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Chembio Diagnostics (CEMI)

Participants
Philip Taylor IR
John Sperzel President, CEO & Director
Neil Goldman EVP & CFO
Per Ostlund Craig-Hallum Capital Group
Bruce Jackson The Benchmark Company
Call transcript
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Operator

Greetings and welcome to Chembio Second Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Philip Taylor, Investor Relations. Thank you.

begin. may You

Philip Taylor

Thank you.

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

Risk uncertainties, including time including Chembio's and statements uncertainties risks XX-K Factors Forward-looking and described subject those in are annual which from Form materially numerous to of are to Chembio's results from and filings, SEC beyond under risks time Chembio's on in assumptions, many Chembio's differ elsewhere projected. may control, those report XXXX. for

filings publicly matters. made undertakes encourage all you obligation to any company's concerning update review today. the and these revise with Chembio SEC other I statement forward-looking to no the or of

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

John Sperzel

performance and second Thank quarter demonstrated strong you commercial XXXX. us Chembio for during the today. operational joining of

of including XX%, revenue the period. respectively, year total and generated prior $X.X compared XX% of team product $X.X representing of million, Our to growth million, revenue

are we reiterating revenue $XX million guidance year, to $XX the For of million. our

accomplishments. performance, In highlight recent to top addition line I several to excellent our want

expectations approvals, we in future create the important During previously communicated second received opportunities. X that line quarter, regulatory will with commercial

was CE which covers Mark, test covers Brazil the Zika, received chikungunya region. and ANVISA, dengue approved Our which for Europe by and our multiplex dengue test Caribbean and

the commercialization an validating Takeda, entered with diagnostic as or represents a collaboration point-of-care company, tests. with our companion global ideal technology This company, platform and into for our major develop we biomarker. of test collaboration pharmaceutical a Last compatible undisclosed month, a leading development to an for pharmaceutical second

questions. preparing priorities: we'll I'll remarks start quarter additional on for On results, for financial second the R&D by expanding growth. make and pipeline discussing open corporate closing and a progress today's commercialization, then Neil Then review advancing call, will our our call X our we'll few

on our commercialization. were second geographies. Strong product in sales with HIV sales the our result our is We pleased opportunity We're priority, increased tests sales HIV numerous market XX% Starting product growth the by for first core XXXX, expanding penetration our of there a quarter products period. market and with believe prior to continued penetration, of quarter the year across significant through commercial during our as expansion of geographic investment. which continued compared

is when the Last great of week, main not unable supply the of one supply products and resolve competitors are in increase HIV and U.S. we have our pursuing. which its U.S. market, it This it will distributors issue. aggressively presents notified HIV to sales as our estimate customers test to does a that to an opportunity

is recent identified believe infectious new chikungunya that XXXX, growth annually. Zika we million is we noting believe significant $XX and as test our there dengue, We products. calls, opportunity opportunity several also of products in new On approximately for growth these disease Brazil for potential our for the drivers

epidemiological present of symptoms by X these Brazil co-circulation situation, arboviruses, faces in which difficult a similar characterized patients. the

to providers population prior management. optimal care health health data providing while between and the help can distinguish tests for infections help surveillance both Our exposure active paths and detecting treatment determine

our to Zika or approval distribute is unable for dengue, in recently therefore, to produce, and disease the expand test Needless and health its fever Brazil had ANVISA, our strengthens and in or our for GMP competitor main confidence tropical potential Brazil's say, Our agency, this chikungunya. tests its business by Brazil. about regulatory to position revoked sell

the Mark total chikungunya. for runs for our the award contract, million XXXX. closer We're contracts, potential one million to through Zika, also the meeting us progress making UNICEF and takes test realizing conditions under dengue the December and having received set step toward $X.X in which This our multiplex XX, of CE $X.X

