- Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Chembio Diagnostics Third Quarter 2022 Earnings Conference Call and Webcast. 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 pleasure to turn the floor over to your host, Philip Taylor. Sir, the floor is yours.

Philip Taylor

Thank you, operator.

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

Rick Eberly

call Good Larry Program. afternoon, our results review call further a cover you joining provide and all our our efficiency for and third quarter Competitiveness On the on thank then and detailed progress, I portfolio. and open test Global operational will growth, we questions. conclude then and developing update strategy and improving for will will our scale financial today's us. the

value significant remains operating the long-term. strategic efforts to renewed initiatives business focus and expect but objective. I in immediately top several quarters Chembio's This year. year higher higher priorities expenses. our core and over margin their pivot markets. commercial for are results current we've company all Not changes coming profitable of the guided want on quarters, our impact provide in have the growth First, the a be to the pursue these business we brief we've the with our description in reduce reflected In financial that on to announced Across prior business,

with large opportunities on higher for markets markets and healthcare recurring like tenders. technologies. average government These represent now the Europe also versus prices advanced one-time US support more We focused are selling that systems

product have believe allow we to contract capabilities revenue. chain efficiency, a manufacturing. manufacturing efficient winning OTC our leveraging our To to further operating to frequent cost should have planning, with orders, be which solutions benefits. we with tighter improve We structural our improve resource regular more of Both management and Additionally, attention provide cadence cost smaller combined Malaysia. expanded automation us our expanded product similar are advanced with expected and in of our business controls manufacturing both markets, supply by

plan differentiated we term to broaden medium premium the Over our to value. command that with develop products tests portfolio

Product was test direct-to-consumer quarter sales e-commerce detect this total mainly in generated our XXX%, In an service Now quarter prior grew prior The COVID million. here to I have compared product revenue antigen resulted the by the the performance the platform. and launch Growth initiated year revenue outline revenue including of will third growth was $XX.X of revenue compared primarily third XX%, of drivers. period. year quarter, third Product million the $X.X $XX.X million and we in driven an period, EUA we through tests. self-test received version of United from to OTC to a rapid the market States. increased of

One in sales DPP our United contributed the the of core to featured also system HIV-Syphilis products, States.

differentiated receipt of this driver growth CLIA test be will waiver. upon We continue a a to meaningful believe

in were on the prior as in million. Latin million from the COVID in America now sales Brazil, to year region SURE product self-testing. marketing and DPP Bio-Manguinhos of Bio-Manguinhos shipped tests SARS-CoV-X the CHECK focused Third our back in we the quarter large HIV tests were $X DPP under the In core region sales order. predominantly sales quarter. Approximately period Sales were HIV to are transitioned for sales $X.X

continue The and by supported of Brazil the system our believe product current is commercial in We portfolio awareness region. that campaigns. in Ministry opportunity through promising healthcare Health the is most currently to the promoting self-testing

our and the SURE a in Asia, three largest our self-test. like pharmacy reminder, shelf In Brazil, the product distribution EMEA sales In just to on grew of resides have heightened CHECK chains year $X.X in HIV XX%, quarter we out we've efforts the Europe in five of channel. the e-commerce compared the As revenues product million. launched and Brazil to third prior

partner excellent to distribution continue on are expand and to the of France. through shipments now in across work pharmacies We pharmacies Europe the shelf in our XX,XXX approximately

have pharmacies in Amazon Within channel launched we the direct-to-consumer through in the region. also our UK, and are

in We to markets seek HIV self-test applicable Europe. across our opportunities continue for of expansion

Turning to Africa.

product quarter pursuing opportunities in pipeline. Chembio markets margins development Ethiopia had our HIV and asset. with shipments X/X tender the solutions. premium to its actively now for now of This below regulatory and This tender STAT-PAK completed higher we our expectations generated are Shifting margin seeking

continue request CLIA test, the DPP additional On a we for achieve work HIV-Syphilis to our data address the FDA's to waiver.

