CEMI - Earnings call transcript Q2 2022 | Chembio Diagnostics Inc.

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Operator

Good afternoon, ladies and gentlemen. And welcome to the Chembio Second Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for questions after the presentation. It is now my turn -- my pleasure to turn the floor over to your host, Philip Taylor. Sir, the floor is yours.

Philip Taylor

Operator. you, Thank

that, be under let time results XXXX, made for begin, XXXX, projected. numerous filings, those future. you the SEC Chembio’s for that differ that include represent forward-looking Before current Chembio’s undertakes and risks control, this turn me Eberly, XX-K to the and with of materially conference remarks statement judgment might information Chief and no in other quarter Chembio Form I company’s revise forward-looking Factors publicly to other obligation during report estimates in X, today. Chembio’s forward-looking. Executive many President made call With on company’s These SEC filings assumptions, predictions, would and you any to the its Risk from the to statements Chembio’s we concerning Officer. full Rick or the these or remind time considered may first call today, all over may I Form review are, those like update the annual They subject of its uncertainties, and encourage XX-Q including year including from uncertainties XXXX matters. risks for however, report which to filings. the quarterly beyond in described are on to subsequent August

Rick Eberly

are strong today’s I like quarter and on open review results Then call, financial cover I Good questions. afternoon to our program. as revenue second the highlight will of will the of -- we the and Larry period. million, cash improved up provide compared To all quarter, provide growth, performance. our and sales respectively, two growth receivable to thank can prioritized growth second under product and that our focusing and In rate markets. having contribution. conclude on the total prior million Along for XX% later mix second collections Strategically, to will year global we pipeline. utilization result the directing effect the To then see a including profitable which quarter, $X.X Competitiveness intend and on main we an $X.X To our on financial controls product channels on of competitiveness detail are profitability, to across to increase our you touch our and pleased begin our burn representing function to accounts in Program, efforts gross efficiency. efforts are the we On Global call cash be million, commercial would cost specifically the us. are revenue and in initiatives By product higher begin, performance opportunistic, reducing with generated the second will prices, revenue we joining quarter to our for tighter how have you, and they updates on $X.X our organization, of XXX%, other quarter we COVID products, with every actions HIV further product higher these currently support towards on higher call. results. the At increase non-core of in our remind margins our to value increase products, opportunities to and same we growth, impact we average our resources time, the and our Self-Test, CHECK continue SURE specifically on we focusing core and margin selling portfolio. our like finalizing respect commercial

lower we costs. manufacturing and reduce continuing automation requirements First, should are our labor expansion, in which result

contract with Diagnostics our our Malaysia at facility. Diagnostics International Chembio agreement Second, assembly we of for have assay manufacturing HIV Reszon an signed STAT-PAK

the of SCoV-X completing product and expenses million, rapid in Ethiopia, most product sales revenue. compared the totaled will purchase test. U.S., controls quarter global led period. in of we Finally, ongoing of the were cost million quarter by $X.X year States distribution order by the $X.X HIVX/X in back product the Sales second of operating driven by assay where COVID of in United the half supported by year. quarter sales third-party tests. portfolio core In fund. driven recognized a the the offering to XXX% and critical Africa, antigen to Chembio Revenue previous second the were detect the evaluation tight shipments are be of we Sales InBios STAT-PAK prior growing was products the in diverse of distributing

announced the we direct-to-consumer consumers we has in has solutions, are self-testing to launch. COVID and through expand are at-home for EOA toward demand platform an website. received June, testing we a Detect As self-test access Chembio’s migrated of e-commerce and pleased available version on an initiating

in supplemented sales spikes unpredictable the our United infection rates, fluctuating HIV-Syphilis DPP system the the Given in is rapidly. products, core test States. demand Among

distribution differentiated driver believe can to represent upon test CHECK continue we on Europe, meaningful receipt On this SURE the are Self-Test. a HIV waiver. CLIA of a focused of growth where We to

We penetrate are pharmacies established experiencing early success through our distributor. in with France, efforts to

to will in Europe. additional HIV to continue markets We pursue self-testing opportunities additional expand in

additional of direct-to-consumer part our in U.K., As efforts channels. the launched we

region Bio U.K. operating in Amazon, first Latin and Product from now CHECK major the DPP CoVX shelves through order in $XXX,XXX, on tests the the their chain Manguinhos the the website through in for in a are quarter. SURE completion SARS purchase were of America sales with We pharmacy Self-Tests HIV

