Research notes on Microbix point to great gains to be made.The following research note I found on the net gives some perspective on some of the recent headlines....worth a read.
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Perspective January 8, 2014
MICROBIX BIOSYSTEMS INC.
Symbol: TSX: MBX
Source: www.bigcharts.com
Price (Jan. 7):
$0.285
52-Week Range:
$0.29-$0.12
Shares O/S:
66.7 million
Market Cap:
$19.01 million
Recommendation:
Speculative Buy
Target Price:
Suspended
Average Volume:
50-Day: 34,700
200-Day:
Website:
21,800
www.microbix.com
PROFILE: A biotechnology company leveraging its long-standing core virology business to develop
products targeted to large global market opportunities.
Q4 AND FULL-YEAR FISCAL 2013 RESULTS,
KINLYTIC™ UPDATE and NOVARTIS LAWSUIT
Microbix Biosystems Inc. has reported Q4 and full-year F2013 results, and has provided an update on its
thrombolytic drug Kinlytic™ (Urokinase).
Q4 Results
Microbix’ financial results for Q4/F2013 (ended September 30) showed revenue up 31% compared with the
corresponding quarter of F2012.
Revenue was $2,468,899 in the quarter, compared with $1,884,801 in the year-ago quarter, with the increase
mainly due to growing demand for the Company’s biological products.
Ongoing cost savings contributed to a reduction in total expenses in the quarter to $634,939 compared with
$973,587 a year ago – a 35% improvement. Lower accretion on the Company’s convertible debentures and
recognition of income tax credits were also factors.
Net income from operations in the quarter was $634,747 versus a net loss of $301,309 (restated), and cash
flow from operations was positive.
Microbix Biosystems Inc. Perspective
eResearch Corporation ~ 2 ~ www.eresearch.ca
COMMENT: In January 2013, the Company closed the sale of its water business to Irvine Scientific, and this
revenue stream ceased. Initially, this secondary core segment was seen as an aid to help stabilize the seasonal
lumpiness of revenues of the antigen/virology business. However, with management’s renewed focus on
improving the performance of the antigen/virology business, the sale of the water products business may prove
useful in helping management become singularly focused on running the antigen/virology business. The results
for Q4/2013 appear to bear this out.
Table 1: Microbix Biosystems Inc. Q4/F2013 vs. Q4/F2012 Results
Source: Microbix Biosystems Inc.
COMMENT: Microbix CEO Vaughn Embro-Pantalony has stated several times since he took the reins of the
Company a year ago that achieving positive cash flow and profitability of the core virology business is
paramount. By combining strong revenue growth with reduced operating expenses, the Company seems to be
achieving this financial goal. With a new approach to its large-market product development, we anticipate that
the core business will remain profitable and cash flow positive.
Full-Year F2013 Results
Revenue for the full year F2013 was up 14% at $7,574,593 compared with $6,669,789 for the full year F2012.
Expenses for the year were $3,665,939, down 29% from F2012’s $5,143,877. Net income before tax was
$168,178 for the year compared with a net loss of $2,389,066 in fiscal 2012.
Cash flow from operations was positive, with Microbix improving its working capital position by
$670,000 on the year.
Table 2: Microbix Biosystems Inc. Full-Year F2013 vs. Full-Year F2012
Source: Microbix Biosystems Inc.
Microbix Biosystems Inc. Perspective
eResearch Corporation ~ 3 ~ www.eresearch.ca
KINLYTIC™ UPDATE
Microbix, along with licence partner Zydus Cadila, had been preparing for a meeting in early 2014 with the
U.S. Food and Drug Administration on the Kinlytic™ (Urokinase) project, in order to present a plan for the
return of the thrombolytic (dissolves blood clots) drug to the U.S. market.
The Company has announced, however, that the agreement has been terminated, citing “strategic reasons” on
the Zydus Cadila side.
COMMENT: The cancellation of the licensing agreement between Microbix and India-based Zydus Cadila
regarding Kinlytic is a major disappointment, since Zydus Cadila has the infrastructure and knowledge
necessary to bring new drugs into the U.S. market. Zydus' priorities for Kinlytic changed over the past several
months, and the level of commitment to bring Kinlytic to the U.S. market waned. This differed from Microbix,
which remains committed to re-introducing Kinlytic into the U.S. market as expeditiously as possible.
The break-down seems to revolve around changing priorities for Zydus, which did not have an in-house sales
team ready to distribute the drug; a third party licensee distributor was already lined up as part of the effort to
bring Kinlytic to market.
As the third party licensee distributor remains committed to bringing Kinlytic back to the U.S. market,
Microbix intends to push forward. The Company will need new funds in order to lease manufacturing space,
install new equipment, and initiate the manufacture of urokinase.
