SQI Diagnostics Inc. ("SQI" or the "Company") (TSX-V: SQD; OTCQX: SQIDF),a life sciences company that develops and commercializes proprietary technologies and products for advanced microarray diagnostics, today reported its financial and operational results for the second fiscal quarter ended March 31, 2015.
"During the quarter the Company continued to advance business with our existing customers and to develop new opportunities," said Andrew Morris, President and CEO of SQI. "The delivery of a fully automated sqidlite™ system to one of our global Pharma customer's US-based facilities is a significant accomplishment for SQI and successful, final evaluation is expected to result in on-going revenue opportunities."
Highlights for the Quarter
During the quarter SQI executed an evaluation agreement with a significant customer and subsequent to the quarter end installed a fully automated sqidlite™ system at one of the customer's US-based facilities. Under the terms of the agreement, the customer will use the equipment primarily in order to validate the performance of a 21-plex test developed for this customer to run on SQI's sqidlite™ system.
Bristol-Myers Squibb ("BMS") highlighted SQI's immunogenicity testing technology in a presentation and a case study at the 9th Workshop on Recent Issues in Bioanalysis in Miami, Florida ("9th WRIB"), from April 13th to 17th 2015. The presentation given by Renuka Pillutla, PhD, Director, Bioanalytical Sciences – Biologics for Bristol-Myers Squibb was titled "Application of SQI Multiplex Platform in Immunogenicity Testing – Epitope Mapping and Isotyping."
Merck & Co. delivered a talk at the Immunogenicity and Immunotoxicity conference in January titled "Immunogenicity Assays: Challenges of Anti-Drug Antibody (ADA) Detection in the presence of High Concentration of Circulating Drug (Drug Tolerance)" which highlighted the superior drug tolerance capabilities of SQI's technology, solving the industry's need for better drug tolerance for their existing anti-drug-antibody (ADA) tests.
We entered into an additional agreement with a global pharmaceutical customer to complete testing of its pre-clinical (monkey) samples as a service in our lab. The first lot of samples was successfully processed during the quarter and additional samples to complete the project are being delivered and are expected to be completed in the third quarter. The first set of monkey sample testing generated greater than 96% agreement to the customer's prior testing method.
During the quarter we completed development work on an anti-drug-antibody ("ADA") multiplex test for a global pharmaceutical customer. The results of this work illustrated that the SQI developed tests had higher sensitivity and better drug tolerance than the tests the customer historically used. SQI has commenced discussions to place instruments and to supply kits to this customer allowing them to complete an evaluation of a completed ADA product developed for them and to initiate several additional projects. We believe that we will sell this customer one or more SQI platforms, as well as test kits for human studies during fiscal 2015.
During the quarter we continued to work with a biotechnology customer's contract research organization ("CRO"), Algorithme Pharma, and subsequent to the quarter end, SQI commenced the development of plans to transfer the tests to Algorithme Pharma allowing the tests to be validated and run at its lab.
During the quarter a contract was signed with a customer in the animal health market to convert three existing veterinary ELISA tests to a single SQI multiplexed test. Significant progress was made with the completion of the product prototype. Additionally, customer samples were run using the SQI prototype tests that resulted in greater than 93% agreement to the expected result. This project is important as it demonstrates SQI's ability to convert multiple, single plex tests in the animal health market to SQI's multiplexing technology. The Company estimates that the products under development and being considered for future products to convert to SQI multiplex tests, represent several millions of tests by this customer on an annual basis.
We executed a fourth development agreement with our infectious disease DNA customer. Each new agreement expands our partnership with this custom diagnostic customer in the infectious disease, DNA market. The first test being developed for this customer is a 31 plex test used to detect infections in human blood. Management expects that a second test targeted at detecting infections in dairy cattle will be developed next.
On January 30, 2015 and on February 20, 2015 the Company completed two tranches of a debenture financing resulting in gross proceeds of $3,236,000.
