Biomerica, Inc. (NASDAQ:BMRA) is a biomedical technology company that develops, patents, manufactures, and markets advanced diagnostic and therapeutic products. The company's primary focus is on research, development, and commercialization of patented, diagnostic-guided therapy (DGT) products to treat gastrointestinal diseases, such as irritable bowel syndrome (IBS), and other inflammatory conditions.
Business Overview
Biomerica's diagnostic test kits are used to analyze blood, urine, nasal, or fecal specimens from patients to diagnose various diseases, food intolerances, and other medical complications. The company's products are designed to enhance health and well-being while reducing healthcare costs.Biomerica's key product focus includes the inFoods IBS test, which uses a simple blood sample to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms. The company recently received FDA clearance for its hp+detect™ diagnostic test, which is used for the detection of the H. pylori bacteria, a leading risk factor for gastric cancer.
In addition to the inFoods IBS and hp+detect™ products, Biomerica's existing medical diagnostic offerings are sold worldwide, primarily in two markets: clinical laboratories and point-of-care (physicians' offices and over-the-counter). These diagnostic test products utilize immunoassay technology and are either CE marked and/or cleared for sale in the United States by the FDA.
Financial Performance
For the fiscal year ended May 31, 2023, Biomerica reported annual revenue of $5,339,000, a net loss of $7,140,000, annual operating cash flow of -$5,474,000, and annual free cash flow of -$5,552,000.In the latest quarter ended February 29, 2024, the company reported net sales of $1,017,000, a net loss of $1,918,000, and used $4,317,000 in operating cash flow. The decrease in quarterly net sales of 8% compared to the prior year period was primarily attributed to reduced sales in food intolerance products, which are subject to periodic and infrequent orders.
Consolidated cost of sales for the quarter increased by 18% to $1,166,000, or 115% of net sales, driven by complexities in international shipping logistics rather than fluctuations in material and labor costs.
Selling, general, and administrative expenses increased by 9% to $1,508,000 for the quarter, primarily due to the establishment of a new sales force and related marketing expenses, partially offset by a decrease in legal expenses.
Research and development expenses decreased by 13% to $343,000 for the quarter, mainly due to a reduction in salary and compensation costs for the R&D team.
Geographic Breakdown
Biomerica derives the majority of its revenues from international sales, with Asia, Europe, and North America being the company's key geographic markets. For the nine months ended February 29, 2024, Asia accounted for 43% of total revenue, Europe 25%, North America 25%, Middle East 7%, and South America 0.3%.Revenue Breakdown by Product Category
Biomerica's revenue is primarily generated from the following product categories:Clinical Lab: $2,683,000 (62% of total revenue) for the nine months ended February 29, 2024, up 4% year-over-year. Over-the-Counter: $1,078,000 (25% of total revenue), up 11% year-over-year. Contract Manufacturing: $530,000 (12% of total revenue), up 23% year-over-year. Physician's Office: $8,000 (0.2% of total revenue), down 97% year-over-year due to the absence of COVID-19 related sales.
The increase in revenue across the non-COVID product lines, particularly in the over-the-counter and contract manufacturing segments, underscores Biomerica's resilience and strategic focus on diversifying its revenue streams beyond the pandemic-driven COVID-19 product sales.
Liquidity and Capital Resources
As of February 29, 2024, Biomerica had cash and cash equivalents of $5,319,000 and working capital of $6,855,000. The company believes the aggregate of its existing cash and cash equivalents is sufficient to meet its operating cash requirements and strategic objectives for growth for at least the next year.In March 2023, Biomerica raised approximately $7,300,000 in net proceeds from a public offering of its common stock, further strengthening its balance sheet and liquidity position. The company intends to use the net proceeds for general corporate purposes, including sales and marketing activities, clinical studies, product development, and working capital needs.
Risks and Challenges
Biomerica faces various risks and challenges, including: - Dependence on a limited number of large customers, which accounted for 44% of net sales and 44% of accounts receivable in the latest quarter - Supplier concentration risk, with one vendor accounting for 50% of raw material purchases in the latest quarter - Potential disruptions in the global supply chain and international business operations due to macroeconomic and geopolitical factors - Regulatory risks associated with obtaining and maintaining product approvals in various marketsOutlook and Growth Initiatives
Biomerica is focused on driving growth through the continued rollout and expansion of its inFoods IBS product, as well as the commercialization of its newly FDA-cleared hp+detect™ H. pylori diagnostic test.The company has successfully launched the inFoods IBS test with numerous gastroenterology (GI) physician groups across multiple states and regions. Biomerica is also exploring partnerships to expand the product's application to other physician segments, such as primary care and neurology, to further penetrate the market.
With the hp+detect™ test now cleared by the FDA, Biomerica has initiated marketing efforts targeting the U.S. market and has also begun discussions with international distributors to expand the product's global reach.
Additionally, the company is working on selecting and validating a new disease area, such as ulcerative colitis or migraines, where certain foods can trigger or contribute to the symptoms, and plans to follow a similar development pathway as the inFoods IBS product.