Business Overview
BioNexus Gene Lab Corp. (BGLC) is an emerging molecular lab focused on the application of functional genomics to enable early detection of infectious diseases and cancers. The company operates through its two Malaysian subsidiaries, MRNA Scientific Malaysia and Chemrex, and has recently made strategic investments to expand its capabilities and market reach.BGLC's core business revolves around its non-invasive blood screening tests, which analyze changes in ribonucleic acid (RNA) to detect diseases such as Coronavirus, Dengue, HIV, HPV, and the risk potentiality of cancers. This unique blood genomic biomarker approach is based on the scientific observation that circulating blood reflects, in a detectable way, what is occurring throughout the body. The company's lab facilities are located in Penang and Kuala Lumpur, Malaysia, allowing it to serve the growing demand for advanced diagnostic services in the region.
In addition to its diagnostic business, BGLC's subsidiary Chemrex is a wholesaler of industrial chemicals for the manufacture of various industries in the ASEAN region. This diversified business model provides the company with a more balanced revenue stream and helps mitigate risks associated with reliance on a single business line.
Financial Performance
For the fiscal year ended December 31, 2023, BGLC reported annual revenue of $9,770,806, a decrease from the previous year's revenue of $10,123,456. The company's annual net income was -$2,629,043, and its annual operating cash flow and free cash flow were -$1,301,595 and -$1,450,993, respectively.In the first quarter of 2024, the company generated revenue of $2,381,851, a slight increase of 0.2% compared to the same period in the prior year. Gross profit for the quarter was $365,031, with a gross profit margin of 15.3%. However, the company reported a net loss of $103,757 for the quarter, primarily due to increased operating expenses, which rose by 20.3% to $645,906.
The decrease in annual revenue and net income was largely attributable to the lingering impact of the COVID-19 pandemic and its variants, which adversely affected the company's diagnostic business. The results of operations for Chemrex were also impacted by the slowdown in the manufacturing sector, as many of its customers experienced supply chain disruptions and declining demand.
Segmental Performance
BGLC's two business segments, MRNA Scientific Malaysia and Chemrex, have demonstrated varying performance during the reporting periods.MRNA Scientific Malaysia, the company's diagnostic business, contributed $3,165 (0.1%) of total revenue in the first quarter of 2024, down from $7,436 (0.3%) in the same period of the prior year. The decrease in revenue was primarily due to RNA machine breakdowns, which disrupted the company's ability to provide testing services. The segment reported a net loss of $43,198 for the quarter.
Chemrex, the company's chemical distribution business, generated $2,378,686 (99.9%) of total revenue in the first quarter of 2024, up from $2,369,769 (99.7%) in the same period of the prior year. The segment's net profit for the quarter was $88,887. The increase in revenue was due to a slight uptick in purchases from Chemrex's customers, as the manufacturing sector began to recover from the pandemic-related challenges.
Liquidity
As of March 31, 2024, BGLC had working capital of $6,188,903, down from $6,415,877 as of December 31, 2023. The decrease in working capital was primarily due to the net loss incurred during the first quarter of 2024.The company's primary uses of cash have been for operations, while the main sources of cash have been generated from operational revenues, the private placement of common stock, and the proceeds of a public offering completed in July 2023. The company believes that its cash flow from operations, together with the funds raised from the public offering, will be sufficient to sustain its current level of operations for at least the next 12 months.
Strategic Investments and Developments
In April 2024, BGLC's subsidiary, MRNA Scientific Sdn. Bhd., announced a strategic investment in Ascension Innovation Sdn Bhd (AISB), a privately held Malaysian company. This investment is expected to enhance MRNA Scientific's technological capabilities and expand its market reach in the region.Additionally, in June 2023, the company completed a 12-for-1 reverse stock split, which was followed by a successful public offering on the Nasdaq Stock Market in July 2023. The public offering raised $5.75 million in gross proceeds, providing the company with additional capital to fund its growth initiatives.
Risks and Challenges
BGLC faces several risks and challenges that could impact its future performance. The company's diagnostic business has been adversely affected by the COVID-19 pandemic and its variants, as people have been reluctant to visit hospitals and clinics for fear of transmission. The company's chemical distribution business has also been impacted by the slowdown in the manufacturing sector, as its customers have experienced supply chain disruptions and declining demand.Furthermore, the company's reliance on a limited number of large customers for its Chemrex business segment poses a risk, as the loss of any of these customers could have a significant impact on the company's financial performance.
Outlook
Despite the challenges faced by BGLC, the company's management remains cautiously optimistic about its future prospects. The strategic investment in AISB and the successful Nasdaq listing are expected to enhance the company's technological capabilities and market visibility, positioning it for potential growth opportunities.However, the company will need to navigate the ongoing impact of the COVID-19 pandemic and the recovery of the manufacturing sector to drive sustained profitability. Investors should closely monitor the company's ability to diversify its customer base, improve operational efficiency, and capitalize on emerging opportunities in the diagnostic and chemical distribution markets.