registered company (other than transfers made between spouses, transfers made between 90% associated companies, or certain other exempt transfers) regardless of where the document of transfer is executed. Irish stamp duty is also payable on electronic transfers of ordinary shares. A transfer of ordinary shares made as part of a sale or gift will generally be stampable at the ad valorem rate of 1% of the value of the consideration received for the transfer, or, if higher, the market value of the shares transferred. With effect from 6 December 2017,9 October 2019, stamp duty at a rate of 6% applied7.5% applies in certain circumstances to the sale or transfer of shares which derive their value, or the greater part of their value, from non-residential property in Ireland (this rate was increased to 7.5% in respect of instruments executed on or after 9 October 2019).Ireland. Any instrument executed on or after 24 December 2008, which transfers stock or marketable securities on sale where the amount or value of the consideration is €1,000 or less may be exempt from stamp duty. Where the consideration for a sale is expressed in a currency other than Euro, the duty will be charged on the Euro equivalent calculated at the rate of exchange prevailing at the date of the transfer.
Transfers of ordinary shares where no beneficial interest passes (e.g. a transfer of shares from a beneficial owner to a nominee) will generally be exempt from stamp duty.duty provided the transfer is not made in contemplation of sale.
Transfers of ADSs are exempt from Irish stamp duty as long as the ADSs are quoted on any recognised stock exchange in the U.S. or Canada. Finance Act 2023 introduced an exemption for any electronic transfers of interests in Irish shares within central securities depositories in either the USA or Canada, where the aforementioned shares are dealt in on a recognised stock exchange in either of those countries. Prior to Finance Act 2023, this exemption was available by way of an administrative practice and taxpayers should have sought Irish Revenue confirmation on a case-by-case basis as to whether this exemption applied.
Transfers of ordinary shares from the Depositary or the Depositary’s custodian upon surrender of ADSs for the purposes of withdrawing the underlying ordinary shares from the ADS system, and transfers of ordinary shares to the Depositary or the Depositary’s custodian for the purposes of transferring ordinary shares onto the ADS system, will be stampable at the ad valorem rate of 1% of the value of the shares transferred if there is a transfer of beneficial ownership or the transfer relates to a sale or contemplated sale or any other changeis made in the beneficial ownershipcontemplation of ordinary shares.sale. Such transfers will be exempt from Irish stamp duty if the transfer does not relate to or involve any change in the beneficial ownership in the underlying ordinary shares and the transfer form contains the appropriate certification.is not made in contemplation of a sale. The person accountable for the payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for consideration less than the market value, both parties to the transfer. Stamp duty is normally payable within 3044 days after the date of execution of the transfer (with a possible 14 day extension for online filings and payments).transfer. Late or inadequate payment of stamp duty may result in liability for interest, penalties, surcharge and fines.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the reporting requirements of the Exchange Act, as applicable to “foreign private issuers” as defined in Rule 3b-4 under the Exchange Act, and in accordance therewith, we file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K.
As a foreign private issuer, we are exempt from certain provisions of the Exchange Act. Accordingly, our proxy solicitations is not be subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act and transactions in our equity securities by our officers and directors is exempt from reporting and the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act.
In addition, we are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
The SEC maintains an internet website that contains reports and other information regarding issuers that file electronically with the SEC. This annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act may be viewed on the SEC’s website at www.sec.gov and on our website at www.trinitybiotech.com. The information contained on our website is not incorporated by reference into this Annual Report.
The documents concerning our Company which are referred to in this Annual Report may also be inspected at our offices located at IDA Business Park, Bray, Co.County Wicklow, Ireland.
I. Subsidiary Information
Not applicable.
Item 11.Quantitative and Qualitative Disclosures about Market RiskItem 11. | Quantitative and Qualitative Disclosures about Market Risk |
Quantitative information about Market Risk
Interest rate sensitivity
Trinity Biotech monitors its exposure to changes in interest and exchange rates by estimating the impact of possible changes on reported profit before tax and net worth. The Group accepts interest rate and currency risk as part of the overall risks of operating in different economies and seeks to manage these risks by following the policies set above.
Trinity Biotech estimates that the maximum effect of a rise of one percentage point in one of the principal variable interest rates to which the Group is exposed without making any allowance for the potential impact of such a rise on exchange rates, would be a decreasean increase in the profitloss before tax for 20212023 by approximately 2.2%1.1%. This does not include any impact from the refinancing of the majority of the fixed interest rate exchange notes with the Perceptive Term Loan as this took place post December 31, 2021.