Finally, outbreak address the to global test. we've of a a number health Ebola in Ebola secure of the declared in we're recognized procurement Democratic funding emergency, organizations Republic World this as test. need, with the Congo Ebola has for of public To our the discussions the the Organization Health our growing need for

point-of-care expand Turning patented priority, our using advance R&D pipeline. advancing development to our second are of our product to the platform. technology constantly DPP To portfolio, we our working tests additional diagnostic

platform made During biomarkers. significant and quarter, leveraging affairs, advances point-of-care we in second the R&D across regulatory our multiple

believe disease tests FDA and of multiplex self-test. second BARDA-funded products infectious and syphilis, half Mark for during approval test to the will and of multiple achieve our prequalification regulatory for our CE HIV approval including continue our Zika We XXXX, of approvals FDA WHO HIV

our the advancing our test. will through the which initiative recent concussion we a also sensitive opportunity of to emergency towards a scans. reducing for be with under Science, concussion a test, and triage MRI need test highly receive support or CT and concussion costly significant agreement for We the market time-consuming both room, Perseus development funding which see patients in could point-of-care We're used

biomarkers technology, a commercialize opportunities analyzer, were that the in by to DPP which create collaborators has level us stated to that the drivers opened Further, May, using the discussion allows we platform. of of In that incorporating to number enhance biothreat a and develop sensing optical our unavailable. growth detection potential previously we tests companion of with were diagnostic fluorescence inclusion and number of

of strategy to to or identify with advance leverage area our to compatible we biomarkers. point-of-care tests of certain develop to pharmaceutical the diagnostics, continue companies collaborating companion technology our In

the test development During the respiratory eosinophilic III quarter, of disease. second completed a program Phase we for AstraZeneca-funded our of in

remain the and study pre-submission the the through FDA. studies, and timing Food We'll of on currently agreement with clinical numerous on the once the to support used focused trial process, and developing Drug the de XXX(k) a marked the novo update is we agreement finalizing a we Administration have CE pathway to on regulatory being pathway. support While filing including test pivotal

validation a for an the to Takeda, with test diagnostic agreement Under quantitative biomarker. funding a of compatible will milestones. technology an testing. pharmaceutical be the to our platform the as undisclosed Additionally, for diagnostic we this with second or as recently signed of terms Takeda further point-of-care potential agreement company, Pharmaceuticals, develop satisfying view companion our for function provided subject certain to We

additional increase possible. To initiatives as our preparing third we financial manufacturing, operational achieve our commenced expand to are priority, automate growth. as for and to We've scale targets, Turning expanding to U.S. our facilities efficiently production capacity infrastructure.

is As underway to the previously United discussed, automated transition from manufacturing our in States. manual

automation manufacturing strategy well as gross margins efficiency capacity, increase is to increase flexibility. Our as and designed production

facility. of planned designed buildings with line completed the Phase test X Line manufacturing foot schedule. facilities, lines which is quarter of of of warehouse is Phase number which DPP and XXXX. functions; for in both end the have is and includes one phases to transition manufacturing for of second automated shipping three, in we by you XXXX. To of quarter to production the of planned the which research the the operational for during end of XXXX. second quarter which first number SURE completion leased XXXX, We're the at transfer half and development, end product, and And the X and the scheduled branded consolidating expansion a XXXX. are transfer half on update and produce I operations, Phase is the QA/QC designed the on be handling in is CHECK STAT-PAK that products, and lines I two, two of U.S. We first the you remind during transfer third plan III, is II, of produce the completion to XXXX. three XX,XXX of branded and the Our is during to number single of the line by XXXX; our to commenced planned includes from are We've DPP delivery operational administrative, our we're improvement quarter to first be planned square on the additional

pre-Q, Finally, we the towards WHO anticipate follow-up prequalification Malaysia Last Health the World goal the week, on continue for facility. And supply us help of our third WHO win cost, in will obtaining significantly to completed WHO to prequalification test manufacturing Malaysia obtain which improve we begin and based will HIV our we for facility quarter results the product our of advance branded we product receiving Africa. inspection. new our important the reduce especially will STAT-PAK business Once be This during planned Malaysia to that inspection, existing for XXXX. gross Organization business. producing on of margins

