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VRAX: Virax Biolabs releases shareholder letter and financial results for the fiscal year ending March 31, 2023.

By Thomas Kerr, CFA

NASDAQ:VRAX

READ THE FULL VRAX RESEARCH REPORT

On June 14th, 2023, Virax Biolabs (NASDAQ:VRAX) released a shareholder letter from CEO James Foster and also filed its 20-F annual report that provided financial results for the fiscal year ending March 31, 2023. The CEO updated the investor community on recent developments at Virax and disclosed for the first time a comprehensive outline of the upcoming milestones for ViraxImmune as well as the ongoing progress of ViraxClear.

Business Update – ViraxImmune

The company believes the ViraxImmune platform will shift the way individuals are able to manage aspects of their immune health by moving testing and diagnostics from event-driven to a proactive and preventative approach. The ViraxImmune platform will allow patients to take control of their health and make informed decisions on how to respond to current and future viral threats.

ViraxImmune assesses susceptibility to viral threats by measuring an individual's specific T-Cell response to viruses. T-Cells are responsible for long-term immunity and the level of T-Cell response typically correlates with the level of immune protection an individual may already have due to prior exposure to the disease.

Consumers will be able to order ViraxImmune kits and have blood drawn at a local phlebotomy site and then sent to a laboratory for analysis using the company’s proprietary technology. Results will then be delivered directly to an individual through the ViraxImmune Mobile Application providing them with an individualized immune profile covering a wide number of viruses.

The company is using COVID-19 as the first target for the in-vitro diagnostic T-Cell tests to prove the technology’s effectiveness. This will then allow them to adapt to additional pathogens, whether variants of existing pathogens or new ones, as they emerge. A subscription can be purchased through the mobile application which will allow the community of ViraxImmune customers to test their immune responses to the most prevalent viral threats annually before they come into contact with the viruses. This will allow customers to make informed decisions on their current immune risk and provide them with actionable results with convenience, high accuracy, and affordability.

The company also intends to pursue partnerships with academic labs engaged in viral studies, as well as pharmaceutical companies and Clinical Research Organizations (CRO) who may need T-Cell tests as a pre-screening tool for clinical trials. By leveraging both business-to-business and direct-to-consumer platforms, the company feels it can maximize the potential opportunities for ViraxImmune.

In terms of the timeline for commercialization, the clinical protocol for the clinical performance study will soon be reviewed during the FDA pre-submission to satisfy the 501(k) requirements. The FDA 510(k) program provides medical device manufacturers with a voluntary alternative review process where accredited Third Party Review Organizations are allowed to review certain low-to-moderate risk medical devices.

This clinical performance study is intended to take place in multiple sites located in the U.S., E.U., and the U.K. in order to facilitate access to U.S. and E.U. markets through the FDA and the E.U. In Vitro Diagnostic Regulation (IVDR) pathways. Regular announcements will be made as the study progresses and the company expects to announce full results in the 4th quarter of 2023.

Once the clinical performance study is complete with satisfactory results, the company can immediately start applications in the 1st quarter of 2024 to seek compliance with U.S. (FDA 501(k)), E.U. (IVDR), U.K. (MHRA) and Canadian (HC) regulations. In parallel with the 510(k) application, the company is also working toward obtaining the FDA's Clinical Laboratory Improvement Amendments (CLIA) approval for the 1st quarter of 2024.

While commercialization entirely relies on approval by various regulatory bodies, the company is confident many markets would be commercially accessible in the 2nd quarter of 2024. The company did note that due to the lack of European IVDR notified bodies, delays in the review of technical documentation can be expected. This means obtaining the European CE marking may not occur until the 4th quarter of 2024.

The company also expects that ViraxImmune will be initially available for Research Use Only (RUO) in the 4th quarter of 2023 before the launch as a commercially available in-vitro diagnostic (IVD) product in 2024. This approach will allow the company to market and commercialize the products before they have gone through the regulatory approval process.

In terms of the consumer facing Mobile Application, the app is being designed to provide tailored wellness advice and practical steps that can be taken to improve an individual's immune profile and lower their risks of infection. Lifestyle questions have been incorporated into the application to capture additional relevant information. This supplementary data will help paint a more well-rounded picture of their immune profile at a specific point in time. These lifestyle questions and additional tests are optional as users can still generate a report using only the ViraxImmune IVD results or any of our additional partner tests. The ViraxImmune mobile application is expected to be launched in the 4th quarter of 2023.

Business Update – ViraxClear

In the 1st half of 2023, the company continued to expand the range of ViraxClear tests and distribution partners. The company signed a purchase order with Cosmos Health to launch and market ViraxClear COVID-19 and Influenza A+B Antigen Combo Rapid Detection Kits. Cosmos has exclusive distribution rights for Greece and Cyprus, with the opportunity to distribute ViraxClear branded test kits across Europe on a non-exclusive basis.

The company also announced an agreement for the distribution of an Avian Influenza A Virus real-time PCR test kit to markets accepting the EU CE mark, and an agreement for the distribution of Marburg Virus PCR testing kits with plans to launch in areas accepting the CE mark.

The ViraxClear business is intended to act as a supporting vertical and additional revenue stream to assist in the funding and development of the company’s primary company focus, the ViraxImmune platform. The ViraxClear segment has been further augmented through the addition of ViraxVet, a veterinary diagnostics platform that is focused on multiplex test kits. By offering a disruptive diagnostic portfolio through the soon to be implemented direct-to-consumer Polymerase Chain Reaction (PCR) & Antigen platform that is inclusive of new multiplex assays and competitively priced, Virax intends to further disrupt the IVD sector.

Financial Results

For the fiscal year ending March 31, 2023, cash and equivalents totaled approximately $9.35 million. The company has no long-term debt other than a note payable with a remaining balance of $146,250, which is offset by an approximate amount included in prepaid expenses and deposits on the balance sheet. The remainder of the liabilities, which are all current, represent trade payables and accrued expenses.

Current assets total approximately $9.6 million while total current liabilities are less than $1.0 million. During the fiscal year, the company was able to extinguish a large portion of payables that resulted in a one-time gain on debt extinguishment of approximately $290,000.

Research and development expense associated with the ViraxImmune platform was approximately $397,000 and the company anticipates additional research and development expenditures to bring ViraxImmune to the market to be approximately $1.1 million. Research and development expenses consist of clinical protocol and performance studies from third party laboratory partners. We believe the company likely has enough capital currently to bring ViraxImmune to commercialization.

General and administrative expenses were $5.3 million and $1.3 million for the years ending March 31, 2023 and 2022, respectively. The large increase in general and administrative costs was primarily due to the increase in costs relating to the preparation for the IPO which occurred in July 2022. Stock compensation for the year was approximately $1.7 million representing approximately 32% of G&A expenses and which was reversed with the cancellation of certain stock options subsequent to the end of the fiscal year.

The company’s burn rate for the year was approximately $4.3 million. The company was able to raise approximately $13.6 million in equity capital from its IPO and two follow up PIPE transactions.

Valuation and Estimates

Virax Biolabs is positioning itself for strong profitable growth and we believe the stock is worth $2.00 based on our discounted cash flow calculation which incorporates conservative estimates and a high discount rate.

CEO James Foster stated, “We continue to focus heavily on piecing together a comprehensive preventative diagnostics platform. By combining cutting-edge technology, strategic partnerships, and a strong infrastructure, we strive to create a unified system that enables early detection and proactive prevention of diseases worldwide.

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