Good day, and welcome to the Trinity Biotech first quarter financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Joe Diaz with Lytham Partners. Please go ahead, sir.
Thank you, Matt, and thanks all of you for joining us today. The management team of Trinity Biotech will review the financial results of the first calendar quarter ended March 31, 2022. Joining us on today's call is Ronan O'Caoimh, Chief Executive Officer, and John Gillard, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. Before we begin, I must inform you that statements made in this conference call may be deemed forward-looking statements within the meaning of Federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements.
These risks include, but are not limited to, those set forth in the risk factor statements in the company's annual report on Form 20-F filed with Securities and Exchange Commission. Trinity Biotech undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. With that said, I will now turn the call over to John Gillard, Chief Financial Officer, for a review of the quarter's results. He will be followed by Ronan O'Caoimh, CEO, to provide further details. John, please proceed.
Thank you, Joe. Good morning, everyone. Now I will take you through the results for Q1 2022. Starting with revenues, total revenues for the quarter were $18.8 million compared with $25.6 million in Q1 2021. As Joe pointed out, and as is our typical approach, Ronan will discuss revenues in further detail later in the call. As such, I will move on to discuss other aspects of the income statement. Before I begin, I will point out that the company recognized one-off accounting charges in Q1, primarily related to the refinancing and repayment of its exchangeable notes. I will give further details later on those charges, but for now, the numbers I quote exclude the impact of those charges. Gross margin for the quarter was 38.7% compared to 42.6% achieved in Q1 2021.
The reduction in gross margin is mainly due to the very strong sales and margins recorded in Q1 2021 within our COVID-19 related portfolio of products. In the years since then, pricing versus products has fallen progressively because of lower demand as the level of PCR testing for COVID has declined in North America and the availability of greater supply from other manufacturers has also negatively impacted demand. As ever, our gross margin remains susceptible to product mix changes, geographic spreads, currency fluctuations, and product level variation. Moving on to R&D expenditure. This decreased to $1 million compared to $1.4 million in Q1 2021. The company continues to focus on operating efficiency and cost control and has continued to reduce headcount as it pursues greater automation and simplification of processes.
Meanwhile, SG&A costs are broadly stable at $5.9 million, down approximately $100,000 versus the corresponding quarter in 2021. This resulted in an operating profit for Q1 2022 of $0.2 million compared to $3.1 million reported in Q1 2021. The aforementioned reduction in revenue and margin contribution from our COVID-related portfolio was the main driver of that reduction in operating profit, with these being somewhat offset by lower R&D and SG&A expenses. Moving on to financial expenses of $2.2 million. As you may have seen from prior press releases, the company refinanced the majority of its exchangeable notes during the quarter, and this has resulted in a change in our interest profile. Financial expenses in Q1 2022 were $2.2 million, compared to $1.2 million in Q1 2021.
The increase of $1 million is due to the debt refinancing which took place at the end of January 2022. $99.7 million of the company's exchangeable notes, which had a coupon rate of 4%, were replaced by a senior secure term loan of $81.3 million with an interest rate of 12.25%. The remainder of the financial expenses consist of notional financing charges arising on leased assets arising from IFRS 16, which was approximately $0.2 million in both Q1 2022 and Q1 2021.
You will note that there is also a non-cash financial expense of $0.1 million this quarter, and this number comprises accretion interest and the amortization of term loan origination costs, which were partially offset by income arising on the fair value remeasurement of two derivative balances related to the new term loan. I will talk more about these derivative balances later on. Loss after tax before one-off items and non-cash financial income was $1.9 million in Q1 2022, compared to a profit of $1.8 million in Q1 2021. As in prior quarters, and as set out in the press release, we quote both earnings per ADS, effectively our equivalent of EPS. Our earnings per ADS have decreased from $0.077 In Q1 2021 to a loss per ADS of $0.50 in Q1 2022.