financial our turn over to provide Neil results. on to I'll Now details it

Neil Goldman

of the of was Good R&D increase the to compared quarter an second sales afternoon, $X.X XXXX the quarter XXXX. which compared not of was of Net product of of decrease incur XX% XXXX. but the increase quarter were to revenues we an License of In $X.X second million, XX% XXXX. royalty $X.X the million, the performance expenses. to of quarter R&D quarter XXXX, related total second and always program everyone. XX% of is grant second second continue XXXX and million, second certain and to and cadence in for revenue obligations, occur in combined to quarter, do a a of timing the quarter revenue compared the

work, are Zika collaboration as such and the addition, projects will in our we Takeda up XXX(k) replaced In the pipeline. which with wrapping others believe Pharmaceutical we be

a benefited GmbH, margin Europe its region, Latin percent. to quarter XXXX. percent of XXXX XX.X% of Chembio to point gains was compared to in XXX for This the America, and offset Ethiopia our Diagnostics XXXX. product gross sales the by was to by product combination earlier, the increase strength to Latin of product experienced and our The second from the improved reduced sales benefits in Africa dengue contribution America improvement quarter from The Africa product XXXX, $X.X second tests reflects our selling improvement geographic impact chikungunya and favorable of margin program, a second from Brazil. the from quarter mix initial quarter the on in basis gross of compared XXXX. for described margin million XX.X% John average of first November Europe. Gross second costs, opTricon, and As contract compared net for of related product of was revenue every product prices. assembly automated nearly labor acquisition line and led the by initial now of margin Zika, continued the

were of general XXXX $X.X R&D by research by the facility $X.X but includes and of ended $X.X Per higher $X.XX per earnings approval a and restricted approximately selling, our regulatory quarter noncash year, million higher is costs equity related of weighted loss increased net expenses, Chembio of we last late X quarter for year for leasing Diagnostics associated million in of per new share increased to other June that second for compared XX.X legal second which was a the costs. acquired shares and issued administrative expenses, quarter loss with million Other compensation compared Net stock spending. diluted share which to with and combination XXXX of or million in calculation second the $X.X expenses, SG&A X.X% rent of is the million related XXXX, in diluted through period. average both excludes share costs outstanding. or costs number the development $X.X Germany, million the and per the $X.XX XXXX. and X and GAAP, unvested outstanding XX, The months shares. prior operating

million. and cash $XX.X Net capital working XXXX, $X.X as June sheet, of of million. balance as totaled cash XX, June XXXX, the XX, On was equivalents

XXXX mentioned, $XX we John guidance to are of full year As our $XX reiterating million. revenue million

adequate be structure plans. We that to our in place an to XXXX we support capital have continue confident

financing our further debt or credit growth momentum, currently our Given a are structure. plans to capital leverage we evaluating facility and

back call John remarks. closing some make to the turn will I to Now

John Sperzel

ease disease In across and by and of built globe. attractive speed point-of-care to cost our customers many differentiated highly broad portfolio of analytical platform summary, that's The tests we've performance, biomarkers. the is a a of technology across infectious tests, use, bolstered leverageable

while our internally We than operations. are confident the efficiently development tests through and in more new collaborators to expand advance ability scaling ever of commercialization and

open to that, questions. now Operator? With we'll it up

Operator

[Operator Instructions].

Craig-Hallum. with Our comes from first question Ostlund Per

Per Ostlund

the with market. fever start Brazilian Let's

your had halted was production John, competitor that remarks, out had, essentially So potential market. there you and mentioned in the reiterated of and the

gotten had initial as of an order the quarterly You last call.

what sort you Now are that it market there? potentially, place Or where given of in the more opportunity in is at capture materially the for more a all your we approvals, factors XXXX item, you've are point gating of this to year? got

John Sperzel

getting the just XXXX it The short believe is potentially answer still And a we opportunity. order. is

Per Ostlund

Okay. No on needed elaboration that.

