Earnings call transcript: Microbix Q3 2025 sees stock drop 14% post-earnings

Microbix Biosystems Inc. (MBX) reported its Q3 Fiscal 2025 earnings, revealing the weakest quarterly performance in three years. The company’s financial results were impacted by slowdowns from two major clients, leading to a net loss of $77.02 million in the last twelve months. This announcement led to a significant market reaction, with the stock price dropping by 14.29% to 0.24, close to its 52-week low of 0.24. According to InvestingPro analysis, the stock appears slightly overvalued at current levels, with additional headwinds indicated by negative EBITDA of $86.28 million.

Key Takeaways

• Microbix experienced its weakest quarter in three years, with significant revenue impact.
• Stock price fell by 14.29% following the earnings announcement.
• Year-to-date growth was observed in caps and antigen businesses, excluding affected clients.
• The company is focusing on strategic product developments in H5N1 and COVID testing.
• Slow demand in the respiratory testing market in China was noted.

Company Performance

Microbix Biosystems Inc. faced a challenging Q3 Fiscal 2025, with the quarter marked as the weakest in three years. The company attributed the downturn to slowdowns from two major clients, which significantly impacted revenue. Despite these challenges, the company reported year-to-date growth in its caps and antigen businesses, excluding the affected clients.

Financial Highlights

• Year-to-date caps business growth: 13%
• Year-to-date antigen business growth: 34% (excluding impacted clients)
• Current ratio: 9.73
• Debt-to-equity ratio: 0.3
• Cash and cash equivalents: $12 million

Market Reaction

Following the earnings announcement, Microbix’s stock experienced a sharp decline of 14.29%, closing at 0.24. This drop brings the stock near its 52-week low, reflecting negative investor sentiment driven by the company’s weak quarterly performance and the challenges highlighted during the earnings call. Analyst consensus from InvestingPro remains cautiously optimistic, with price targets ranging from $30 to $44, suggesting potential upside despite current market pessimism. The stock has seen a significant decline of 45.24% over the past year.

Outlook & Guidance

Microbix is looking to recover from client setbacks in fiscal 2026, with potential sales growth anticipated from five major clients. The company is also targeting the launch of its Kinlytic product in 2027 and expects its QuantDX line to generate under $500,000 CAD in 2026. Despite current challenges, Microbix continues its share buyback program.

Executive Commentary

"We’re not flouncing about doing basic research. We are very much a product development company," stated Ken Hughes, COO, emphasizing the company’s focus on product innovation. CEO Cameron Groom addressed the client concentration risk, saying, "This is frustrating, but as we’re building the business, you inevitably get a bit of customer concentration risk." He also noted, "We don’t want to cut our way into prosperity," underscoring the company’s commitment to maintaining its scientific team.

Risks and Challenges

• Continued slowdowns from major clients could further impact revenue.
• The respiratory testing market in China is experiencing low demand.
• The gradual decline in COVID-related sales may affect future revenues.
• The company faces risks associated with its customer concentration.
• Macroeconomic pressures could influence future market conditions.

Q&A

During the earnings call, analysts inquired about the Kinlytic partnership with Sequel, challenges in the China market, and the company’s product development strategy. Executives clarified that there are no immediate plans for significant cost-cutting, emphasizing a commitment to maintaining their scientific team. For comprehensive analysis of MBX’s financial health, growth prospects, and peer comparison, investors can access the detailed Pro Research Report available exclusively on InvestingPro, covering over 1,400 top US stocks.

Full transcript - Microbix Biosystems Inc. (MBX) Q3 2025:

Deborah, Moderator/Host: Morning, everyone. Thanks for joining us. We have an update with Microbix focused on their q three fiscal financials that they reported this morning. For those of you who have not seen them, you can find them on SEDAR and, I believe, the website. As always, I don’t believe we’re gonna work off a presentation today, but I promise to get an updated one on the website later today.

But as always, this presentation will contain forward looking statements. If you’d like to know more about those, you can find them on the presentation on the company’s website. And with me today, I have Cameron Groom, CEO Ken Hughes, COO and Jim Curry, CFO. I think the format will be Cameron’s gonna do a bit of an overview on the quarter, and then we’ll jump into q and a and then have closing remarks. With all of that out of the way, Cameron, nice to see you.

Cameron Groom, CEO, Microbix: Thank you, Deborah. Great to see you as well, and thank you, Ken and Jim also. You know, we this morning, we reported the results for our 2025. That’s the quarter ended 06/30/2025, and it was, a weak quarter, our weakest in about three years due to lower sales to two clients. One, to our distributor into China, and second, a customer that canceled a major development program that we were supporting.

