|Pressure BioSciences (NASDAQ: PBIO): A New Paradigm for Sample Processing|
|Saturday, 19 September 2009 14:49|
Pressure BioSciences (NASDAQ: PBIO) is a life science research tools company that is commercializing and developing its innovative core technology platform known as pressure cycling technology (PCT).
PCT uses cycles of hydrostatic (water-based) pressure between ambient and ultra-high levels (up to 45,000 PSI) at controlled temperatures to rapidly and repeatedly control interactions at the molecular level. The Company sells and installs pressure-generating instruments (Barocyclers), and its internally developed consumables product line includes PULSE (Pressure Used to Lyse Samples for Extraction) Tubes as well as application specific kits which include consumable products and reagents (ProteoSolve kits) which together make up the PCT Sample Preparation System (PCT SPS).
The pressure generated by this process occurs quickly (three seconds) and is equal to 2-3X the pressure that occurs at the deepest part of the ocean (i.e. over five miles below the surface at the Mariana Trench). PCT involves the compression of water which is mostly transferred to the sample since water only compresses a small amount (about 6%). Pressure and temperature for the system is controlled by a microprocessor for programming based on the pressure profile characteristics of the sample.
PBIO currently focuses its efforts on the development and sale of PCT-enhanced enzymatic digestion products designed specifically for the mass spectrometry marketplace, as well as sample preparation products for biomarker discovery, soil and plant biology, forensics, histology, and bio-defense applications. The Company currently holds 13 U.S. and 6 foreign patents covering multiple life sciences applications of PCT, including those outlined below.
1.) sample preparation for genomic, proteomic, and small molecule studies (e.g. the drug discovery process);
2.) pathogen inactivation (e.g. bio-defense and food safety issues with Salmonella and E. coli);
3.) protein purification (e.g. monoclonal antibodies);
4.) control of enzymatic reactions (e.g. breakdown and analysis of proteins);
5.) Immunodiagnostics (clinical lab testing).
Current customers of PBIO include more than 75 instrument placements for use by researchers at a wide variety of academic labs, government agencies, and biotechnology, pharmaceutical and other life sciences companies in the U.S. and abroad – such as Amgen (NASDAQ: AMGN), Novartis (NYSE: NVS), Eli Lilly (NYSE: LLY), Monsanto (NYSE: MON), Pacific Northwest National Laboratory, government agencies (e.g. NIH, FDA, FBI, USDA), and universities (e.g. Harvard and NYU).
On 8/10/09, PBIO announced 2Q09 results, including total revenue of $270,381 (+125% from the year-ago period), which included sales related to PCT products and services of $159,202 (+35% from the year-ago period) and the installation of 12 Barocycler instruments (versus seven in the year-ago period) and $111,179 in grant revenue (versus $2,486 during 2Q08).
The Company initiated a restructuring program in December 2008 which reduced the cash burn rate for the quarter to $663,000 (versus approximately $1.3 million in the year-ago period) and resulted in an operating loss for 2Q09 that was cut in half to $0.8 million (M) from the year-ago period – with sufficient liquidity until 2Q10. The restructuring program included a personnel reduction of eight full-time employees (40% of the workforce), a reduction in travel and meeting expenses, a continued reduction in investor relations activities, reductions to the base salary of most employees and all executives a shutdown of R&D facility in Rockville, MD, a consolidation of R&D activities in Massachusetts, and a delay of several R&D and marketing programs.
The stock price of PBIO as of 18-September is $1.85 (within a 52-week range of $0.55 – $3.21) and the Company has 2.2M shares of common stock outstanding with a $4M market cap. As of the end of 2Q09, PBIO has $1.5M cash + equivalents, zero debt, and $0.75M current liabilities. Trailing 12-month financial statistics include $1.2M revenue, a ($3.1M) net loss, ($2.8M) cash in operations. As of 2Q09, PBIO has approximately 1.5M options outstanding at a weighted average price of $2.54/share and 3.1M warrants outstanding at a weighted average price of $1.63/share – representing a total of 4.2M shares that are outstanding and exercisable.
The Company anticipates an average cash burn of about $600,000 per quarter for the remainder of 2009 versus a burn rate of about $1 million per quarter last year. Earlier this year in February, PBIO completed a private placement consisting of convertible preferred stock and warrants for gross proceeds of $1.8M and was informed that it was eligible for an income tax refund of $0.6M based on provisions in the 2009 American Recovery and Reinvestment Act. Both of these events are reflected in the Company’s 2Q09 results and financial statements.