John Sperzel

It's call To Yes. their it, that call, under hold with little a and gone let's on on step happened ANVISA. expand had license supplier, the by a bit a the what we were, previous they've they mentioned GMP revoked. further past

from open an to window gone door. open an that's So

Per Ostlund

come line half and I good. very as of It seen a wanted of back Very, opportunities. A are Okay. couple the HIV-Syphilis to to. matters still sounds couple self-tests DPP, like time second

get I if in the expecting Mark pregnant wanted an you some or update on test. the to from you and you were correctly add on XQ? And filing HIV women -- the to characterize... do the think, CE data self-test, potentially the Did things stand I Just filing the there? to side so, Where those happen? on if And HIV-Syphilis sense could your collection then the recall on WHO claim feedback

John Sperzel

Yes.

Okay.

question, pieces that question. Per, excellent So few there are to

U.S. HIV-Syphilis take let's First, in the

one that's in this opportunity the who the year, HIV the have to to the those customers in is so We there's market. should FDA U.S. also that gone Abbott, that look to communicated continue other remarks, significant competitors, the They've emerged U.S. approval, supply get bit market a PMA unable supply which on our To the a in suppliers of that their distributors a second expand test customers in U.S. creates made as that to to of comments going prepared far that say market. be product. and significant I in half is to with to and little opportunity a of and U.S. confident Determine that get we're

worth when who, testing noting, opportunity So the is that Alere And we them beyond currently previously products market. Abbott. approval, Chembio also Abbott for distributed bought the through with and course, customers FDA it's we waiting HIV from an those have immediate U.S. HIV-Syphilis buy actionable now in of

that's U.S. WHO getting Mark, prequalification our Europe focused CE we're HIV-Syphilis. HIV broadly, SURE So love get United and the cover, market it. with customers region forward, which and we the think love that our the Caribbean we now for then HIV the that Remember, that customers have brand have that right used is self-test. for a on well, and Europe with in we the going once through incredibly it Internationally, distributor use. getting CHECK the test and is great in HIV our the in approval self-test same easy public opportunity the health both as we And test would States feedback to very also

for of both creates which in the So self-test second of us segment. half year, the in we anticipate getting approvals those this additional opportunity

Per Ostlund

I'm Excellent, had if with wondering excellent. on HCV. any there's project on updates the Question that going you FIND there.

they've if of core of I RFQ maybe anything, did be I commercialization wondering might RFP last naturally you I looks But had not just terms was update an they there's any able they've see that disclose an and to there an out summer, although in development anything. originally, and kicked think it off think down kind there. test. HCV I'm and of it to means their which focus number than don't narrowed lesser disclosed a partners like of antigen

John Sperzel

test not on We that is our update know officially. how performed. an There

platform hepatitis was that it's forward an on that testing none that I go test, C going in I've could forward hepatitis for to world the data exists with doing two components were an continue we'll test. assess antigen-based whether work with based we're C don't antigen-based to a unlikely FIND. perform that seen. know the think which the There that's to rapid One I today.

of we'll go we'll but on antibody-based high had part, much forward, that which you once other plan our the that I there's developed. is That data test, likelihood very like, more and which that front. think outstanding, move update we is what encouraging, exactly performance C previously forward we encouraging. looks looks internationally, And The hep a

Per Ostlund

And to excellent. last last just squeeze one, in. one then Okay,

that guidance included UNICEF literally, number? in make to I taken the With conditions where, of the Is million, conditional reaffirmed facet not million that the order. assume $XX $XX of that, it's before does you of situation that every are sure still include the care will a

John Sperzel

point. That's Brazil, encouraged as tropical did disease pretty correct, upside any potential the of which in include at also, fever a yes. this just it reminder, we're about and not tests And

Operator

Kyle Company. with Dougherty is Our Bauser next from & question

Unidentified Analyst

It's start, actually in previous just But Greg the on to follow question. for up, I Kyle. to want filling

nice for a a when that anticipating typically with and and can year had initial fever tests? last we're Brazil you To had subsequent You give last topical the material have discussions you Brazil extent tell, order does subsequent order. from awards Brazil since And any quarter?