SURE inventory. HIV self-testing beginning pharmacies focused through subsidiary. adoption for Ministry the healthcare our is of system and in now opportunity test Brazilian the awareness we as currently several promoting Health and to accelerating the of attractive are most on The Retail products carry region. Brazil the core our self-testing in see Europe, campaigns. We Like CHECK are

five to pleased chains pharmacy have in the are product of in shelf the three We now Brazil. on largest

respiratory who have laid are are pursuing and traditional respiratory infection partners, the in channels a pharmacy distribution through e-commerce testing clinics. for other We distribution Should approaching customers. we market market groundwork clinic DPP approved our well platforms hospital season, through traditional the of test the healthcare our and Brazil experience panel as and

also submit will in Brazil. at-home for approval We tests the

Now transitioning development product regulatory and our pipeline. to discuss

front, On for the FDA the regulatory approvals working to secure tests. two are we with actively

We test. we DPP over active CoV-X At for this are the collect SARS pursuing FDA a by under working HIV-Syphilis we encouraged FDA. the are data submission progress EUA point, CLIA by remains the been that The to are the months. the review has waiver by DPP the past additional antigen seen and test requested for

we product the unmet and to Given multiplexing leverage platform, the DPP selectively R&D, we unique results, high-value capabilities can needs. these like where numerical features clinical are address of investing innovative in

two collecting for We have in the potential data in identified are similar with now stages, top products meetings pre-submission development the Both use to relatively preclinical FDA. that priorities are Chembio.

are requirements Our structure our clinical HIV-Syphilis and Syphilis would to we serve intention portfolio a and complementary Screen is for potential transmitted Lyme trials. on combination to Confirm & sexually guidance these core Today, and the for to and disease test. the DPP the DPP meetings pivotal Screen test DPP be the to DPP Syphilis, introduce assay. happy as reflex discuss Assay Confirm

whether and and of also test. confirm six-plex test, would common when DPP be IgG syphilis Screen most both combination and with patients an test infection the is a HIV for the active or infected determine antibodies three syphilis by could for & screen syphilis Syphilis positive test when a a example, that confirm Confirm antibodies infection for they prior the the with For result detection with Lyme IgM developed disease. body Lyme infection the

tests, but As quarter development Larry the the is and advances, have early in on commercialization second we we of as operational will make more material we financials details will provide additional do I share now not hand to Program. Competitiveness our the stages, improvements timelines Global details. under over to detail these call for

Larry Steenvoorden

Rick. you, Thank

total of compared June compared million, year expiration the XXX% previous revenue three development XXXX, a June $X.X months For due revenue royalty XX% to ended the $X.X the the year for $X.X revenues grant the quarter agreements. Government period, the revenues R&D was and of second income, decrease year license were was months partner three combined increase to of representing period. million, and ended XX, prior compared to XXXX to for of Product million, an growth XX% of XX, prior period. prior the XXXX,

our prior and legal months lower $X.X loss loss of in the in of June million million development to were second Our the related $X.X Gross costs for share, revenues decreased second loss was quarterly compared agreement to costs. ended prior months diluted period. of a compliance to million Gross year agreements. the in $X.XX second million Net percent were the $X $X.XX to three quarter associated margins compared the attributable share margin to in of to second product to the to the diluted year with year the with $X.X million, to primarily administrative compared of impairments, or development by general XXXX, completion credit ended There prior in per period. expenses a million work year $X.X period $X.X prior of share the product $X the or prior XXXX, prior the during XXXX, XXXX, $X.XX covenants XXXX, restructuring, negative in in costs in net was by or $X.X a period XXXX, negative year the of severance Selling, total increased minimum million compared compared million $X.X in of loss XX-month R&D from primarily compared per in the of XX, quarter per quarter X% revenue no X% rolling three to decreased second million quarter XX, partnership period. or XXXX. quarter June

the XXXX, equivalents June common cost as usage working sell cash $X.X ATM on of working not million. were spend any in capital On million the through the was as cash controls second million. of the reduce quarter able in XX, sheet, part $XX.X company did capital tight June $XX.X to We of management. as offering cash shares Net and XX, of balance stock, XXXX. The totaled of quarter and XXXX, to

challenging of second we to will the Global revenues regards forward, quarters the will nature for our I of which are the orders COVID third two priority an the will overview the of and in large year, Line year the we XXXX. comparisons be of fourth the first face with making the quarters, major on half over the especially now our past markets. provide of half revenue Competitiveness growth customers sales Looking in XXXX. expect Program, for a given and and sight of weighted we on quarter we first launched substantial is progress

as Notably, This across are when see resources markets. criteria. in this markets. being to these HIV our we global core SURE Rick aligned non-core focused for fit support a we with Self-Test our growth includes products discussed, adoption products, laser opportunity have First, significant margin and our of product on CHECK opportunities business higher opportunistic profitability and

