By GREGORY ZELLER //
An oversupplied Latin American market put a dent in Chembio Diagnostic’s 2015 earnings, but coming battles with the Zika virus may turn fortunes around.
That was the message to investors Tuesday as CEO John Sperzel III reported the Medford firm’s financials for the year ended Dec. 31, 2015. While the company’s science – point-of-care diagnostic tests for infectious diseases – is in increasing demand, the numbers were not great.
Chembio’s reported 2015 revenues were down 12.3 percent from 2014, while sales were down 15.7 percent. That conspired to double investors’ net loss to $2.4 million, while the company’s operating loss increased to $3.55 million, up from $1.55 million the year prior.
The biotech firm’s fourth-quarter financials stayed that course. In the quarter, also ended Dec. 31, Chembio recorded revenues of $4.42 million, down from $7.1 million in 4Q 2014, and sales of $3.74 million, down from $6.55 million. The company’s quarterly operating loss doubled to $1.2 million.
Sperzel traced a large percentage of those losses to Latin America – specifically, a decline in demand for Chembio’s STD-related products south of the border. In Mexico, excess 2014 inventory caused a $3.5 million drop in 2015 sales of Chembio’s HIV-syphilis platform; the company also recorded a $2.1 million decrease in sales of its HIV test in Brazil.
STD products “continue to make important contributions to our business,” Sperzel told investors, noting a slight increase (to $440,000) of HIV-product sales in U.S. markets during 2015. But the company’s best financial hopes, according to the CEO, rest with its burgeoning portfolio of fever-disease diagnostic products.
Sperzel was referring, in part, to this week’s announcement that Chembio is collaborating with Bio-Manguinhos – the biopharmaceutical unit of the Rio de Janeiro-based Oswaldo Cruz Foundation, which supports biomedical R&D – to develop point-of-contact tests for the Zika virus. Chembio and Bio-Manguinhos have worked together previously, developing field diagnostics for HIV, syphilis and other infectious diseases over the last 12 years.
Chembio is using a previously-announced $550,000 grant from the Paul G. Allen Family Foundation to retrofit its patented Dual Path Platform technology for two purposes: a stand-alone point-of-contact Zika test and a “multiplex POC assay” that can simultaneously detect the Zika, dengue and chikungunya viruses.
Both of those products are likely big Latin American sellers, Sperzel noted.
“We expect that our recently announced DPP Zika Assay program will expand our sales in this region,” he said. “And given our initial indications for 2016, we believe Latin America will continue to be a strong market for Chembio.”
The $550,000 grant, announced in February, followed a $2.1 million grant from the Allen family foundation for the development of speedier tests for Ebola, malaria and other fever-inducing viruses. While sharpening Chembio’s fever focus, that earlier grant, announced in October, also helped soften the blow of the company’s poor 2015 fiscal performance.
Also from the Good Problem to Have File: Chembo’s 2015 bottom line was lowered considerably by R&D expenses that increased from $4.83 million in 2014 to $6.38 million. The increase was due primarily to fever-disease work stemming from that $2.1 million grant, some of which is milestone-based – meaning the fruits of that labor won’t be counted until certain milestones are achieved.
Chief Science and Technology Officer Javan Esfandiari said this week the company was testing the Zika and multiplex platforms, as well as other Chembio diagnostic products, using clinical samples from Brazil, Colombia, Malaysia, the United States and elsewhere, and the results so far are “highly encouraging.”
“Our ongoing collaborations with Bio-Manguinhos and the global scientific community are extremely helpful,” Esfandiari noted.
In his investors’ call Tuesday, Sperzel agreed, noting Chembio has been “very successful executing our strategy to obtain grant-based or partner-based funding” for its fever-portfolio projects.
“While the company continues to strengthen its sexually transmitted disease business, we are also building robust product pipelines in two new areas,” the CEO said. “We believe our new fever-disease portfolio and technology collaborations will pave the way for future growth.”