Chembio Diagnostics, Inc. (“Chembio” or the “Company”) (Nasdaq:
CEMI), a leading point-of-care diagnostics company focused on
infectious diseases, today reported financial results for the
quarter ended June 30, 2022.
Recent Highlights
- Achieved second quarter 2022 total revenue of $9.2 million
including product revenue of $8.9 million, representing growth of
42% and 125%, respectively, compared to the prior year period:
- U.S. product revenue of $3.4 million, representing growth of
208% compared to the prior year period
- Africa product revenue of $3.1 million, representing growth of
114% compared to the prior year period
- Completed manufacturing and most of the shipments under the $4
million HIV test purchase order supported by The Global Fund
- Broadened relationship with Reszon Diagnostics International to
manufacture HIV1/2 STAT-PAK in the Chembio Diagnostics Malaysia
facility and to increase commercial presence in the Asia-Pacific
region
- Expanded Direct-to-Consumer channel for the commercialization
of the Sure Check HIV Self-test in Brazil and the United Kingdom,
and the third-party SCoV-2 Ag Detect Self-Test in the United
States
- Improved cash usage in the second quarter of 2022 to $1.6
million, from $8.8 million in the prior year period and $4.4
million in the preceding quarter, with a cash and cash equivalents
balance as of June 30, 2022 of $22.8 million
“We are pleased with our performance in the
second quarter including strong sales growth driven by
contributions from our core products and a significant improvement
in cash burn,” said Richard Eberly, Chembio’s President and Chief
Executive Officer. “During the quarter we made continued progress
with our Global Competitiveness Program – positioning the team to
drive adoption of our core higher margin products in high-growth
markets, and expanding manufacturing capabilities through
automation and a contract manufacturing agreement leveraging our
facility in Malaysia. Additionally, we are excited to advance key
new product development and regulatory initiatives, all of which
help define a path to more profitable growth.”
Second Quarter 2022 Financial
ResultsTotal revenue for the second quarter of 2022 was
$9.2 million, an increase of 42% compared to the prior year period.
Net product sales for the second quarter of 2022 were $8.9 million,
an increase of 125% compared to the prior year period. Government
grant, license and royalty, and R&D revenue for the second
quarter of 2022 totaled $0.3 million, a decrease of 88% compared to
the prior year period.
Gross product margin for the second quarter of
2022 was $0.8 million, compared to negative $0.1 million for the
prior year period. Gross product margin percentage for the second
quarter of 2022 was 9%, compared to negative 3% for the prior year
period. Gross product margin improvement in the second quarter of
2022 was driven by product mix and operational productivity.
Research and development expenses decreased by
$0.8 million, or 27%, compared to the prior year period to $2.0
million in the second quarter of 2022.
Selling, general and administrative expenses
decreased by $0.8 million, or 13%, compared to the prior year
period to $5.2 million in the second quarter of 2022.
Net loss for the second quarter of 2022 was
($6.9) million, or ($0.23) per diluted share, compared to a net
loss of ($9.1) million, or ($0.45) per diluted share, for the prior
year period.
Cash and cash equivalents as of June 30, 2022 totaled $22.8
million, compared to $24.4 million at March 31, 2022.
Conference CallChembio will
host a conference call today beginning at 4:30 pm ET to discuss its
financial results and recent business highlights. Investors
interested in listening to the call may do so by dialing
888-506-0062 from the United States or 973-528-0011 from outside
the United States and providing entry code 558147. To listen to a
live webcast of the call, please visit the Investor Relations
section of Chembio's website at www.chembio.com. Following the
call, a replay will be available on the Investor Relations section
of Chembio’s website. A telephone replay will be available until
4:30 pm ET on August 18, 2022 by dialing 877-481-4010 from the
United States or 919-882-2331 from outside the United States and
using passcode 45932.
About Chembio
DiagnosticsChembio is a leading diagnostics company
focused on developing and commercializing point-of-care tests used
for the rapid detection and diagnosis of infectious diseases,
including sexually transmitted disease, insect vector and tropical
disease, COVID-19 and other viral and bacterial infections,
enabling expedited treatment. Coupled with Chembio’s extensive
scientific expertise, its novel DPP technology offers broad market
applications beyond infectious disease. Chembio’s products are sold
globally, directly and through distributors, to hospitals and
clinics, physician offices, clinical laboratories, public health
organizations, government agencies, and consumers. Learn more at
www.chembio.com.