As I previously mentioned, the company incurred one-off costs in the quarter, and I want to provide you with more information on those now. At our January EGM, our shareholders approved resolutions which facilitated refinancing transactions with respect to substantially all of the company's $99.9 million exchangeable notes. The accounting measure of the total consideration for the retirement of those exchangeable notes was $92.9 million, comprising of cash consideration of $86.7 million, and ADSs in the company with a market value at the date of issue of $6.2 million. Exchangeable notes were treated as a host debt instrument under IFRS, with embedded derivatives attached. The embedded derivatives relate to a number of put and call options, which were measured at fair value in the income statement.
On initial recognition in 2015, the host debt instrument was recognized at the residual value of the total net proceeds on the bond issue, less the fair value of the embedded derivative. Subsequently, the host debt instrument was measured at amortized cost using the effective interest rate method. At date of disposal, the carrying value of the extinguished exchangeable notes was $83.2 million. As the IFRS accounting measure of consideration was higher by $9.7 million, the resulting loss and disposal was recorded as a once off charge in the income statement in Q1 2022. However, from a commercial perspective, I would point out that we obtained approximately a 7% discount on the repayment of the exchangeable notes.
The remainder of the one-off items in Q1 2022 comprises $600,000 of professional fees, primarily in relation to the aforementioned refinancing. I will now discuss the accounting treatment of our term loan credit facility with Perceptive Advisors. It's a four-year term loan of $81.3 million. In accordance with IFRS accounting standards, the term loan is represented by three separate balances in our balance sheet. $76.2 million is shown in long-term liabilities as a senior secured term loan. On initial recognition, the balance comprised the principal loan amount of the $81.3 million, less loan origination cost of $3.6 million, less two derivative financial balances totaling $1.7 million to give a balance of $76 million.
In Q1 2022, accretion interest and the amortization of loan origination costs of $0.2 million were recorded to give a closing carrying value of $76.2 million at March 31, 2022. The other two balances are, one, a derivative financial asset, and two, a derivative financial liability, and these are initially recognized at fair value under IFRS 9. The derivative financial asset is valued at $0.2 million at March 31, 2022, and represents an estimate at that date of the value to the company of being able to repay the term loan early, potentially refinance at lower interest rates. The derivative financial liability is valued at $1.7 million at March 31, 2022, and represents the fair value of the warrants issued to Perceptive.
The fair value remeasurement of these two derivative financial balances in Q1 2022 result in a non-cash financial income of approximately $0.2 million being recognized in the income statement. I will now move on to address some of the main balance sheet movements we have seen since Q4 2021. Intangible assets increased by $1.3 million, which is made up of additions of $1.6 million, partially offset by amortization. Moving on to inventories. You will see that these have increased by 1.7% since last year-end, which is in the normal range of fluctuation for our inventory levels and are largely influenced by timing variations in the fulfillment of purchase and sales orders.
As I described earlier, during the quarter, the majority of the exchangeable senior notes were retired, and as a result, the associated liability has reduced from $83.3 million to $210,000 during the quarter. Finally, I will discuss our cash flow for the quarter. Cash generated from operations during the quarter was an outflow of $1.3 million. The debt refinancing and exchangeable notes payment resulted in a net cash outflow of $9 million. The company paid $3.1 million in interest on the exchangeable note and the term loan. The other major cash flow for the quarter included capital expenditure of $1.8 million. Overall, this results in a cash balance of $10 million at the end of March 2022.
However, the amounts mentioned above are before the $45 million strategic investment received from MiCo Group in May 2022. As we mentioned on our last conference call, we expect that the MiCo investment will support us in refinancing the Perceptive debt in the near term by reducing our leverage. To that end, in May 2022, we repaid almost $35 million of the $81 million nominal amount of the loan. This should reduce our annual interest cost by over $4 million. We are also engaged with a number of potential credit partners regarding the refinancing of the balance of the Perceptive debt. However, at the same time, we're examining how best Trinity Biotech can capture growth and value from the developments in the decentralized diagnostic testing market.
Given the consumer and healthcare provider changes post the COVID pandemic conditions, especially so given our new strategic partnership with MiCo Group. The decisions we make about how best to capture those growth opportunities will impact on the type of credit partner that can best support our growth over the medium- term. As such, we intend to be thoughtful about what type of replacement finance and partner we proceed with. I will now hand back to Ronan, who will bring you through the revenues.
