Pressure BioSciences: A Low Risk, High Reward Stock In The Biotech Space

| About: Pressure BioSciences, (PBIO)
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Pressure BioSciences Inc. (NASDAQ:PBIO) is a life sciences company 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.

PBIO also markets shredder systems, which are low shear mechanical devices for gentle, rapid and safe disruption of tissues and organisms. Both the PCT Shredder and The SHREDDER SG3 can provide effective extraction of DNA, RNA, proteins, mitochondria, lipids and small molecules from tissues and organisms when used with Shredder Tubes and user's choice of buffers.

The Company's targeted market is research products and services for the life science industry. This market is comprised of academic research institutions (both private and government-sponsored), biotechnology and pharmaceutical companies, and other public and private laboratories. Currently, the Company provides PCT-based sample preparation products for genomic, proteomic, and small molecule studies. Pressure BioSciences also plans to pursue the further development and commercialization of its PCT platform in other life sciences applications such as pathogen inactivation, protein purification, control of chemical reactions, and vaccine production, which could include working with various strategic partners that have greater scientific, and regulatory, expertise in the respective applications.

Pressure BioSciences was formerly known as Boston Biomedica Inc. and changed its name to Pressure BioSciences Inc. in 2004 after Boston Biomedica's core business units were sold. The new company commenced operations as Pressure BioSciences in February 2005 and has been focused exclusively on the development and commercialization of pressure cycling technology. The Company was founded in 1978 and is headquartered in South Easton, Massachusetts.

Unique and Superior Pressure Cycling Technology for Sample Preparation

Pressure BioSciences' major business for research products and services market is based on a unique and superior sample preparation technology: pressure cycling technology (PCT). Its PCT Sample Preparation System (PCT SPS) consists of internally developed instruments and single-use consumables.

The Company's technology platform is based on high hydrostatic pressure technology, a Nobel Prize winning technology. Percy Bridgman from Harvard University won the 1946 Nobel Prize for his innovative work on the physics of substances under high hydrostatic pressure. Based on Percy's concept, Pressure BioSciences established a patented, novel, enabling platform PCT technology with broad applicability in life science research. The mechanisms of action of the PCT SPS differ significantly from other existing sample preparation techniques. Specifically, cell disruption, or lysis, occurs when samples are subjected to well-controlled, alternating cycles of ambient and ultra-high pressure of up to 35,000 psi in the hydrostatic reaction chamber of either of the two Barocycler instruments. This use of rapid and repeated alternating cycles of hydrostatic pressure at controlled temperatures controls the interactions of biomolecules and induces cell lysis for extraction of cell components. There are two components of Pressure BioSciences' PCT Sample Preparation System. The first is the pressure-generating instrument known as the Barocycler, which subjects a sample to cycles of pressure from ambient to ultra-high levels and back to ambient in a precisely controlled manner. The second component of the PCT SPS is the specially designed, single-use processing containers, PULSE Tubes, which contain the laboratory sample and appropriate processing reagents.

The Company's PCT platform employs a unique approach that has the potential for broad applications in a number of established and emerging life sciences areas, including:

  • sample preparation for genomic, proteomic, and small molecule studies
  • pathogen inactivation
  • protein purification
  • control of chemical (primarily enzymatic) reactions; and
  • immunodiagnostics

The PCT Sample Preparation System has the following features and benefits:

  • Safe - PULSE Tubes offer a closed system to reduce sample handling and minimize exposure to pathogens/toxins
  • Fast - Nucleic acids, small molecules, and proteins are released from a wide variety of cells and tissues in minutes
  • Powerful - Up to 35,000 psi can be used to lyse samples and release excellent quality and quantity of bio-molecules
  • Efficient - Up to three samples can be extracted simultaneously, in minutes
  • Versatile - Animal, plant and microbial cells and tissues, particularly those considered "hard-to-extract," can be processed - either standard or user defined protocols can be used
  • Reproducible - Computer controlled protocols mean consistent sample extraction each time, every time

Sample preparation is a significant bottleneck to discoveries in genomic and proteomic research. There are several incumbent technologies that offer scientists varying degrees of success in sample preparation, but there are a number of significant issues related to the use of currently existing methods, including: complexity, sample containment, cross-contamination, shearing of bio-molecules of interest, and limited applicability to different sample types, ease-of-use and reproducibility.

