Second Quarter Financial Results
On July 29, 2010, Trinity Biotech (TRIB) reported financial results for the second quarter ending June 30, 2010. Revenue of $22.6 million beat our $21.5 million estimate by 5%. Clinical lab revenue came in at $18.6 million ($4.4 million continuing operations and $14.2 million related to the divested coagulation business) versus our estimate of $17.0 million, and was aided by strong Lyme disease sales and products from the Fitzgerald business.
Point-of-care revenue was $4.0 million in the second quarter, down 32% year-over-year and $529k lower than our estimate. Trinity still has not resolved credit issues related to an African HIV customer, which continues to negatively impact international POC [point-of-care] sales. Meanwhile, U.S. HIV sales grew 4% in the quarter, which was also below our estimate.
EPS, adjusted for the non-recurring items related to the May 2010 coagulation divestiture, was $0.151 versus our estimate of $0.160. Compared to our estimate, EPS benefited from the higher-than-forecasted revenue figure, which was offset by significantly higher-than-anticipated SG&A and other operating income expenses.
Trinity generated $5.9 million in operating cash flow in the second quarter ($4.4 million ex-changes in working capital) and $11.0 million ($9.3 million ex-changes in working capital) through the first six months of the year. The company exited the quarter with $50.0 million in cash on the balance sheet.
We look for revenue of $88.7 million in 2010 and EPS of $0.567. We are maintaining our Outperform rating on Trinity Biotech. We believe the shares remain significantly undervalued. Our price target is $7.94, representing 14.0x our 2010 EPADR estimate of $0.567.
Conference Call
On the conference call, management gave a limited business update. The company is close to getting distribution partners in place in Europe and the U.S. for its high-potential PDX instrument. The machine is expected to launch in Europe in November and potentially in the U.S., China and Brazil in 2011. We believe the PDX instrument has enormous potential and will be a significant driver of revenue and earnings.
Trinity has also begun building out its POC research and development teams in San Diego and Ireland. Development on several new POC products continues including a HIV p24 antigen test, a quantitative lateral flow D-dimer test (for diagnosis of deep vein thrombosis) and several infectious disease tests (giardia, clostridium difficile and cryptosporidiosis). We continue to believe the POC segment is where the bulk of Trinity’s opportunity lies and where the company can realize strong double-digit revenue growth.
Management also noted that it has begun the process in seeking approval from the Irish courts to obtain approval to institute a share buyback program. Apparently the company must seek court approval, as, according to Irish law, they do not have sufficient reserves in order to qualify to buyback their stock — this is due to Trinity’s large writedown in 2008.
The expectation is that they will receive the authorization from the courts in November of this year (although management noted there is no guarantee to this). Management would not provide details of the potential size of a stock repurchase program they may institute.
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