Second, costs. we volumes are increasing margin taking lower product and manufacturing to Automation opportunities. support labor action essential and new are to to for unit scaling gross management

now four a increases. we material manufacturing and is a up price a We new running, costs. margin line. logistics high provide causing production is agreement initiated third down currently major are inflation as Reszon Our line and our line drive headwind, on manufacturing installed facing supplies have contract been also and pathway Furthermore, to manufacturing automated has with should semi-automated

incorporated As algorithm. lead assumption materials of a manufacturing have into our longer times result, for we the

impacts. products our industry-wide We and for evaluating schedules price are to offset these appropriate increases delivery

reductions Third, of we headcount to of XXX and reduce XXX plan to are the review employees non-core includes of businesses external to attrition Mainly costs. the headcount completed majority all costs. spend strategic and down on through work and analysis end an to Fourth, reduce related year lower support automation have in with from second organizational We working our adjust is XXXX. volumes. further to functions assets. the we at of the infrastructure the This efficiencies our of in-depth half

to the Our business. for focus independent path has been intent each and profitability with Germany in develop on Brazil our subsidiaries

key pillars pillars, of customers business. critical the We We number towards such employee the U.S. have local markets for dependent upon expansion that distributors, and as, subsidiary, these at our when is clear execution a regulatory of a these believe topline, factors, roadmap a restructuring of with approvals. taken the reductions as in on Successful such together, provide including and German relationships delivering large completed comfortability. the trajectory

providing concluding to will We pillars execute. are continue these updates the adhering now forward to call committed we to turn look to remarks. to back and Rick as I for

Rick Eberly

Thank you, Larry.

upon pleased with first are to results We and momentum. XXXX build excited our the are this half from positive of

our improved impacts program. growth, experienced global margins see We year-over-year our strong have positive to gross the and revenue are competitors beginning of

Progress which growth such more of increased as please offer years the our to call will to efforts on commercial our France, increase the profitable high the Brazil. growth the core up the come. products, regulatory distribution the in we U.S., to higher front, value development product open opportunities U.K. on have our With We markets and Operator, that, and drive in questions.

Operator

Thank you. Instructions] [Operator

Your Craig-Hallum. question. Sir, Ostlund first with question coming Per pose is from your please

Per Ostlund

foundational I a Good bit it with Thank be to but afternoon, think be will you. start dumb start nevertheless. a guys. of -- a it with, might little bit question I might

up, you the come platform DPP [ph] the at about as and I these Zika the is, have refocusing opportunities and core you guess first think certainly to how other can outbreak now And talked you portfolio. be core have a reason Monkeypox qualify But are well, as open in they core do COVID development question an talked question as a the product I been internally, look things quarters Zure relatively or as it’s recent or for about there and because friendly whether around you is ask about portfolio virus not my actually COVID question. So your is, easy and weaning, do we how that obviously I define it’s maybe increasingly that is whether use. always

pursue, these do to are you a not, can? as are but they what or come they to refocusing circuitous core, things of potentially whether So you evaluate, know whether of there, get when around up, opportunities or kind are let’s not, want start kind I the core how to way you it’s core if we that,

Rick Eberly

to pandemic we had is core margins. we the the at our you. the the thank have that Per, selling greatest have and higher pre-pandemic, are during market, on post-pandemic, revenue This Certainly, prices drive Sure. potential products as Rick. defining higher average products and that

we have HIV look products the So on you U.S., market at different if under three the three primary platforms.

traditional SURE platform a HIV, for for HIV-Syphilis Our is lateral a combination CHECK our flow is test. then and platform self-test STAT-PAK DPP our HIV

market -- we core is the So Certainly, that a have product U.S. as Zika on our DPP IgM product. well. Zika

that and from? So evaluate Screen confirming growth product, is fundamental we Where when today, So the products is we look at that clinical our has an value United new infections. example, announced Confirm, analysis principal right? high do multiplex Syphilis opportunities, market Per, the coming core opportunity, & underlying see Syphilis in we products a the as in DPP States

was where The our clinical today other talked a United the is product, we example in DPP Lyme Lyme about States. growing multiplex concern

can value on DPPs product our clinical capability products utilize are from very need. focused development high see multiplexing pipeline, that you So innovative to deliver we