So those were, very material, impacts on us, slowdowns with two large clients. And, you know, as with any small businesses, you smaller businesses, you’re building it, you inevitably end up with some customer concentration. And I think we could have readily withstood a slowdown from one customer, but a slowdown from two, creates a situation where you can’t backfill the revenues quickly enough. So there then there’s some downstream impacts in relation to that on margins is is the fixed portion of manufacturing cost has to be covered across a fewer number of, units produced, which pulls down margin and, of course, leads to, negative figures on the net earnings perspective as there aren’t weren’t enough sales to cover the 5 to 5 and a half million breakeven point for which we’ve engineered the business. So, so admittedly a tough quarter.

Our viewpoint is it will continue to move past this and resume our growth, although it will take some quarters to move us back through that. We did continue to see double digit year over year growth in our caps business if we remove the one customer that canceled that program. Encouraging. And the year over year sales are not particularly different for the, recurring sales over the period, 14.8 versus 14.6. But, obviously, the customer setbacks clipped the growth we were expecting and resulted in a net loss that we were not targeting.

Jim, did you wanna comment any further about the specifics of the quarter?

Jim Curry, CFO, Microbix: Sure. I’ll give a couple of updates, I guess. It was a disappointing quarter. No question. On the revenue side, as Cameron indicated, there was a couple of clients that fell short of expectation due to cancellation and some issues with China.

I think there was a little bit of silver lining in that. In a year to date basis, Excluding those two clients, we did see growth of 13% in our caps business and actually 34% in our antigen business. So there so in our other clients, we are seeing growth, which is good news, and we expect that to continue. Margins, again, not where we had wanted them to be. We do have fixed manufacturing costs, which obviously with the sales levels down, the amount it was impacted our margins.

The product mix always also was unfavorable, and then there was a couple of products that we typically have, and their sales levels were lower during the quarter. So there’s a couple number a few factors that impacted our margin. On the OpEx side up, we are continuing to invest in our sales and marketing. We did we are attending addition we did attend additional trade shows, again, trying to promote our both of our businesses. R and D spending is up.

Again, we wanna make sure that we are investing in new products and launching new products on an ongoing basis. We did have a couple of things that impacted the we had OTF funding last year that we didn’t have this year. It was about a $150,000. Our financial expenses were impacted. Again, there was an amendment to our agreement with FedDev last year that gave us a favorable $166,000 that obviously isn’t there this year either.

And we had some unfavorable FX losses during the quarters that affected our operating expenses. From a financial perspective, from a balance sheet perspective, we still continue to be in good shape. Current ratio, 9.73. Our debt to equity ratio is in a good position at point three. We’ve got cash of $12,000,000 cash and cash equivalents of $12,000,000.

So we are still a very financially viable organization, and we’re looking forward to growth as we move forward.

Cameron Groom, CEO, Microbix: Yeah. Worth worth noting that balance highlighting that balance sheet strength. You know, we’ve continued to pay down debt. We have repurchased shares, obviously. And, between our cash holdings, our undrawn, mortgage, and our, undrawn bank line, you know, we could access up to 24,000,000 of capital if needed.

So, incurring a few quarters of losses is not going to submarine our business as we continue the build of our revenue oriented businesses as well as to, advance Kinlytic. And I think it’s worth noting, we’re working very hard to add back sales by new customers and new products and new programs, and that infill will accomplish across, fiscal twenty twenty six as soon as possible, and we expect to continue that build. Some of the, highlights of of matters we’ve announced over the past quarter, I think, noting our alliance with the National Center for Infectious and Parasitic Diseases of Bulgaria gives us an act access to a incredible library of pathogens that that organization’s been, collecting as far back as 1881 and makes us independent of, the American based ATCC, which is often problematic for commercial licenses on reasonable terms. So we have, not only access to keep building our native antigen portfolio, we can also use our our recombinant and our synthetic biology capabilities to continue do that doing that. We’ve also recently announced a line of quantitative, well characterized reference materials to help assay developers.

This is our QuantDx line. This will sell at lower volumes than our caps, but at much higher prices per unit for these, well characterized and quantified materials and get us embedded with, our customers that much earlier as they’re developing assays as well. And we’ve also announced some very strategic product elements with our work in h five n one and our work in, COVID as well. Ken, did you wanna talk about operations? And I think perhaps without getting too far ahead of our skis, to speak about Kinlinic as well.