Going Concern Considerations
The Company continued to experience market, clinical trial and
regulatory complications in seeking to develop and commercialize a
portfolio of COVID-19 test systems during the continuing, but
evolving, uncertainty resulting from COVID‑19. For the three and
six months ended June 30, 2022, the Company also continued to incur
significant expenses in connection with pending legal matters.
The Company performed an assessment to determine
whether there were conditions or events that, considered in the
aggregate, raised substantial doubt about the Company’s ability to
continue as a going concern within one year after the date the
accompanying unaudited condensed consolidated financial statements
are being issued. Initially, this assessment did not consider the
potential mitigating effect of management’s plans that had not been
fully implemented. Because, as described below, substantial doubt
was determined to exist as the result of this initial assessment,
management then assessed the mitigating effect of its plans to
determine if it is probable that the plans (1) would be effectively
implemented within one year after the date the accompanying
unaudited condensed consolidated financial statements are issued
and (2) when implemented, would mitigate the relevant conditions or
events that raise substantial doubt about the Company’s ability to
continue as a going concern.
The Company achieved significant revenue growth
in recent years while profitability has not been at levels as
expected. It has taken steps including investments in automation to
mitigate headwinds such as labor availability, volatile capacity
planning and implementation of operational efficiency targets to
proactively monitor production with the overarching goal of
profitable growth. The Company undertook measures to increase its
total revenues and improve its liquidity position by continuing to
develop the Global Competitiveness Program. The main pillars of the
Global Competitiveness Program include the following:
- Focus on higher margin business in growth markets
- Lower manufacturing costs
- Reduce infrastructure costs
- Strategic review of non-core businesses and assets
In addition, the Company will continue to focus
on regulatory approvals for its DPP SARS-CoV-2 Antigen test system,
DPP Respiratory Antigen Panel, and DPP HIV-Syphilis test system.
These measures and other plans and initiatives have been designed
to provide the Company with adequate liquidity to meet its
obligations for at least the twelve-month period following the date
the accompanying unaudited condensed consolidated financial
statements are being issued. The Company’s execution of its plans
continue to depend, however, on factors and uncertainties that are
beyond the Company’s control, or that may not be addressable on
terms acceptable to the Company or at all. The Company considered
in particular how:
- The ongoing healthcare and economic impacts of COVID-19 on the
global customer base for the Company’s non‑COVID-19 products
continue to negatively affect the timing and rate of recovery of
the Company’s revenues from those products.
- Although the Company has entered into agreements to distribute
third-party COVID-19 products in the United States, its ability to
sell those products could be constrained because of staffing and
supply chain limitations affecting the suppliers of those
products.
The Company further considered how these factors
and uncertainties could impact its ability over the next year to
meet the obligations specified in its Credit Agreement with the
Perceptive Credit Holdings II, LP. Those obligations include
covenants requiring: i) minimum cash balance of $3.0 million and
ii) minimum total revenue amounts for the twelve months preceding
each quarter end. For the next four quarters, the minimum total
revenue requirements range from $45.6 million for the twelve months
ending September 30, 2022 to $50.1 million for the twelve months
ending June 30, 2023. Upon an event of default under
the Credit Agreement, Perceptive Credit Holdings II, LP could elect
to declare all amounts outstanding thereunder, together with
accrued interest, to be immediately due and payable. In such an
event, there can be no assurance that the Company would have
sufficient liquidity to fund payment of the amounts that would be
due under the Credit Agreement or that, if such liquidity were not
available, the Company would be successful in raising additional
capital on acceptable terms, or at all, or in completing any other
endeavor to continue to be financially viable and continue as a
going concern. The Company’s inability to raise additional capital
on acceptable terms in the near future, whether for purposes of
funding payments required under the Credit Agreement or providing
additional liquidity needed for its operations, could have a
material adverse effect on its business, prospects, results of
operations, liquidity and financial condition.
Accordingly, management determined the Company
could not be certain that the Company’s plans and initiatives would
be effectively implemented within one year after the date on which
the accompanying unaudited condensed consolidated financial
statements are being issued. Without giving effect to the prospect
of raising additional capital, increasing product revenue in the
near future or executing other mitigating plans, many of which are
beyond the Company’s control, it is unlikely that the Company will
be able to generate sufficient cash flows to meet its required
financial obligations, including its debt service and other
obligations due to third parties. The existence of these conditions
raises substantial doubt about the Company’s ability to continue as
a going concern for the twelve-month period following the date on
which the accompanying unaudited condensed consolidated financial
statements are being issued.