States the a is California public York I and declaring of disease have think Monkeypox, also terms WHO the So emergency. Illinois the health example. an emergency for opportunistic a to in suit, that’s New XXrd, on health everyone of today other certainly, Government declared states, aware a U.S. declared Relative followed July health that public emergency public and

got are a monitoring then -- U.S. that. back look at an our the market, for Zika and was developed get States. went and Rapid DPP that we XXX(k) in rapidly to a history, you XXXX, on outbreak on product Zika. So for the if product impacting for followed EUA we We approval United the Zika Zika Certainly, when

clinical need Zika. outbreak. for an there So Ebola there was certainly a year, following The was

of in Government emergency then tests. So And test a the COVID, We got Ebola, help in United which the the -- XXXX, with that with product we the develop U.S. as today we to developed use million Ebola still pandemic authorization developed rapidly outbreak of developed tests. to DPP $XX around hit COVID portfolio a with from funding COVID of States. obviously, when

cases. very are globally we situation In XX So X,XXX XX,XXX there’s in know now States, very, monitoring the United reported over cases that there’s We Monkeypox countries. the closely. now

very to We can that transmitted healthcare problem. an is eczema. as have other because value, we see where and The like for thing essentially as So area outbreaks. symptoms and interesting other issues is this other it with are well syphilis, like herpes growing that similar diseases a the done provide Monkeypox as scabies we

to show a because similar symptomology of difficult beginning with to like a it’s diagnose, other viruses. So it’s very disease

we So to going closely. are monitor this

individuals the a have at great well BARDA, NIH, network test of as COVID We our development. funded CDC, the as who

skin need and PCR, So good we current is to difficult our very the see NIH, you sample PCR. in CDC the with samples obtain at what today very painful, BARDA, very, the have very from for is Monkeypox conversations are are and to open the in that consultation tests are which lesions, take available colleagues a the for which to

we growing this to forward not. all did product So and will closely, are see and ability monitoring if with the make there’s are a we us Zika our move and clinical we need a or and decision we consistent for COVID, options open as utilize Ebola, technologies

come the making So, is really, premise back core is that which there product is higher have I for focusing it’s along decision for high want in we for need, product, commercial Guidelines, to the and company do Competitiveness our our Global on a a clinical fundamental growth there margin to growing need opportunity a markets. analyses but higher of on a

opportunity. are initiatives this hope hope that’s up really evaluating the I answer are clears how long a direct-to-consumer, future a talking lot about a in we that CHECK our OTC our are margins higher I much driving you there, and perfect Self-Test, countries SURE example growth. it because but have on So we in are Monkeypox pharmacy we place where got for HIV that of we that realizing is product

Per Ostlund

helpful. margin, about That’s talking kind in of margin for and very was feels fourth about the It have and quarter XX% there Since here product It’s to think I the in No. so long was you quarter you quarter X%, ended comprehensive. the single digits first was somewhere. second very gross Absolutely. negative answer.

So considerations absorb here Bio XX% of of QX that is to of improvement there second factors that in of was there from just going in logic much bit and that sort comeback chunk some order little to a and or of fulfilled not of a mix the having were revenue a the quarter. trying thing just to How that X%, contributed big to being Manguinhos and that the there? stark having overhead think

Rick Eberly

I Per, provide then at product its quick take volume will Larry shot mix Yeah. over to it a additional and and that to turn Certainly, detail. any related.

If you of due for and largely quarter more compared the to product was revenue mix margins, the the look our at to and HIV product Ethiopia. was second gross our high quarter, volume product in it where first mix the

talking So that in those you as Larry that the inflationary when opening two margin the factors, quarter. second remarks, his combine other of in was well as some measures drove gross

Larry Steenvoorden

just Yeah. Per, add that. to to

So certainly was revenues the the large African in have lower revenue, margin. that $X.X U.S. offsetting. solid We a million was did

play. in we progress But So I automation. have a raw made in was inflationary factor. think that’s Certainly, materials

now as now So you is and the and running. going up where attrition is down can automation see headcount our from our getting with

continue. just So that -- that will will

manual of the production So a really move transformation this automate another to labor it. is quarter from

really journey trajectory from Chembio line, right? has the more volume been automated we automation, will that end an to higher the get are and get to with drive the our on coming to QX, through the all for now be the product So as margin. we drop to even platforms So to

Per Ostlund

answering here. there you a lost for question? second it still I the Are

Larry Steenvoorden

Yeah. here. are We

Can Per? are you We hear here. us,

Per Ostlund

hear I now. fine you Yeah. can

that. about Sorry

second. disappeared Just a for

Larry Steenvoorden

Okay.