The PCT Sample Preparation System is a novel and enabling system for genomic, proteomic, and small molecule sample preparation that has been shown to offer a number of advantages over other methods of sample preparation. For several years, PBI scientists have been performing comparative studies with thousands of samples to better understand how pressure cycling technology compares with these competitive technologies.

In addition to above mentioned features, the PCT Sample Preparation System offers a number of other significant advantages over other sample preparation techniques. Below is an illustration of how pressure cycling technology compares to several existing, widely used technologies across the key attributes that were assessed (with an "x" denoting a negative attribute, and a "√" denoting a positive attribute, and "Min" denoting a minimally sheared product).

PCT SPS outperforms others

Key Attributes

Incumbent Technologies



Bead Beating

Tissue Homogenizer

Mortar Pestle

French Press

Closed System





Storage, Transport























Shearing Molecules







The Niche Market, Rather Large but Underserved

PBIO is currently targeting the research products and services market. Since February 2005, PBI has focused substantially all of its research and development and commercialization efforts on sample preparation for genomic, proteomic, and small molecule studies. This market is comprised of academic and government research institutions, biotechnology and pharmaceutical companies and other public and private laboratories that are engaged in studying genomic, proteomic and small molecule materials within plant and animal cells and tissues.

The research products and services market is a multi-billion dollar market. Sales from Life Technologies Corp. (NASDAQ:LIFE) alone were $3.8 billion in 2012 and revenue from Qiagen NV (QEGN) also crossed the $1 billion mark in 2009, and reached $1.3 billion in 2012. 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 the pharmaceutical/biotech industry and reduction of government research grants 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 (NASDAQ:AFFX).

Research laboratories were previously using a "home brew" batch procedure for sample preparation before the process was greatly simplified by Qiagen and other commercial companies. 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.

PBIO's customers include researchers at academic laboratories, government agencies and biotechnology and pharmaceutical research facilities. In the future, the company plans to further expand PCT applications beyond its current focus area of genomic, proteomic and small molecule sample preparation and expand its customer base to include hospitals, reference laboratories, blood banks and transfusion centers, plasma collection centers, pharmaceutical manufacturing plants, and other sites involved in specific applications that can benefit with the PCT platform. International expansion is also important to boost its revenue base and sustain growth in the long run.

One of the Company's targeted markets in the sample preparation market is Mass Spectrometry. Mass spectrometry is one of the most powerful laboratory tools used today, and is frequently used by research scientists to study proteins and nucleic acids (DNA and RNA). It is playing an increasingly important role in the analysis of biological samples in life sciences research. A number of important companies and research laboratories in this market are currently PBIO's customers, or are in the process of evaluating its technology for use in their laboratories. PBIO is focusing primarily on the application of PCT-enhanced protein digestion and integral membrane extraction for mass spectrometry and other clear advantages of PCT in this market.

The process of preparing samples for genomic, proteomic and small molecule studies includes a crucial step called sample extraction, or sample disruption. This is the process of extracting nucleic acid (DNA and/or RNA), proteins, or small molecules from plant or animal cells and tissues that are being studied. Sample preparation is widely regarded as a significant impediment to research and discovery, and sample extraction is generally regarded as the key part of sample preparation. PBIO's current commercialization efforts emphasize that pressure cycling technology provides a superior solution to sample extraction compared to other available technologies or procedures, and can thus significantly improve the quality of sample preparation. Indeed, because virtually all aspects of the sample preparation can be controlled, we believe that the PBI solution may well be the new "standard" of sample preparation for not only the Mass Spectrometry market, but many other markets where this exquisite level of control is necessary.

