Full-Year Sales of $10.5 Million, QAPs Sales Grow by 41%
MISSISSAUGA, December 18, 2020 – Microbix Biosystems Inc. (TSX: MBX, Microbix®), a life sciences innovator making critical ingredients that enable the production of clinical diagnostics and creating medical devices that help ensure test accuracy, reports results for its 2020 fiscal year (“2020”) and fourth quarter (“Q4”) ended September 30, 2020, with continued progress toward its operational goals.
2020 did not achieve the financial targets we had set-out at the start of the year- due in large part to the COVID-19 pandemic. However, what we have achieved is dramatic progress in transforming Microbix from a lower-profile maker of test ingredients into an internationally-recognized creator, manufacturer, and marketer of innovative, proprietary, registered, and branded medical devices. This transformation opens up myriad new revenue opportunities for Microbix and, we believe, is the means to achieve growing sales, expanding margins, sustained and growing net earnings, and share price appreciation.
12 Month Financial Results
2020 revenue was $10,524,904, a 22% decrease from 2019 revenues of $13,412,341. Included were antigen product revenues of $8,688,239 (2019 – $11,980,527), QAPs revenues were $1,527,998 (2019 – $1,087,200) and royalties were $308,667 (2019 – $344,614). Antigen sales declined 27% versus the prior year, due to global focus upon testing for COVID-19 disease at the expense of more routine diagnoses. In contrast, Microbix’s sales of QAPs grew by 41% versus 2019, reflective of continuing sales of white-labelled products to lab accreditation organizations, initial stocking orders of branded QAPs to the five distribution partners engaged in the spring, and revenues from the custom QAPs development agreement announced in June.
Gross margin for this year was 44%, down from 49% last year. Margins were impacted by changes in product mix year over year, and most specifically due to problems with bioreactorequipment and supplier materials reliability that resulted in multiple lost batches. This occurred principally in fiscal Q3, the first ever quarter of constant usage of all bioreactor units, and had a large negative impact on margin and bottom-line results that quarter. Those problems are being addressed with heightened preventative maintenance, scrutiny of suppliers, and of processes. They are thereby targeted to be non-recurring. Operating expenses decreased by 4% from 2019, primarily a result of slightly higher foreign exchange gains, lower travel and trade show costs in the last half of the year, due to COVID-19 travel restrictions and government wage subsidies.
As at September 30, 2020, Microbix determined that, due to the prolonged time which Kinlytic® urokinase has been pursuing partner-derived funding and the greater difficulty of securing such funding during the pandemic, IFRS guidelines require a write-down of the value of this asset. Accordingly, the Company has recorded an impairment charge of $3,078,585 which reflects the change in the IFRS valuation of the asset as at September 30, 2020. Similarly, due to Microbix not achieving its operational profitability goals in 2020, a write-down of Deferred Tax Assets (DTAs) was also taken. A second 2020 non-cash impairment charge of $1,568,237 has therefore been taken in relation to the DTAs.
Lower sales, fewer resulting gross margin dollars, the write down of the deferred tax assets and the impairment of assets for the year led to a 2020 operating loss of $1,580,703 and net loss (after the above non-cash impairment charges) of $6,227,525 versus an operating income of $43,681 and net income of
$31,918 in 2019. Cash from operations was $8,566, compared to cash from operations of $44,368 in 2019.
At the end of 2020, Microbix’s current ratio (current assets divided by current liabilities) was 1.59 and its debt to equity ratio (total debt over shareholders’ equity) was 1.36.
Fourth Quarter Financial Results
Q4 revenue was $2,705,732, a 25% decrease from Q4 2019 revenue of $3,587,285. Included were antigen product revenues of $2,151,767 (2019 – $3,092,285), QAPs revenues were $505,898 (2019 – $406,831) and royalties were $48,067 (2019 – $84,016). Q4 sales were impacted by lower antigen sales as outlined above and changes in product mix. This was offset by QAPs Q4 sales which increased by 24% vs. prior year.
Q4 gross margin was 35%, down from 44% in 2019, due to lower margin product mix in Q4 2020, along with the aforementioned bioreactor issues.
Operating expenses in Q4 decreased by 25% from 2019, primarily due to receipt of government wage subsidies and lower travel and trade show costs. As outlined above, the DTAs and Kinlytic were written down during the quarter. Lower sales and fewer gross margin dollars during Q4 led to an operating loss of $336,175 and net loss of $4,982,997, versus an operating loss of $127,738 and net loss of $48,816 in Q4 2019. Cash used in operations was $216,083, compared to cash from operations of $574,570 in 2019.
For fiscal 2021, Microbix will continue strengthening each of its three revenue-focused product areas. For antigens, this will comprise continuing to improve gross margins, both as a percentage and in terms of their consistency. For QAPs, this will entail adding to the ten licensed/registered medical devices offerings and expanding sales to PT agencies, Dx OEMs, clinical labs, and distributors. For our newest product area, viral transport media, we are targeting to begin sales in January, 2021 and grow them through the year.
About Microbix Biosystems Inc.
Microbix develops proprietary biological and technology solutions for human health and well-being, with about 80 skilled employees and sales growing from a base of approximately $1 million per month. 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 the quality of clinical diagnostic workflows. Microbix antigens enable the antibody tests of over 100 international diagnostics companies, while its QAPs are sold to clinical laboratory accreditation organizations, diagnostics companies, and clinical laboratories. Microbix QAPs are now available in over 20 countries, distributed by Alpha-Tee Systems, Inc., Diagnostic International Distribution S.p.A., Labquality Oy, The Medical Supply Company of Ireland, and R-Biopharm AG. Microbix is ISO 9001 and 13485 accredited, U.S. FDA registered, Australian TGA registered, 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 viral transport media to stabilize patient samples for lab-based molecular diagnostic testing and Kinlytic® urokinase, a biologic thrombolytic drug used to treat blood clots. Microbix is traded on the TSX and OTCQB, 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.
Cameron Groome, CEO (905) 361-8910
Jim Currie, CFO (905) 361-8910
Deborah Honig, Investor Relations Adelaide Capital Markets
(647) 203-8793 firstname.lastname@example.org
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