Year-Over-Year QAPs Sales Growth of 141% for Q3
MISSISSAUGA, August 14, 2020 - Microbix Biosystems Inc. (TSX: MBX, Microbix®), an award-winning life sciences innovator and exporter, reports results for its third quarter and year to date fiscal 2020 (Q3 and YTD) ended June 30, 2020, with an increase of 141% in sales of Quality Assessment products (QAPs™).
Overall, Q3 revenues were down from Q3 2019, due in part to negative pressure on antigen demand for non-COVID infectious disease testing. Specifically, lower antigen revenues were achieved from Europe and Asia, from a combination of pandemic-related patient-flow disruption impacting end-user demand, an unforeseen production issue, order periodicity, and contract pricing adjustments. While antigen sales are now being negatively impacted by the pandemic, they are expected to recover across fiscal 2021 as patients more readily return to clinics for non-COVID testing.
In contrast, sales of QAPs more than doubled year-over-year for Q3, due to sales of new products and contract development revenues. Although initial shipments to distributors occurred only late in Q3, the novel and innovative PROCEEDx™ and REDx™ brand QAPs are now being well-received by commercially-important test makers and labs in multiple countries. Looking beyond COVID, the market potential for the HPV QAPs remains robust, but sales growth of this product line has been delayed by the global pandemic. We anticipate HPV QAP sales to begin to have a more material impact in F2021. Lastly, the manufacturing build-out at our second site is underway to facilitate increased QAPs production and efficiencies.
Despite significant progress on the QAPs side of the business, gross margins for Q3 disappointed – Beyond normal swings in product mix there were a series of batch contaminations later in this first quarter of full bioreactor usage. All affected batches were written-off in Q3 and a series of corrective and preventative actions (CAPAs) are being implemented to prevent recurrences. Contamination of the bioreactor batches was principally due to supplier quality issues that have now been identified and addressed, so Microbix does not expect any similar impact on sales and margins in future quarters. Such bioreactor batch losses are largely responsible for the net loss recorded for Q3, which was unforeseen.
For the balance of fiscal 2020 and into fiscal 2021, further QAPs sales growth and continuing improvements to gross and net margins are targeted and expected – driven by product mix and efficiency gains. Microbix remains committed to improving its operational and financial strength and thereby driving share price appreciation. The Company also remains in active discussions with multiple parties regarding partnering its Kinlytic® urokinase project in order to maximize shareholder value for that asset.
Third Quarter Financial Results
Total Q3 revenue was $2,898,328, a 7% decrease from Q3 2019 revenues of $3,110,615. Included were antigen revenues of $2,245,912 (Q3 2019 - $2,791,846), while QAPs revenues of $570,148 were up by 141% (from $236,551 in Q3 2019), and royalties were flat at $82,268 (Q3 2019 - $82,218). Gross margin for this quarter was 47%, down from 49% last year and impacted by the unforeseen batch losses. While revenues from bioreactor-produced antigen were up significantly from last year, overall Rubella antigen sales were down from Q3 2019. In addition, a Q3 sales mix skewed to weaker-margin products adversely affected gross margin compared to the same period last year, which had a higher-margin sales mix.
Operating expenses increased by 5% from Q3 2019, primarily a result of increased investment in product development and unfavourable foreign exchange losses in the current quarter.
Lower sales and fewer gross margin dollars in Q3 led to an operating loss & net loss of $440,233 versus an operating loss & net loss of $191,322 in Q3 2019. Cash from operations of $764,707 was up substantially from last year’s cash used of $201,783, most of the difference from non-cash working capital changes.
YTD Financial Results
YTD revenue was $7,819,172, a 20% decrease from 2019 YTD revenue of $9,825,056. Included were antigen revenues of $6,550,289, 26% lower than 2019. YTD sales were impacted by timing of orders and emerging pandemic-related factors, as outlined in our prior quarterly commentaries and herein. YTD QAPs revenues were strong at $1,022,153; up 51% from YTD 2019. YTD revenue from royalties were essentially flat at $246,730 (2019 - $260,597). Gross margin YTD was 48%, down from 51% in fiscal 2019, due to a higher margin product mix in 2019 and a Q3 departure from targeted bioreactor product margins.
YTD Operating expenses increased by 3% from 2019, primarily due to increased investment in sales, marketing, and new product development. Weaker YTD sales and gross margins led to a net loss of $1,244,528 versus a net profit of $171,419 in 2019. Cash from operations was $224,648, compared to cash used of $530,202 in 2019, with the increases in 2020 due mainly to non-cash working capital accounts.
For the balance of fiscal 2020 and into fiscal 2021, Microbix will work to continue improving the percentage gross margins from its critical ingredients (antigens) business and achieve strong growth in sales of its lines of innovative, proprietary and branded quality assessment products (QAPs™). Additionally, work continues with regards to securing a partnership agreement to advance Microbix’s Kinlytic® urokinase project for its catheter-clearance indication.
Adelaide Capital will host a live webinar with management, on August 19, 2020 at 11am EST. Please register here: https://us02web.zoom.us/webinar/register/WN_whsjrXWDQs2gypU7OFGFVA
The event will also be live-streamed to YouTube Channel: https://www.youtube.com/channel/UC7Jpt_DWjF1qSCzfKlpLMWw.
About Microbix Biosystems
Microbix develops proprietary biological and technology solutions for human health and well-being, with approximately 80 skilled employees and sales now usually exceeding $1 million per month on average. It makes a wide range of critical biological materials for the global diagnostics industry, notably antigens for immunoassays and its laboratory quality assessment products (QAPs™) that support clinical lab proficiency testing, enable assay development and validation, or help ensure quality control of clinical diagnostic tests. Microbix antigens and QAPs are sold to many customers worldwide, at present primarily to multinational diagnostics companies and laboratory accreditation organizations. Microbix is ISO 9001 and 13485 accredited, FDA and Health Canada establishment licensed, and provides CE marked products.
Microbix also applies its biological expertise and infrastructure to develop other proprietary products and technologies, most notably Kinlytic® urokinase, a biologic thrombolytic drug used to treat blood clots. 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 current or future products, 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