In the meantime, Microbix has initiated discussions with other potential Kinlytic™ partners.
COMMENT: Microbix needs to reapply for another FDA review of the business plan for bringing urokinase
to market in the USA. The first date for an FDA review was delayed because of the U.S. government shutdown
in November, and this distorted the FDA's schedule. The FDA has to review the plan within 75 days of filing.
The likely time-line in 2014 for Microbix is: (a) obtain financing; (b) apply for FDA review; and (c) start the
manufacturing and licensee distributing process to bring Kinlytic back to the U.S. market. This most likely
will require considerable time, perhaps as much as a couple of years.
NOVARTIS LAWSUIT
On January 6, 2014, Microbix announced that it was commencing with a patent litigation against Novartis
Vaccines and Diagnostics (“Novartis”), alleging that Novartis infringed on the Company’s proprietary
VIRUSMAX technology. Microbix was granted patent protection for VIRUSMAX in 21 countries between
the years 2006 and 2011. The Company filed its complaint in the Eastern District of Texas. The application of
VIRUSMAX technology was observed to lead to a substantial increase in flu virus production in chicken eggs,
the conventional method of virus production for vaccines.
In August 2013, the Company announced that, on January 23, 2014, it would defend a challenge of its
VIRUSMAX patent by Novartis at the Opposition Division of the European Patent Office.
COMMENT: The timing of this announcement is surprising, given that it is just weeks away from the
Company’s defence of its patent of VIRUSMAX before the European Patent Office. Management must
believe it is in a strong position with respect to Novartis’ challenge because it has been a long time since
the Company was granted patent protection for VIRUSMAX: Microbix received patent protection for
VIRUSMAX in the USA in April 2007 and in the European Union in April 2011.
Microbix Biosystems Inc. Perspective
eResearch Corporation ~ 4 ~ www.eresearch.ca
THE COMPANY
Microbix Biosystgems Inc. is a biotechnology company, focused on leveraging its Core Base Business unit
that has commercialized over 60 products in the virology and cell culture technologies, in order to finance its
more-lucrative large-market pipeline of products. These include: Kinlytic™ (Urokinase), a thrombolytic drug;
LumiSort® (livestock sex selection technology); and VIRUSMAX™ (Virus Yield Enhancement Technology).
(1) Kinlytic™: Microbix and Zydus Cadila, a global pharmaceutical company and the 12th-largest generic
drug distributor in the USA, had signed a Definitive Licensing Agreement on August 23, 2012, whereby Zydus
would bring Microbix’ Kinlytic™ (Urokinase) product to market in North America. However, as mentioned
above, this Agreement has been terminated, and Microbix is seeking another partner. Regulatory approval
relating to the manufacturing process had been expected by late 2014. The drug is already FDA-approved. It is
difficult at this point to gauge when this project will be moved forward, or when the FDA will approve the
manufacturing process.
(2) VIRUSMAXTM: Microbix continues working with potential investors to raise the necessary funds to
underwrite a new influenza vaccine facility in a partner country. In the meantime, Novartis has challenged the
patent granted to Microbix by the European Patent Office. A hearing is scheduled for January 2014.
(3) LumiSort®: The Company’s livestock sex selection technology has been verified by engineering firm
Lathrop Engineering of the USA; European Patent offices have extended patent protection; and Microbix is in
advanced negotiations to complete financing for moving forward with the development of LumiSort®. (On
November 30, 2012, eResearch published a report focusing on LumiSort®. The report is available on our
website at www.eresearch.ca).
All of these opportunities require additional financing. Microbix intends to raise the capital through various
structures, partnerships, and profit-sharing, insulating the core virology business from continued financial
encumbrances.
Microbix is progressing towards a break-through for one, if not two, of its large-market development products
over the next several months. The Microbix story is one where management has taken a core virology
products business and used the proceeds this business has generated over the years to develop or acquire highpotential,
large-market products to serve a variety of health-science segments. The Company continues to
persevere in discussions with potential partners to bring its development products to market.
For further information on Microbix Biosystems Inc., see eResearch’s reports on the Company on our website
at: https://www.eresearch.ca/profile.asp?companyID=627.
Microbix Biosystems Inc. Perspective
eResearch Corporation ~ 5 ~ www.eresearch.ca
eRESEARCH CORPORATION
eResearch Analyst:
Bob Weir, B.Sc., B. Comm, CFA
Analyst Affirmation: I, Bob Weir, hereby state that, at the time of issuance of this research report, I do not
own, directly or indirectly, shares of Microbix Biosystems Inc.
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