Earnings call transcript: Microbix Q2 2025 results miss expectations

Microbix Biosystems Inc. reported its Q2 2025 earnings, revealing a revenue shortfall that led to a 5.56% decline in its stock price. The company posted $5.32 million in revenue, missing the forecast of $6.9 million by 22.9%. According to InvestingPro data, the company remains profitable over the last twelve months despite the revenue challenges. This miss, coupled with anticipated challenges in the second half of the fiscal year, has impacted investor sentiment. InvestingPro analysis suggests the stock is currently fairly valued based on their proprietary Fair Value model.

Key Takeaways

• Revenue fell short of expectations by 22.9%.
• Stock price dropped by 5.56% post-announcement.
• Gross margins improved to 60% from the previous year.
• Strengthened cash position through warrant/option exercises.
• Anticipated weaker sales in the latter half of the fiscal year.

Company Performance

Microbix’s Q2 performance was marked by a revenue miss, although the company showed strength in gross margins and cash position. The company continues to invest in technological advancements and product development, which may bolster future performance despite current challenges.

Financial Highlights

• Revenue: $5.32 million (22.9% below forecast)
• Gross Margin: 60% (up 7% YoY)
• Net Earnings (First Half): $900,000
• Cash Position: $2.7 million from warrant/option exercises

Earnings vs. Forecast

Microbix’s Q2 revenue of $5.32 million was significantly below the forecast of $6.9 million, missing expectations by 22.9%. This deviation is notable and may signal operational or market challenges.

Market Reaction

Following the earnings announcement, Microbix’s stock price fell by 5.56%, closing at $0.34. This decline reflects investor disappointment with the revenue miss and cautious outlook for the remainder of the fiscal year. InvestingPro data shows the stock has experienced a significant YTD decline of 44.82%, with the current price sitting 62% below its 52-week high of $27.50. Get deeper insights into Microbix’s technical analysis and 12+ additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Microbix anticipates a challenging second half of the fiscal year, with expectations of weaker test ingredient sales. InvestingPro analysts confirm this outlook, anticipating sales decline in the current year. However, the company maintains strong financial health with a remarkable current ratio of 23.31, indicating robust liquidity to support its operations. The company remains focused on strategic client acquisition in its CAPS business and continues its Kinlytic drug development, aiming for FDA re-approval by 2027. Access the comprehensive Pro Research Report for detailed analysis of Microbix’s growth strategy and financial outlook.

Executive Commentary

CEO Cameron Groom stated, "Strategically, we’re very much executing," highlighting the company’s focus on long-term goals despite short-term setbacks. COO Ken Yu expressed confidence in product development, saying, "There is zero chance of clinical failure of this product."

Risks and Challenges

• Revenue miss and anticipated sales decline in the second half.
• Temporary sales pause in China due to reduced respiratory infections.
• Potential supply chain disruptions affecting new product launches.
• Market saturation and competitive pressures in key regions.

Q&A

During the earnings call, analysts questioned the impact of reduced sales in China, which the company attributed to seasonal factors. Discussions also covered the Kinlytic drug development timeline and European expansion strategies.

Full transcript - Microbix Biosystems Inc. (MBX) Q2 2025:

Deborah, Moderator/Host: Good morning, everyone. Thanks for joining us today. We have a session with Microbix to discuss the Q2 results they put out this morning. You can find those on the company’s website on SEDAR and the press release. Probably was sent to your inbox, let’s hope.

So with me today, I’ve got Ken Yu, COO Jim Curry, CFO and Cameron Groom, CEO. The format of the session will be a review of the quarterly results by Cameron and his team, and then we’ll open it up for Q and A. So feel free to start putting your questions in the Q and A box if you’d like, or you can email them to me. I don’t believe that we’re going to work off a formal presentation today, But as always, this session will contain forward looking statements. You can find more about those on the company’s website on the presentation on the website, which I will update later today with the results.

And with that out of the way, I’d like to turn the mic over to Cameron Grum, CEO. Hi, Cameron.

Cameron Groom, CEO, Microbix: Hello, Deborah. I’ll start by taking myself off mute. It’s always a good start for these things. Thank you very much, Deborah, and Jim and Ken for joining us and for Second Deborah as well. The and thank you to everyone participating for taking the time this morning.

Very pleased to be reporting our results for the second quarter and first half of Microbix’s fiscal twenty twenty five. In these periods, the three and six months, respectively, we’ve demonstrated solid sales, excellent gross margins and material net earnings. All those achieved as we’ve been continuing to build out the capabilities and capacity needed to successfully engage with the largest multinational diagnostics companies and PTEQA agencies and clinical lab chains. Our Q2 results specifically, we had $5,300,000 in total revenues, strengths in our antigen or ingredient sales business over the quarter and slower sales of our quality assessment products due to a few one off factors. We had excellent gross margins for the period at 60%, up a full 7% gross margin over the prior year.

And as expected in the second quarter, we had geared for this level of revenues to generate effectively a breakeven result, which is what we achieved. For the first half, total revenues of 11,400,000.0 gross margins up by 10% year over year, so very strong progress there and materially positive net earnings of $900,000 which while we don’t publish our budgets, both figures were in line or ahead of what we had targeted for the six months. Jim, did you want to offer any further color on the Q2 or first half results?