Exchange rate sensitivity
At year-end 2021,2023, the total net liability denominated in currencies other than the US Dollar, principally the Euro, Brazilian Real, Canadian Dollar, Swedish Krona and Great British Pound was US$6,434,000.9.1 million.
A strengthening or weakening of the US Dollar by 10% against all the other currencies in which the Group operates, would have the approximate effect of increasing or reducing the Group’s 20212023 year-end net worth by approximately US$643,000.1.0 million.
Qualitative information about Market Risk
Trinity Biotech’s treasury policy is to manage financial risks arising in relation to or as a result of underlying business needs. The activities of the treasury function, which does not operate as a profit centre, are carried out in accordance with board approved policies and are subject to regular internal review. These activities include the Group making use of spot and forward foreign exchange markets.
Trinity Biotech uses a range of financial instruments (including cash, forward contracts and finance leases) to fund its operations. These instruments are used to manage the liquidity of the Group in a cost effective, low-risk manner. Working capital management is a key additional element in the effective management of overall liquidity. Trinity Biotech does not trade in financial instruments or derivatives.
The main risks arising from the utilisation of these financial instruments are interest rate risk, liquidity risk and foreign exchange risk.
Trinity Biotech’s reported net income and net assets are all affected by movements in foreign exchange rates.
At December 31, 2021 Group2023 the Group’s borrowings were at a mixture of variable and fixed rates of interest. The senior secured term loan accrues interest at an annual rate equal to 11.25% plus the greater of (a) the Term SOFR Reference Rate and consisted of US Dollar denominated(b) one percent per annum. The exchangeable notes are at a fixed rate of interest of 4% and Euro andthe convertible note is at a fixed rate of interest of 1.5%. The Group also had one remaining US Dollar denominated finance leases.lease which expired in 2023. At December 31, 2021 year-end borrowings2023 the carrying value of the Group’s indebtedness totalled US$99,156,000 (2020:67,954,000 (2022: US$102,625,000) (2019:73,769,000) (2021: US$102,174,000)99,156,000) at interest rates of 4.00%1.5% to 5.51% (2020: 4.00%16.3% (2022: 1.5% to 5.51%) (2019: 4.00% to 5.51%15.4%). The nominal amount of the Loan Note borrowings is US$99,900,000. The first date on which holders of the Loan Note can exercise their put option is April 1, 2022. If the put option is exercised, the issuer has to repurchase the notes at par.
In broad terms, a one-percentage point increase in interest rates would increase interest incomeexpense by US$31,000 (2020: US$31,000) and would not affect the interest expense in 2021 or 2020; resulting in an417,000 (2022: increase in interest incomeexpense of US$31,000 (2020: US$31,000)468,000).
As set out further in Note 30, Post Balance Sheet Events, the group refinanced the majority of the exchangeable notes in January 2022 with the Term Loan with Perceptive Advisors. In addition, the company entered into agreements with the MiCo Group with regards to investment in equity and convertible bond investment, with a combined value of approximately US$45,000,000 - See Note 30, Post Balance Sheet Events.
The majority of the Group’s activities are conducted in US Dollars. The primary foreign exchange risk arises from the fluctuating value of the Group’s Euro and Brazilian Real denominated expenses as a result of the movement in the exchange rate between the US Dollar and those currencies. Arising from this, where considered necessary, theThe Group periodically pursues a treasury policy which aims to sell US Dollars forward to match a portion of its uncovered Euro and Real expenses at exchange rates lower than budgeted exchange rates. These forward contracts are primarily cash flowdid not engage in foreign currency hedging instruments whose objective is to cover a portion of these Euro or Real forecasted transactions. These forward contracts normally have maturities of less than one year after the balance sheet date. There were no forward contracts in place as at 31 December, 2021.2023.
The Group had foreign currency denominated cash balances equivalent to US$6,434,0001,283,000 at December 31, 2021 (2020:2023 (2022: US$5,025,000)3,722,000).
Item 12.Description of Securities Other than Equity SecuritiesItem 12 | Description of Securities Other than Equity Securities |
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable In February 2024, the Company adjusted its ADS ratio from 1 ADS: 4 ordinary share to 1 ADS: 20 ordinary shares. The ADS numbers shown hereunder reflect the revised ADS ratio.