This is where the company's business opportunity lies. PCT is an enabling platform technology based on a bio-physical process that had not previously been used to control bio-molecular interactions. Although PBIO's currently targeted market is sample preparation, research studies so far have demonstrated that PCT can be used both within and outside the sample preparation market.

In addition to genomic, proteomic and small molecule sample preparation, PCT is potentially beneficial in a number of other areas of the life sciences, including pathogen inactivation, protein purification, control of chemical (particularly enzymatic) reactions, and immunodiagnostics. We believe the Company will target these markets after it has sufficiently penetrated the sample preparation market. The penetration of these new markets will further boost the Company's top line and provide sustainable growth for the company.

Two New Products Will Be Launched Soon and Will Accelerate Revenue Growth

We recently talked to management of PBIO about the company's development plan of new products. Management indicated that two new instruments will be launched in 2014.

The HUB880 will be launched during 1Q14 and the High Throughput Barocycler will be launched in June 2014.

The HUB880 is a first-in-kind instrument. It will generate pressures up to 100,000 psi. This is the type of pressure that will be very helpful to scientists making vaccines, to researchers in the food industry (pathogen inactivation studies), material science applications (quality control of petroleum, hydraulic fluid, plastics, valves, etc.). And it will play an important role in life sciences research as these pressures will unravel the secrets of many biological substances that are not extracted/inactivated/recovered/etc. at "lower" pressures. This instrument is expected to be released in 1Q14.

PBIO's HUB880 targets the large market of vaccines, food industry and material science.

The High Throughput (HT) Barocycler uses the disposable microwell strips that are universally used by labs worldwide. PBIO's ability to perform PCT with these strips will allow the Company to directly integrate its PCT instruments with the current automated robotically-driven microwell templates used by thousands of labs worldwide. This instrument is expected to be launched in June 2014.

The high throughput system is a breakthrough technology for PBIO. PBIO announced in June 2013 that they have achieved and passed proof-of-principle objectives in their multi-year investment into the development of a high throughput system for their patented pressure cycling technology (PCT) platform. The new HT design will allow their PCT platform to integrate with the automated, universally accepted HT sample preparation and analytical system formats installed in tens of thousands of biological research laboratories worldwide.

This breakthrough also has the potential to significantly accelerate its growth in existing and new PCT-based applications and products, and its ability to attract and form new strategic partnerships.

There are more than 80,000 research laboratories working with biological samples worldwide and many of these laboratories use automated, HT sample preparation and analytical systems in their studies. HT systems generally use sample handling robotics and "multiwell" test plates in standardized formats (e.g., 24, 96, or 384 wells per plate) for processing and testing large numbers of samples simultaneously. The multiwell plate is often processed in an automated fashion, allowing scientists to perform other important tasks while samples are being processed unattended.

Although a number of studies have shown significant advantages of the PCT platform in preparing biomolecules (e.g., DNA, proteins, and lipids) for analysis, the PCT platform continues to be used primarily in small but important research studies. Unlike today's popular HT multiwell plates that use an automated, unattended approach, the PCT Platform uses individual test tubes that require a lot of manual sample handling. These manual sample handling requirements have prevented the PCT platform from being better accepted by the research community. To that end, PBIO's new HT multiwell format will substantially enhance and accelerate the acceptance of the PCT platform in the life sciences R&D marketplace. This technology breakthrough is a game-changer for PBIO in our view.

While the new HT multiwell PCT platform has the potential to significantly accelerate growth in existing and new PCT applications and products, installed base and strategic partnerships, both HUB880 and the new HT will accelerate sales reach and overall revenue growth in fiscal 2014 and beyond.

Record Revenue Reported for 3Q13, Continued Revenue Growth Expected for 4Q13 and Year 2014

On November 7, Pressure BioSciences, Inc. reported financial results for the three months ended September 30, 2013, and provided a business update.

Total revenue for the third quarter of 2013 was $420,762 compared to $391,616 for the same period in 2012, an increase of 7.4%.

