Pressure BioSciences (OTCQB:PBIO) has received an upgraded "outperform" rating from its prior "neutral" by analysts at Zacks Investment Research Thursday, who called the life science company's valuation "very attractive at this time".
"We are impressed and optimistic about the company's novel, enabling platform technology pressure cycling technology (PCT) which has competitive advantages over existing technologies in the sample preparation market," notes analyst Grant Zeng.
"PCT is increasingly gaining recognition by research labs. The company just reported record PCT product sales in 3Q12 and we expect continued growth in 4Q12 and beyond."
Indeed, earlier this month, the company posted a 40 per cent increase in revenues for its third quarter, reporting record sales of its PCT products.
The life sciences company's PCT platform uses rapid and repeating cycles of hydrostatic pressure at controlled temperatures to extract cell components in the preparation of a biological sample - such as DNA and proteins from humans, animals and plants - for further study.
Its PCT products can be used for mass spectrometry, biomarker discovery, bio-therapeutics, vaccine development, forensics, and counter-bioterror applications, among other applications.
For the three months that ended September 30, total revenue rose to $391,616 from $280,422 in the same period a year ago. Revenue from PCT products and services was $297,867 in the latest period, up 37 per cent year-over-year.
Third quarter product sales were also $0.05 million over Zacks' estimate of $0.25 million, the report notes.
The company said it installed eight PCT sample preparation systems in the latest period, while sales of PCT-based consumables generated sales of around $28,000 - a rise of 33 per cent.
Loss per common share - basic and diluted - was nine cents for the third quarter compared to 19 cents for the same period in 2011.
"We are especially happy to see increased sales of consumables for the quarter. We expect the sales of consumables will continue to grow in the coming quarters. As we pointed before, this growth in consumables sales is very important to the company's long term sustainable growth," Zeng says.
He reminds investors that consumables are a recurring revenue source to the company with higher margin, which are associated with the installation of PCT equipments.
"When more and more equipments are installed, more consumables will be used. The growth of installed equipments will eventually stabilize, but the use of consumables will increase each quarter as the equipment base becomes larger."
Although revenue from consumables currently accounts for only a small portion of PCT product sales, at about 10 per cent, Zeng expects this number will become larger going forward and make a "meaningful contribution to the top line."
What's more, the company also announced two significant pieces of news this week.
On Wednesday, Pressure BioSciences announced a boost to its balance sheet, after Ironridge BioPharma converted their remaining 200 shares of Pressure's Series E convertible preferred stock into common stock.
The funds received were used in part to support the new marketing and sales program that the company introduced earlier this year, which helped Pressure BioSciences achieve record PCT products revenue in the third quarter.
"With the conversion, the perceived overhang is gone, and PBIO paid out no more shares than originally registered. The conversion not only boosts PBIO's balance sheet, but also validates the company's PCT technology platform," Zeng assures.
"This is an indication that Ironridge BioPharma is optimistic about PBIO's prospect and is willing to become its long term investor." Ironridge BioPharma is an institutional investor specializing in equity investments in the life sciences sector.
The second significant event for the company took place on Monday, when it inked a two-way strategic marketing, selling and distribution agreement with UK-based biomedical product provider Constant Systems, with the deal to expand Pressure's international reach into 12 additional countries.
Under the agreement, US-based Pressure BioSciences now has non-exclusive rights to market, sell and distribute Constant Systems' high pressure cell disruption equipment and consumables, which are used particularly for the extraction of proteins, in the US, Canada and Mexico.
Meanwhile, Constant gets the rights to market, sell, and distribute Pressure BioSciences' patented PCT-based instruments and consumables in England, Scotland, Wales, Ireland, Spain, Portugal, Italy, Norway, Sweden, Finland, Denmark, and Singapore.
The parties have also started discussions on the possibility of expanding the agreement to include cooperative research, development, and manufacturing in the near future.
"This is a big deal for PBIO in our view," Zacks' report notes. "The two companies are worldwide leaders of complementary ultra-high pressure product lines for the life sciences market.
"The two product lines complement each other exceedingly well. While both the CS and PBIO technologies are based on high pressure, each product line has fundamental scientific capabilities that the other does not have."
Word of the company is spreading. Earlier this month, two separate research groups presented data at a recent scientific world congress showing that the inclusion of the company's PCT platform into their sample preparation processes resulted in a "marked improvement in the quality and/or efficiency of test results."
And in a recent article from influential financial markets blog Seeking Alpha, contributor Vineet Dutta wrote about the fact that biotech services giant Thermo Fisher's (NYSE:TMO) unit Cole-Parmer recently agreed to carry Pressure BioSciences' PBI Shredder SG3 System.
"With Cole-Parmer s reputation and extensive distribution channels, sales of SG3 will be greatly boosted in the coming quarters, which will make a meaningful contribution to PBIO s top line growth down the road," Zeng highlights.
The company also signed three global distribution deals back in the summer, expanding its reach even further.
Zacks' analyst has a $1.25 price target on the company, based on two factors - improving financial results and business development, and an attractive valuation.
In terms of valuation, he notes that Pressure BioSciences' shares are undervalued based on the company's fundamentals, as it trades around 20 cents per share, with a market cap of $2.0 million.
Zeng concludes: "With a rapidly growing market worldwide, combined with its unique technology and broad range of product offering, the company is well positioned to boost its top line and bottom line in the coming years."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.