IBEX Technologies Inc. (IBT.V) manufactures and market enzymes for biomedical use internationally. Clients include manufacturers of medical devices, quality control labs and academic research institutions. IBT.V produces enzymes at its sites in Montréal, Quebec, as well as, at a third party facilities.
The company has two main product lines: High purity enzymes for in-vitro diagnostics and ELISA kits for osteoarthritis research. In addition, IBT.V also provides lyophilization services for disposable medical components, custom fermentation services, and has a few patents.
Heparinase I is reported by IBT.V as its most important enzyme - it is made through a proprietary process and is the only one approved for use in clinical diagnostics in North America and Europe. Heparinase I neutralize the effects of heparin.
Coverage was initiated on November 2018. Below is an update of IBT,V's activities.
Dec. 14 - Q1 Earnings. "As expected, revenues in the first quarter were disappointing, tracing to the reduction in sales to one customer on one product. We also incurred an increase in personnel expenses related to new employees in operations. We believe that the revenues shortfall may continue for several quarters”. Revenue of $ 1,03M vs. $ 1,18M YOY, Net Loss of $ (0.20M ) vs. $ 0.12M YOY, Cash $2.8M vs. $ 3.1M YoY
Mar. 12 - Plans to Close Iowa Production Facility on July 31, 2019. The facility came with the 2013 acquisition of Bio-Research Products Inc. (“BRP”). BRP produces, among other things, a series of enzymes used in clinical diagnostics which complements the IBEX enzyme product line.
The production of the BRP clinical diagnostics enzymes will be transferred to the Montréal facility.
The Company will book approximately $0.15M in shut-down related costs in the fourth quarter
Mar. 22 - Q2 Earnings (Ended January 31, 2019). We were pleased with our operating results for the quarter, driven by a rebound in sales revenue. Revenues increased by $0.53M to $1,43M compared to $0.89M YOY.
June 13 - Q3 Earnings (Ended April 30, 2019). Revenues decreased by $0.72M to $0.66M compared to $1,3M YOY. Net loss for the period was $0.51M compared to net earnings of $0.20M YOY. The negative change of $0.72M is related mainly to the decrease in revenues.
The decrease in revenues traces mainly to a reduction in sales to one customer who is facing generic competition in China, and to another customer who was purchasing product for the development of a new diagnostic test.
Management believes that the Company has sufficient funds to meet its obligations and planned expenditures for the ensuing twelve months as they fall due. The Company continues to work on a number of heparinase-containing clinical device projects with its key customers, some of which may result in additional revenues in Fiscal 2020 and beyond; however, as with all developmental projects, we cannot give any assurances that any of these customer-driven projects will come to market and produce significant revenues.
In the last six months IBT.V valuation has taken a hit. The decline in revenue from Q3 to Q2 (-53%) was the salient turning point which led to a loss of ($0.51M) in Q3 that is significantly higher than Q1. IBT.V explained that the results are related to customer order timing in Q2 which was expected to impact Q3 revenues. Otherwise, the decline in stock price (-32%) was mitigated by cash on hand that is relatively healthy considering performance.
The closure of the Iowa facility (July 2019) was reported to cost IBT.V ($0.15M) to be booked in Q4 but is also reported to generate annual operational savings of over $0.80M by F2020 with an additional savings of $0.20M once the Iowa facility sells. Overall, this represent a net decrease of $.075M in operational cost. Hence, the decision to consolidate assets under one roof is sensible and enables better alignment.
The key will be for IBT.V to generate more revenue in the upcoming quarters. It is reportedly involved with a "number of clinical project devices" and "developmental project" which can have an impact on its bottom line. As mentioned in our earlier note, the verticals IBT.V operate in are set to grow.
As such, while its trading at $0.12 cents (recent options issued at $0.145 cents) with low volume, IBT.V is not redundant.
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