Thank you. I'm going to review quarter one revenues before opening the call to question and answer session. Our revenues for quarter one were $18.8 million compared with $25.6 million in the corresponding quarter last year, which is a decline of 27%. Point of care revenues for quarter one increased to $2.2 million from $1.9 million in quarter one last year, which is an increase of 15%. This increase was driven by higher HIV revenues in Africa. Our non-HIV point of care revenues, which mainly comprise syphilis, were broadly unchanged from the prior quarter.
However, in February, we received WHO approval for our TrinScreen HIV test, and since then a number of country algorithms in Africa have come up for review, and we are deeply involved in endeavoring to be selected as the HIV screening choice in those countries. We are very encouraged to be making such rapid progress so quickly after approval. We believe that this product will be a significant growth driver for the company. Moving on to clinical laboratory, our revenues were $16.6 million, compared with $23.7 million in the current quarter, representing a decrease of 30%. This decrease is almost entirely due to lower revenues from our COVID-19 related portfolio of products and in particular reduced sales of our PCR viral transport media products.
Sales volumes for PCR viral transport media products have decreased since the first half of 2021 due to significant scaling down of PCR testing programs for COVID-19, with unit selling prices also decreasing due to a ramping up of global manufacturing capacity in the market. Meanwhile, last month we received CE mark European approval for our 10-minute COVID-19 antigen test. In addition to its ease of use and impressive speed to result, in extensive clinical trials, the test demonstrated 99% sensitivity and 99% specificity, which are accuracy levels superior to most tests currently on the market. We are now actively marketing the product throughout Europe and MiCo BioMed are marketing the product in Southeast Asia, where their distribution channels are strong. Meanwhile, we are proceeding for an FDA approval of the product. Moving on to diabetes testing.
Our Premier revenues increased over 20% when compared with quarter one of 2021, reflecting the fact that patients are returning to their doctors to perform their hemoglobin A1C tests on a regular basis as the impact of the pandemic is lessening. During the quarter, we placed 54 instruments as instrument placements returned towards normalized levels. Meanwhile, Fitzgerald, which is our life science business, performed strongly with revenues in line with the corresponding quarter last year. Our autoimmune revenues decreased by 4%, primarily due to lower revenues in our reference laboratory. This relates to our New York reference laboratory, which offers laboratory testing services for autoimmune disorders such as Sjögren's, hearing loss, CIDP, lupus, rheumatoid arthritis, and systemic sclerosis. Our revenues for our proprietary Sjögren's syndrome test increased significantly.
These were offset by a reduction in testing for other disorders due to fewer patients visiting their physicians for pandemic reasons and also due to supply chain constraints. We expect demand for Sjögren's testing to continue to grow as there appears to be a commonality between Sjögren's symptoms and long COVID. In addition, we continue to focus on expanding the range of tests available at the reference laboratory, including testing panels specifically aimed at our autoimmune conditions associated with long COVID. As you know, we were delighted to announce a $45 million investment in the company by the MiCo Group in April at an average effective share price of $2.60 per share. The transaction closed in early May.
As John said, we utilized most of the money for the immediate pay down of the high-yield Perceptive debt, resulting in a reduction in annual interest of $4 million. However, we are confident that this investment will enable the elimination of the balance of the high-yield debt, excuse me, with low-cost bank funding, and that we can achieve this in the short- term, even as John has said that we are well advanced in that endeavor.
With the restructured balance sheet, we believe that Trinity can now move forward with confidence and that recent events constitute a new beginning for the company. As well as injecting capital into the company, MiCo Group owns a medical diagnostic subsidiary, MiCo BioMed, and that company has a range of innovative technologies, including lab-on-a-chip and artificial intelligence-based rapid point-of-care testing applications, as well as a desktop molecular PCR test platform that has achieved 800 placements over the past two years. Through distribution and joint development agreements, it is intended that Trinity will distribute the MiCo BioMed molecular PCR and next-generation ELISA diagnostic platforms in Trinity's core markets, including North America and Western Europe, thereby providing Trinity with a significant expansion of its product portfolio.
