A cursory glance at a three-year chart of Belleville’s Bioniche Life Sciences (TSX:BNC) illustrates the promise and subsequent disappointment of the company’s plans to expand beyond its core business. A closer look reveals a minor resurgence is underway, as the company has focused on the bottom line during the transition.
For years, Bioniche was better known to your veterinarian than your doctor. The company, which formed in 1979 to develop veterinary bio pharmaceutical products, received worldwide attention three years ago when it was granted a Canadian license for Econiche, the world’s first cattle vaccine against E.coli.
Sales of Bioniche veterinary products such as FOLLTROPIN-V, used to induce ovulation in cows, and SETTLE®, a therapy used to treat inflammation or irritation of the lining of the bovine uterus, helped establish the company as a public entity that grew from $27 million in revenue in 2007 to more than $45 million in fiscal 2010. Fiscal 2011, however, was a disappointment for the company and its shareholders, as Bioniche’s animal health product sales slipped and the company’s foray into human health products did not replace that lost revenue.
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Bioniche actually established a human health division in the early 1990’s, but it wasn’t until 2010 that the potential of the division sparked the imagination of the market. Shares hit a high of $1.80 on October 15th, 2010 on the promise of Urocidin, a product Bioniche has developed to treat non-muscle-invasive bladder cancer that doesn’t respond to current first-line therapy. The company continues to supply a formulation of the treatment to Endo Pharmaceuticals for use in the ongoing Phase III clinical program it expects be completed by December, 2013. But by late last year sales of human health care products were still a drop in the bucket compared to the animal health division.
With sales of animal products slipping, Bioniche shareholders were, on Wednesday, greeted with a “going concern” uncertainty note in the company’s Q2 financial statement, meaning it did not have cash on hand to sustain the next twelve months of operations. But Bioniche management says this note now lags reality for two key reasons.
In the company’s most recent Management Discussion and Analysis, CEO Graeme McRae said Bioniche’s cash position is currently much higher than the Q2 statement because of an outstanding payable of $2.75 million from the Business Development Bank of Canada. This means Bioniche actually has $9.65 million in the bank, not the $6.9 million that was reported. The second reason is that the company now expects to reach a zero burn rate by the end of fiscal 2013. But Bioniche’s renewed focus on its animal health division may, in fact, allow them to do this even more quickly. Q2, 2012 sales of animal health products increased in the quarter by to $7.4 million, up $1.3 million as compared with the same quarter in fiscal 2011. Bioniche management says it has already pulled its burn rate down to $1 million a month in Q2, from the $1.2 it was burning in Q1.
Despite the improved situation of the balance sheet, Mcrae says the company does intend to seek a non-dilutive financing, such as a revolving credit facility or royalty stream debt financing, in the upcoming months.
Share of Bioniche closed down 5.5% to $.69 cents Friday.