Mr. Schumacher estimates that there are less than 1 million shares of PBIO stock available in the public float, based on his ownership of over 227,000 shares and other large holders. As the Company delivers on its growth strategy, the lean capital structure offers the potential for rapid gains in share price given the low share count and large market potential for PCT, even when all options and warrants are considered. The President and CEO of PBIO, Richard T. Schumacher, stated at the time of 2Q09 results that a key growth driver for the Company is the PCT MicroTube Adapter kit, which was released in June.
This product is focused at scientists who are working on the enzymatic digestion of proteins and who require higher sample throughput than the Company’s PULSE Tube configuration. Mr. Schumacher believes that this new product offering targets thousands of new potential customers and greatly expands the targeted customer base for the Company. In early August, PBIO announced that scientists from three separate U.S. Department of Agriculture (USDA) labs have presented data generated through the use of PCT related to innovative, plant pathology studies of various pathogens that can significantly and adversely affect important food crops, such as strawberries, wheat, peas, lentil, barley, canola, and especially citrus.
For example, citrus Huanglongbing (HLB) is a very serious bacterial disease that is adversely affecting citrus groves worldwide and HLB was discovered in Florida during 2005 with the potential to have a major negative impact on the multi-billion citrus industry in the U.S. and rest-of-world. The Company’s technology allowed scientists to extract a high yield (10X greater than other methods tested) and high quality DNA samples for genome sequencing of the HLB bacterium in order to gain a better understanding of the disease and possible resistance mechanisms that the microbe employs to propagate itself and destroy citrus crops.
Similar presentations were made using PCT for DNA extraction and genome analysis for a type of fungus that targets strawberries and another that targets wheat, pea, lentil, barley, and canola crops. In this case, fungal DNA was obtained and extracted from contaminated soil using PCT. Furthermore, another USDA group is now evaluating PCT to extract DNA from fungi in soil that infects strawberries and the findings outlined above will support the Company's goal of developing multiple PCT applications and a goal of establishing PCT as the standard and technology of choice for the agri-biotech industry.
Mr. Schumacher also outlined the following milestones and upcoming value-enhancing catalysts related to the growing, developing, and expanding the Company’s core business and sales in conjunction with the 2Q09 results. I had an opportunity to conduct a 60-minute phone interview with Mr. Schumacher on 9/18/09 to discuss PBIO with a focus on upcoming milestones, goals, and the strategic plans for the Company outlined below.
(1) continued progress on the Company’s goal to reach an agreement with one or more large, multi-national companies for a marketing and/or distribution partnership before year-end – this is a very important element to increasing awareness and sales of PCT since the area of sample processing has not experienced much innovation and PBIO does not have the size or scale to conduct a nationwide or global marketing campaign and it would not be in their best interests to attempt this in-house due to the time and money required;
(2) transforming the nearly 300 new leads generated at the 2009 mass spectrometry conference into new customers, increased sales, and new instrument placements during 2H09 – a key element to this strategy is the recently launched PCT MicroTube Adapter kit as a platform-enabling technology that targets an estimated 8,000 labs with mass spec instruments installed and speeds up the traditional process of molecular analysis by about 20X (in less than one hour) and allows for either 48 or 16 samples to be analyzed at once because the micro-tubes are much smaller than standard sized test tubes;
(3) significant progress in the Company’s goal to enter into a Cooperative Research and Development Agreement (CRADA) with an agency of the U.S. government to develop an exciting new use of PCT which has the potential to offer significant benefit to many thousands of scientists and physicians worldwide;
(4) measurable progress in potential strategic partnership discussions with several small, life sciences companies whose products may be significantly improved when combined with PCT;
(5) securing additional funding (current liquidity is sufficient through 2Q10) to achieve profitability, which is expected to occur during 2011 – Mr. Schumacher noted that a variety of news flow in this regard is expected to occur before year-end and funding sources could include any/all of the following: conversion of existing warrants, strategic partnership(s), and a private placement transaction.
In summary, PBIO presents a unique opportunity to invest in an emerging life science tools company that has developed an improved technology platform (PCT) to revolutionize the long-neglected initial step of sample processing during the scientific research process across a wide range of disciplines reflected in the customer base earlier in this article – spanning biopharmaceutical drug discovery, agri-biotech, food safety, and scientific research conducted at the university level. The Company does not carry the added risk of conducting time-consuming and expensive clinical trials in order to achieve regulatory approval from the FDA since it supplies the tools used in research process rather than focusing on the end product of R&D activities.
PBIO has a corporate profile page at OneMedPlace and maintains a video gallery and a section at its corporate website for scientific presentations and publications (with many made by independent researchers) that provides evidence of the growing interest in PCT as a paradigm-shifting technology platform focused on improving the long-neglected niche of sample processing as the initial step across the entire spectrum of the life sciences research process – with much of the attention and innovations focused on latter stages such as analyzing the samples and processing this information to generate results and a conclusion from the raw data.
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