Jim Curry, CFO, Microbix: Yes, Cameron. I think you’ve covered the key points, but certainly the one area that I’m happy with and I don’t get happy easily as these two guys know. But I’m happy with is the gross margins and the cost of sales of the products, especially on the antigens business. We’ve put a number of processes in place within our antigens business to improve our margins. And we’ve seen that come through in spades over the last year.

So that’s an excellent one. We’ve also from a in terms of the quarter, we’ve had a good strong quarter from cash and available credit, guess, during the quarter. Exercised or people exercised $2,700,000 worth of warrants and options during the quarter. We utilized some of those funds to pay down our mortgage at 1,150,000 And we also work with our bank to increase our credit line, doubled it from $2,000,000 to $4,000,000 So overall, a good strong quarter and we see that our balance sheet is in probably the best shape it’s ever been in. We had good strong ratios at the end of the quarter with our current ratio at 9.36 and our debt equity ratio at 0.27.

So overall, an excellent quarter and an excellent half.

Cameron Groom, CEO, Microbix: Thank you very much, Jim. I think that’s a great point to discuss the financial strength of the company, just how we have been building up our liquidity to keep executing and have been adding to our capabilities and capacity in that process and ending up still stronger. We’ve also, of course, bought back a material continue to buy back a material number of shares. And that is a use of proceeds and capital that also serves as a holds back the improvement of those ratios somewhat as we’re using equity to buy back shares and some of our surplus liquidity. So I think that’s a wonderful summary, Jim.

Thank you very much and we’ll leave time for more questions on the quarter should people want to field them into the Q and A queue. We’ve also done, I think some excellent operational work over in Q2 and over the six months. Some of the things that I’ll point to there, we have commissioned for the first time recombinant capabilities are coming in. So our specialty has been in native antigens, which are the native viruses and bacteria grown up, purified and inactivated for use as ingredients in immunoassay tests. But there are cases where synthetic or recombinant test ingredients can play an important role.

And onboarding these capabilities, as we announced in January, is now ongoing, progressing very well and opens up the substantial new addressable markets for our Test Ingredients business that really enables us to offer a broader suite of services to our customers. We’ve also made some excellent progress in our CAHPS business with demonstrating our global leadership in screening for human papillomavirus, so screening for cervical cancer and enabling globally the move from the 1950s, albeit very valuable, pap testing methodologies, which rely on cytology and pathology into molecular diagnostics, looking for the genetic signature of the virus that will drive that cancer formation over a period of many years, five to ten typically. Our leadership there is enabling that transition globally as evidenced by our Indo Pacific Alliance with the Australian Centre for the Prevention of Cervical Cancer and other global organizations across the Indo Pacific. We’ve also demonstrated our leadership in emerging pathogens with our work with the H5N1 virus in developing synthetic constructs to be able to determine can labs existing tests pick up the emergence of H5N1 into human to human transmission and more broad spread, God forbid that happen, but we’re enabling labs to validate whether their lab developed or commercial tests can do that detection with our partner API and again demonstrating technical leadership.

We’ve also been opening up new addressable markets in our CAHPS business, starting work in genetics testing with a very exciting point of care genetics test program out of The UK and in oncology, working to help in the emerging field of molecular pathology as there’s really a blending between pathology and molecular diagnostics and all of those innovations need to be validated and Microbix again taking a leadership role in doing that. And lastly, before I hand the baton over to Ken for a bit of an operational update, I don’t want to neglect mentioning the excellent progress that is being made with Microbix Therapeutics therapeutic drug asset. This is the thrombolytic kinolytic urokinase, a program that would have been too much of a financial lift for Microbix to undertake on our own and have been successfully partnered with Sequel Pharma, a portfolio company of a globally significant U. S.-based private equity firm that has been of all been wonderful partners in advancing that, and we had a very substantial milestone. Just announced a short while ago at the on May 5, outside of Q2, is still relevant for this discussion where our partner has undertaken another major program step providing the incontrovertible evidence that this program is progressing well.

So I don’t want to steal all your material, Ken, but maybe you could dive in a little bit more deeply on some of the operational progress that’s being made.

Ken Yu, COO, Microbix: Sure. The operational side of the business the the operations of the business is humming along very nicely. And, we’ve spoken about building capabilities and building capacity for to support our growth going forward, and that’s exactly what we’re doing. That’s exactly what we’ve done, and that’s what we will continue to do. So from the the purpose of from the perspective of manufacturing, the manufacturing process upgrades we’ve put in place in the last little while using operational excellence are manifested in the numbers in the margins.

And we’re getting much better yields in our major bigger yields in our antigen products. We’re getting a far lower scrap rate, and, we’re gonna be driving on from there. As I say, that is represented in margin gains to a certain extent, and we’re gonna continue doing that. The use of the digitization that we’ve done, the electronic quality management system and the enterprises source planning, software has allowed us to and and, of course, all the automation we’ve done in the lab as well and last a while has allowed us to reduce the workload and the drudgery to quality control, to quality assurance and regulate. We know the manufacturing staff, and that again is manifested in capacity of the building of the business and in the margins that you see in our financials.

