Update: BioLife Q2 Earnings - Strong Growth Reaffirms Bull Thesis

| About: BioLife Solutions, (BLFS)
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BioLife reported earnings for Q2 2014 on August 7.

I reiterate my bull thesis based on rising core product revenues and growing margins.

I anticipated increased product sales of BioLife's biopreservation media this quarter. The Q2 earnings report corroborates this position.

In May I wrote a PRO article with a thesis stating that BioLife Solutions Inc. (NASDAQ:BLFS) is an undervalued and de-risked, long-term life sciences investment opportunity, but a sustained negative sentiment surrounding the regenerative medicine sector, a lack of awareness of BioLife's rather speculative CryoStor and HypoThermosol biopreservation media segment, and a general market decline were holding back shares. Nevertheless, the recent multi-year contract manufacturing agreement with Somahlution LLC, and the acquisition of a new Cryostor clinical customer, TxCell, have driven shares higher over the last several months, up approximately 15% since my initial recommendation. And with BioLife's strong Q2 earnings performance, I suspect additional upward movement in corroboration of my bullish thesis on this emerging, but relatively unknown "sleeper" play.

As reported by Yahoo, some key highlights of BioLife's Q2 earnings report are as follows:

  • Core product revenue increased 29% to $2.2 million over six months ended June 30, as compared to the same period for 2013. For Q2 2014, however, core product revenue increased 14% to $1.1 million as compared to Q2 2013.
  • Total revenue decreased 48% to $1.2 million, as compared to Q2 2013.
  • Gross margin increased to 45%, as compared to 35.6% in the same period in 2013.
  • Net loss increased to $883,356, as compared to $282,506 in Q2 2014 and $559,371 in Q1 2014.

The strong earnings performance was driven by a variety of factors. Product revenues benefited from an increase in sales to regenerative medicine market and cell suppliers. Nevertheless, overall revenues dropped substantially due to the cancellation of BioLife's contract manufacturing services agreement with Organ Recovery Systems, after receiving confirmation that no further purchase orders would be issued. Given that this contract represented 90% of BioLife's contract manufacturing revenue, it shouldn't be a surprise that the company experienced a 48% decline as compared to Q2 2013, when the agreement was still intact. Nevertheless, as reiterated today, BioLife entered into a long-term contract manufacturing agreement with Somahlution LLC this quarter. Since it is expected to begin product delivery of DuraGraft to Somahlution in Q4 2014, BioLife should be able to offset the 48% drop in revenue seen in Q2. Also worth noting is the healthy flow of revenue from BioLife's core products. Despite the fact that none of its clinical customers have advanced their products to market - which is where the true value of BioLife's core segment lies - the company still managed to generate $1.1 million. As revenues continue to rise across the board, I believe this sleeper company will start to wake up in a big way, and, thus, I reiterate my bullish position on BioLife.

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

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