Disease test announced for and clinical rapid third a for quarter, of continues awarded EUA by we diagnostic review over under we progress syphilis. for Our contract point-of-care the the million FDA antigen a by from was be the made SARS-CoV-X company the for the validation quarters. past the DPP in and to $X.X submission the Control test Late active the encouraged Centers development are

We or we're Reader are syphilis proprietary actively developing Micro our and branding treponemal, DPP TNT, DPP Dual technology II. Platform a Path that leveraging nontreponemal

the will will be will grant simultaneously detect be begin expect anticipate the that treponemal separately in assay the and and through regulatory IgG and submission. and milestone-based able nontreponemal quarter IgM that We We fourth to revenue antibodies.

to quickly we expand highly or test, a can for and we our a syphilis as physicians to develop sensitive excited specific portfolio prior need where and are active endeavor confirm We large anticipate accurately infections. to

to Recently, require Lyme has disease burgdorferi its with via in diagnostic a Lyme The is test CDC bacterium test for algorithm a for take DPP transmitted algorithm humans guidelines disease point-of-care and termed point-of-care to that testing. into tick Lyme one time multiplex the trained announced test a testing methods utilizing DPP quarter for is for objective our bites. also diagnosis development We are results. combine designed third by updated test and of personnel. two-tier rapid run the rapid long to new test labor-intensive, two-tier Micro disease. the II be IgM/IgG Lyme MTTT infected caused Borrelia cassette, modified a the These laboratory steps are Reader professional DPP two

collecting We data Lyme for test DPP development. our are in currently preclinical

with We this hopeful underpin FDA. are the a productive pre-submission meeting data will

Lyme discuss guidance the requirements quarter Program. both to more potential on and for complete the will to meetings and operational structure pivotal detail to and the under Competitiveness third financials hand the on is details intention over Our pre-submission Larry the improvements the the trials. for to call provide our I DPP clinical Global TNT test now

Larry Steenvoorden

Rick. you, Thank

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

diluted Gross inventory total XX% the was covenant year by margins in $X.X in percent to ended impacted our third XX, Gross agreement. were rolling $X.X by during XX% margin product with in of XXXX compared quarter $X.XX quarter compliance $X.XX per revenues the completion decreased primarily of the $X.X prior Selling, in of of quarter third a the compared period. quarterly development the the XX-month to in loss revenue the September $X.X third in in XXXX. prior Net expenses work a million, to quarter, period months third September credit the in and loss prior loss the period to period. minimum million year share to three million taken development million, to partnership a XXXX, XXXX, $X.X million, year. prior the of costs million $X.X this three Our reserves general compared loss product the the months in or to quarter agreements. year in of per of by was million from of XX, $X.X million ended compared decreased net share, with R&D year XXXX, to or prior diluted decreased administrative $X.X compared associated

million. million. of offering. $XX.X million as cash cash XX, totaled sheet, company quarter September XXXX, proceeds Net of received third as was as XXXX approximately ongoing of $X part capital balance net of In XXXX, the stock, XX, On common its its from the of equivalents sales $X.X of September ATM working and the

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

as prioritize that within key opportunities. identified to has prime continue margin higher markets We organization options the growth

be profitable. core products that to distribution. We've products CHECK its a for global and and focusing adoption to are SURE We support our identified have both self-test potential non-core HIV have on allocated resources and opportunity

labor and cost to scale automated Additionally, we're initiatives. believe actively automation and new gross required are unit lowering product our increased of improve manufacturing. to adoption volumes margins through support manufacturing We reductions

to have our is executed with platforms Diagnostics strategy on-demand oversee contract production September reduced external of to up expenses, and our of our organizational International line Bolstering we effort product and of infrastructure running and to an our on in Chembio the QX. now Malaysia have previously an to these facility. employees we Diagnostics as end head the a In facility. manufacturing initiated an reduce business by have in We XX. of count efforts XXX costs. They efforts, reduce audit HIV our internal STAT-PAK communicated assay We spending XXX X/X conducted to Reszon on from our are all