Trinity is now in a position to strengthen its management team, and in that respect, I'm really pleased to announce the appointment of Dr. Yung Hang as Chief Strategy Officer of the company. Dr. Hang brings to the company a wealth of experience, particularly in rapid point-of-care diagnostics in the U.S., in Africa, and in Southeast Asian markets. I think this reflects our commitment to grow our rapid point-of-care business worldwide. If I could now open the call to a question and answer session, please.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Jim Sidoti with Sidoti & Company. Please go ahead.
Hi, good afternoon. Thanks for taking the questions, Ronan. You mentioned the viral transport media revenue was down. I believe it was around $8 million in the year-ago quarter. Can you tell us what it was for the first quarter of 2022?
Yeah. About $2 million, Jim.
It's about $2 million. It's down about $6 million?
Yeah.
Okay. I mean, that's really the bulk of the revenue decline then is the VTM revenue. It looks like.
Yes.
Okay. All right. Do you think, you know, it'll remain steady at around $2 million a quarter, or do you think it'll continue to decline throughout the year?
I think we'll see a drop-off in Q2, and I think we'll see a ramp-up in Q3, second half of Q3, and then if we go into Q4, I think we'd expect to see demand increase again.
Okay. All right.
In addition to that.
I'm sorry. Go ahead.
No, I was gonna say in addition to that, of course, now we've received the CE mark approval for our COVID antigen test. We should see revenues commence there.
Right. That was gonna be my next question. You've gotten two major approvals since February, the antigen test and the TrinScreen. Can you give us an update on when you think you'll start generating revenue from those products?
In terms of TrinScreen, a number of algorithms just happen to have kind of opened up for review and renewal. We're seriously in the chase in a low single digit, three or four countries where we're pursuing basically. We're looking to be included in the new algorithm. It's too early to be sure, but we're doing well. A few of them are significant countries. We're very encouraged by how we're doing. It's still an ask to replace an incumbent who's been in there for a significant amount of time, but it's looking very encouraging.
I mean, bearing in mind that the WHO themselves ran a very significant trial which resulted in 100% sensitivity and 100% specificity. It puts us in a really good position in that sense.
What about the point-of-care test for COVID?
In terms of COVID, we've received just in the past number of weeks a CE mark approval, which enables us to sell the product throughout Europe. In addition to that, it actually opens up many other international markets, albeit not the U.S. market. Many other countries outside of Europe will accept a CE mark. As I mentioned in my prepared remarks, MiCo BioMed, who have a strong distribution channel in Asia and Southeast Asia, are endeavoring to sell the product there. Meanwhile, we are basically working on selling the product through our distributor base or indeed in some cases directly in Europe. We haven't made any breakthroughs yet, but bear in mind we're literally only about eight weeks into the market.
We're pretty encouraged by development and we're seeing, you know, a resurgence of COVID levels, COVID infections at the moment. So we're optimistic of breaking into the market. Meanwhile then, we're pursuing an FDA approval.
As sales of these two products start to ramp, are you fairly confident that the first quarter of 2022 will be the lowest quarter revenue-wise of the year?
You know, I mean, I don't know. Obviously, I'd hope so. I feel like I don't want to.
I mean, I, Jim, yes, I suppose so, but I'm reluctant to, you know, indicate otherwise, you know.
I think it would be helpful. We'd expect that H2 is gonna be stronger than H1 because we have those new products coming onto the market with sufficient time from regulatory approval to be able to, you know, get sales in the market and get those volumes out.
All right.
I mean, in overall terms, Jim. Yeah.
I'm sorry. Go ahead.
In overall terms, we're very optimistic. I mean, at this moment in time, I talked about a new beginning. I mean, we have moved from a situation where we were extremely worried about repaying, you know, $100 million loan note, in circumstances where we didn't really have the funds to do so. The situation where we've repaid that, where we've brought in $45 million worth of equity, at a price of two. Average price of $2.60 per share. Thereby, I think, very significantly restructuring our balance sheet. We've got a very strong partner, who brings not just a lot of money to the table, but also a lot of expertise in terms of they're well-funded. They have, they have a significant diagnostic business of their own.