The CL 2 the new CL 2 Laboratory, continuing at Level 2 Laboratory and Building 3 is humming along nicely. It’s fully operational, and there’s good testing and products coming out of that as we speak. The high throughput filling line is online and operational. The new caps quality assessment products coming from the molecular side and the protein side and the formalin fixed paraffin embedded clinical specimen side from that oncology and then and molecular pathology. They’re they’re moving along.

The recombinant aspects are going really well. Our first recombinant antigen is is gonna be ready for prime time imminently, and there’s a rich pipeline coming beyond that. You know, that will open up new customers, but also we’ll be a customer for that because we’ll be securing our own supply chains for products down the line. And, you know, really, everything we’re doing is is bearing fruit in the operational side. And I can’t really speak highly enough of the team of the team, whether it’s manufacturing, QC, QA, r and d, I d IT, facilities, and finance, even finance.

They’re all doing a great job and creating a great environment for growth, and, that that’s what I would say with firm operations. Things are going very, very well.

Cameron Groom, CEO, Microbix: Excellent. Well, you very much, Ken. That’s great. So first half, very much delivered as we have been targeting. And we’re pleased to see the build of our financial strength, the build of our operational capabilities and capacity.

You will see in reviewing the disclosures associated with Q2, though, we are looking at a more challenging outlook for the second half of the year, specifically that’s going to be weaker than we’ve been targeting on our sales of test ingredients and offset somewhat, but not entirely by strength in our antigens business. We’ve seen specifically in the test ingredients business a real pause in our sales of certain respiratory oriented antigen products into China. Our distributor and other clients with whom we deal have indicated that there just wasn’t as much spread of bacterial pneumonias in China over the twenty twenty four, twenty twenty five Chinese New Year period, which is normally a period of many, many hundreds of millions of people traveling over that period and presents a spreading event. We provide antigens for that diagnosis, which is done immunologically in China, and there wasn’t a great sell through this year of those tests. So understandably, clients, they’re pausing their purchase of ingredients until that inventory is either sold through or expires.

So we are looking at a reduction in our sales into China over the second half, but we are looking and we are seeing the onboarding and acquisition of many new clients in our caps business. And although that doesn’t result in an immediate upshift in sales, it gives us very excellent visibility on the strategic wins that we’ve been targeting for our caps business. So we are looking at a more challenging second half, but from a revenue perspective, but that is a tactical matter while we are achieving all of the strategic objectives that we’re looking for as our business in acquiring major international multinational diagnostics companies and PTEQA agencies and continuing to build our more retail sales into the clinical lab period. So continued excellent prospects for our business, strategically more tactical challenges over the second half of twenty twenty five, for which, of course, we have ample treasury to withstand any headwinds and continue to move forward. And all the while, of course, Kinlytic is moving forward as well.

So from things looking a little too far away to perhaps grab attention fully, that is moving ever closer. And we are continuing to be optimistic for a refiling of a supplement to the biological slicing applications, SBLA, by our partners and ourselves in 2027 with the target of a re approval by FDA late that year. So that’s most of the news that’s fit to print and happy to go into specifics. I do also have our current and recently refreshed corporate PowerPoint ready to pull up should we want to touch on any supplement, any of the information provided here. But I do encourage everybody to review that on our website.

I think there’s some excellent materials in there. And all the time, we look to provide everything we see going on in as much of a level of candor as we can about the excellent progress that’s being made as well as some of the challenges as well. So with that, happy to take launch into questions, Deborah.

Deborah, Moderator/Host: Sure. I’ve got a few audience questions. So talking about the slowdown in revenues from the Chinese market, do you expect this to normalize in the coming year? Or do you expect that cat sales are anticipated to compensate for the shortfall long term?

Cameron Groom, CEO, Microbix: Well, with China, we’ve had no evidence and we’ve worked through a distributor in China, but we’ve had no evidence that this is anything geopolitical rather it’s just probably residual immunity from a worse year from a respiratory infection point of view, the prior year that people still had some ongoing acquired immunity to those bacteria this year. So we have to balance between China perhaps snapping back very fast with a bad respiratory season in 2025, ’twenty six, or does that take longer? So we don’t want to be caught without inventories with those products, but we don’t want to build too much either. So we’re threading a needle between too much and too little on that for those products and with those particular SKUs.

Deborah, Moderator/Host: Understood. Then a couple of questions about the caps. So has the delay in the caps partner impacted your outlook on overall cap sales? Do you still foresee this segment growing annually?

Cameron Groom, CEO, Microbix: We do very much see this segment growing. And one of the absolutely delightful and motivating things has been to attend some of the major international trade shows and scientific congresses and just see the excitement with potential major companies about the capabilities we have and what we can deliver for it. So working with such companies is absolutely delightful. And we’re currently acquiring and in the process of onboarding some of the largest companies in the field that have huge instrument installed bases as well that need new assays, new games for that Game Boy or PlayStation installation. And it’s a delight to be pulled into supporting those customers.

It takes a little while. Typical workflow is the product starts with product development and that’s revenues in the tens of thousands then into pilot lots to validate manufacturing, which moves into the hundreds of thousands, then prelaunch inventories and potentially onboarding kits to train new sites and new installations, and then finally into commercial reorders of product post launch. And that takes multiple quarters to work through that process. But as we load the pipeline at the front end, our experience has been that things do come out the back end, and that involves 100 fold expansion in the potential revenues, so we’re there, the revenues from the start to the finish of that process. So as we keep loading the pipeline, we see that coming, and it becomes a question more of when rather than if.

Deborah, Moderator/Host: Can you provide some color on the delays with the large caps customer?

Cameron Groom, CEO, Microbix: This quarter, we had two issues, customer and it’s impolite to kiss and tell too much and go into details. So I won’t be discussing specific client names. But one client moved from parallel development of multiple assays to serial development, and that has led to timing changes in their plans and revenue changes for us, at least in the short term, while we onboard other clients in the field. Because keep in mind, we work with supporting multiple companies and we’re platform agnostic by and large. The other issue in this quarter is many of our proficiency testing customers.

These are the agencies that provide what’s called proficiency testing programs in North America or EQA, external quality assessment programs, schemes, they call them in Europe. So it’s either PT programs or EQA schemes, depending on whether you’re using North American or European terminology. Those programs most often have three events per year. So a lab’s competency is challenged with blinded package of CAPS for a particular form of testing three times per year. So one of our major CAPS clients, it happened this quarter that one of their events the shipment for one of their events did not fall within this quarter, so that meant a lower CAPS number for this quarter.

And we’ll see a resumption of CAPS numbers more in the 2,000,000 plus range per quarter from Q3 forward.

Deborah, Moderator/Host: Do you expect a bit of a rebound in the back half of the year for CAPS?

Cameron Groom, CEO, Microbix: Very much. Yes, CAPS will be fine and on track in the back half of the year. And it’s always a question of which new customer moves from that tens of thousands to hundreds of thousands to more process and how many quarters that takes. And sometimes customers, for example, if they’re working on a respiratory assay, you’ve got two choices, you’ve either got the Northern Hemisphere, Flu season or the Southern Hemisphere Flu season to do your studies, but you don’t have it, you can’t just pick August and expect to enroll patients to qualify a new respiratory virus test, for example. There’s some inherent seasonality to some things like respiratory or gastrointestinal.

One tends to be winter, the other tends to be summer. And some things have no seasonality or little seasonality associated with them, so you don’t have that timing issue there.

Ken Yu, COO, Microbix: Got it.

Deborah, Moderator/Host: But as you continue to expand that pipeline of devices and products in kind of your formative tens 10 thousands of sales, as that grows, the lumpiness should go away on the larger orders?

Cameron Groom, CEO, Microbix: Absolutely. And along with customer concentration issues as well, the two come together. We’ve had we have now about 10 clients each in the 100. We have several clients in the multimillion dollar range across our portfolio. We have about 20 clients that are $100,000 or more in annual revenues split between antigens ingredients and caps medical devices.

And as we broaden out that number of significant customers of 6 or 7 figure customers, the customer concentration risk comes down as does the lumpiness in revenues quarter by quarter.

Deborah, Moderator/Host: Got it. Taking a step back, what are the total addressable market sizes for cats and antigens respectively?

Cameron Groom, CEO, Microbix: Well, for antigens, we’re broadening it out substantially with bringing on full recombinant antigen capabilities. We expand that addressable market by multiples. You’re probably looking for native antigens, the total addressable market would be in the 50,000,000 to $100,000,000 range globally. With the amount we can capture being a subset of that, we’ve expanded that substantially with our with onboarding recombinant capabilities. And keeping in mind, we’re not doing this on speculation, but rather microbics will become the first customer for our recombinants that we produce, we’ll use in our medical devices business for our caps and then be able to offer those more broadly to our ingredients customers as fully validated products.

And that’s the process we’re undertaking there. So that market expands at least doubles or triples in terms of the addressable market there. And in caps, it’s an interesting question. We probably originally overestimated the potential of that business in the laboratory space, as many laboratories use patient sample pools rather than that are internally validated rather externally validated controls as they should under the regulations, but are under extreme margin pressure and have to sometimes come up with creative solutions. For the proficiency in EQA business, we’re certainly expanding that, and we’ve grown that at least fivefold over the past several years in terms of our penetration of that business.

And I think that certainly moves us well into the tens of millions in overall potential for the accreditation side, the proficiency and accreditation side of our business. And then the test makers, which is what we’ve started and are now adding more and more customers, has dramatic potential for external controls used in kits of point of care test cartridges is certainly an area we see tremendous potential on, as well as internal controls that we’ll talk more about, I think over the coming quarters, their materials within the actual test cartridges of companies is another big area we’re looking at. And then of course, onboarding kits for training and validating new sites and use in the clinical lab to bookend daily test runs even if they’re on large automated instruments.

Deborah, Moderator/Host: And a couple of questions on G and A. Was the increase in G and A part of ongoing OpEx investment? Should we expect a similar run rate going forward?

Cameron Groom, CEO, Microbix: Good question. Jim, do you want to tackle that one?

Jim Curry, CFO, Microbix: Sure. Some of definitely is. As Cameron indicated, we are certainly making further investments in research and development, as well as in our sales and marketing, unless it was specific to the midline. I guess in the admin line there was some sort of non recurring costs in the admin side that we incurred during the quarter that we do not anticipate going forward. Of our total OpEx in the quarter, there’s probably a couple of hundred thousand dollars in there that will not be recurring and we shouldn’t see in Q3 and Q4.

Cameron Groom, CEO, Microbix: Yes. By and large, we have created deliberately the level of infrastructure to frankly be taken seriously and have the cutting edge capabilities and win new business. So you’ve got to have that balance with enough financial strength that potential international clients look at us and say we are a good pick as a critical sole source supplier to those customers. And that’s really what we’ve been doing and why we’re running the business as we are in bringing in state of the art capabilities, whether that’s synthetic biology, digital PCR, bioreactors, recombinant technology, all these immense capabilities that we’ve onboarded while improving our financial strength along the way. So I think it’s been a challenging course to chart, but a lot of fun to sail that race.

Ken Yu, COO, Microbix: Yes. We have a lot of capabilities now in place to support growth without adding massively to the operational expenses. We have that additional capacity. In the next little while, we’re going to realize a little bit of increased margins as we reduce testing portfolio or automate automate testing. So we’re really building on efficiency in the background all the while.

And so you won’t see any particular increase in operational expenses as our sales grow.

Cameron Groom, CEO, Microbix: I may lean on Jim, though, just to be born to authorize fixing those broken chairs in the boardroom and perhaps even redo some of the carpets. It’s getting a little embarrassing. We have clients in, but we do spend all the money on the labs, manufacturing spaces.

Deborah, Moderator/Host: I guess similar question. This level of gross margin, is it like as a percentage, is it sustainable going forward? Sounds like yes. I’ll let you guys in.

Cameron Groom, CEO, Microbix: Jim has a bit of alchemy on overhead allocations, I think that’s a bit more teasing there. Sorry, Jim. But yes, in short, these are improvements that have been most significantly driven by progress from our MTech group on manufacturing technology engineering and some benefit from optimizing pricing and having a very clear eyed and steely eyed view on what our real costs are. Jim, did you want to comment further?

Jim Curry, CFO, Microbix: I think you covered most of it off, Kevin. I think, yeah, I think as we go forward, that would be my expectation. I think one of the key areas where we have been held back a little bit has been in our test ingredients or antigen business where we haven’t had the yields that we had anticipated and we were working on process improvements that have finally come to fruition. And so based upon where we are today, I would expect that the margin expectation should be where they are right now.

Ken Yu, COO, Microbix: Yeah. And we still have and now we have the capabilities, the size, the critical mass to drive these processes to continue to boost yields and to continue to reduce unit costs. That’s all going So bottom line here is absolutely we’d expect to maintain those margins.

Cameron Groom, CEO, Microbix: Yes. And I think we have the torque on revenue growth as well as Ken had indicated and Jim has indicated. We’re not adding a tremendous amount from here to our footprints and infrastructure. So as revenues grow, we’ll see some of that some further margin expansion, particularly as we secure longer run commercial programs and fewer pilot product development programs for our CAPS business, that would have an upward bias on margins. But of course, we need to be allocating manufacturing costs across what revenues we generate quarter to quarter.

So we’ll still have some lumpiness for a few quarters yet, I think before that works its way through the system.

Jim Curry, CFO, Microbix: That’s a good point, Cameron. I was just going to say that. I mean, often, I mean, one component of gross margin is the cost aspect, but the other is the revenues. And we’ve certainly got the manufacturing infrastructure in place to grow our business and probably produce 50% more than we are producing today. However, if we do drop off in revenues, they’re going to be absorbing the overhead in that short term period.

Deborah, Moderator/Host: Yeah. on, I’ve got two questions left. So if anyone has any, make sure to get those in before we get through these. So the first question is on most favored nation policy implications. How might the recently revived most favored nation directive proposed by President Trump impact the pricing strategy or reimbursement outlook for Kinlytic in The US?

This policy could potentially influence reimbursement dynamics, and we’re interested in understanding the company’s preparedness and response. Bit of a long long camera, it’s the first one in the Q and A box if you need to review it.

Cameron Groom, CEO, Microbix: I may do just that. Just going to digest that sentence here. Okay. So this refers to the comments in the past few days about drug pricing in The United States and how The United States should not be priced dramatically higher than other nations in terms of the cost of drugs. We’re very fortunate in what we’re doing is very much rubber meets the road kind of medicine.

So we’re talking about a drug for with kinolytic urokinase for catheter clearance, where you are infusing about $150 worth of drug into a catheter to dissolve a clot and then safely remove it and avoid probably $10,000 or more of surgical costs from having to remove a long term indwelling catheter and replace it with a vascular using a vascular surgeon as the physician and often a general anesthetic and a nurse and risk of morbidity and mortality associated with that. So this isn’t the sort of million dollar orphan therapy that we hear about. It’s very much meat and potatoes in terms of the dollar costs being modest and the benefits being incontrovertible. So I don’t see this being an issue for us at all. In fact, partners are looking at the manufacturing of this drug in The United States for the critical portion of the manufacture of the active ingredient.

So it will be a U. S. Product for the vast majority of its value and thus would attract no tariff regardless of the situation. And the pricing is so modest compared to many therapies and the benefits so clear, I don’t see it being an issue at all. Ken, is there anything you’d want to expand on or correct in that?

Ken Yu, COO, Microbix: No, think that’s fine. The urokinase program is addressing what is essentially an unmet medical need or monopolist situation. So the drive to do that is clear and to your point, SQL and the CDMO that we’re working with will be essentially enough a US based experience. And therefore, we don’t see any problem with that going forward. Notwithstanding, it’s it’s the state of the art.

It’s the it’s the best product in this particular space, and so people want it anyway. And, we’re moving forward forward in a pace to do that. I mean, I I might jump in and and reiterate to the group that, our relationship with SQL is excellent, and they’re very sophisticated in the process development, regulatory, and marketing aspects of this. And we’re working for, closely with them, and, of course, they’re a portfolio company, one of the biggest life sciences VC groups in the world who are covering the entire cost of this, including paying for my time to help them with the technical and regulatory aspects of this product. So we’re very, very serious in moving forward.

And, of course, recently, in this milieu, SQL has just brought on board the contract manufacturing organization for the fill, finish of the drug products, the labeling, the packaging and labeling and ready for distribution as part of the program. So we’re moving forward and we expect to realize all the time line remains the same for 2027, the opportunity remains the same going forward and the relationship with CIPO continues to be excellent.

Cameron Groom, CEO, Microbix: Absolutely. Thank you, Ken. And I would encourage everybody to review our news release from May 5, which describes the latest progress, and that’s the second biggest contract in the and spend associated with the return of Kinlytic to market. The largest contract and spend was with the Drug Substance Manufacturing, CDMO, or Contract Drug Manufacturing Organization that was announced last year. This year, this spring, we’ve been pleased to announce the engagement of the drug product CDMO.

So one is the active ingredient, the other is the finished formulated package product. And both those contracts have been undertaken. Collectively, they would have blown through our entire treasury, probably times two, those agreements. So it speaks to the logic of our doing this through a partnership where all costs are being funded and including the direct support, as Ken mentioned.

Ken Yu, COO, Microbix: And the relationship with both CMOs continues to be very constructive and on pace and on track.

Cameron Groom, CEO, Microbix: Yep. Thank you.

Deborah, Moderator/Host: Great to hear. Got another one another long one for you, Cameron. Again,

Cameron Groom, CEO, Microbix: it’s Okay. Better open it up.

Deborah, Moderator/Host: So this one’s on your European expansion strategy. And I actually, let’s start with because they they talk about cyanurkinase, which as a layperson, I’m assuming is some sort of drug competitor to urokinase. So maybe we can start there, and you can give us a little bit of background on cyanurkinase.

Cameron Groom, CEO, Microbix: I don’t know that trade name specifically, but there have been what are called high molecular weight urokinases available as legacy approval drugs in Europe. And there are a number of functional differences with high molecular weight kinases that make them less desirable as a therapeutic. But the biggest issue is that high molecular weight urokinase is manufactured by isolating the molecule from vast quantities of urine collected typically from soldiers or prisoners. And that process is typically run-in India or China, where there are large population centers of such individuals. Regardless of how good your filtering or viral inactivation processes may be, there’s always an immense risk of a process failure or a catastrophic risk, however small, of process failure exposing treated individuals with potentially the risk of fifty thousand or one hundred thousand individuals’ health records.

So those sorts of products, while they have legacy approval in some markets, would never get approval in The United States or approval at the EU level, even if they’re available as legacy items in some markets. So that’s sort of the difference. Our process is cell culture derived from a single tissue donation. So the risk is completely inverted, whereas the fifty thousand people might be contributing urine to a pool and then that be treated with thousands of people, we’re looking at one donation that would be heavily screened as well as all state of the art viral inactivation, filtering procedures being conducted on it from a clean donation versus donations that inherently cannot be clean and relying on that. So just a bit chalk and cheese, if I can use the term in terms of comparability.

Ken Yu, COO, Microbix: So maybe just to supplement that, cynokinase is indeed a urine derived, high molecular weight form of urokinase, which is from thousands of liters of donated urine with all the issues that Cameron described there. High molecular weight urokinase has been used in Europe and in Asia for for a long time. It’s never been approved in The US for the very reasons Cameron already said about the the safety and the origin of of the materials. There’s another aspect of this. The urokines that comes out of the urine is high molecular weight form, which has growth factor domains and different by distribution capabilities, which can influence potentially influence health outcomes.

And that’s the reason why tPA is totally dominated in that market as well. It’s not a good alternative, and we shouldn’t be confusing high molecular weight, urokines with kinetic, which is the low molecular weight form, which doesn’t have all those receptor binding domains that cause differential by distribution, also it’s produced with a biotechnology process with all the necessary bells and whistles and testing that goes with that. So, and I would also point out even though the presence of syndokinase in Europe, TPA still has more or less a monopoly and the European regulators actually reached out to Microbix to remind us not to forget them with our product when we bring it back online after we’ve dealt with the FDA in The US market. So clearly, this is a superior product, and they don’t have the advantages we do, and they also don’t have the advantages we have over TPA, which is the stability of urokinase at room temperature. The tPA is stored in the fridge and that’s a very big operational advantage for urokinase going forward.

So I would not be concerned by the presence of a high molecular weight urokinase form whatsoever. It will not take over the tPA market. We will be a functional biosimilar to TPA when we come on the market and the actual bio better.

Cameron Groom, CEO, Microbix: Yes, great points, Ken. Thank you so much. And just dealing with the second part of that question, how does that expand? How do we expand that market? Initially, we’ll be looking at clearance of blocked catheters in The United States.

Then we will be looking at likely catheter prophylaxis, so clearing of biofilms out of catheters that aren’t yet blocked to reduce the risk of blockage or infection. We’ll then in parallel be looking at expanding the geographies for the catheter clearance indication. And then we’ll in parallel be doing some, I hope redevelopment of the upstream manufacturing processes to enhance efficiencies. Once we have in dated product to compare with, we can more readily validate new processes, and that is the path to reopening the systemic indications, the many systemic indications for our low molecular weight neurokinase kinetic, for things like pulmonary embolism and other systemic clots, like stroke, heart attack, peripheral arterial occlusions, deep vein thrombosis, and so forth.

Deborah, Moderator/Host: Well, I think just in providing some background on cyanide kinase, you mostly answered this question, but just so that I’m thorough, I’m gonna pose it. And if there’s anything else you would like to add, feel free. So the question was, it is our understanding that cynurokinase is currently available in four European countries and holds approval across all big four major indications, a milestone that Kinlytic may be some time away from reaching. Is there any concern that Sinr kinase has not expanded to the more EU countries because the demand may not be sufficiently strong? I think you’ve covered that it’s not a demand issue, but maybe a product issue.

Cameron Groom, CEO, Microbix: No, I think it’s very much a product issue. And anytime you’re looking at product that’s pooled from many individuals that inherently have a risk of having infectious human pathogens in the sample or tissue they’re donating. It has enough risk to make regulators pause. So I think expanding countries and the number of approvals and indications will be a challenge and it will be even more of a challenge when Kinlytic comes back into those markets. Then you say, if we can supply something that’s superior from functionality point of view, as Ken indicated, and has lower associated inherent risks becomes a question, what is the role for synergic kinase going forward much more than it is a question about what’s the role for Kinlytic?

Ken Yu, COO, Microbix: Yes. Synokinase is an inferior product to tissue plasminogen activator, and that describes why it hasn’t taken off. Kinlytic is not the superior inferior product to tissue plasminogen activator, the current market incumbent effective monopoly. It’s a better product. And therefore, if you look at where PPA set sale sells, you’ll understand where Kinetica is going to sell.

Deborah, Moderator/Host: I think that answers the question sufficiently. So moving on some other more general questions. Can you provide information regarding the development going on for European customers? What kind of revenue you are expecting from the different regions you operate? I’m assuming that they mean for all products.

Cameron Groom, CEO, Microbix: Yes. I’ll cite a typical example. On the May 13, we announced a program with Orevia for support of labs doing molecular diagnosis of bacterial vaginosis, which is a condition of an imbalance between healthy and potentially pathogenic bacteria. Such a program initially starts as a pilot program and that might involve 50 to 100 labs where that’s piloted out to see how the microbics caps perform on all the different instrument platforms and help provide that validation. So typically, that will involve, in this case, three samples, three events, 50 to 100 labs piloted.

And then as data is gathered and any troubleshooting necessary troubleshooting is done, then that program might expand five, ten, 20 fold next year in terms of the number of labs and become a regular product offering for that customer, of that agency customer and an annuity for microbics. So what we’re doing is building and layering on these annuities. And another example would be the H5N1 work with American Proficiency Institute, again, started with multiple pilot events to look at that, and then that will become a regular product offering into likely thousands of labs in subsequent years 2025 forward, as labs need to continually revalidate, revalidate that, yes, we can find H5N1 if it occurred. So again, another layering on of INNuity. Other developments that we look at anytime we’re baked into the regulatory file of an assay, and that could be a laboratory based assay or a point of care assay, those reorders again become recurring business to us.

And there are a few things that are less predictable, for example, our onboard kits, where those are for training new installations and new assays. That just depends on the ongoing market penetration growth of customers as well. So there’s many layers to our business and we continue to grow them. And Europe remains an important market for us. It’s fluctuated between about 40% of our sales and probably and 25% to 30% depending on what’s gone in other markets, but it remains a significant portion of our business.

Jim Curry, CFO, Microbix: That was 35% through the first half of the year.

Cameron Groom, CEO, Microbix: You, Jim. I didn’t have that number in my head, that’s absolutely wonderful to get it. Appreciate that.

Deborah, Moderator/Host: Staying on percentage of sales, we have our last question, which is what percentage of antigen sales are in China?

Cameron Groom, CEO, Microbix: We grew that into a significant portion of business across two categories, respiratory and prenatal test screening. The portion of antigen sales overall became significant, quite significant last year and has been significant in the first half as well. So we were north of 40% in terms of sales into Asia for the ingredients business last year for the antigens business. And it was significant over the first half as well.

Deborah, Moderator/Host: I don’t see any additional questions, but somebody always sneaks one in at the end, so we’ll give them a minute. Cameron, Jim, Ken, thanks for taking the time to review the quarterly results and outlook for the rest of the year. I think that’s been really helpful. Is there anything that we that you wanted to discuss today that we didn’t cover or any last thoughts you wanted to leave

Cameron Groom, CEO, Microbix: Yes. I think certainly our strategic gains are continuing to come, and we’re going to see those come, I think, fast and furious. Just looking at the disclosures we’ve made of new programs and customer onboardings since January is quite significant. And we don’t see that pace slowing down at all. So strategically, we’re very much executing.

