Akers Biosciences Down on Wider Q1 Loss, Sales Fall Y/Y - Analyst Blog

Shares of Akers Biosciences Inc. AKER fell 6.4% to $3.93 on May 15, after the company reported lackluster first-quarter 2015 results on May 14.

Loss of 26 cents per share widened from a loss of 14 cents per share incurred in the year-ago quarter, on the back of declining revenues.

Notably, Akers completed its initial public offering (IPO) in Jan 2014.

Quarter Details

Revenues tanked 57% on a year-over-year basis to $0.5 million. The revenue deterioration can be attributed to lack of orders from the company’s global distributor – ChubeWorkx Guernsey Limited – during the quarter.

However, management had anticipated to realize lower revenues from this distributor.

Sales of Particle ImmunoFiltration Assay (PIFA Heparin/PF4), the company’s flagship rapid test, increased 17% to $0.3 million. Notably, PIFA Heparin/PF4 is the only rapid test designed to detect Heparin Induced Thrombocytopenia (HIT), which is the development of thrombocytopenia (low platelet count condition). Akers estimates that an average U.S. hospital can save well over $1 million annually by using this rapid test.

However, management claims that it is is yet to gain the expected benefits from either the price increase (effective from May 1, 2015 for new customers) for the PIFA Heparin/PF4 test or the expansion of its U.S. sales team. These initiatives should boost sales of the test further.

Thanks to Akers’ strong international distribution network, the company’s flagship test is now available in over 20 non-U.S. markets.

Gross margin in the first quarter was 56%, higher than 49% in the year-earlier quarter.

Research and development (R&D) expenses increased 20% to $0.3 million, primarily on the back of expenses incurred on professional services. General & administrative expenses jumped 7.7% on a year-over-year basis. Sales & marketing expenses surged more than 100%, due to significant increase in personnel costs.

The Road Ahead

Management foresees Akers’ newly expanded sales and marketing team working toward enhancing the visibility of the heparin allergy test in the U.S. market.

Alongside, Akers is also looking to help its distribution partners build up sales internationally for different tests, particularly in China.

The company is also striving to establish sales channels for Akers Wellness products that are directed at the health and wellness sector, particularly for weight-loss and anti-aging. Aker is also focused on bringing new, highly disruptive rapid testing solutions in the market for conditions like chlamydia and diabetic ketoacidosis.

To add to that, Akers is developing breath tests for lung cancer, asthma and chronic obstructive pulmonary disease. Additionally, the company is also developing a breath test to help diabetics evaluate their ketone levels without having to provide blood or urine samples.

On the cardiovascular diseases front, Akers is developing a rapid blood test for heart attacks. In infectious diseases, among other tests, an on-the-spot finger stick blood test for chlamydia (most prevalent among sexually transmitted diseases) is on the cards.

Our Take

We are impressed with Akers’ innovative product pipeline that includes hassle-free rapid test solutions for lung cancer, asthma, chronic obstructive pulmonary disease, diabetes and cardiac arrest.

Akers plans to commercialize rapid tests for chlamydia, malaria and dengue fever in 2015, which hould serve as key growth catalysts particularly in countries in the Asia-Pacific region.

The company’s efforts to ramp up sales of PIFA Heparin/PF4 in the U.S. and overseas through new distribution partnerships are also encouraging.

However, the unimpressive first quarter results keep us on the sidelines at the moment.

Stocks to Consider

Stocks that warrant a look in the medical sector are Bio-Rad Laboratories BIO, LeMaitre Vascular LMAT and Hospira HSP. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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