Per Ostlund

Okay.

referenced I to me, in So I tackle so are price what an last tests that bit past be of ticket since lot you candidly me would that low, wouldn’t have tend that to little thought, which on the one increase make that increases the possibility and was one inflation, And onerous. kind the a of a you price mentioned helpful. think your of quick think for of just that’s

markets end some that. and going customers have more to do end are be you sensitive to that Now

rest of you Difficulty] more of like see guess and I it’s price your… across wondering, price potential these am U.S., do higher or Europe [Technical the increases I France or residing or the increases portfolio markets like of some in margin kind So the

Rick Eberly

Yeah.

Per Ostlund

with -- penetrating margin … a really gained you price? CHECK you markets you have SURE absolutely feel product that just unique to with there’s like that be there

Rick Eberly

and been would has approach Yeah. Asia, regions. our South increases much to regions even products measures America. across we across say, uniformly I and the Obviously, where in, compete pricing to our Per, Africa some some and pretty like

have We competition Asian countries. of from lot a

in every current increase can be get position yet So maintain to possibly our we a we customers. price going are after and

same certainly, Africa. suppliers lines, as seen better Asian So, in across because U.S., price the increases markets United the from product don’t have we the our for States have and we in we options competition do like

strategic So any a the the maximize and organization try opportunity our yet across Program being for of it increase, competitive. was Competitiveness globe Global price part the balancing plan, commercial to while for a

Per Ostlund

All makes it’s -- question That a ask a question, it’s right. of lot -- I I too. much as a I as Sure. guess sense. comment lied. will

that here long and where think just quarter the was negligible over not was $X ago, that in usage impressive very million. really cash very I it considering the

to collection usage. longer have would AR AR you did it’s that The implement be mitigate and then it, cash factor suspect cost You of would when you that no factor endeavor I lowering usage. and be over a side have you continue that you collect think, thing control, then to a to time I that clearly one mention and it, contributing help to

that it’s just of obviously look $X be million first it when it, little reside -- an it? want the and eye-popping reflective to of when you of ask a inserting and and guide look this can there, you you in or the think, Does the you quarters? around $X I couple quarter is next a the next trying but it quarter it at think be maybe a this number, think it’s was want of considering was to where million of kind two you trying was to get bit or second me to handle So quarters, imagination, you not where outlier it more in call get at your you change this been, in quarter? used number, by Do encouraging I guess, of was it, X.X, to -- a just kind of I it’s because between am sustainability in very a in sort something fairly to the, necessarily

Larry Steenvoorden

Yeah. Per, it’s Larry.

the large the from So and the collection orders certainly, from those factor. tailwinds of the quarter, receivables was primary a

the in So controls will were place, tight in place. to continue be

to look half the second that we expect As it of level. same the to don’t year, have at

We will have and innovation. costs associated trials product with

are So cash a we half, than our we higher are burn so be can. there being as that expected absolutely priority on as that and burn. associated the the this be will the said, are closely at are we be to we second we volume would force But quarter, where focused as monitoring looking from labor a what with higher

here right So discipline cost would be long-term again on this innovation well. the spending going product we like we and -- our for to of to continue as that are

Per Ostlund

Okay. for answers appreciate you. away thank on I I the all Excellent. apologies you. keeping at and firing

Rick Eberly

you, Per. Thank you. Thank

Operator

questions queue. to in appear there be Sirs, no further

will closing hand for to management comments. back I So it any

Rick Eberly

our your wonderful today Operator. you, have and Thank day evening. out quarter everyone call a time second I for of you. Thank earnings thank want taking to for

Operator

Thank does you, today’s gentlemen. call. ladies conference and This conclude

day. wonderful participation. a have and time this at you lines your Thank your for disconnect may You

Chembio Diagnostics (CEMI) 7 Aug 222022 Q2 Earnings call transcript