automation continue capabilities and head to increase reduce and manual count labor. to expect on our our further dependency We

path profitability clear. Our to is

company the to efficiency, can necessary both of forefront growth. for are our believe now back the excited forward Keeping to and we is reduce call We of future concluding As to to Rick our we and more at our well deliver our realign updates prioritize and the internationally. remarks. the I'll believe expansion, customers domestically long-term Chembio. turn initiatives costs the look achieve providing vision, for for positioned we organization organization

Rick Eberly

Larry. you, Thank

pleased with third are results the our We from XXXX. of quarter

market promising operating growth CDC, open of key up year, Over call the this pipeline markets. on to efforts efficiency, With visibility a With supported top improved our and please propel our our identified we core questions. We excited and commercialization and that, on of are in products profitable reduced line, ahead we by refocused that improved contract, with long-term opportunities, our by operator, course in been lie have the initiated sales have the new to opportunities growth. Chembio the for advancements infrastructure.

Operator

for is Thank Per [Operator go open you. now Please question Ladies ahead. from a We with and Instructions] Ostlund have gentlemen, the Craig-Hallum. floor questions.

Per Ostlund

afternoon, guys. you. Good Thank

Rick Eberly

Per. Hey,

Per Ostlund

kind than the being sequential going of was pleasantly and been have having of had you've would lighter first officially in half. that, half number. being assume while the we QX I I I year talked that the about of sort earlier start I'm we couple here. to – contracts talked step with And with estimate, Candidly, a see not an down. second out fulfilled revenue surprised a the

that was quarter. stocking was simply here a be So order order or function the see that as otherwise a of depth you have geography and wouldn't the that far are anything of product number there you so disposal? growing I Was – to as happy of your in bolus somewhere recur, unusual this strong at

Rick Eberly

surprised. that Per. happily you I'm question, glad you and were Yeah, for Thank

year it region by from talked to several Fund quarters, we've or or last orders, by been product, in Global strategy Brazil, As they last become government large really large diversify tenders, the as less countries the our experienced over Africa. dependent on we've and whether business over government has the come

sales from balanced So the in this in tremendous the getting think we're was quarter, made indication good our growth that from investment States United revenue I good and we've the team a US.

America same thing. South

HIV COVID. pharmacy our dependent an And set beyond partners strategy, up. our is SURE now We online self-test our Brazil. now where Brazil our CHECK in a attack balanced are Our of in platform as Bio-Manguinhos. or focused as core now well have on on We're selling websites, strategy retail upon government e-commerce we've their is Brazil or multifaceted. in the Ministry products Health Not

a that's So retail strategy.

like in the Sao Paulo, Brazil traditional as forth they're well for clinics governments, distribution and strategy Brazil, our throughout city going the state programs, into rapid on with other is and markets well going together where to hospitals out areas we're testing. in Our who through states work Rio local, Brazil and now the to the and so And then calls and partner as country. in putting

I say, approach would balanced So a strategically. it's

Brazil. We the maintain continue with Ministry as Bio-Manguinhos to well excellent in relationships, Health, of as

with well-detailed for forecast then XXXX. So on over a working to we're them And Europe.

They're pharmacies countries. our products. who East into that strong our now European beginning fruits strategy, well product. in talking of we're investment a launching European in in with France, Western XX,XXX to as is about see, the We're every SURE Eastern a HIV partner think I for CHECK almost in new distribution country Middle