Revenue from the sale of products and services was $327,958 for the third quarter of 2013 compared to $297,867 for the same period in 2012, an increase of 10%.

Grant revenue for the third quarter of 2013 was $92,804 compared to $93,749 for the comparable period in 2012.

Sales of consumables were $51,450 for the three months ended September 30, 2013, compared to $27,993 for the same period in 2012, an increase of 84%.

Operating loss for the third quarter of 2013 increased to $844,033, from $686,520 for the same period in 2012. This increase was mainly due to increased costs associated with the expansion of the company's strategic marketing and sales alliance with Constant Systems and with its marketing and sales plan in general, with the development of the company's new High Throughput and HUB880 Barocycler instruments, and quarter over quarter cost increases in patent, investor relations, and outside services.

Loss per common share - basic and diluted - was $0.06 for the third quarter of 2013 compared to $0.09 for the same period in 2012.

As of September 30, 2013, PBIO had cash and cash equivalents of $66,680. Management has been committed to strengthening its balance sheet by raising new funds to grow its business.

We are very pleased with the third quarter financials. The company has made the following notable achievements:

  • recorded record quarterly total revenue of $420,762;
  • recorded record quarterly products and services revenue of $327,958;
  • recorded record quarterly consumable products sales of $51,450;
  • recorded record quarterly Shredder System sales of $50,480;

We are especially impressed with the increased revenue from consumables in the third quarter. Sales of PCT-based consumables generated revenue of $51,450 in 3Q13, a record revenue from consumables. This compares to $26,034 for the three months ended June 30, 2013, an increase of 98%. This is important to PBIO as we previously said. As more and more PCT instruments are installed, more consumables will be used on these instruments. Revenue from consumables is recurring, which will increase with the number of installed PCT instruments.

The financial success in 3Q13 was achieved from the company's continued progress in implementing its aggressive sales and marketing plan. PBIO expanded its strategic marketing and sales program with Constant Systems, increased its social media presence, revamped its corporate website, and increased its support of and training programs with its distributors. PBIO increased its marketing presence in the life sciences area, and increased its sales outreach to potential users of the PCT system. These efforts resulted in record instrument and consumable sales for the quarter.

PBIO has reported three consecutive quarters with total revenue exceeding the prior year period. Management disclosed that the company had a very strong start in the first five weeks of Q4. We believe sales will continue to grow in 4Q2013 and in fiscal 2014.

For 4Q13, we estimate product sales will be $0.25 million, an increase of 104% over $0.12 million for 4Q12. Total product sales will reach $1 million and total revenue for the year of 2013 will reach the $1.5 million mark for the first time in the company's history according to our estimate.

Based on the two new product launches and continued marketing efforts by management, we estimate product sales will reach $1.5 million in fiscal 2014, an increase of 45.6% over $1 million product sales for fiscal 2013.

Novel Use of PCT Platform Offers New Insights into Protein Structure and Function

On Aug. 1, 2013, PBIO announced that data supporting important advantages of PBIO's powerful and enabling Pressure Cycling Technology (PCT) platform were presented at the 27th Annual Symposium of the Protein Society held July 20-23, 2013 in Boston, Massachusetts.

The use of highly sophisticated analytical instrument systems by research scientists worldwide has resulted in a greater understanding of complex biological molecules, including proteins. One such instrument system, Electron Paramagnetic Resonance (EPR) spectroscopy, has been shown to provide key information on the structure, flexibility and function of proteins. This information is crucial to the development of new and better diagnostics, therapeutics and vaccines.

At this year's annual Protein Society symposium, researchers from UCLA reported on the development of an improved EPR system based on the use of high pressure. This novel system combined (for the first time ever) two cutting-edge EPR methods: site directed spin labeling (SDSL) and double electron-electron resonance (DEER). This strategy allowed the investigation of dynamic events in proteins that would be difficult or even impossible to study by conventional EPR technology.

