Mr. Cameron Groome reports

MICROBIX REPORTS RESULTS FOR Q4 & FULL-YEAR FISCAL 2023

Microbix Biosystems Inc. has released results for its year (2023) and fourth quarter (Q4) ended Sept. 30, 2023, with solid sales and a resumption of profitability in Q4, continuing progress to increase revenues from its diagnostic-test-related ingredients and devices, and recognition of a fully financed program to revalidate and relaunch its approved drug, Kinlytic urokinase.

Management discussion

Results for Q4 and 2023 complete a challenging and fulfilling year during which Microbix successfully adapted to postpandemic conditions -- adding important new customers and products, signing a fully financed redevelopment deal for its biological drug, Kinlytic urokinase, and maintaining its financial strength. However, sales did not grow in 2023 due to a lack of new orders for the company's DxTM viral transport medium, which, net of other new revenues and expenses, led Microbix to a small net loss for 2023. More happily, Microbix expects record sales across fiscal 2024, along with significantly positive net earnings.

Year ending Sept. 30, 2023

Two thousand twenty-three revenue was $16,514,776, a 13-per-cent decrease from 2022 revenues of $19,076,241. Antigen sales grew by 16 per cent to $9,592,219 (2022 -- $8,287,908), while QAPs (quality assessment products) declined by 5 per cent to $5,087,321 (2022 -- $5,375,329). Revenue from DxTM was nil in 2023, down from $5,004,359 the prior year, while royalties increased to $484,718 (2022 -- $408,694). Two thousand twenty-three revenues were most influenced by the lack of DxTM sales, which was only partially offset by growth in antigens and receipt of Kinlytic licensing revenues of $1,348,500 (2022 -- nil).

Two thousand twenty-three gross margin was 45 per cent, down from 2022 gross margins of 58 per cent. Gross margins were impacted by increased labour, manufacturing and supply chain costs -- all due to inflationary pressures. In addition, the lack of DxTM sales negatively impacted gross margin due to product mix and an inventory write-off.

Operating and finance expenses in 2023 increased by 14 per cent relative to 2022, principally due to increased investment in research and development (R&D) projects for the company's QAPs business, and incremental spending on implementation of ERP (enterprise resource planning) and eQMS (electronic quality management system). This was somewhat offset by reduced interest costs due to the repayment of debentures and BDC loans, plus greater interest income from short-term investments.

Lower sales, reduced gross margins and increased operating expenses (due to increased investment into business growth and infrastructure) led to an operating loss (before finance expenses and reversal of impairment of intangible assets) of $2,736,432, and a net loss of $39,483 versus a 2022 operating income of $2,610,213 and net income of $1,788,689. Cash used in operating activities was $1,094,561, compared with cash provided by of $3,465,199 in 2022.

At the end of 2023, Microbix's current ratio (current assets divided by current liabilities) was 5.13 and its debt to equity ratio (total debt over shareholders equity) was 0.45.

Quarter ending Sept. 30, 2022

Q4 revenue was $4,264,229, relatively flat from Q4 2022 revenues of $4,329,052. Included were antigen sales of $2,977,179 (2022 -- $2,629,783), up 13 per cent due to continued demand recovery. QAP sales were down 25 per cent to $1,195,231 due to timing of deliveries (2022 -- $1,601,950). DxTM sales were nil in Q4 (2022 -- nil), and royalties were $91,820 (2022 -- $97,319). Year-over-year, Q4 sales were most influenced by growth in antigens, offset by weaker QAP sales due to timing of shipment to customers and revenue recognition.

Q4 gross margin was 33 per cent, down from 47 per cent during Q4 2022, and due to a higher-proportion antigen sales, the antigen product sales mix, increased antigen batch failures and weaker QAP sales in the quarter.

Operating expenses (including financial expenses) were up 4 per cent in Q4 2023 when compared with Q4 2022. The quarter reflected both increased investment in R&D projects for the company's QAP customers and increased IT (information technology) infrastructure costs related to systems upgrades. This was offset by a reduction in interest costs due to the repayment of debentures and BDC loans, and increased short-term investment income in fiscal 2023.

Over all, flat sales and less available gross margin dollars led to a Q4 2023 operating loss (before finance expenses and reversal of impairment of intangible asset) of $990,563 and net income of $1,997,273 versus Q4 2022 operating loss (before finance expenses and reversal of impairment of intangible asset) of $256,885 and net loss of $464,080. Cash used in operating activities was $1,456,196 for Q4 2023, compared with cash provided by of $146,437 for Q4 2022, reflecting increasing systems.

Corporate outlook

Microbix will continue to drive sales growth across all of its businesses, and work to keep improving percentage gross margins and driving bottom-line results. Management currently expects Microbix to generate meaningful sales and net earnings growth across full-year fiscal 2024.

Adelaide Capital will host a live webinar with management, on Wednesday, Jan. 3, at 11 a.m. ET. Please register on-line.

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A replay of the webinar will also be made available on Adelaide Capital's YouTube channel.

About Microbix Biosystems Inc.

Microbix Biosystems creates proprietary biological products for human health, with over 100 skilled employees and annualized sales targeting $2-million per month. It makes a wide range of critical ingredients and devices for the global diagnostics industry, notably antigens for immunoassays and its laboratory quality assessment products (QAPs) that support clinical lab proficiency testing, enable assay development and validation, or help ensure the quality of clinical diagnostic workflows. Its antigens drive the antibody tests of approximately 100 diagnostics makers while QAPs are sold to clinical lab accreditation organizations, diagnostics companies and clinical labs. Microbix QAPs are now available in over 30 countries, supported by a network of 10 international distributors. Microbix is ISO 9001 and ISO 13485 accredited, U.S. FDA (U.S. Food and Drug Administration) registered, Australian TGA (Therapeutic Goods Administration) registered, and Health Canada establishment licensed, and it provides CE-marked (Conformite Europeenne) products.

Microbix also applies its biological expertise and infrastructure to develop other proprietary products and technologies, most notably Kinlytic urokinase, a biologic thrombolytic drug used to treat blood clots, and viral transport medium (DxTM), to stabilize patient samples for lab-based molecular diagnostic testing. Microbix is headquartered in Mississauga, Ont., Canada.

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