today reported its financial and operational results for the fourth quarter and fiscal year ended September 30, 2018.
SQI is a Toronto-based life sciences and diagnostics company that develops and commercializes proprietary technologies and products for advanced multiplexed diagnostics.
- Achieved revenues of $1,335,000, a rise from $968,000 over fiscal 2017.
- Achieved over 500% increase in recurring kit sales.
- Launched three new commercial products.
- Entered into the Direct to Consumer market with the launch of our customer’s imaware™ test for celiac awareness testing.
“This year, we accelerated our transition into a commercial enterprise by exceeding a major milestone for kit sales with a major customer; introducing new products into the marketplace; and expanding our pipeline with new customers who can all provide ongoing revenues next year.”
Financial and Business Highlights for the Quarter and Year
Experienced the third consecutive quarter of growth in recurring kit sales starting from the first fiscal quarter of 2018.
From the first quarter, the number of patients being tested using our products has grown steadily. This has resulted in the growth in quarterly revenues from kit sales – from $24,000 in the first fiscal quarter of 2018 to $195,000 in the last fiscal quarter. In 2019, we foresee our customers undertaking marketing and regulatory initiatives that could significantly expand the number of patients using SQI-based tests and increasing the number of test kits sold to our customers.
Our progress this past quarter with Microdrop LLC has opened the new direct-to-consumer market to SQI.
We delivered two sqidlite™ instrument platforms to Microdrop during the quarter with training and validation activities occurring during August. This customer’s first kit purchases were a pair of SQI-proprietary autoimmune diagnostic tests that had previously been developed for the in vitro diagnostic (IVD) market. Subsequent to the quarter end, we announced the launch of the imaware™ at-home test for celiac disease by our partner, Microdrop. Run on SQI’s automated systems and using SQI test kits, the imaware™ at-home test for celiac disease addresses a current unmet need in the market today. The second test for rheumatoid arthritis is expected to be launched in early calendar 2019. Following the successful launch of our first two tests with Microdrop, we expect to work with Microdrop to develop more diagnostic tests for the direct- to-consumer market.
We ended the fourth quarter of fiscal 2018 with eight revenue-generating customers.
Subsequent to the quarter end, we installed a demonstration system with a large CRO to evaluate our cytokine multiplexed test kits. We had previously said that we would place five systems in calendar 2018 and should this fifth customer successfully complete its evaluation we will have reached this major milestone.
We made significant progress with the organ transplant customer in our sales pipeline. We expect to complete commercial agreements with them before the end of the year.
The organ transplant market is a high-value and underserved segment for diagnostic tests.
The reality is that today, many organs go unutilized. What’s more, existing methods of assessing organ health are highly subjective, even when performed by highly skilled surgeons. SQI’s test has the potential to bring new rigour and improve health outcomes for transplant patients in this critically important medical market.
Diagnostic approaches today are limited by the lack of specific biomarker tests that can be run during the transplant process. Our multiplexing tests and automated systems will help determine the viability of organs from the moment they are harvested through to transplantation. SQI’s test’s biomarkers and algorithm are proprietary and will help expand the number of donor organs available to recipients.
Q4 and Fiscal 2018 Financial Results Overview
Revenue for the year ended September 30, 2018 was $1,335,000 versus $968,000 for the year ended September 30, 2017. This is a 40% increase in revenues and more notably is driven by significant commercial progress achieved with our customers in fiscal 2018. During the three months ended September 30, 2018, the Company recorded revenue from the sale of custom kits and platforms, as well as service revenue to our Pharma and diagnostic customers. Revenues for the fourth quarter of 2018 were $563,000 as compared to $126,000 in the same period last year. The increase was driven by two platform sales in the last quarter as noted above, as well growing kits sales.
The net loss for the year ended September 30, 2018 was $7,437,000 ($0.06 net loss per share) as compared to $5,929,000 ($0.06 net loss per share) for the year ended September 30, 2017. For the quarter, the Company recorded a net loss of $1,976,000 ($0.01 net loss per share) as compared to the net loss of $1,536,000 ($0.01 net loss per share) for the quarter-ended September 30, 2017.The increase in net loss is a result of increased product commercialization and development costs and the increased marketing costs associated with the shift to a more sales-focused company.