Financial Results Overview
During the second quarter of fiscal 2015 the Company continued to record revenue from product and services sales in our DDTS business. Revenue for the three months ended March 31, 2015 was $70,000 compared to $18,000 for the same period last year. Revenue for the six months ended March 31, 2015 was $85,000 compared to $20,000 for the same period last year. The growth in revenue for the three and six months ended March 31, 2015 reflects the continued progress of the Company with its global Pharma customers. This includes the execution of an agreement in the current quarter for the evaluation of a sqidlite™ platform by our fist global Pharma customer who will validate the system and the performance of a 21-plex test developed for this customer. Successful, final evaluation is expected to result in the purchase of the sqidlite™ system and the on-going sales of initial products for use in the customer's clinical programs.
For the quarter-ended March 31, 2015, the Company recorded a net loss of $1,613,000 ($0.03 net loss per share) compared to a net loss of $964,000 ($0.02 net loss per share) for the quarter-ended March 31, 2014. The loss for the six months ended March 31, 2015 was $2,978,000 compared to $2,465,000 for the same period last year. The net loss for the three and six month period increased due to expenditures on sales and strategic initiatives. The net loss for the three and six months ended March 31, 2014 was minimized to some degree by a $300,000 SR&ED investment tax credit. The SR&ED investment tax credit benefit was not available to the same degree in 2015 as our activities focus more on commercialization.
R&D expenditures, excluding SR&ED investment tax credits, amortization and stock based compensation, for the three months ended March 31, 2015 were $788,000 compared to $638,000 for the same period last year. R&D expenditures, excluding SR&ED investment tax credits, amortization and stock based compensation, for the six months ended March 31, 2015 were $1,472,000 compared to $1,478,000 for the same period last year. R&D expenditures were consistent for the six month periods ended March 31, 2015 and March 31, 2014. R&D expenditures increased by $150,000 for the three month period ended March 31, 2015. Costs for the three and six months ended March 31, 2015 included work on 4 DDTS customer projects and the advancement of two IVD assays in the pipeline. Cost for the three and six months ended March 31, 2014 included costs related to the validation of the Celiac DGP assay, which was approved by both Health Canada and the FDA in calendar 2014, and work on 3 DDTS customer projects.
General and administrative expenses, excluding stock based compensation, were $476,000 for the quarter-ended March 31, 2015 compared to $371,000 for the quarter-ended March 31, 2014. General and administrative expenses were $854,000 for the six months ended March 31, 2015 compared to $680,000 for the six months ended March 31, 2014. The increase in general and administrative expenses was due to strategic advisory and investor relations activities as well as to OTCQX fees and the hiring of one executive level position in 2015.
Sales and marketing expenses were primarily related to sales and marketing consultant fees and travel related to selling activities in the quarter. Sales and marketing expenses, excluding stock based compensation, totaled $198,000 for the three months ended March 31, 2015 compared to $71,000 for the three months ended March 31, 2014. Sales and marketing expenses, excluding stock based compensation, totaled $358,000 for the six months ended March 31, 2015 compared to $221,000 for the six months ended March 31, 2014. Sales and marketing expenses were higher for the three and six months ended March 31, 2015 compared to the same period in the previous year, primarily due to the addition of two individuals in the sales and marketing area during the first and second quarters of fiscal 2015 and the effects of the US dollar exchange rate.
At March 31, 2015, current assets were $2,427,000 compared to $2,058,000 at September 30, 2014. As at March 31, 2015 the Company has a $1,882,000 working capital surplus compared to a surplus of $1,625,000 at September 30, 2014.
About SQI Diagnostics
SQI Diagnostics is a life sciences and diagnostics company that develops and commercializes proprietary technologies and products for advanced microarray diagnostics. The Company's proprietary microarray tests and fully-automated systems are designed to simplify protein and antibody testing workflow, increase throughput, reduce costs and provide excellent data quality. For more information, please visit www.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 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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SOURCE SQI Diagnostics Inc.