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Pressure BioSciences' Recovery Continues, Q3 Revs up 19 Percent

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This story originally ran on Nov. 18.

By Tony Fong

Despite a contraction in revenues related to its core technology, sample prep firm Pressure BioSciences this week reported a 19-percent increase in total revenues for the third quarter.

For the three months ended Sept. 30, the South Easton, Mass.-based company posted receipts of $317, 427, up from $265,662. Net loss for the quarter shrank 31 percent to $753,449, or $0.35 per share, from $1.1 million, or $0.50 per share, a year ago.

The results continued an upswing in the company following a restructuring program implemented at the end of 2008 that resulted in the layoff of eight full-time employees, or 40 percent of its staff, the closure of one R&D facility, and the scrapping of other R&D projects in order to cut expenses [See PM 12/04/08].

To be sure, PBI's future remains overcast, but in a conference call accompanying its earnings release, Richard Schumacher, president and CEO of PBI, called the quarter's results "very encouraging … especially in light of the challenges that we and many other companies continue to face with the current economic conditions."

During the third quarter, the company's operating loss shrank 32 percent to $754,180, from $1.1 million in the year-ago period. The most recent figure includes non-cash charges related to stock-based compensation of $99,000. Excluding that charge and depreciation/amortization expenses of $59,000, PBI's cash burn rate for Q3 2009 was about $597,000.In Q3 2008, the company's cash burn was $970,000.

PBI officials had previously stated a goal of an average cash burn rate of below $600,000 per quarter for the year. This week, they raised that figure to $650,000 per quarter.

Through the first nine months of the year, revenues have spiked 73 percent from a year ago, to $894,570, compared to $518,222. The revenue increase, along with cost-cutting measures, has resulted in a drop in PBI's operating loss to $2.4 million through the first nine months of 2009, down almost 41 percent from $4.1 million in the year-ago period.

The company also reined in overall spending, as total operating costs and expenses dropped 22 percent during the most recently completed quarter, to $1.1 million. R&D spending was down 27 percent to $273,286, while SG&A expenses shrank 16 percent to $724,228.

During the quarter, PBI recorded 20 installations of its Barocycler Pressure Cycling Technology instruments, the most in the company's history and the fourth consecutive quarter of double-digit installations. Despite that, revenue generated by its core PCT products and services slid 8 percent to $204,584 in Q3 2009, compared to $222,825 a year ago.

According to company officials, the drop in PCT-related revenues was partly due to a higher mix of leases versus sales of Barocycler instruments in Q3 2009, compared to Q3 2008.

According to Schumacher, the firm's skeleton staff of three researchers was busy working on studies related to PBI's two SBIR grants, leaving them little time to focus on issues that leasing customers may have had with the instruments. "Unfortunately, that lends itself to not as many sales and what happens is we end up getting more leases," he said.

Additionally, while domestic installations during the quarter? more than doubled to 19 from nine a year ago, international installations fell to one from eight a year ago. Without elaborating, Schumacher suggested issues with its overseas distributors were to blame.

The company's distributors include Disruptive Technologies in France, Switzerland, and Belgium; TouchDown BioInnovation in the rest of Europe; Analyx Technology in Beijing, Shanghai, Chengdu, and Guangzhou; CM Corporation in Korea; Utek International in Taiwan; and Veritas in Japan.

"We think our international distributors can do better," he said. The company has "looked at it with a fine-tooth comb and we've got a number of things we're trying to do … to get a better response from our international collaborators."

PBI has about 90 Barocycler installations worldwide currently, according to Schumacher.

Along with product revenue, the company posted $112,843 in grant revenue for the quarter from its two SBIR grants — a 163-percent increase on $42,837 in grant revenue from a year ago. One, a 10-month, $110,000 SBIR phase I grant from the National Institute of Allergy and Infectious Diseases, covered research related to the microbiome.

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That grant was to show proof of principle that PCT would offer advantages "in studying the microbes in and around the human body," Schumacher said. Data from that work will be used by PBI when it files for a phase II study early next month to further that work.

PBI is also in the second year of a two-year, $850,000 grant from the National Institute of General Medical Sciences targeted at cellular organelles and their functions with an emphasis on mitochondria.

In August, the company received an income tax refund of $623,262 based on provisions in the federal stimulus bill, which it used to hire an additional full-time employee and "several" part-timers, Schumacher said.

As of Sept. 30, PBI had cash and cash equivalents of almost $1.4 million, $500,000 more than it had at the end of 2008.

'Many, Many Hats'

Despite its healthier ledger, PBI remains in survival mode, and the restructuring program begun nearly a year ago is still in place. "We're just really asking everybody to wear many, many hats until we get to a point where our sales will allow us to look at expanding our company," Schumacher said.

A critical factor in the company's restructuring was its inability to access the capital and credit markets.

Though PBI announced in February that it had received $1.8 million from the sale of 156,980 units in a private placement, Schumacher this week acknowledged PBI's ongoing need for cash: "We know that in order to grow this company, we need additional cash resources and we have a number of things that are being worked on in this area."

On Wednesday, two days after releasing its earnings results, the company announced it had raised $1.16 million in the first tranche of a $2.5 million private placement.

Each unit was priced at $18.80 and consists of one share of non-voting Series B convertible preferred stock and one warrant to buy a share of Series B convertible preferred stock at an exercise price of $23.80 per share. The warrant expires on Aug. 11, 2011.

In a statement, R. Wayne Fritzsche, chairman of PBI's board, said the funds will be used to hire a full-time sales director, a full-time applications scientist, "several" part-time support personnel, and to "finish the development of PCT-dependent consumables and instrumentation for the mass spectrometry, forensics, and biomarker discovery sample preparation markets."

Schumacher also made clear during the conference call that PBI's ability to attract sales and marketing partners for its PCT products will be crucial to the company's success. Late last month, PBI and Protein Forest announced a co-marketing and sales agreement covering each company's core technologies. They will also develop new instruments, accessories, and consumables that combine the companies' products [See PM 10/23/09].

This week, Schumacher said that PBI is in talks with several firms about potential partnerships. He declined to provide further details but said that the goal is to "do a deal with a large company with many pairs of feet on the ground," and to reach an agreement by the end of this year or in early 2010. "We need a group with 50, or 100, or 200, maybe even more sales people in the field."

Unlike many companies that target customers based on whether they are in the academic, government, or biotech market, for example, Schumacher said that PBI is interested in targeting deals that are applications-based. Mass spectrometry, protein purification, and forensics, for example, are areas "that we believe we can show advantages over the competition," he said. Agriculture, food and water safety, and bio-terror have also been identified by the company as potential growth applications.

Schumacher said that PBI believes the PCT has "multiple application areas that we believe are very, very large, and which we believe we can play a role in bringing a technology with advantages over the current methods in those areas."

But as a small company, it cannot devote the necessary sales and marketing resources to all those application areas. "So our goal is … really two-pronged," Schumacher said.

"The first is to find a partner, or partners, that can help us in specific areas and to try to work out an agreement in which they can … market our product in that area. The second is all of the other areas that are still open for us either to find another partner in or to continue to sell ourselves," he said.

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