John Sperzel

the take question. those I'll So thanks for Greg, reverse order, and in

disease Brazil in and the fever are tropical with about We constant discussion opportunity.

finalized previously Bio-Manguinhos, on had multiplex have with test pricing our We pricing on chikungunya test, the We Zika. dengue established partner, the test. and the

Recall the the out. Health. they've that the of to that The in actually organizations. contractual previous is on of partner the each tests one side government had the tender forward product of Brazilian moving our They that of year, generally things. both few quarter supplies we're third Ministry happens award those So Bio-Manguinhos that for are the years

we the so anticipate occurring And third quarter. that in

Unidentified Analyst

Okay. timing deal with the can in I the touched remarks. little if is any then prepared think look million, and Takeda Foundation million to that milestones? the Takeda, Zika more the provide months was your you a color assume around over then the you I Astra at particular, in contract same partnership Great. And regarding you And Allen in ballpark? for is XX $X.X it agreement, -- $X.X the which fair think over Paul bit

John Sperzel

Sure.

It's we're mean I to company. a work XX all, top of Takeda. pharmaceutical excited First

Shire I you for of think recently than all more $XX know, acquired billion. they

about that opportunity. really we're excited So

has company scientific stamp it's to for mentioned our real and approval our Chembio, work in platform I pharmaceutical the remarks, that's the with of a prepared As and capabilities. chosen second major that

reason the it each can harmful potential speaking, with that bluntly of can we be And many partners, be collaboration. Takeda the which through negotiations future also is it are other funding ongoing. don't or in collaboration the disclosed for helpful haven't disclose We

why So disclosed that's haven't we it.

a to mean number finally, think, referenced part then about that I in of put with fair we of it question we collaborations way, that a the we and I couple other AstraZeneca with think provided And had Allen your funding. publicly. are that You that out process. not was Paul Greg, it's multimillion-dollar it's but have your where

have phase updating We're go forward as the and in the look kicked feasibility forward. we off We program. to

Operator

comes The question with from Bruce next Jackson Benchmark Our Company.

Bruce Jackson

or be to Takeda And this going product, to Pharmaceuticals diagnostic? a is to So biomarker is the be on multi-biomarker it continue single assay? going a companion a

John Sperzel

It's or a haven't disclosed a test. and single a we companion if multiplex test, it's diagnostic

Bruce Jackson

suppose can't area what you I be And therapeutic Okay. might discuss it in.

John Sperzel

Correct.

Bruce Jackson

with bring you perhaps on And then Okay. could AstraZeneca, if story. speed the up us to

So what you -- the work. finished up And What clinical the have with now? seems the of sticking FDA? kinds you to be discussions right the point what's had

John Sperzel

So when appropriately. make work, I that want finished that respond to the clinical I you up sure we say to just

We for clinical suggesting, the have you finished Bruce. the FDA not that's if trial were submission, what

Just clarify for that maybe me.

Bruce Jackson

Yes.

But gotten the to there. approach verbiage project the stage about FDA. Sorry where the you've you're to ready the

take So best is like just through are time looking the discussions those the knowledge what us of to line now. and right nature what your of the

John Sperzel

Yes.

with So start today, I on test is the we the are to diagnostic no -- application it's pursuing. there important think that for market

novo comprised start through get efficient, to diagnostic use what terms on to no pre-submission want prepare we to you to if to it's product. intended a generally, trial there with clinical clinical the be in trial. of predicate there's you your the we to FDA, de between that want And Because pathway. need of agreement of company and regulatory is means, intended the prove as in terms. dialogue agency a what So follow That and the of process, device, lots a is talk

as FDA, discussion the leading in so the agency. it that single AstraZeneca. would say characterizing meeting had effort, every And I Chembio, involved every as terms And pretty of dialogue well with single that and They're it's in includes who's we've extensive. the with

on As far line it's concerned, premature is time as the to comment a little that.

don't FDA, to time a we we'll agreed that As we put be then able yet. have soon as with as I it the mentioned, line to pathway and on that have

Operator

over are to the time, turn questions. closing call back comments. further John At like Sperzel for no this There I'd to

John Sperzel

Look today. Thank you call. next forward for a us updating on you Have great our afternoon. to joining

Operator

conference. This today's concludes

lines we thank may You time, disconnect your and for at this participation. you your