today reported its financial and operational results for the three and nine months ended June 30, 2018.
SQI is a Toronto-based life sciences and diagnostics company that develops and commercializes proprietary technologies and products for advanced multiplexed diagnostics.
Said Andrew Morris, SQI’s President and CEO: “With each quarter, our commercial traction grows and our business model advances from vision to reality.”
Financial and Business Highlights for the Quarter and Year to Date:
For the first time we have accomplished a major commercial milestone in our business model by with recurring kit sales to a significant customer whose volume of kit usage is growing. Our commercial success is anchored in our ability to grow the sales of platforms and kits to our customers and transition the relative contribution of revenue from service-based sales. We are now delivering on that model and there are many reasons we expect this trend to continue. The number of kit sales to customers, including those run in our lab, will continue to grow as our customers gain confidence and expand their business with us.
Experienced an eight-fold increase in kit sales from the first quarter for our customer’s cardiac health predictive product. We continue to believe that the number of recurring, monthly kits sales will be on-track to exit fiscal 2018 at over 5,000 patient samples per month.
The test’s predictive potential is cited in leading scientific papers to show the likelihood that patients will experience a heart attack (ACS event) up to five years in advance. The benefit is significant and obvious: doctors can now put in place potentially life-saving preventative measures to keep that heart attack from happening.
We achieved excellent progress during the quarter with our key customer that opens up the new direct-to-consumer market to SQI. We delivered two sqidlite™ instrument platforms to this customer during the quarter with training and validation activities occurring during the month of August. This customer’s first kit purchases will be a pair of SQI-proprietary autoimmune diagnostic tests that had previously been developed for the in vitro diagnostic (IVD) market. Commercial launch of the first test for Celiac Disease and Wheat Allergy is expected in early fall followed shortly thereafter by the commercial launch of the second test for Rheumatoid Arthritis. We are in active discussions with this customer to develop additional diagnostic test products for the direct-to-consumer market.
We ended the third quarter of fiscal 2018 with a total of eight customers that are now generating revenues. In addition, we have agreed to ship a demonstration system to a large CRO to evaluate our cytokine multiplexed test kits, and advanced a number of near-term customers along the sales pipeline.
We made continued progress with our instant immunoassay collaboration with McMaster University. During the quarter we continued to progress on our targeted development milestones and have achieved a more consistent methodology for manufacturing the single-use chips. Our next milestone for this project is August 2018 when we will continue to optimize the performance of the pilot design for better sensitivity, linear range, precision, and device stability.
The large comparative study we reported last quarter with our DNA customer is on-going and new opportunities for the product have been identified. SQI is working closely to support the efforts by this customer to expand its regulatory efforts and customer initiatives.
Q3 2018 Financial Results Overview
Revenue for the three months ended June 30, 2018 was $220,000 compared to $176,000 for the same period last year. Revenue for the nine months ended June 30, 2018 was $772,000 compared to $842,000 for the same period last year. Kit sales have increased significantly in both the three- and nine-month periods as compared to the same periods last year. Recurring kit sales represent 65% of total revenue for the three months ended June 30, 2018 as compared to 11% for the same period in 2017. The total revenues for the nine-month periods ended June 30 2018 and 2017 are positively affected by platform sales, which form the basis for recurring kit sales. This positive trend in revenue is a direct result of transitioning our existing customers into the commercial phase – meaning that the development phase of their projects are complete and they are now purchasing kits. We continue to perform development work for our DNA-based customer and have done development work for two new pharma customers in the nine months ended June 30, 2018.
For the quarter, the Company recorded a net loss of $2,042,000 ($0.02 net loss per share) as compared to the net loss of $1,607,000 ($0.01 net loss per share) for the quarter-ended June 30, 2017. For the nine months ended June 30, 2018, the Company recorded a net loss of $5,461,000 ($0.04 net loss per share) as compared to the net loss of $4,393,000 ($0.05 net loss per share) for the nine months ended June 30, 2017.
The increase in net loss for the three and nine months ended June 30, 2018 as compared to the three and nine months ended June 30, 2017 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.
R&D expenditures, excluding amortization and stock-based compensation, for the three months ended June 30, 2018 were $1,130,000 compared to $848,000 for the same period last year. R&D expenditures, excluding amortization and stock-based compensation, for the nine months ended June 30, 2018 were $2,847,000 compared to $2,273,000 for the same period last year. The increase in R&D expenditures for the three and nine-month periods is a result of higher laboratory costs primarily related to consumables purchased at a higher than normal level to ensure completion of critical projects to meet internal deadlines and to deliver finished products to our customers for their validation and commercial kit sales. During fiscal 2018 the Company had two customer projects move into the commercial phase; started development work on two new pharma projects; and initiated development work on two assays for our direct to consumer customer.
Corporate and general expenses excluding stock-based compensation, totaled $341,000 for the three months ended June 30, 2018 as compared to $299,000 for the three months ended June 30, 2017. Corporate and general expenses excluding stock-based compensation, totaled $1,128,000 for the nine months ended June 30, 2018 as compared to $949,000 for the nine months ended June 30, 2017. Corporate and general expenses are higher for the three and nine months ended June 30, 2018 compared to the same periods in the prior year due to higher professional fees for recruiting, investor relations, as well as the payment of bonuses.
Sales and marketing expenses were primarily related to sales and marketing consultant fees and to travel related to selling activities in the quarter. Sales and marketing expenses, excluding stock-based compensation, totaled $297,000 for the three months ended June 30, 2018 compared to $286,000 for the three months ended June 30, 2017. Sales and marketing expenses, excluding stock-based compensation, totaled $845,000 for the nine months ended June 30, 2018 compared to $809,000 for the nine months ended June 30, 2017. Sales and marketing expenses were higher for the three and nine months ended June 30, 2018 compared to the same period in the previous year, primarily due to the addition of sales personnel during the first half of fiscal 2017 and to the payment of bonuses or commissions.
Conference Call Details:
Date: Friday August 17, 2018
Time: 10:00 a.m. ET
Live Call: 416 764 8609 (local) 1-888-390-0605 (Canada and the United States)
Conference ID: 57923237
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/1810476/16BFC1AE50D00FCDBCB1149FCB65F51D.
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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