On December 15, 2021, the Company agreed to issue warrants exercisable for 500,000 of the Company’s ADSs to Perceptive. The warrants were issued in January 2022 following the drawdown of the term loan. The per ADS exercise price of the Warrants was US$6.50. The warrants are exercisable, in whole or part, until the seventh anniversary of the date of drawdown of the funding under the Term Loan. In February 2023, in connection with an increased Term Loan facility, the Company agreed to reprice the 500,000 warrants originally issued to Perceptive to an exercise price of US$5.36 per ADS.
On January 30, 2024, the Company entered into a further amendment to its senior secured term loan credit facility with Perceptive. In connection with the Amended Term Loan, Perceptive received new warrants to purchase an additional 500,000 ADSs and the Company has agreed to price these additional warrants and reprice the existing warrants to purchase 500,000 ADSs that were issued to Perceptive under the original term loan, with an exercise price of US$2.20 per ADS.
Also on January 30, 2024, the Company issued warrants to a consultant assisting with our CGM business to purchase 60,000 ADSs with an exercise price of US$2.20 per ADS. The warrants are exercisable, in whole or part, until the fifth anniversary of the issue date.
C. Other Securities
Not applicable.
D. American Depositary Shares
Set forth below is a summary of certain provisions in relation to charges and other payments under the Deposit Agreement with the Bank of New York Mellon, as depositary, and the owners and holders from time to time of ADSs issued thereunder, or the Deposit Agreement).thereunder.
Fees and Charges Payable by ADS Holders
The table below summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, to our depositary, The Bank of New York Mellon, pursuant to the deposit agreement (filed with the SEC on January 15, 2004 as an exhibit to our Form F-6, registration no. 333-111946) and the types of services and the amount of the fees or charges paid for such services. The actual fees payable by Trinity Biotech and the holders of ADSs are negotiated between Trinity Biotech and the depositary. In connection with these arrangements, Trinity Biotech has agreed to pay various fees and expenses of the depositary. Trinity Biotech will pay any fee chargeable upon the issuance of ADSs in connection with the exchange of the notes. Currently, ADS holders are responsible for paying a fee upon the delivery of ordinary shares against the surrender of ADSs.
The fees and charges that an ADS holder may be required to pay can be changed in the future upon mutual agreement between Trinity Biotech and by the depositary and may include:
| Service |
| Rate |
| By whom paid |
| (1) Issuance of ADSs upon deposit of ordinary shares. | | Up to $10.00 per 100 ADSs (or portion thereof) issued. | | Persons depositing ordinary shares or person receiving ADSs. |
| | | | |
| (2) Delivery of deposited securities against surrender of ADSs. | | Up to $10.00 per 100 ADSs (or portion thereof) issued. | | Persons surrendering ADSs for the purpose of withdrawal of deposited securities or persons to whom deposited securities are delivered. |
| | | | | |
| (3) Issuance of ADSs in connection with a distribution of shares. | | Up to $10.00 per 100 ADSs (or portion thereof) issued. | | Person to whom distribution is made. |
| | | | |
| (4) Distribution of cash dividends or other cash distributions, including distribution of cash proceeds following the sale of rights, shares or other property in accordance with the deposit agreement | | Up to $0.02 per 1 ADS | | Person to whom distribution is made. |
| | | | | |
| (5) Transfer of ADSs | | Up to $1.50 per certificate for ADRs or ADRs transferred | | Person to whom Receipt is transferred. |
In addition, ADS holders are responsible for certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:
transfer and registration fees of securities on Trinity Biotech’s securities register to or from the name of the depositary or its agent when ADS holders deposit or withdrawal securities;
expenses for cable, telex and fax transmissions and for delivery of securities;
expenses incurred for converting foreign currency into U.S. dollars; and
taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit, other than taxes for which Trinity Biotech is liable).
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.
The Depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (e.g., stock dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor, the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.
In the event of refusal to pay taxes or other governmental charges by the holder of an ADS, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of such tax or other governmental charge from any distribution to be made to the ADS holder, and the ADS holder would remain liable for any deficiency.
The disclosure under this heading “Fees and Charges Payable by ADS Holders” is subject to and qualified in its entirety by reference to the full text of the Deposit Agreement.
On February 15, 2024, Trinity Biotech Plc finalized a ratio change of our American depositary shares (“ADSs”) from one (1) ADS representing four (4) Class A ordinary shares to one (1) ADS representing twenty (20) Class A ordinary shares. The change in ADS ratio will have the same effect as a one-for-five reverse ADS split.
