Champions Oncology, Inc. (NASDAQ:CSBR), a technology-enabled research organization focused on transformative solutions for drug discovery and development, has navigated a challenging fiscal year 2024 but is now poised for a return to growth and profitability.
The company reported annual revenue of $50.2 million and a net loss of $7.3 million for the fiscal year ended April 30, 2024. While these results represent a decline compared to the prior year, Champions Oncology has implemented strategic operational improvements that are beginning to show positive results, as evidenced by its improved performance in the fourth quarter.
Business Overview
Champions Oncology operates a comprehensive research center that combines computational and experimental platforms to facilitate drug discovery and development. The company's Translational Oncology Solutions (TOS) business provides services to pharmaceutical and biotechnology companies, leveraging its proprietary TumorGraft Technology Platform and Lumin Bioinformatics software. Additionally, the company has a drug discovery and development pipeline, which it is actively working to out-license or spin out.Operational Challenges and Improvements
Fiscal year 2024 was a challenging year for Champions Oncology, as the company faced a combination of external and internal factors that impacted its financial performance. Externally, the weakness and retraction in the biotech sector led to a decrease in R&D budgets, resulting in lower bookings growth and an increase in study cancellations. Internally, the company experienced operational issues that led to the need to repeat some work, increasing costs and delaying revenue recognition.In response to these challenges, Champions Oncology has implemented strategic operational improvements, including enhancing its processes, systems, and management teams. These efforts have enabled the company to improve its revenue conversion, as evidenced by its improved performance in the fourth quarter of fiscal year 2024. The company's CEO, Ronnie Morris, noted that the operational enhancements have put Champions Oncology in a stronger position to support future growth and sustain its target discovery efforts.
Financial Performance
For the fiscal year ended April 30, 2024, Champions Oncology reported revenue of $50.2 million, a decrease of 7% compared to the prior year. The company's net loss for the year was $7.3 million, which included $3.5 million in non-cash expenses. Excluding these non-cash items, the company's adjusted loss was $3.9 million, compared to an adjusted loss of $1.3 million in the prior year.In the fourth quarter of fiscal year 2024, Champions Oncology's revenue increased to $14 million, up 7% year-over-year. The company's adjusted EBITDA for the quarter was approximately $900,000, compared to an adjusted loss of $900,000 in the same period of the prior year. This improvement was driven by increased revenue and the company's operational efficiency initiatives, which helped to expand the pharmacology services gross margin to 49% in the fourth quarter, up from 47% in the prior year period.
Liquidity and Cash Flow
Champions Oncology ended the fiscal year with $2.6 million in cash and no debt. For the full year, the company's operating cash flow was negative $6.1 million, and its free cash flow was negative $7.0 million. The company is carefully managing its cash balance and expects to maintain a generally cash-neutral position over the next few quarters, with no significant capital expenditures planned for the upcoming fiscal year.Outlook and Strategic Priorities
As Champions Oncology looks ahead to fiscal year 2025, the company is cautiously optimistic about the improving market conditions and the impact of its operational improvements. While the company has not provided specific guidance, it has indicated that it expects to return to profitability and revenue growth in the first half of fiscal year 2025 compared to the same period in the prior year.The company's strategic priorities include: 1. Expanding and deepening relationships with its large pharmaceutical customers, which have the ability to sign larger studies and are less susceptible to the biotech sector downturn. 2. Continuing to develop its ex-vivo platform, which has contributed meaningfully to the company's top-line growth in recent years. 3. Growing its clinical biomarker business and expanding its customer base. 4. Actively engaging in discussions to out-license or spin out its drug development subsidiary, Corellia, to minimize the burden on the company's bottom line.