Full-Year Sales Growth of 23%, Progress Toward Sustained Profitability
TORONTO, December 21, 2018 - Microbix Biosystems Inc. (TSX: MBX, Microbix®), an innovator of biological products and technologies, reports results for its fourth quarter of fiscal 2018, the three-month period ending September 30, 2018 (“Q4”), with strong sales and progress toward its operational goals.
In 2018, Microbix advanced upon its goal of sustained profitability, tripling its prior rate of sales growth, increasing its manufacturing capacity, and undertaking full-scale use of its new bioreactor production platform. These changes enabled the achievement of a new sales record of $12.5 million for fiscal 2018 (“2018”), although such operational progress was not yet realized in margins for Q4 or the full year.
For fiscal 2019, continued sales growth and better gross and net margins are expected. Microbix is committed to improving operational and financial strength and thereby driving share price appreciation.
Fourth Quarter Financial Results
Total Q4 revenue was $3,389,574, a 20% increase over 2017 fourth quarter revenue of $2,813,282. Included were antigen and quality product revenues of $3,308,913, 22% higher than 2017 due largely to strong sales growth in Asia via our distributor. Revenue from royalties were $80,661 (2017 - $93,663).
Gross margin for Q4 was 41%, up from 39% in Q4 of fiscal 2017, but well below objectives. Gross margin varies with product mix but, as in Q2 and Q3 of 2018, yield-control issues with a conventionally-produced antigen meaningfully reduced gross margin (by about 10%). Those issues are now resolved and further measures to improve yields and margins are being undertaken across multiple products.
Operating expenses for Q4 decreased compared to 2017, due to lower legal and interest costs. However, during its review of corporate assets, Microbix determined that it has become less likely that it will fully recover the investments made in LumiSort™. The decision was therefore made to write-down all LumiSort related assets; namely its original investment and its capitalized development, prototyping and patenting costs. While Microbix can no longer support retaining an asset value of $7,878,758 on its books for LumiSort, efforts to license or sell the technology will continue.
As a result of the non-cash LumiSort write-down, Microbix incurred a Q4 net loss $8,185,894 (versus a 2017 net loss of $1,009,911). However, Microbix generated a reduced Q4 operating loss before such one-time adjustments of $307,135, (versus a 2017 loss of $917,673). Cash provided by operations (“CFO”) in Q4 was also improved to positive $249,815, compared to cash used of $447,812 in 2017.
12 Month Financial Results
Total 2018 revenue was $12,510,558, a 23% increase over 2017 revenue of $10,185,798, with sales to each of Microbix’ two largest customers increasing significantly. Included were antigen and quality product revenues of $12,191,357, up by 23% from 2017. Royalty revenue was up 9% at $319,201 (2017 - $293,939).
At $5,369,436, gross margin for 2018 increased by $557,063 or 12%, due to increased sales and changes to product mix, but with sales-related gains offset by the previously outlined yield-control issues. Additionally, the benefit of shifting production of a leading antigen into bioreactors was not fully realized due to the conversion of a key customer being slower than expected.
Operating expenses for 2018 decreased compared to 2017 due to lower legal and interest costs. Such cash cost savings were overshadowed by the non-cash charge associated with the LumiSort assets write-down. As a net result, the Company experienced a net loss for the year of $8,621,566 (versus a net loss of $3,780,088 for 2017). Adjusting for such one-time costs (restructurings, settlements and write-downs) in both fiscal years, the net operating loss in 2018 was $742,808 compared to a loss of $1,499,534 for 2017.
Cash used in operations in 2018 was $537,005, compared to cash provided of $297,047 in 2017. This swing in CFO was largely due to utilization of funds to reduce accounts payable in Q1 and Q2. Cash used in investing activities was $1,217,999 (2017 - $640,750), due to increased investment in capital equipment and manufacturing facility upgrades, with the increase partly offset by lower investment in development of intangible assets.
At the end of Q4 after the asset value write-downs associated with LumiSort, Microbix’s current ratio (current assets divided by current liabilities) was 1.46 and its debt to equity ratio (total debt over shareholders’ equity) was 0.87.
For fiscal 2019, Microbix is again targeting double-digit sales growth, with that goal supported by its log of open purchase orders. Efforts to improve gross margins and profitability are ongoing, with the goal of achieving successive quarterly improvements via greater yields, upgrades to production technologies and changes in product mix. Additionally, work continues with regards to securing a partnership agreement to advance Microbix’ Kinlytic® urokinase project and to derive value from LumiSort.
About Microbix Biosystems Inc.
Microbix specializes in developing proprietary biological and technology solutions for human health and well-being. It manufactures a wide range of critical biological materials for the global diagnostics industry, notably antigens used in immunoassays or quality assessment products. Microbix’s products are sold to more than 100 customers worldwide, primarily to multinational diagnostics companies and laboratory accreditation organizations.
Microbix also applies its biological expertise and infrastructure to create proprietary new products and technologies. Currently it has two; (1) Kinlytic® urokinase, a biologic thrombolytic drug (used to dissolve blood clots) and (2) LumiSort™ cell-sorting, a technology platform for ultra-rapid and efficient sorting of somatic cells that can be used to enrich cell populations of interest (such as sexing semen for the livestock industry). Established in 1988, Microbix is a publicly traded company, listed on the Toronto Stock Exchange and headquartered in Mississauga, Ontario, Canada.
This news release includes “forward-looking information,” as such term is defined in applicable securities laws. Forward-looking information includes, without limitation, discussion of financial results or the outlook for the business, risks associated with its financial results and stability, its biologicals business, development projects such as those referenced herein, sales to foreign jurisdictions, engineering and construction, production (including control over costs, quality, quantity and timeliness of delivery), foreign currency and exchange rates, maintaining adequate working capital and raising further capital on acceptable terms or at all, and other similar statements concerning anticipated future events, conditions or results that are not historical facts. These statements reflect management’s current estimates, beliefs, intentions and expectations; they are not guarantees of future performance. The Company cautions that all forward looking information is inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond the Company’s control. Accordingly, actual future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. All statements are made as of the date of this news release and represent the Company’s judgement as of the date of this new release, and the Company is under no obligation to update or alter any forward-looking information.
Please visit www.microbix.com or www.sedar.com for recent Microbix filings.
For further information, please contact:
Cameron Groome, CEO
Jim Currie, CFO
Deborah Honig, Investor Relations
Adelaide Capital Markets
(647) 203-8793 email@example.com