Part II
Item 13.13. | Defaults, Dividend Arrearages and Delinquencies |
Not applicable.
Item 14.14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
Not applicable.
Item 15.15. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
The Group’s disclosure and control procedures are designed so that information required to be disclosed in reports filed or submitted under the Securities Exchange Act 1934 is prepared and reported on a timely basis and communicated to management, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(d) of the Securities Exchange Act of 1934 as of the end of the period covered by this Form 20-F. The Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of December 31, 2021.2023.
In designing and evaluating our disclosure controls and procedures, our management, with the participation of the Chief Executive Officer and Chief Financial Officer, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Group have been detected.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Trinity Biotech are responsible for establishing and maintaining adequate internal control over financial reporting. Trinity Biotech’s internal control over financial reporting is a process designed under the supervision and with the participation of the principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and preparation of Trinity Biotech’s financial statements for external reporting purposes in accordance with IFRS both as issued by the IASB and as subsequently adopted by the EU.
Trinity Biotech’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of the financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with the authorisation of management and the directors of Trinity Biotech; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of Trinity Biotech’s assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.
It is not always possible to conduct an assessment of an acquired business’s internal control over financial reporting in the period between the purchase date and the date of management’s assessment. In such cases, management will note that it has excluded the acquired business or businesses from its report on internal control over financial reporting. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of internal control over financial reporting based on criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has concluded that the Group’s internal control over financial reporting was effective as of December 31, 2021.2023.
Since Trinity Biotech is a non-accelerated filer, our auditor, Grant Thornton, an independent registered public accounting firm, is not required to issue an attestation report on the Group’s internal control over financial reporting as of December 31, 2021.2023.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
16 A. 16 A. | Audit Committee Financial Expert |
Mr James MerselisTom Lindsay is an independent director andwho joined as a member of the Audit Committee.Committee in October 2022. Our board of directors has determined that Mr James Merselis meetsTom Lindsay meet the definition of an audit committee financial expert, as defined in Item 401 of Regulation S-K.
16 B. Management notes that due to changes in the composition of the Board of Directors, the Audit Committee now consists of only one director. However, the Board of Directors are seeking to recruit at least one additional suitably qualified independent director to join the Audit Committee in order to strengthen the internal control environment including the Committee’s oversight of its external auditors.
Trinity Biotech has adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and all organisation employees. Written copies of the code of ethics are available free of charge upon written request to us at the address on the first page of this annual report. If we make any substantive amendments to the code of ethics or grant any waivers, including any implicit waiver, from a provision of these codes to our Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, we will disclose the nature of such amendment or waiver on our website.
16 C. Principal Accounting16 C. | Principal Accountant Fees and Services |
Fees Billed by Independent Public Accountants
The following table sets forth, for each of the years indicated, the fees billed by our independent public accountants and the percentage of each of the fees out of the total amount billed by the accountants.
| | | Year ended December 31, 2021 | | | Year ended December 31, 2020 | | | Year ended December 31, 2023 | | | Year ended December 31, 2022 | |
| | | US$’000 | | | % | | | US$’000 | | | % | | | US$’000 | | | % | | | US$’000 | | | % | |
| Audit | | | 477 | | | | 72 | % | | | 495 | | | | 80 | % | | | 909 | | | | 66 | % | | | 1,064 | | | | 92 | % |
| Audit-related | | | 94 | | | | 14 | % | | | - | | | | - | | |
| Tax | | | 89 | | | | 14 | % | | | 124 | | | | 20 | % | | | 463 | | | | 34 | % | | | 89 | | | | 8 | % |
| | | | | | | | | | | | | | | | | | |
| Total | | | 660 | | | | | | | | 619 | | | | | | | | 1,372 | | | | | | | | 1,153 | | | | | |
Audit services include audit of our consolidated financial statements including interim financial statements, as well as work only the independent auditors can reasonably be expected to provide, including statutory audits. Audit related services are for assurance and related services performed by the independent auditor, including any special procedures required to meet certain regulatory requirements. Tax fees consist of fees for professional services for tax compliance and tax advice.
Pre-Approval Policies and Procedures
Our Audit Committee has adopted policies and procedures for the pre-approval of audit and non-audit services rendered by our independent public accountants, Grant Thornton. The policy generally pre-approves certain specific services in the categories of audit services, audit-related services, and tax services up to specified amounts, and sets requirements for specific case-by-case pre-approval of discrete projects, those which may have a material effect on our operations or services over certain amounts.