Ken Hughes, COO, Microbix: Sure. I mean, from an operational side, we continue to build capabilities and improve ever improve efficiencies. Our enterprise resource our enterprise resource planning software is implemented and operating excellently, we continue to build on our electronic quality management system to improve efficiencies going forward. In terms of investment in capabilities, we’ve talked about synthetic biology and we’ve also talked about the recombinant program and we’re already producing raw materials for our own development of caps and antigens going forward. Through operational excellence where increasing yields daily in all sorts of different antigen productions, which is obviously going to reduce costs.

So in terms of the operation of the bill of the business as a whole, we’re continuing to build capacity and capability, improve efficiency, and, of course, that will drop to reducing costs and then driving top line in the fullness of time. So we’re in really good shape there. In terms of Kinlytic, not too much to to see other than we continue to move forward at the pace described. Work is ongoing. Our relationship with Sequo is excellent.

The contract manufacturing organizations working for the drug substance, the active pharmaceutical ingredient, if you like, and the drug product, the filled and finished product are underway. Tech transfer is proceeding. It’s both the CDMOs are working with are excellent, and there’s no change to the timeline for a 2027 launch that I’ve discussed many times. We’re just advancing that ball in a nice little way. If I got ahead of my skis there, Cameron, I apologize.

Cameron Groom, CEO, Microbix: But I don’t think I’m

Ken Hughes, COO, Microbix: glad to see about Kinetic whatsoever.

Cameron Groom, CEO, Microbix: Excellent. Good. Well, you know, this is, I think, you know, as we as we, consider, the fundamental progress of the company, you know, this is what we’re continuing to advance while managing our finances in responsible manner. You know, it’s impossible to control all elements of our of our clients’ worlds, but we’re continuing to add, to our clients and our relationships and our our products and programs as we demonstrate in our in our ongoing continuous disclosure. And, you know, that includes engagement with, just, you know, who’s who of industry players on our caps, and we’ll announce those relationships as as they ripen in due course.

And and some of those are with companies that are, logarithmically larger than, the customers that we’ve had that have events problems in in the, q three that we’ve just reported. So that continues to drive forward, and we’re we’re very pleased about that and continuing to build the real value of the company in a responsibly managed fashion. So, unfortunately, this isn’t this isn’t a quarter that will go down as my favorite and nor nor anybody else’s, but we’ve got to continue to, report and disclose both the, both the ups and the downs as we continue building microbials forward. So that those would be my my remarks. And, Deborah, maybe we can open it up for questions.

Deborah, Moderator/Host: Going back to Kinlytic, I had a couple questions here, from audience members. Can the team walk us through the Kinlytic royalty agreement? Why did Sequel agree to fund commercialization of the biologic? Is there a patent clip to worry about here, or are there some other factors that can allow for sales for a long period of time? And for whoever wants to take that one is the first question.

If you get lost

Cameron Groom, CEO, Microbix: Why don’t I why don’t I take a stab at it and then and then Ken can can expand or or maybe even correct. Okay. So why did Sequel agree to fund a recomercialization of this biologic? Well, kinlytic is biologic in a class called a thrombolytic or a clot buster, clot dissolving drug. So, I’m sure many of, of us have had, you know, friends, family, or or personal experiences with with blood clots and the life threatening emergencies that those can create.

There are different ways of dealing with blood clots mechanically is one way, by a drug that actually breaks down safely breaks down the structure of a clot is another way. And kinlytic is a biological drug called low molecular weight urokinase that has some very specific targeting of clots and can dissolve them safely and effectively ex vivo outside the body, such as in a blocked catheter. It might be a central venous catheter administering long term nutrition, intravenous nutrition, or chemotherapies or antibiotic therapy. It could be a indwelling, dialysis catheter that is implanted for long term, regular treatment of dialysis. And that’s the initial market we’re going after, and that’s been a monopoly for a drug called TPA for a number of years now.

But there has been many problems with supply of TPA, the reliability of that supply, as well as monopolist, type pricing for that. So our view in the view of Sequel is that there’s great merit to returning and a great commercial opportunity to returning Kinalytic to the market initially to The United States market for catheter clearance for clearing blocked biomedical catheters, and then, subsequently expanding that into other markets, other catheter related indications, and also the systemic indications such as pulmonary emboli, blood clots, lungs for which it had had prior FDA approval. As a biologic, there is, in this case, no patent issue, with the product. The challenge in the IP is in is in the know how of being able to produce the product. And similar to the competitive product, which has no patents and no competitors, we see Kinlytic, not being readily replicated either, and that hasn’t been done anywhere in the world for these products.

