By Grant Zeng, CFA
On November 16, 2010, Pressure BioSciences, Inc. (NASDAQ:PBIO) reported financial results for the third quarter ended September 30, 2010.
Total revenue for 3Q10 was $372,103 compared to $317,427 for the comparable period in 2009, a 17% increase. Sales from PCT products and services were $194,730 for the three months ended September 30, 2010, down 4.8% yoy compared to $204,584 for the same period in 2009. During the third quarter of 2010, the company completed the installation of 15 Barocycler instruments, compared to 20 during the same period of 2009. Fourteen of the 15 instruments were domestic installations and one was an international sale, compared to nineteen domestic installations and one international sale for the same quarter in 2009. Sales of PCT-based consumables generated revenue of approximately $22,000 for the three months ended September 30, 2010 compared to approximately $18,000 for the same period in 2009, an increase of approximately 22%.
Total revenue for the nine months ended September 30, 2010 was $1,065,020 compared to $894,570 for the same period in 2009, a 19% increase. Revenue from the sale of PCT products and services was $667,262 for the nine months ended September 30, 2010 compared to $585,928 for the same period in 2009, a 14% increase. During the first nine months of 2010, the company installed 37 Barocycler instruments, as compared to 42 during the same period of 2009. Thirty-six of the 37 instruments were domestic installations and one was an international sale, compared to 35 domestic installations and 7 international sales for the same nine-month period in 2009. Sales of PCT-based consumables generated revenue of $81,096 for the nine months ended September 30, 2010 compared to $58,816 for the same period in 2009, a 38% increase.
Operating loss for 3Q10 was $842,587 compared to $754,180 for the same period in 2009. After the exclusion of non-cash charges, operating cash burn for the third quarter of 2010 was approximately $711,000, compared to approximately $597,000 for the third quarter of 2009, an increase of about 19%.
Loss per common share -- basic and diluted -- was $0.26 for the third quarter of 2010 compared to $0.35 for the third quarter of 2009. The loss per common share for 3Q10 included an income tax benefit of $244,479.
What’s the Implication for the Company’s Stocks?
We think PBIO has another strong quarter. Total revenue achieved 17% increase year on year, although less stellar than second quarter’s 48% increase. Some investors may be concerned about the yoy 4.8% revenue decline from PCT sales in 3Q10. However, we are not worried about this at all. As we mentioned in our previous reports, Pressure Bio is in the early stage of commercialization of its PCT technology. It takes time for research labs to recognize PCT’s superiority and advantage. Therefore, initial slow sales are understandable and acceptable. We believe sales of the equipment will continue to vary in the short term. But in the long run, we expect to see a relatively stable growth of PCT equipments yoy.
On the other hand, we are impressed by the 22% yoy growth in consumables sales. This growth is very important to the company’s long term sustainable growth in our view. We remind investors consumables are recurring revenue source to the company which are associated with the installation of PCT equipments. When more and more equipments are installed, more consumables will be used. The numbers of installed equipments will eventually go down, but the use of consumables will increase each quarter as the equipment base becomes larger. Although currently, revenue from consumables accounts for only 6.3% of total PCT related revenue, this number will become larger going forward.
Since we initiated our coverage of PBIO in middle August 2010, the company has been making great progress in expanding its PCT applications to new customers in existing areas. At the same time, the company is making great efforts in pushing its key platform technology, PCT, into new application areas which include forensic applications, oil spill clean-up and agricultural applications. Pressure Bio is also in discussions with possible strategic partners on co-marketing and co-development deals. Management indicates that an agreement will be finalized soon.
We believe PBIO is headed in the right direction. The company has made great efforts to expand its applications from conventional use in the life science labs to new frontiers such as in the area of oil spill cleanup, forensic detection and agricultural applications and has been successful in this regard. PCT may become a choice of technology in many sample preparation areas as the company continues to push the envelope.
We believe the new applications of the PCT technology in the oil spill clean-up, forensic, and agricultural areas can lead to increased installation of the instrument and the increased usage of consumables which will ultimately translate into additional top line growth in the future for the company in our view.
We maintain our Outperform rating on the company’s shares and reiterate our six to twelve month price target of $5
Disclosure: No positions