Research and development (“R&D”) costs, excluding amortization and stock-based compensation, were $3,717,000 for the year ending September 30, 2018 (three month - $870,000) compared to $3,030,000 for the year ending September 30, 2017 (three month - $757,000). In fiscal 2018, R&D efforts were focused on development work for three customer projects in our Pharma and diagnostic businesses. R&D costs were higher for fiscal 2018 compared to fiscal 2017. This was due to consumables bought at a higher than normal level to ensure critical projects were completed in order to deliver finished products to our customers for their validation. Other factors were commercial kit sales and higher personnel costs.
In the second half of fiscal 2018, one of our suppliers experienced a defect in its raw materials. We worked quickly with them to help fix the issue, which involved changing our manufacturing process. While everything is now resolved, the defect came with predictable costs: higher than normal rejection rates; a higher one-time negative impact on gross margins; and development expenses to solve the problem. This impacted our net income for the last two quarters of fiscal 2018, as we worked to produce finished goods that satisfied our performance standards. We are working with our supplier to recover most of the losses incurred by their defect. We are also confirming with our customers that these changes have returned the test to its previously high standards.
Corporate and general expenses, excluding stock-based compensation, totaled $1,589,000 for the year ended September 30, 2018 and $1,332,000 for the year ended September 30, 2017. Corporate and general expenses, excluding stock-based compensation, totaled $461,000 for the three months ended September 30, 2018 as compared to $383,000 for the three months ended September 30, 2017. Corporate and general expenses are higher for the year and three months ended September 30, 2018 compared to the same periods in the prior year due to higher professional fees and recruiting fees as the Company made key personnel changes to assist in the transition to a commercial operation.
Sales and marketing expenses, excluding stock-based compensation, totaled $1,145,000 for the year ended September 30, 2018 (three month - $300,000) compared to $1,067,000 for the year ended September 30, 2017 (three month - $258,000). Sales and marketing expenses were higher for the year and three months ended September 30, 2018 compared to the same period in the previous year, primarily due to the payment of commissions on product sales and additional travel for customer system installations and training.
At September 30, 2018, current assets were $3,758,000 compared to $2,414,000 at September 30, 2017. As at September 30, 2018, the Company’s current assets exceeded current liabilities by $2,691,000 compared to a surplus of $1,919,000 at September 30, 2017.
President and CEO, Andrew Morris, along with Company management, will host a conference call to review financial results and discuss business developments for the period. Details are as below:
Conference Call Details:
Date: Wednesday December 12, 2018
Time: 10:00 a.m. ET
Live Call: 416 764 8609 (local) 1-888-390-0605 (Canada and the United States)
Conference ID: 25700854
An archived copy of the conference call will be available for 90 days on the Company website at www.sqidiagnostics.com/about/investors and also at https://event.on24.com/wcc/r/1889636/B54D06E398697F620AAE7B5E5CCDD839
Detailed financial statements and the management’s discussion and analysis (MD&A) will also be made available on the Company website at www.sqidiagnostics.com and at www.sedar.com.
Investor Relations Contact:
Chief Executive Officer
416.674.9500 ext. 229
Vice President of Finance
416.674.9500 ext. 277
About SQI Diagnostics
SQI Diagnostics is a life sciences and diagnostics company that develops clinical grade multiplexed microarray and molecular assays run on its automated instrumentation for the pharmaceutical research, animal health, and clinical diagnostics markets. SQI develops custom research and diagnostic assays that are multiplexed; meaning the simplification, consolidation and automation of many individual tests into one. This increases sample throughput, reduces time, cost and chance for human error, and provides excellent data quality. For more information, please visit sqidiagnostics.com.
This press release contains certain statements including, without limitation, the words “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “believe”, “in the process”, “benefits”, “leading to”, “position” “possible”, “is subject to” and other similar expressions which may constitute “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectations and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to: our ability to market and sell our products including our novel multiplexing technologies and detection platforms; our ability to maintain any technical or product advantages; the success of our Diagnostic Tools and Services business and our intent to build near-term revenue streams from this business; the successful regulatory filing and receipt of regulatory approvals for our later stage quantitative diagnostic consumable kits; adverse changes in general economic conditions; international risk and currency exchange fluctuations; competitor activity; technology changes; regulatory approvals and the impact of healthcare reform legislation; and, SQI's ability to raise additional funds in the future.
Such statements, risks and uncertainties are detailed in the Company’s ongoing filings with the securities regulatory authorities, and are available to the public at www.sedar.com. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable securities laws.
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