Microbix has an upside of 136 per cent, Industrial Alliance says

A new development at Microbix Biosystems (Microbix Systems Stock Quote, Chart, News, Analysts, Financials TSX:MBX) has Industrial Alliance Securities analyst Chelsea Stellick reaffirming her bullish stance on the stock.

Founded in 1988 and headquartered in Mississauga, Microbix Biosystems develops and commercializes proprietary biological and technological solutions for human health and wellbeing in North America, Europe and internationally.

On August 10, Microbix announced that it had executed a purchase and supply agreement by which Microbix QAPs (quality assessment products) will support assays on what the company described as an “industry-leading molecular (polymerase chain reaction) and antigen-based point-of-care testing platforms”.

“Our firms have been working together for many months and it is a pleasure to fully formalize our close and positive relationship,” said senior VP of sales Phil Casselli. “This Microbix customer is continuing to ensure optimal diagnosis of infectious diseases via leading-edge point-of-care PCR and antigen-based testing, including the quality management system support provided by our FLOQSwab-formatted QAPs.”

Stellick says this recurring revenue signals the next stage of growth for Microbix.

“Investments in R&D and sales and marketing to scale up to the next level of growth have paid off through the addition of approximately $5M in annual incremental QAPs™ sales, through an initial large contract with a diagnostic OEM,” she said. “This supply agreement will materially increase revenues and benefit Microbix’s brand by expanding its reach through the consumable assay kits of a multinational diagnostics company. With a strong balance sheet, improving current ratio, and declining debt ratio, Microbix has the capacity and flexibility to secure additional large customers and expand its reach within the growing diagnostics vertical.”

In a research update to clients Wednesday, Stellick maintained her “Buy” rating and one-year price target of $1.25 on Microbix, implying a return of 135.8 per cent at the time of publication.

Stellick thinks the company will generate EBITDA of $4.8-million on revenue of $20.5-million in fiscal 2022. She expects those numbers will improve to EBITDA of $6.4-million on a topline of $24.5-million the following year.