Pre-approval may be given as part of the Audit Committee’s approval of the scope of the engagement of our independent auditor or on an individual basis. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be presented to the full Audit Committee at its next scheduled meeting. The policy prohibits retention of the independent public accountants to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the SEC, and also considers whether proposed services are compatible with the independence of the public accountants.
16 D. 16 D. | Exemptions from the Listing Standards for Audit Committees |
Not applicable.
16 E. 16 E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
None.
Share Buyback
Trinity Biotech did not purchase any of its own shares during 20212023 or 2020.2022.
16 F. 16 F. | Change in Registrant’s Certifying Accountant |
Not applicable.
16 G. 16 G. | Corporate Governance |
NASDAQ Stock Market Rules and Home Country Practice
Under NASDAQ Stock Market Rule 5615(a)(3), foreign private issuers, such as our company, are permitted to follow certain home country corporate governance practices instead of certain provisions of the NASDAQ Stock Market Rules. A foreign private issuer that elects to follow a home country practice instead of any of such NASDAQ requirements must submit to NASDAQ, in advance, a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. We provided NASDAQ with such a letter of non-compliance with respect to:
Rule 5605(b)(1) - The Rule requiring maintaining a majority of independent directors (Rule 5605(b)(1)).directors. Instead, under Irish law and practice, we are not required to appoint a majority of independent directors.
Rule 5605(b)(2) -The Rule requiring that our independent directors have regularly scheduled meetings at which only independent directors are present (Rule 5605(b)(2)).present. Instead, we follow Irish law according to which independent directors are not required to hold executive sessions.
Rule 5605(e) - The Rule regarding independent director oversight of director nominations process for directors (Rule 5605(e)).directors. Instead, we follow Irish law and practice according to which our board of directors recommends directors for election/re-election by our shareholders.
Rule 5635(c) - The requirement to obtain shareholder approval for the establishment or amendment of certain equity based compensation plans, (Rule 5635(c)), an issuance that will result in a change of control of the company (Rule 5635(b)), certain transactions other than a public offering involving issuances of a 20% or more interest in the company (Rule 5635(d)) and certain acquisitions of the stock or assets of another company (Rule 5635(a)). Instead, we follow Irish law and practice in approving such procedures, according to which Board approval may suffice in certain circumstances, depending on the extent existing general authorities to issue shares are in place.
| • | Rule 5605(c)(2) - The Rule requiring maintaining an audit committee consisting of at least three independent directors (Rule 5605(c)(2).directors. Instead, we follow Irish law that requires that an audit committee have at least one independent director. Our audit committee consists of two independent directors. |
| | |
| • | Rule 5605(d)(2) - The Rule requiring a compensation committee consisting of at least two independent directors (Rule 5605(d)(2).directors. We have had a compensation committee, which we referreferred to as the remuneration committee,committee. We have engaged an international consultancy to advise the Board on Board and although it consists of two independent directors, we may follow Irish law in the future, which does not require us to have an independent compensation committee.executive compensation. |
| | |
| • | Rule 5620(c) - The Rule requiring a quorum of 33 1/3% at any meeting of shareholders (Rule 5620(c)). Instead, we follow the provisions of our Articles of Association which require a quorum of 40%>. If a quorum is not present unlesswithin 30 minutes (or such longer time not exceeding one hour as the chairperson of the meeting has beenmay decide to wait) after the time appointed for the holding of the meeting a quorum is not present, or if during the meeting a quorum ceases to be present, the meeting, if convened byon the requisition of shareholders, in which case the meeting shall be dissolved the meeting will beand in any other case, shall stand adjourned to another date.the same day in the next week or to such other day and at such other time and place as the chairperson (or, in default, the board of directors) may, subject to the provisions of the Companies Act 2014, determine. If at such adjourned meeting a quorum is not present within 15 minutes ofafter the time setappointed for holding it, the adjourned meeting, the meeting may commencemembers present in person or by proxy shall be a quorum, but so long as there arethat not less than two shareholders present.individuals shall constitute a quorum. |
16 H. 16 H. | Mine Safety Disclosure |
Not applicable.
16 I. | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections |
Item 16J. | Insider Trading Policies |
Not applicable.
We have adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our ordinary shares by directors, officers and employees, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq listing standards.