Europe. So running now good on partner our we're UK, contribution well and partner invested Pharmacy. shelf in the as through UK. distribution with as Boots Amazon in And UK, the our from the pharmacy the get energy getting we've time in up in to and UK It's the then the

tests. Per, the So core pressure, manufacturers largely in Africa they Southeast as from world long-winded think the rapid regions on but focused distribution good think South our I Asia, products, by history competition well a in answer where around Chembio, Asian it's of really as beginning product there's of were we're to tremendous revenue of the see where pricing tremendous and a I

that's we're at. So where

Per Ostlund

can a when some contribute. I these of perfectly answer, accept regions starting are long-winded to other

for you thank So going that into detail.

of test those HIV-Syphilis as – here was value there. being I I the at number As trying think that going US out in key Rick, the foundational forward called accomplish to quarter. what well think higher are that nice as we in COVID one to drivers markets a look you the the you're is Detect as

So, for scratching two you that reason but have it or opportunity you've And even seen domestically number the I'll say type to here the there's of a still hazard, I that are to of two the whether to in that opportunities retail would to sort already opportunity? some gating that contribution what with thing about are the talk you front say you're on of then questions as safe HIV-Syphilis One, penetrating you that, as that say, factors OTC/DTC well, opportunity globally waiver the related Minute surface that stands to given it US. is it's the pursuing? here. barely to safe it's logic it. a Is And something you the that CLIA the Is that Walgreens Clinics let you? of and

Rick Eberly

Yeah.

So a Per, have we for the do strategy US.

QX, that Most testing get with of We've US. we've end It's US FDA, physician talked in where and office. of an the test talked a is about the waiver. point stages care. the quick the HIV hopeful result HIV-Syphilis CLIA in HIV-syphilis they We're office, the in a for can want the market be We're terms implemented Our the a OB/GYN early treatment syphilis, or is in so immediately at in in of testing. It's getting about. upon QX. to both combination lot

exist we States, it's are in just so the which labs and on urgent post-COVID. labs States did CLIA how the XXX,XXX United offices the in care analysis many CLIA physician CLIA-waived So And centers, now forth. mostly labs, some United

in the seeing is the optimistic really States. CLIA reasons transmitted the growth HIV-syphilis growth sexually the that of are in And say waiver they're once I about community, we thing is other tremendous get is would the one concerned co-infections. disease United CDC we that see So in we'll a

being if to risk infected if times with syphilis, partner is HIV, the that infected five risk. So times patient's you're of HIV-positive with the six your

United CDC the growing So the the syphilis Syphilis CDC is and tracking additional exponentially is testing. is pushing for that. in States

of treat million third one back the very and product, diagnose of CDC, during Especially, visit. $X.X a DPP second patient they because is or a part in allowing grant to immediately very, that's our office Chembio the the pregnancy before saw maybe the and the visit important. to multiplex leaves physician not So value was for

happening we're CDC to that funding screen So of TNT committed kind very, that product will take us the product clinical delighted in has very through the development which syphilis confirm full the to be this trials and XXXX. and

what HIV to $XX a for to want reluctant individual weeks to urgent for home care the physician's allow the self-test. the center United times of lot CDC's to just program in office We're it's that's million Regarding not are privacy discreetly. the get the the an we're I three discreet announced because seeing seeing test, in at discreet. test interested home available or States make their CDC. people of ago our a a But say again test home. interest will in people for or tremendous testing They And OTC tested tests that in home self-test

the So WHO on in is very CHECK Brazil. in Europe. have interested And been or very very, because proven the since a product certified Visa approved, supporting in we also because XXXX and approved it's Marked CE us it's market CDC SURE

our sample, performance is really So good It It's competition. easy the And basically to which is seeing whole compared blood fingerstick blood. microliters has a performance record. a which we product smallest good they're with got SURE of extremely world's is that's the that use. extremely track they're what X.X to drop is CHECK seeing the

trial we how for can HIV that market And and stages XXXX CDC accelerate with the early an of are US. the the in onto discussions FDA product get clinical in on to abbreviated so in the we OTC the

are value higher we markets. going the after So

that the about it haven't talked would Per, We name we we and brand product the antigen now States. are respiratory I thing by add a really is other in The a a that selling United lot product Status. of flu

we a south in flu if incidence the and up do north. have flu coming in United the an to we're and in see So season uptick beginning States moving