The accompanying unaudited condensed
consolidated financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates
continuity of operations, realization of assets and the
satisfaction of liabilities in the normal course of business for
the twelve-month period following the date the accompanying
unaudited condensed consolidated financial statements are issued.
As such, the accompanying unaudited condensed consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of assets and their carrying
amounts, or the amount and classification of liabilities that may
result should the Company be unable to continue as a going
concern.
Forward-Looking
StatementsCertain statements contained in the third and
fourth bulleted items under “Recent Highlights” above and in the
paragraph following the bulleted items under “Recent Highlights”
above are not historical facts and may be forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include statements
regarding the intent, belief or current expectations with respect
to Reszon Diagnostics International’s manufacturing products and
Chembio’s increasing its commercial presence in the Asia-Pacific
region; Chembio’s expanding the Direct-to-Consumer channel for the
commercialization of the Sure Check HIV Self-test in Brazil and the
United Kingdom, and the third-party SCoV-2 Ag Detect Self-Test in
the United States; Chembio’s continued progress with its Global
Competitiveness Program, positioning it to drive adoption of its
core higher margin products in high-growth markets, and expanding
manufacturing capabilities through automation and a contract
manufacturing agreement leveraging its facility in Malaysia; and
Chembio’s advance key new product development and regulatory
initiatives, all of which help define a path to more profitable
growth. Such statements, which are expectations only, reflect
management's current views, are based on certain assumptions, and
involve risks and uncertainties. Actual results, events or
performance may differ materially from forward-looking statements
due to a number of important factors, and will be dependent upon a
variety of factors, including, but not limited to, the following,
any of which could be exacerbated even further by the continuing
COVID-19 outbreak in the United States and globally: the ability of
Chembio to continue to generate revenue from the HIV test purchase
order supported by The Global Fund or other product orders, and the
margins it can realize from that revenue, or its ability to develop
new products, will depend on the availability and cost of human,
material and other resources required to build and deliver the
tests, which factors are largely outside Chembio’s control; the
ability of Chembio to maintain existing, and timely obtain
additional, regulatory approvals, which approvals are subject to
processes that can change on a recurrent basis without notice; the
highly competitive and rapidly developing diagnostics market, which
includes a number of competing companies with strong relationships
with current and potential customers, including governmental
authorities, and with significantly greater financial and other
resources that are available to Chembio; and the risks of doing
business with foreign governmental entities, including
geopolitical, international and other challenges as well as
potential material adverse effects of tariffs and other changes in
U.S. trade policy. Chembio undertakes no obligation to publicly
update forward-looking statements in this release to reflect events
or circumstances that occur after the date hereof or to reflect any
change in Chembio's expectations with regard to the forward-looking
statements or the occurrence of unanticipated events. Factors that
may impact Chembio's success are more fully disclosed in Chembio's
periodic public filings with the U.S. Securities and Exchange
Commission, including its Annual Report on Form 10-K for the fiscal
year ended December 31, 2021, its Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2022 and in subsequent filings,
particularly under the headings “Risk Factors.”
DPP is Chembio’s registered trademark, and the
Chembio logo is Chembio’s trademark. For convenience, these
trademarks appear in this release without ® or ™ symbols, but that
practice does not mean that Chembio will not assert, to the fullest
extent under applicable law, its rights to the trademarks. All
other trademarks appearing in this release are the property of
their respective owners.