So those would be that’d be a summary. Ken, what would you want to expand upon or or, Paul, refine?

Ken Hughes, COO, Microbix: Yeah. I’ll I’ll start by saying there’s no patent cliff for us for the reasons you’ve given. The only real, like, intellectual property opportunity would be because we’re upgrading the systems. There might be some process plans which will actually assist us. But what we’re really working with is the regulatory file, the NDA, then now the BLE, the biological license application with the FDA that we own.

And so that has the detailed trade secrets and know how, which is required to bring this product back to market. I would say that, yes, there is only one incumbent TPA in the market right now, and that has had some supply supply issues. And what we are doing is a functional biosimilar to that. It’s a different molecule, but in the same indications. However, it is a bio better in that.

Urukine is a stable at room temperature where TPA requires refrigeration. And for the bigger clots in in the when you’re actually looking at systemic clots, urokinase has a reduced propensity by by its nature to cause internal bleeding, which, of course, is a major issue for these types of drugs and major advantage to urokinase going forward. So all of that so the driver to bring this back is the fact that there’s a regulator we filed. Urokinase was indeed the standard of care for decades in this particular space keeping TPE quite small in this market. TPE grew when you’re kind of no longer being able to to be manufactured.

We’re bringing that manufacturing back by seek through SQL, and we expect to be the best product on the market as a as a result. And so I think that also describes Sequel’s interest there. And I’ll remind that again that urokinase was the standard of care for decades. There’s no chance of a clinical failure in this situation. This is purely a setting up of new manufacturing and bringing the quality management system to bear to satisfy the regulatory requirements, but there’s no chance whatsoever of a clinical failure this product will work.

Cameron Groom, CEO, Microbix: Thank you, Ken. Deborah, I I see a question there regarding the the manufacturing sites for KINLYtic. So why don’t I why don’t I go ahead and answer that? You know, Microbix has historically made the molecule in in company owned facilities. So we we very much know what we’re doing there.

But our facility is dedicated to growing, growing, purifying, and act and inactivating human pathogens. So it it would not be, viable. It would not be acceptable to us or or a regulator to manufacture the drug in our facilities. So the choice became do, do we, our partners, fund a greenfield or brownfield dedicated facility to make Kinlytic and, and have that you know, all the overheads associated with that facility carried for several years prior to, a refiling and relaunch, or would we contract that out to somebody who already has a qualified facility that already has that overhead carried across multiple projects and drive it forward in a less expensive fashion that way. And that’s how we’ve done it.

So this is why we refer to the CDMOs, the contract drug manufacturing organizations that are doing the production of the active molecule, that’s referred to as the drug substance production, and then the production of the field finished, you know, capped and labeled files of product that would be formulated with the stabilizing excipients and so forth, and that’s the drug product CDMO. So there’s two major contracts that have been undertaken by our partner fully funded by them that together certainly total a commitment of more than 20,000,000 US just for those two contracts, to drive that. So this is very much a game that, you know, we would have been massive forced to massively dilute shareholders if we were funding raising capital along the way to fund this. So instead, we partnered this asset. We’ll be we’ve already received 4,000,000 US as effectively good faith money associated with that.

We’re supporting with our technical knowledge the CDMOs and our partner on moving the product forward, and it will be launched out of those manufacturing sites. Now down the road, there’s an opportunity to further modernize manufacturing, moving from roller bottle technology where the drug’s been traditionally made into potentially bioreactor technology, and very few companies have more experience than we do in migrating, production from those those precise manufacturing techniques. So that’s somewhere where we’d like to take a role in the future, but we’ll see what the art of the possible is as we move forward on that.

Deborah, Moderator/Host: One other sorry. Go ahead, Cameron.

Cameron Groom, CEO, Microbix: I was going to say, I see a tongue in cheek question there. I don’t know if you want me to address that.

Deborah, Moderator/Host: You could sure. Somebody was asking if my

Cameron Groom, CEO, Microbix: probics Somebody asked if if Toronto, if my microbics and the Toronto Maple Leafs are related, and I I presume this perhaps relates to a, late fiscal year disappointment, the the answer the direct answer to that, tongue in cheek question is no. And, having been born in Montreal, I’d I’d have to, give my heart to the Canadians on on that one. And and, well, it may take, some rebuilding. We do plan on winning the cup for our shareholders.

