By Grant Zeng, CFA · Grant revenue in Q413 was $53,424, compared to $93,747 for 4Q12.
Strong Fourth Quarter and Fiscal Year 2013 Financial Results
On April 1, 2014, Pressure BioSciences (PBIO) presented strong financial results for 4Q13 and fiscal year ended December 31, 2013.
· Total revenue for 4Q13 was $354,052, compared to $216,032 for the same period in 2012, an increase of 64%.
· Product and service revenue was $300,628 for Q413, compared to $122,285 for 4Q12, a 146% increase.
· Sales of consumables were $52,968 for 4Q13, compared to $18,624 for 4Q12, an increase of 184%.
Loss per common share was $0.16 for 4Q13, compared to $0.10 for 4Q12. The additional loss per common share was due primarily to the change in the fair value of the derivative instruments in Q4 2013.
For fiscal year 2013:
· Total revenue for the fiscal year 2013 was $1,503,288 compared to $1,238,217 for the fiscal year 2012, a 21% increase.
· Revenue from the sale of products and services was $1,046,678 for FY 2013 compared to $809,308 for FY 2012, a 29% increase.
· Grant revenue in FY 2013 was $456,610 compared to $428,909 for FY 2012.
· Sales of consumables were approximately $157,676 for FY 2013 compared to approximately $85,493 for FY 2012, an increase of 84%.
Operating loss for 2013 decreased to $3,327,192 from $3,463,642 for the fiscal year 2012, a reduction of 4%.
Loss per common share was $0.44 for 2013 compared to $0.43 for the same period in 2012.
As of December 31, 2013, PBIO had cash and cash equivalents of $31,417.
We are very pleased with the strong financials for both 4Q13 and fiscal 2013. The company reported both record total revenue and product revenue for fiscal 2013. Product revenue reached the $1 million mark first time in the company’s history.
We are especially impressed with the increased revenue from consumables in the second half of 2013. Sales of PCT-based consumables generated revenue of $51,450 and $52,968 in 3Q and 4Q13, respectively, a record revenue from consumables. This is an increase of 98% and 184% respectively for 3Q and 4Q13 respectively. This is important to PBIO as we always said. As more and more PCT instruments are installed, more consumables will be used on these instruments. Revenue from consumables is recurring, which will increase with the number of installed PCT instruments.
The financial success in 2013 was achieved from the company’s continued progress in implementing its aggressive sales and marketing plan. PBIO expanded its strategic marketing and sales program with Constant Systems, increased its social media presence, revamped its corporate website, and increased its support of and training programs with its distributors. PBIO increased its marketing presence in the life sciences area, and increased its sales out-reach to potential users of the PCT system. These efforts resulted in record instrument and consumable sales for 2013.
PBIO has reported four consecutive quarters with total revenue exceeding the prior year period. Based on the two new products launch and continued marketing efforts by management, we estimate product sales will reach $1.5 million in fiscal 2014, an increase of 48% over $1 million product sales for fiscal 2013.
Valuation Is Very Attractive
We maintain our Outperform rating on PBIO shares and raise our twelve-month price target to $2.00 per share from previous $1.25 per share.
Our call is based on three factors: strong 4Q and fiscal year 2013 financial results, business development are improving and valuation is very attractive.
PBIO reported record product sales and total revenue for 2013, and we expect continued revenue growth in fiscal 2014 and beyond due to two new products launch and continued marketing efforts from management.
In terms of valuation, we think PBIO shares are undervalued based on the Company’s fundaments. Currently, the Company trades around $0.60 per share with a market cap of $7.2 million. We believe this deeply undervalues the Company based on the current fundamentals mentioned above. We understand that market discounts the value of the Company because the Company has only limited revenue base and has been losing money since its inception. We also understand that the Company has a relatively weak balance sheet, and further financing will be needed. However, when we look at the Company and the industry in which it operates in more detail, we realize that this is a company with huge opportunity and one that can grow its revenue and earnings at a tremendous rate in the next few years.
PBIO operates in the rather large, but underserved research services market. The Company has developed a unique and superior pressure cycling technology (PCT) for the preparation of biological laboratory samples. The Company’s PCT platform holds competitive advantages over incumbent technologies in many important aspects related to sample preparation.
Currently, the Company is in the early stage of commercialization of its platform technology. We have realized that sales have not been stellar so far, but this is understandable. Pressure cycling technology is quite new to most customers in the sample preparation market, and the costs for PCT are also higher than those for most existing technologies. Therefore, rollout of the PCT platform will take time. However, once customers become familiar with the new PCT platform, and realize its advantages over existing technologies, uptake of PCT and its consumable products by the industry will increase dramatically in our view.
We are especially optimistic about the Company’s collaboration programs which will generate great awareness of the PCT platform among researchers in the sample preparation market. We are also impressed with the potential of the PCT technology in new application areas such as in the forensic, oil spill clean-up, agricultural applications and lipids extraction.
PBIO has established extensive distribution partnerships with leading companies in the life science industry. With continued marketing efforts and a clear growth strategy in place, sales should pick up steam in the coming quarters.
We are now optimistic about the Company’s prospect. With a rapidly growing market worldwide, combined with its unique technology and broad range of product offering, the Company is well positioned to boost its top line and bottom line in the coming years.
According to our long term financial model, the Company’s revenue will grow at a compound annual growth rate (CAGR) of 66% in the next six fiscal years from 2014 to 2019. PBIO will become profitable in fiscal 2018 with an EPS of $0.01.
We think PBIO is more like a development stage biotech company. Our price target of $1.50 per share values the company at 18 million in market cap based on 12 million outstanding shares. This valuation is still very conservative in our view. As long as the Company can execute its growth strategy correctly, we believe this goal is achievable. Patient investors will get rewarded.
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· Grant revenue in Q413 was $53,424, compared to $93,747 for 4Q12.