They've got a strong management team, and they've got a lot of enthusiasm. They have multiple investments in various diagnostic sectors, mostly in point-of-care areas. I and they intend, I think, to use Trinity Biotech as a medium to bring these products, all these various products to market. Many products that we haven't talked about, we're not really necessarily in a position to talk about yet, but really interesting, innovative products. Basically what we have is we have a chairman of MiCo BioMed, who basically has invested significantly his own personal money. He's very interested in diagnostics and has invested significantly in multiple new point-of-care platforms. We see all of these coming through Trinity Biotech.
In addition to that, we are now in a position to invest in R&D, to look forward positively to bring in strong management. We're doing that. We just talked about Dr. Yung Hang joining us. We're looking at new R&D programs. I think we have a focus on point of care, but it won't be exclusive in that area. I think we're moving forward with genuine confidence, and I think we're a company transformed. I think you will see now over the coming weeks and months, in coming weeks, I think you'll see the final restructuring of our balance sheet, and thereafter, I think you're going to see all at the same time, you're going to see, you know, significant management appointments.
I think a rebirth and we're very positive for the future.
You think the.
You know, the approvals of both TrinScreen and the COVID-19 antigen test have been very significant as well. Really.
Do you think now that the balance sheet has improved, it'll be easier to negotiate contracts with new customers? Was that a concern in the past?
Frankly, in essence, actually, no. That was never really an issue for us. But I mean, I think, you know, in bringing in strong management has been an issue or having the, you know, the confidence to invest significantly in new or research and development projects or, you know, to license. The ability to, for example, license in technologies or, you know, do joint ventures with partners for innovative new products. I mean, it's very difficult to do any of those deals against the background of, you know, the first of April repayments of $100 million when you don't have it in your balance sheet. Yeah. I think at the customer level, I don't think it's been a problem. It hasn't held us back.
Okay. How about in terms of management resources now? Are you able to now focus on some of these new opportunities now that you've got the balance sheet cleaned up?
Yeah. Absolutely. Like, I think we've spoken before about the changes that we see happening in the diagnostic industry, post-COVID, where people now have a new relationship with diagnostic providers. We see a continually increasing role for diagnostic providers who can provide solutions, you know, outside of the traditional healthcare setting, right? Whether it's at home, across over-the-counter products, point-of-care products, that they're going to be more and more a feature in people's healthcare journeys. They're typically faster, they're typically cheaper, which is also important in the context of maybe some of the economic headwinds that we're facing, right? You know, we think that COVID has really led to a breaking of significant adoption taboo in people learning how to use these types of tests and being able to take biological samples themselves.
In that context, you have to ask the question, are people going to spend time going to, you know, their doctor to get a simple test where they can potentially do that at home themselves or do it in some other setting, such as a pharmacy that's more towards point of care? We think the testing volume is going to come towards point of care, which is obviously a very strong area for Trinity and has been for 30 years. Then also, I suppose, as we see continued aging of the population and a greater use in people's lives of information and data to make decisions, the diagnostics really is a very powerful data source for people to take a, you know, significant role in their own healthcare journeys.
I think there's a lot of, kind of, broader trends that feed towards where our business is. Because remember, we have a lot of features, Jim, outside of just being in point of care. We own or have our own lab, we develop our own tests, we manufacture our own tests. We have a huge amount of that overall value chain associated with diagnostics in-house within Trinity. I think to Ronan's point, which, you know, renewed financial confidence, that gives us the opportunity really to, you know, aggressively attack those opportunities and, you know, derive growth and additional value from them.
I think that's it for me. Thank you.
Thanks so much, Jim.
Again, if you have a question, please press star then one.
Yeah. I don't believe we have any more questions, so could I just take this opportunity to say thank you very much. Good afternoon, and speak to you soon again.
The conference is now concluded. Thank you for attending today.