Deborah, Moderator/Host: And not hitting the golf course heavily for the rest of summer?

Cameron Groom, CEO, Microbix: We definitely haven’t hit the golf course.

Ken Hughes, COO, Microbix: Right now, we’re aligning with the Blue Jays, so, and that’s a much better place.

Cameron Groom, CEO, Microbix: Okay. Okay. Good morning.

Deborah, Moderator/Host: Good to know. Cameron, just staying on theme because there is one more Kinletic question further down. And for any audience members, if you do have a Kinletic question, I’d ask that you input it quickly. So does SQL have a sales organization, or will they sell it to another pharma company? I’m not sure if they mean will they sell the full like, Kinlytic, or will they sell

Cameron Groom, CEO, Microbix: it to another drug company? It could it could, it’s a great question. You know, would would Sequel, create a Salesforce to sell this, or would they partner it on? Either way, our our royalty revenues would be the same. We we get, a royalty on top line net sales of product.

So that wouldn’t change the economics for us. I think SQL has tremendous experience, their leadership in selling to the large hospital chains, the group purchasing organizations, the dialysis chains, that would be the major buyers of Kinlytic in The United States. So that would be something they could certainly do directly. I think they’d be more inclined to partner that with specialty pharma companies for Europe, Canada, and other geographies. But in The States, I think they’re very capable of doing it direct, should they choose.

Ken Hughes, COO, Microbix: Yeah. They do have deep deep marketing capabilities in house in this regard. And, as Cameron says, that doesn’t affect the outcome for us.

Deborah, Moderator/Host: Moving on, let’s talk about antigens. So what level of antigen production is required to return margins back to near 60%? And are there any near term pipeline opportunities that could fill the gap?

Cameron Groom, CEO, Microbix: Great. Great question. I think the question probably is broader than just antigen production. I think it would be across both caps and, antigens. So our controls business and our antigens.

To move margins back to 60%, you’re likely looking at, you know, boosting sales by a couple of million a quarter to move it back to that level. Jim, you know, the fixed portion there’s a large fixed portion of manufacturing overheads, of course, and we’re, people are fully deployed on that, then those those costs are fully absorbed across the SKUs being produced.

Jim Curry, CFO, Microbix: I mean, I think yeah. You’re absolutely correct, Cameron. It’s it’s both products, not just antigens. Certainly, we’ve been doing a lot within the antigen business to improve our margins, to improve our production efficiency of our key antigen products. So they are much better positioned today than they were a year or two ago in terms of producing better margins and better yields.

Cameron Groom, CEO, Microbix: No. Thank you. And with regards to pipeline opportunities, absolutely. You know, we have I can think of off the top of my head, you know, five, major clients with with products teaming teeing up with us. The question is when do those really start to hit the ground and gain traction, and that that will be across the 2026 that will be fiscal twenty twenty six that we’ll be seeing that that impact.

Ken Hughes, COO, Microbix: Yeah. And we’ve

Cameron Groom, CEO, Microbix: And if if we hadn’t if we hadn’t seen setbacks with China and and that other customer, we’d be we’d be everyone would be thrilled with the growth that we’re we’re recording, but that growth is being somewhat masked by some some customer specific setbacks.

Ken Hughes, COO, Microbix: Yeah. Well, adding, you know, synthetic biology and common biology capabilities, that’s going to lead to a higher efficiency and new products with high margins. Through operational excellence, I mentioned earlier, we’re improving yields and reducing costs, particularly through our electronic quality management system. So we’re going to continue building that individual margin gap, you know, growth with, you know, at the end of the day, but the the top line and the bottom line will work together.

Deborah, Moderator/Host: Being on the theme of antigens in China, I have a couple questions here. I think I’m gonna start with this one. Is there any expectation for the antigen business in Asia to recover? If so, do you have a time frame, and is your distributor providing any visibility?

Cameron Groom, CEO, Microbix: Great question about China. The primary reason that we’ve seen for the China slowdown, a lot of the product that we sell into China is related to respiratory path testing for respiratory infections. And, in Asia, there’s, you know, for folks that have traveled there, common areas of buildings are typically not heated. There’s also a high population density, and there is a fair bit of pollution as well. So between between, crowding, you know, pollution, and unheated buildings, a lot of times people have a low level respiratory infection.

And PCR tests are not really good at are are not that quantifiable in in the ways they’re used there. So they prefer to do immunologic testing, looking for acute phase antibody reactions as really diagnostic as to whether you have an active infection with a clinical impact. And we’ve been supporting those tests. So there was a lot of what was called white lung or we would call it walking pneumonia in the twenty twenty three, twenty twenty four season in China, and we were supporting test production for, for that outbreak. It was expected by parties that there’d be not too dissimilar levels of disease in the twenty twenty four, twenty five winter respiratory season, and that did not materialize.

So there was very little disease, and it appears that whatever strains were circulating the prior year, there was residual immunity among the population to to those pathogens. So there was a low ebb, for the twenty twenty four, twenty five. Hence, the test manufacturers didn’t reorder our materials to make more tests because they had some unsold inventory. So the question is, you know, what is the life of each, the shelf life of each individual test maker’s tests, and when do those when does that inventory either get consumed or expire? So we, with our distribution partner, are each keeping some inventory ready for a fall twenty five, fall and winter twenty twenty five, twenty six respiratory season, and we’re hopeful we’ll see some resumption.

But I’m cautious to forecast, wherever we don’t have the direct contact with the individual customers. I hope that helps provide some context.

Deborah, Moderator/Host: Definitely. Another question about antigens in China. If you were to replace your US distributor with one from another country, would that make any difference?

Cameron Groom, CEO, Microbix: We don’t we don’t believe this is a political issue. I mean, China always will prefer, you know, domestic production. It’s it is a more protectionist market than perhaps our own is, but our products have great reputation for quality. They have great reliability, and our distributor is, is an American company owned by, an Asian conglomerate, and our product is Canadian made. So we know we don’t see, you know, switching the the flag of convenience on the distributor really as having a meaningful impact on, whether or not sales to China resume.

Deborah, Moderator/Host: Moving on. Can you expand on the new QuantDX product line? Who are the end users, and how big is the market? And how much of the market does Microbix think it can capture? Is there any incremental spend required for this launch?

It’s the first question.

Cameron Groom, CEO, Microbix: Great great question. A lot to a lot to unpack there. With with QuantDX, you know, we we’ve looked in our our CAPS product line. The way that’s been constructed is there’s the the amount of, the amount of signal or organism in the CAHPS products is a is a clinically relevant level. So it’s meant to emulate what would be seen in a in a patient sample, and that could be a relatively low signal for a low normal.

You know, what would be the low range that you would see in a patient sample or what would be the usual range you would see in a patient sample. But we haven’t certified exactly what or provided the information about exactly what copy number of organisms, for example, would be in there. So QuantDX is quantifying and providing very tightly sort of tightly determined copy numbers as well as precise information on what strains or characterizations of organisms there are. So for a test developer, that’s vital information as they’re trying to maximize the sensitivity of their tests, discover where their lower limited detection of their assays are, and do all that development work to make sure that they can detect, across different strains of organisms. So QuantDx will be principally sold to those test developers, could be major industry players, or labs trying to certify a lab developed test and confirm its function.

So those would be the principal determinants. The volumes would be, oh, and another major area, of course, is is manufacturing product release. When when, assay makers then commercialize, the QuantDX materials would also be used for, batch lot release testing as part of their QCQA systems. So the QuantDX product line has both early usage in development and ongoing usage in manufacturing, and those samples would sell for likely 10 times or more per unit what a CAHPS sample would sell for. Ken, do do you want to expand or correct?

But, those are those are, the intel that I can provide.

Ken Hughes, COO, Microbix: Well, I think that’s a pretty accurate description of of what is and the opportunity going forward. I mean, I obviously look at the perspective of keeping the team in place to drive the production of these materials for sales going forward. But, yeah, I think you’ve off covered pretty well there, Cameron.

Cameron Groom, CEO, Microbix: Okay. No. Thanks, Ken.

Deborah, Moderator/Host: Another audience question. The focus of the company seems to be product development instead of selling existing products. What is Microbix doing to find new clients and to increase sales on existing product lines?

Cameron Groom, CEO, Microbix: Well, we we often see, our product lines, for example, with our proficiency testing and external quality assessment agency clients. We’ll see them pilot a program with us, in year one after developing a product, and then that is rolled out more broadly to their customer base, after that pilot validation. So some of them, for example, that I that I would, draw to, we announced a program in the in this year on norovirus. So this is often referred to as stomach flu, and antigen based testing for norovirus, did not have validation materials available. We created them.

Our partner tested them, with a pilot PTEQA program, and that will now become a regular part of their product offering and recurring revenues for us. With our h five n one bird flu work, very critical in assessing whether existing tests could pick up this very dangerous and and possibly emerging new pandemic, strain of flu. We’ve tested that, in a in a pilot fashion, and that will form a regular product offering of that customer. So there’s often recurring sales of products. Now we are seeing and the industry is seeing, less validation testing.

COVID, for example, that’s becoming you know, from being the focus a few years ago, that’s becoming a part of a much broader approach to validating respiratory tests. So, you know, COVID sales of ours are continuing to, you know, to gradually slope down, but our other sales continue to increase both of existing products and of new products.

Ken Hughes, COO, Microbix: I would say that, I mean, Microbix does development of product, but it doesn’t do basic research per se. I mean, we’re developing products which have practical applications in the short to near term, and we’re applying multiple technologies that we validated to do exactly that. So it’s not that we’re, you know, indulging in basic research here. We’re actually developing products for sale. I think that distinction needs to be made.

So the then the whole purpose of that is to drive that sale. So these two things exist in parallel and synergize as we move forward, and that’s really the business model.

Cameron Groom, CEO, Microbix: Yeah. I I think that’s a great point, Ken. You know, we’re not we’re not, flouncing about, you know, doing basic research. We are very much a product development company and our, you know, when we I I think very few instances where we’ve developed a product that hasn’t resulted in commercial sales. The question is, you know, at what level and continuing to move that forward and cross sell even products across multiple customers as well.

Ken Hughes, COO, Microbix: Yeah. And we focus on process process development to boost yields and reduce costs.

Cameron Groom, CEO, Microbix: Yeah.

Deborah, Moderator/Host: Any key roles that the company is looking to hire or fill currently?

Cameron Groom, CEO, Microbix: Not not that I’m aware of at present. I think we have we have u usually at some level of turnover more at the technician level, you know, as as people’s life circumstances change, somebody decides they wanna move to a community that’s too far to commute, what you know, decides to move to a new city. So we do have hires around that, but we’ve had a very stable senior management team within the organization as we’ve continued to build. So, unless anybody really is, you know, retiring in the next, you know, five to ten years, I think we’ll see some turnover at the at the top level there. But, currently, I think we have a great team in the key roles.

Deborah, Moderator/Host: A related question that just came in. Will the QuantDX product line require a new Salesforce, and what is the expected sales ramp for the product?

Cameron Groom, CEO, Microbix: For QuantDX, we’ll definitely not need a new Salesforce. This can be very, handily detailed by our existing sales and business development group. Where I think it will definitely help us is getting us embedded in customer systems earlier, in assay development as people are doing some of that benchmarking of their sensitivity and specificity of their assays. We’ll be getting involved earlier via QuantDX, and I think that will help us also embed our caps ultimately as tightly associated with those companies’ assays. In terms of Quantity, I I think we will likely see QuantityX sales be likely under half a million Canadian in 2020 across 2026, but it’ll continue to build and, likely has similar potential to what we see in our caps business, which, you know, grew from under a million dollars in around a million dollars in 2019 to 7,000,000 in 2024.

So we’ll continue to, to support the program. And, as it gets embedded in different companies manufacturing lease specs, for example, there’ll be a growing annuity stream we expect from Vontiacs.

Deborah, Moderator/Host: And I’ve got a question that’s a bit of a blast from the past. Has Microbic had had any recent discussions regarding the sale of DXTM with Ontario or other provinces? Any chance that this product line could see sales going forward?

Cameron Groom, CEO, Microbix: We we continue to have those discussions. You know, the there’s the talk the talk and the walk the walk about, you know, buy Canadian, and we continue to see a lot more talking than walking. We will continue to to pursue that, and we have been selling different DXTM like reagents, for example, for control dilution buffer uses a buffer to, for use in association with our caps. So we are producing some product of a DXTM type nature, and we’re continuing to explore the opportunities to strengthen domestic supply chains, you know, including, you know, tariff related tensions and, geopolitical tensions as well.

Deborah, Moderator/Host: Couple final questions. Are you looking to undertake any cost cutting measures?

Cameron Groom, CEO, Microbix: Yeah. We we’ve talked we’ve talked about this. Certainly, you know, last last year, you know, when we did a compensation review, there was a recommendation for higher fixed compensation to our executives, which we declined. We felt that was premature given the scale of our business, and we elected instead to increase, performance driven bottom line performance driven variable compensation, which we will not be paying out in the near term, obviously, given given the, net earnings challenges we’re facing in the short term. So that’s one area where we proactively protected against any further costs to the company.

With regards to cost cutting, I think we’ll see whether we need to replace, individuals that might depart in the normal course, but we’re not looking to make any cuts to headcount. We have, really a fantastic team of people delivering, and we’re doing a lot of fundamental, work in the background, rebuilding cell banks and seed seed banks, etcetera, and broadening out our product production capabilities using the technical teams. And with regards to facilities and equipment, we’re really pretty damn efficient already. So I think we’re in the minimum, low stable orbit right now with the capabilities that we built and the facilities we have. So we’ve talked about this a lot at the board level as well, and we don’t feel that cutting our way into prosperity is the way to go.

We wanna grow the top line going forward and continue to be able to demonstrate, best in class capabilities, stability, and capacity to prospective clients. So, no, we won’t be trying to cut our way into prosperity in that regard.

Ken Hughes, COO, Microbix: Microbix is a highly scientific and highly technical company where a lot of expertise resides in the extremely well trained individuals which form the framework of our of our staff. So if you’re talking about downsizing in that regard, the danger would be throwing the baby out with the bathwater and not being, available to grow as we see the growth going forward in the next little while. We brought together a whole load of different capabilities. That’s both physical in terms of machinery and and reagents, but it’s really the expertise of the individual scientists and technicians and and supervisors and quality people and, you know, the testing groups that are so pivotal to the expertise we have, which will drive our growth going forward.

Cameron Groom, CEO, Microbix: Absolutely. And as as we, replace revenues and and continue to grow from there, you know, we see there being great opportunities, not just for shareholders, but for our staff. And we’ve been very clear to staff that, you our know, commitment to them remains undiminished, and, and that they’ve we continue to have bright futures with Microbix. And

Deborah, Moderator/Host: one last question. Would you consider this to be a good time to buy shares with the buyback program taking advantage of this this temporary setback? Is there any conflict with cash preservation?

Cameron Groom, CEO, Microbix: We’re able to buy back a specific number of shares per day with our share buyback maximum number, and we’ve continued to buy back with the maximum number, and we’ve not made any determination to change that. I think the only and there’s no con material conflict with cash preservation on that maximum daily use of the share buyback. I think where we’ll weigh matters carefully is, the extent to which we’ll react to blocks in the share buyback. We’ve used up enough of our room in ’20 cross 2025 that we don’t have a lot of room left in the 2025 plan to react to blocks. But I think going into 2026, we’ll could likely continue the maximum daily share buyback purchases and, and determine the extent to which, we wanna react to blocks based on on share price and and cash flow outlooks.

Deborah, Moderator/Host: Okay. That’s all I have for audience questions. Cameron, do you wanna give some final thoughts?

Cameron Groom, CEO, Microbix: Yeah. I mean, this is you know, it it’s frustrating, but it it’s it’s a bit of, you know, frustrating what we’ve seen in having setbacks with with two large clients. But as we’re building the business, you inevitably get a bit of customer concentration risk. You know? And, you know, I’d I’d said to the board in multiple quarterly reports that we’ve moved past the point where the setback with a single customer would really sting, but it would take two major customers, for that to happen.

And that’s what did happen, and we’re going to add much more than two customer new customers to, to infill those and continue to build our sales geographically by product line and across multiple customers. And, we’re committed, still committed to growing our, sales significantly and, and moving in as soon as we can back into, quarter by quarter positive net earnings.

Deborah, Moderator/Host: And, I mean, a tough quarter, but it sounds like the team’s taking meaningful steps to position the company for future growth. So thanks for your time.

Cameron Groom, CEO, Microbix: Thank you. And absolutely. And and, again, you know, we we have a tremendous level of financial strength as well. And one of the reasons we built that financial strength and maintained it is in order to successfully withstand any short term setbacks like we’ve seen here.

Deborah, Moderator/Host: Makes sense to me. Well, thank you, three, for the update. Thanks to the audience for your questions and your participation. As always, if anyone has any additional questions or would like a meeting, please feel free to reach out. Yeah.

Appreciate everyone’s time today.

Cameron Groom, CEO, Microbix: Yeah. Thank you, everyone, for joining us, and, you know, we appreciate everyone’s continued support. And, we’ll be, driving to, to grow our sales and deliver real value both with our revenue business and with Kinlinic. Awesome.

Deborah, Moderator/Host: Thanks, everyone. Have a good day.

Cameron Groom, CEO, Microbix: Thank you, everybody. Take care.

Ken Hughes, COO, Microbix: Bye, Kevin. Bye.

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