So a flu product, if well product have and A position a that a season, standalone antigen do detects respiratory in great product flu we flu a with typical as a position flu as flu -- COVID B. we're pretty

that's your XXXX. So into move that's to to another markets, And hopefully, answer we but strategy average we're moving. our higher where it's long as Higher prices. imperative value selling question,

Per Ostlund

sense. is long answers odd going out going so in -- actually it as business, That place, company is value and that more ask of away logical. money Long I company you I as Are have long the it makes kind past on revenue higher have perfectly more you've to chasing or think position the sake. Malaysia do in for historically agreement characterized that any the now little could than in a questions chase in make have to you desire or less on -- any testing. sound fully probably you a margin you you the are -- from This Island has? higher back as revenue's But place of roll automation you

Rick Eberly

Per. Yeah,

business in focused I are countries from high-volume the on always in certain algorithms. seven changes We we're Africa. changes It year-to-year. to mean, meaning in There's not algorithms already -- low-margin

in was end of that For three-year example, contract XXXX. algorithm started the a Ethiopia that

to margins a go below the and margins. our volume margins, have -- said said, can XX% although to resources we range it to was Larry business. product after get that it so both We've margin to XX% business for again want gross takes that contribution into gross high And expectations. And I

seeing in if compete. organization around though there's position production it's manufacturers Malaysia, win as commercial like Malaysian partner a STAT-PAK we'll pursue compete where higher are opportunistic. price Indonesia, that Korea and not from is focused business of The price that Africa, we're We're with But extremely not is If we're Thailand, cost where Asia a I products. our algorithms and in Malaysia we on said erosion Southeast our now China going be and We position for it. with can some incredible. our can on opportunities Vietnam, viewing some the business of come in that But margin in as to we focus.

been has raised STAT-PAK years great and a again Global recently. among It's price our countries. record, track So many the proven. a WHO out there Funded also many, performance And for great we

on this point. So business again an that opportunistic it's view at

Per Ostlund

that there rolls with I further. or forced trailing into some XX suspect in number? last big just covenants. Okay, that in for answer. me away. appreciate And of a -- the QX off guess I and noted that like maybe And issue of you you're months. Is dovetails debt to the I to situation, the back relationship won't are would I covenant business so a QX think to that QX. goes good. number bad room there or full revenue I sake, The a But maybe or there that it last one. end like take as go it lead we And -- elephant when I in the think Larry debt is in compliance reconfigure to revenue chase the not promise is up paying call And effort the short get try that feeling Herculean discussions won't XXXX. you're and an all to you're believe, being of my while make the of of could not I the in QX to that's envelope ends revenue's -- XXXX here chasing fairly off hog all place up

Larry Steenvoorden

Yeah. answer Larry. I'll that. Per it's

want we We are as in so address we all an quarter have option. the do filing options. searching out next is proactively yeah, an year S-X this to that certainly there, And company address feel We capital overhang be start to and that our able We our minimize a structure. out. then is cash burn to to want to look we our valuation. and major So,

raise we the next and speaking our capital certainly the look are other to months, update everyone either we will So lender. or on through as where we would options get with to

to come through and company as major to get agreement. us a absolutely more priority debt a that for So

Per Ostlund

Thank color, Thanks Fantastic. it. for the of all you.

Larry Steenvoorden

Yeah.

Rick Eberly

you, Thank Per.

Operator

appear it further no to comments be to for to has there back finish closing the as I will he queue, Gentlemen with. hand questions any Rick in

Rick Eberly

to want questions really for I thank from appreciate time today. I Per. you the your

for have thanks time again So your good a and evening.

Operator

and call. Thank does conclude this conference today's gentlemen, you ladies and

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

Chembio Diagnostics (CEMI) 6 Nov 222022 Q3 Earnings call transcript