MBX Microbix Biosystems Inc

Announces Completion of First Phase of LumiSort™ Platform Development

TORONTO, Dec. 29, 2014 /CNW/ - Microbix Biosystems Inc. (TSX: MBX), an innovator of biological products and technologies, today reported financial results for its fourth quarter and its fiscal year ending September 30, 2014.

Full Year Financial Results

Microbix reported total revenue of $8,396,796 in 2014 compared to $7,574,593 in 2013, or an increase of 11%. Virology products revenue was $8,258,175 in 2014 compared to $6,584,844 in 2013, or an increase of 25%. Strong customer demand and a favourable currency impact are the main drivers of this growth. R&D contract revenue was $138,621 in 2014 compared to $989,749 in 2013, reflecting the termination of the Kinlytic® license agreement by Zydus Cadila in the first quarter.

Total expenses were $4,035,877 in 2014 compared to $3,665,939 in 2013, or an increase of 10%.  After removing $507,550 of non-recurring gains from total expenses in fiscal 2013, namely a $131,379 gain on asset disposals and a $376,171 gain on debt restructuring, 2014 total expenses actually declined 3% compared to 2013. Operating income before income taxes was $475,624 in 2014 compared to $168,178 in 2013, or an improvement in the bottom line of $307,446, which was entirely attributable to higher virology products revenue.

Net cash flow in 2014 was $287,308 compared to $31,619 in 2013. Cash used in operations was $1,170,842 compared to $428,355 of cash provided from operations in 2013, which was due to an increase in accounts receivable ($1 million) and inventory ($0.5 million), driven primarily by significantly higher virology sales in 2014. Cash from financing activities was $5,002,766 higher in 2014 compared to 2013, mainly due to proceeds from: (1) a new convertible debenture of $1.5 million to finance the LumiSort prototype development, (2) the exercising of stock options and warrants of $1.1 million, and (3) a private placement offering of $2.0 million. Cash used in investing activities increased $3,130,190 compared to 2013, largely due to the development of the LumiSort prototype instrument.

Fourth Quarter Financial Results

Total revenue in the fourth quarter was $2,355,879, compared to $2,468,899 in 2013, or a decline of 5%. Although Virology sales at $2,258,029 were 3% above that of the comparative quarter in fiscal 2013, total revenue was lower due to a $185,394 reduction in research and development contract revenue that resulted from the termination of the Kinlytic license agreement by Zydus Cadila in the first quarter of fiscal 2014.

The operating loss in the fourth quarter was $302,963 compared to a normalized operating income of $64,382 in the fourth quarter of 2013, (after removing one-time gains of $507,550 in the last quarter of fiscal 2013). This operating loss is the result of lower sales in the fourth quarter as well as increased spending on pipeline activities.

Vaughn Embro-Pantalony, President and Chief Executive Officer remarked, "I am pleased with our financial performance in 2014. The Virology products business is the cornerstone of our Company and a key contributor to our financial objectives. Through strong revenue growth and careful cost control, our Virology business delivered significant cash flow during the year, which helped to fund our various strategic spending priorities."

He continued, "It was also important that we continued to strengthen our balance sheet with key decisions during the year. We refinanced the debt with a major debenture holder, which included new financing for the development of the LumiSort prototype. We also closed on a private placement offering late in the year, and we benefited from the ongoing conversion of previously issued common share warrants and stock options into common stock during the year. As a result, we have significantly improved our overall financial position."

Removal of Auditor's Going Concern Opinion

Improvements in the Company's earnings, liquidity and overall financial position during the year ended September 30, 2014, and projected improvements on a go-forward basis, resulted in the Company's independent public accounting firm removing a longstanding cautionary note from its audit report dated December 19, 2014. In previous years, this note expressed uncertainty about the Company's ability to continue as a going concern; also known as a "going concern" notice.

Embro-Pantalony commented, "The removal of the going concern notice is a significant accomplishment. It provides yet another validation of the Company's improving financial position and it instills confidence in our business on the part of shareholders, customers and partners.

Financial Highlights

Corporate Update

LumiSort™

Microbix also announces completion of the first phase of the LumiSort semen sexing development program. The goal of the program is to bring a commercial version of this platform to the global livestock artificial insemination market, which is valued at over $2 billion annually. The LumiSort platform will introduce transformative advantages in speed, yield and fertility to semen sexing that will provide livestock producers in the dairy and beef industries with significant benefits in reproductive efficiency by decreasing costs and improving productivity. Not only will the LumiSort platform produce sexed semen more quickly and with less damage than conventional sexed semen, but also the yields are expected to be three times higher, resulting in value-added throughout the production chain.

Microbix also reports that the engineering work has resulted in the further expansion of its worldwide intellectual property portfolio. New patent applications are being filed in a variety of technology areas, reflecting the continuing innovation and value flowing from the Company's investment in development.

Vaughn Embro-Pantalony commented, "We are very pleased with the outcome of the first phase of our development program. We are now planning to demonstrate the key attributes of our LumiSort platform to potential collaborators in the industry in the coming weeks, which will provide important feedback in planning our next steps." He added, "Our relationship with Lathrop Engineering in California continues to be very productive. We are fortunate to be working with the leading engineering design-build firm in this field."

Robert Lathrop II, President and CEO of Lathrop Engineering remarked, "Our team is excited and engaged by our collaboration with Microbix to deliver the LumiSort instrument and the impact the platform will have on the semen sexing market. We have full confidence that the LumiSort instrument will perform with high speed and specificity, and we see the platform as a game changer in cell-sorting technology."

VIRUSMAX®

The Company continues to support its legal actions against Novartis Vaccines and Diagnostics in the U.S. and Europe, alleging infringement of its VIRUSMAX patents in both jurisdictions. In January, Microbix successfully defended its European patents against a challenge by Novartis at the European Patent Office.

Embro-Pantalony stated, "We are working closely with our legal counsel in both the U.S. and Europe with respect to these actions. We continue to vigorously enforce our rights within our VIRUSMAX patent estate following our unequivocal success at the European Patent Office hearing last January."

Kinlytic®

The Company is in advanced discussions with potential partners that are interested in returning Kinlytic to the market. Embro-Pantalony commented, "I continue to be optimistic that we will secure a new partner to commercialize Kinlytic and return this life saving therapy to the North American market."

Please visit www.sedar.com for recent Microbix Biosystems, Inc. filings and financial information.

About Microbix Biosystems

Microbix Biosystems Inc. specializes in the research and development of biological solutions, including products for human health applications, namely in the vaccine, therapeutic and diagnostic markets, as well as animal reproductive markets worldwide.  The Company manufactures and distributes a wide range of infectious disease antigens to a worldwide customer base. The Company's pipeline of innovative technologies and products includes LumiSort semen sexing technology for the livestock industries, Kinlytic, a thrombolytic drug with several approved and potential applications including the treatment of life-threatening blood clots, and VIRUSMAX, a proprietary technology for increasing virus yields in the manufacture of influenza vaccine. Established in 1988, Microbix is a publicly traded company, listed on the Toronto Stock Exchange, and headquartered in Mississauga, Ontario.

Disclaimer

This press release contains forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements including the risks associated with development projects, operations in foreign jurisdictions, risks associated with engineering and construction generally, risks associated with production including control over costs, quality, quantity and timeliness of delivery of products, foreign currency and exchange rate risk, and risks of raising capital on acceptable terms or at all.  These forward-looking statements represent the Company's judgment as of the date of this press release. The Company disclaims any intent or obligation to update these forward-looking statements.

SOURCE Microbix Biosystems Inc.