These and other data reported by researchers using pressure-based EPR and NMR systems strongly indicate that PCT can enhance the recovery, detection and measurement of proteins from a wide variety of samples. In turn, this information has the potential to help accelerate the design and manufacture of new and better diagnostics, therapeutics and vaccines. We believe that the advantages of pressure-based spectroscopic methods are just now beginning to be realized by scientists, and that as the body of data continues to grow from high pressure-based spectroscopic studies, that PBIO has the potential to become a major provider of high pressure equipment into the exciting and growing spectroscopy area.

Valuation Is Very Attractive

We maintain our Outperform rating on PBIO shares and reiterate our twelve-month price target of $1.25.

Our call is based on two factors: financial results and business development are improving and valuation is very attractive.

PBIO reported record product sales and total revenue for 3Q13, and we expect continued revenue growth in 4Q13 and fiscal 2014 due to the two new products launch and continued marketing efforts from management.

In terms of valuation, we think PBIO shares are undervalued based on the Company's fundamentals. Currently, the Company trades around $0.30 per share with a market cap of $3.6 million. We believe this deeply undervalues the Company based on the current fundamentals mentioned above. We understand the market discounts the value of the Company because the Company has only a limited revenue base and has been losing money since its inception. We also understand that the Company has a relatively weak balance sheet, and further financing will be needed. However, when we look at the Company and the industry in which it operates in more detail, we realize that this is a company with huge opportunity and one that can grow its revenue and earnings at a tremendous rate in the next few years.

PBIO operates in the rather large, but underserved research services market. The Company has developed a unique and superior pressure cycling technology (PCT) for the preparation of biological laboratory samples. The Company's PCT platform holds competitive advantages over incumbent technologies in many important aspects related to sample preparation.

Currently, the Company is in the early stage of commercialization of its platform technology. We have realized that sales have not been stellar so far, but this is understandable. Pressure cycling technology is quite new to most customers in the sample preparation market, and the costs for PCT are also higher than those for most existing technologies. Therefore, rollout of the PCT platform will take time. However, once customers become familiar with the new PCT platform, and realize its advantages over existing technologies, uptake of PCT and its consumable products by the industry will increase dramatically in our view.

We are especially optimistic about the Company's collaboration programs, which will generate great awareness of the PCT platform among researchers in the sample preparation market. We are also impressed with the potential of the PCT technology in new application areas such as in the forensic, oil spill clean-up, agricultural applications and lipids extraction.

PBIO has established extensive distribution partnerships with leading companies in the life science industry. With continued marketing efforts and a clear growth strategy in place, sales should pick up steam in the coming quarters.

We are now optimistic about the Company's prospects. With a rapidly growing market worldwide, combined with its unique technology and broad range of product offerings, the Company is well positioned to boost its top line and bottom line in the coming years. According to our long-term financial model, the company's revenue will grow at a compound annual growth rate (CAGR) of 89% in the next three fiscal years from 2013 to 2015.

We think PBIO is more like a development stage biotech company. Our price target of $1.25 per share values the company at 15 million in market cap based on 12 million outstanding shares. This valuation is still very conservative in our view. As long as the Company can execute its growth strategy correctly, we believe this goal is achievable. At its current market price of $0.30, we think the downside risk is relatively low and the upside potential is high. Patient investors will get rewarded.

But keep in mind the risks. PBIO is a micro-cap biotech company currently trading on the OTC. Trading volume is relatively low and its price will certainly fluctuate. Another concern is its cash burn. As of September 30, 2013, PBIO had cash and cash equivalents of $66,680. Management has been committed to strengthening its balance sheet by raising new funds to grow its business. We remind investors that equity financing will dilute the existing shareholder base. As a means of reducing individual risk, we suggest investors to consider diversification.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: I work as a Consultant Analyst for Zacks Investment Research. The article is written by me and is 100% my opinion. I receive compensation from Zacks for writing equity research reports and providing valuation analysis on this company’s stock and expect to do so in the future. Zacks receives compensation from the company. Please see the Zacks Disclaimer for further information: