PBIO Is Poised to Grow in 2012
Grant Zeng, CFA
Patented, Proprietary Platform Technology with Competitive Advantages
Pressure BioSciences is a research products and services provider for the life science industry. The Company is engaged in the research, development and commercialization of a novel, enabling platform technology called pressure cycling technology (PCT).
PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels (≥35,000 psi) to control bio-molecular interactions. The current product portfolio includes Barocyclers, PCT based instruments, and consumables, which include PULSE (Pressure Used to Lyse Samples for Extraction) Tubes as well as application specific kits (which include consumable products and reagents). The instruments and the consumables together make up the PCT Sample Preparation System (PCT SPS). The system follows the highly successful and profitable “razor and blade” business model.
We are impressed with and optimistic about PBI’s patented, novel, enabling PCT platform technology. The Company’s PCT Sample Preparation System (PCT SPS) has competitive advantages over existing technologies in the sample preparation market. The Company continues to make progress in pushing the technology from the conventional use in life science labs into new application areas.
Based upon the PCT platform, PBIO has established a broad product portfolio for the sample preparation market. The instruments and consumables, a “razor and blade” model, that form its PCT Sample Preparation System (PCT SPS) are now increasingly being recognized by many research labs as a novel and paradigm shifting sample preparation method due to PBIO’s focused marketing efforts. We believe uptake of the PCT SPS will accelerate in the coming years.
The Niche Market, Rather Large but Underserved
PBI is currently targeting the research products and services market. The research products and services market is a multi-billion dollar market. Sales from Life Technologies Corp (formerly known as Invitrogen) alone were $3.2 billion in 2009 and revenue from Qiagen NV also crossed the $1 billion mark in 2009 and will record double digit growth in the next few years. The market is still growing rapidly, although there have been some negative events developing in the life science industry in recent years such as the restructuring and consolidation in pharmaceutical/biotech industry and reduction of government research grant for medical research in the US. On the other hand, the downsize of research spending in the US has been offset by increased research spending in other parts of the world especially in emerging markets such as in China and India. As a result, the market has attracted many players like Qiagen, Life Technologies and Affymetrix.
Pressure BioSciences elected to initially focus its resources on the market of genomic, proteomic, and small molecule sample preparation because sample preparation:
is a rapidly growing market;
has a large and immediate need for better technology;
is comprised mostly of research laboratories, which are subject to minimal governmental regulation;
is compatible with its technical core competency; and
is the area in which the Company has strong patent protection.
We think the Company’s Barocycler instrumentations and PCT-dependent consumable products fill an important and growing need in the sample preparation market for the safe, rapid, versatile, reproducible, and quality extraction of nucleic acids, proteins, and small molecules from a wide variety of plant and animal cells and tissues.
The research products and services market is rapidly growing with a large and immediate need for better technology, which we expect will create a huge opportunity for PBIO to grow its business in the coming years.
Great Progress Has been Made in 2011
In fiscal year 2011, PBIO has made great progress in terms of business development and financing.
• PBIO announced that NASDAQ has given the Company until Feb 29th to get back into compliance. Therefore, the Company’s shares will remain listed on the NASDAQ Capital Market until then.
• Over a dozen presentations have been made at scientific meetings, discussing the advantages of PCT over current sample prep methods.
• PBIO has received a grant from the NIH for $161K to help develop a new method for the processing of cancer and other samples.
• PBIO has received a grant from the Dept of Defense for $750K to help develop a new PCT-based instrument for high throughput processing, using the 96-well template that is universal in labs worldwide.
• PBIO has filed and been granted a three year, S-3 shelf registration for up to $15 million, so that the Company will have access to funds, if needed.
• PBIO has already successfully used the shelf registration in an $843 offering in November 2011.
• The Company’s revenue in Q3 2011 was 50% greater than revenue in either Q1 or Q2 2011. Its PCT products revenue in Q3 was the highest it has been in a year.
• PBIO expects to announce expanded distribution capabilities for its PCT product line before the end of the 2011 year.
What are the implications for PBIO?
The Company has turned the corner. We think PBIO is poised to grow dramatically in fiscal 2012.
PBIO is an emerging leader in the sample preparation market with its unique and powerful PCT platform technology. The Company’s PCT technology has competitive advantages over existing technologies in the sample preparation market. As we pointed out in our previous research reports, PBIO is still in its early stage of commercialization and PCT is increasingly gaining recognition by research labs worldwide.
Things are better at PBIO now than they have been in over a year, yet the stock is still down to a third of its price a year ago. Therefore, we maintain our Outperform rating for PBIO with a price target of $5 per share.
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