By GREGORY ZELLER //
Chembio Diagnostics Systems Inc. has significantly diversified its product portfolio, built up its global sales infrastructure and expanded its operational capacities – but the numbers just aren’t there for the Medford-based biotech.
Reporting Tuesday on the results of its 2016 fourth quarter and its 2016 fiscal year, which both ended Dec. 31., the manufacturer of point-of-care diagnostic tests for infectious diseases (Nasdaq: CEMI) noted a series of down numbers, with declining global sales to blame.
Chembio’s science continues to soar – in January, the biotech was approved to sell its combination test for HIV and syphilis in most of Europe and the Caribbean, just two months after Brazil’s national health-regulatory agency approved commercial use of Chembio’s rapid field test for the Zika virus, a major step toward selling the product in the Zika-ravaged Brazilian market.
The company is also seeking approvals for its single-use HIV/syphilis tests in Southeast Asia, and expects to complete U.S. clinical trials for its DPP HIV-Syphilis Assay during the first quarter of 2017 – “on schedule,” according to CEO John Sperzel III, who said preliminary results from early testing is “highly encouraging.”
And all that’s in addition to building “a highly differentiated fever and tropical disease business,” Sperzel added, not just Zika in Brazil but assays built to detect malaria, dengue and other tropical maladies throughout southern climates, sped up by federal awards and a series of private donations.
That’s all good stuff – but still reeling from a series of lost deals and oversaturated markets, Chembio continues to take it on the fiscal chin.
The company on Tuesday reported revenues of $4.25 million for the fourth quarter of 2016, not far off the $4.42 million reported for 4Q2015, and sales of $3.23 million, at least in the ballpark of the $3.74 million reported last year.
But Chembio’s fourth-quarter operating loss of $2.57 million more than doubled the $1.2 million loss reported for 4Q2015, leading to a net loss of $2.56 million (21 cents per diluted share) – up sharply from the $650,000 quarterly loss (7 cents per share) reported last year.
The full-year results were actually worse. Chembio reported total revenues of $17.87 million for FY2016, down nearly 36 percent from the $24.26 million reported for FY2015. Declining year-over-year product sales, from roughly $22 million to under $14 million, took most of the blame.
Adding to Chembio’s fiscal woes was a $5.8 million “non-cash income tax provision” regarding deferred tax assets, the company said. Bottom line: A FY2016 operating loss of $7.57 million, more than doubling FY2015’s operating loss of $3.55 million, and a FY2016 net loss of $13.35 million ($1.26 per diluted share), annihilating the $2.4 million net loss (25 cents per share) reported for FY2015.
Despite the down year, Sperzel believes things are looking up, with new international markets opening, the tropical-disease vertical developing and indications pointing toward good news on the domestic front.
The company expects the numerous tropical-disease assays “to make important future revenue contributions,” the CEO said Tuesday, and has appointed “experienced senior commercial leaders” to oversee key markets in Latin America, Africa and the Asian Pacific.
And not all of the numbers are terrible, Sperzel added, noting a 13.3 percent increase in fourth-quarter revenues and a 29.2 percent increase in fourth-quarter sales, compared to the third quarter.
After terminating its previous U.S. distributor, acquiring a key manufacturing asset in Malaysia and expanding its global marketing infrastructure, Chembio is “well-positioned to commercialize our new and existing products, strengthen and expand our global distribution channels and provide local support to customers and commercial partners around the world,” Sperzel said in a statement to investors.
“Despite reporting a decrease in product sales during 2016, we are seeing important quarter-over-quarter sales growth,” the CEO added.