I think what we have is the simple market ebb and flow coming out of Asia on disease incidents, and that’s going to bite us a little bit in the second half. But we have tremendous financial strength, so we have no issues with that tactical matter disrupting anything strategic that we’re pursuing and continuing to execute on. So great strength in the diagnostics oriented side of our business and excellent ongoing progress there, coupled to tremendous balance sheet strength and all the while we’re winding forward on Kinlytic to drive that forward. So a healthy diagnostics business growing and providing leadership and firing customers left, right and center and adding programs coupled to the successful development of a drug asset and without the normal binary balance sheet risk that we see with such companies. So again, Microbix operationally excellent strategically in place and immense financial strength.

Deborah, Moderator/Host: I think it’s interesting that you said sorry, go ahead.

Cameron Groom, CEO, Microbix: No. I was just going to ask if Jim or Ken wanted to add any thoughts.

Ken Yu, COO, Microbix: I would just support that position. I think we’re in an operationally excellent position. We’re continuing to build yields, add product offerings, reduce costs, build product offering by, you know, implementing things like the electronic quality management system and your ERP. Everything’s on course as it should be. We’ve executed as we said we would.

All the labs are there, and I can’t speak highly enough of the teams from all of the different departments. We have a fantastic group at at my companies. It’s not just us three sitting here. We have a huge team behind, not a huge team, but a very strong team behind us driving driving us forward, and that capacity building, that capability building is setting us in great stead to go forward. Basically, just to support what you said, Cameron, I think that’s absolutely right.

Cameron Groom, CEO, Microbix: Great. Well, thank you, Ken. Jim, any any parting words?

Jim Curry, CFO, Microbix: No, I think you two gentlemen have covered everything off pretty well. So no, nothing incremental.

Cameron Groom, CEO, Microbix: Okay. All right. Well, Deb, any questions, further questions you might have?

Deborah, Moderator/Host: No, I was just going to comment that Kinlytic is something that we’ve discussed for a long time. It’s always seemed long dated. But as you point out, like 2027 is not that far away. As I’ve watched a lot of companies report Q1 over the last couple of weeks, You’ve seen analysts start to roll out their 2027 estimates. You’re a quarter ahead.

Right? So I would assume that you’re gonna start to see 2027 estimates being put out there in the market. And, I mean, it’s eighteen, whatever, eighteen to twenty four months away still, but it’s it’s gonna creep up pretty fast. And I think it’ll start to materially impact how people are evaluating Acrobix or it should within the next year. So I think that’s a a strong positive for the stock.

And, you know, not to harp on the past at all, but I have worked with you for a long time, Cameron. I’ve seen you lose revenue lines before and quickly replace them. I think that’s one of the really efficient skill sets that the Microbix team has is is the ability to backfill products and backfill revenue and figure out new product lines. So like you always talk about, you build a platform for growth. So now you just have to go and find some of that growth for the back half of the year and for next year.

And I have full confidence. You’ve done it before. You’ll do it again. But for anyone new to the story, I would say the coming quarters is probably going to be a really good buying opportunity.

Cameron Groom, CEO, Microbix: Yes. I think this is it. We’ve got to run we obviously disclose what we see when we see it, and we’ll continue to be completely forthright. And I just remind everybody, when we do disclose programs, these aren’t things we just conceived and threw out there. These are things that are now fully baked, and that’s the trigger for our disclosures.

So when you see a new program coming out, we’re announcing it because it’s done. And we continue on that pathway.

Ken Yu, COO, Microbix: Speaking to the timeline and the risk on Kinlytics that you mentioned as well. Yes, the timeline is short and it’s still talking 2027 as we’ve as we said all along. But as I see it pretty much every time, I’m gonna see again. This product is not new. It’s already approved with we’re putting new manufacturing in place, and there are decades of clinical experience for this product.

This is a new a new biologic expression a production system, but not a new biologic per se. And that’s why I’ll state directly, there is zero chance of clinical failure of this product. So this is purely a manufacturing site transfer, And that’s why the timelines are short, and that’s why the risks are low.

Cameron Groom, CEO, Microbix: Yep. Still expensive. It’s a big boy big boy game biologic drug manufacturer.

Ken Yu, COO, Microbix: You’ve been old.

Cameron Groom, CEO, Microbix: And why we partnered this Yeah. Yeah.

Ken Yu, COO, Microbix: You end the the end phase one, less than 10% exit phase three successfully. There’s no chance of that happening with Kinmedic.

Cameron Groom, CEO, Microbix: Exactly.

Deborah, Moderator/Host: Well, we’re ending pretty much right on the hour. So thank you, gentlemen, for your time. Thanks for the thanks to the audience for your questions and your participation. And I hope everyone has a really nice afternoon.

Cameron Groom, CEO, Microbix: Thank you. Thank you, Deborah. Thank you, Jim, Ken, and and everybody. Really appreciate it.

Deborah, Moderator/Host: Take care. Bye. Good morning, everyone. Thanks for afternoon.

Cameron Groom, CEO, Microbix: Everybody, really appreciate

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