Investor Relations
ContactPhilip TaylorGilmartin Group(415)
937-5406investor@chembio.com
CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited) |
|
|
|
|
|
|
|
|
|
For the three months ended(Unaudited) |
|
For the six months ended(Unaudited) |
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
REVENUES: |
|
|
|
|
|
|
|
Product revenue |
$ |
8,858,146 |
|
|
$ |
3,931,383 |
|
|
$ |
27,385,602 |
|
|
$ |
7,956,045 |
|
R&D revenue |
|
8,046 |
|
|
|
727 |
|
|
|
26,219 |
|
|
|
1,107,366 |
|
Government grant income |
|
- |
|
|
|
2,280,000 |
|
|
|
- |
|
|
|
5,630,000 |
|
License and royalty
revenue |
|
295,238 |
|
|
|
250,000 |
|
|
|
566,220 |
|
|
|
493,058 |
|
TOTAL
REVENUES |
|
9,161,430 |
|
|
|
6,462,110 |
|
|
|
27,978,041 |
|
|
|
15,186,469 |
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
|
Cost of product revenue |
|
8,086,849 |
|
|
|
4,039,696 |
|
|
|
23,310,710 |
|
|
|
7,588,137 |
|
Research and development
expenses |
|
2,042,351 |
|
|
|
2,796,981 |
|
|
|
3,696,057 |
|
|
|
5,660,319 |
|
Selling, general and
administrative expenses |
|
5,249,980 |
|
|
|
6,001,353 |
|
|
|
12,196,250 |
|
|
|
12,086,422 |
|
Impairment, restructuring,
severance and related costs |
|
- |
|
|
|
1,961,156 |
|
|
|
3,043,179 |
|
|
|
2,044,243 |
|
TOTAL COSTS AND
EXPENSES |
|
15,379,180 |
|
|
|
14,799,186 |
|
|
|
42,246,196 |
|
|
|
27,379,121 |
|
|
|
|
|
|
|
|
|
LOSS FROM
OPERATIONS |
|
(6,217,750 |
) |
|
|
(8,337,076 |
) |
|
|
(14,268,155 |
) |
|
|
(12,192,652 |
) |
|
|
|
|
|
|
|
|
OTHER
EXPENSE: |
|
|
|
|
|
|
|
Interest expense, net |
|
(728,414 |
) |
|
|
(727,374 |
) |
|
|
(1,461,976 |
) |
|
|
(1,439,851 |
) |
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME
TAXES |
|
(6,946,164 |
) |
|
|
(9,064,450 |
) |
|
|
(15,730,131 |
) |
|
|
(13,632,503 |
) |
|
|
|
|
|
|
|
|
Income tax (provision)
benefit |
|
(279 |
) |
|
|
65 |
|
|
|
(6,606 |
) |
|
|
67,955 |
|
|
|
|
|
|
|
|
|
NET LOSS |
$ |
(6,946,443 |
) |
|
$ |
(9,064,385 |
) |
|
$ |
(15,736,737 |
) |
|
$ |
(13,564,548 |
) |
|
|
|
|
|
|
|
|
Basic and diluted loss
per share |
$ |
(0.23 |
) |
|
$ |
(0.45 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding, basic and diluted |
|
30,222,758 |
|
|
|
20,219,617 |
|
|
|
30,156,768 |
|
|
|
20,191,657 |
|
CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
AS OF |
|
|
|
|
|
(Unaudited) |
|
|
|
June 30, 2022 |
|
December 31, 2021 |
|
|
|
|
- ASSETS - |
|
|
|
CURRENT
ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
22,837,453 |
|
|
$ |
28,772,892 |
|
Accounts receivable, net of
allowance for doubtful accounts of $242,671 and $243,042 as of June
30, 2022 and December 31, 2021, respectively |
|
4,255,944 |
|
|
|
11,441,107 |
|
Inventories, net |
|
11,308,660 |
|
|
|
12,920,451 |
|
Prepaid expenses and other
current assets |
|
2,498,447 |
|
|
|
2,096,399 |
|
TOTAL CURRENT
ASSETS |
|
40,900,504 |
|
|
|
55,230,849 |
|
|
|
|
|
FIXED
ASSETS: |
|
|
|
Property, Plant and Equipment,
net |
|
8,843,954 |
|
|
|
8,556,773 |
|
Finance lease right-of-use
asset, net |
|
172,676 |
|
|
|
191,870 |
|
TOTAL FIXED ASSETS,
net |
|
9,016,630 |
|
|
|
8,748,643 |
|
|
|
|
|
OTHER
ASSETS: |
|
|
|
Operating lease right-of-use
assets, net |
|
5,841,382 |
|
|
|
5,891,906 |
|
Intangible assets, net |
|
|
|
Goodwill |
|
|
|
3,022,787 |
|
Deposits and other assets |
|
297,024 |
|
|
|
358,010 |
|
|
|
|
|
TOTAL
ASSETS |
$ |
56,055,540 |
|
|
$ |
73,252,195 |
|
|
|
|
|
- LIABILITIES AND STOCKHOLDERS’ EQUITY - |
|
|
|
CURRENT
LIABILITIES: |
|
|
|
Accounts payable and accrued
liabilities |
$ |
10,051,649 |
|
|
$ |
13,127,993 |
|
Deferred revenue |
|
|
|
Operating lease
liabilities |
|
905,516 |
|
|
|
886,294 |
|
Finance lease liabilities |
|
73,724 |
|
|
|
68,176 |
|
Current portion of
long-term debt |
|
3,000,000 |
|
|
|
1,200,000 |
|
TOTAL CURRENT
LIABILITIES |
|
14,030,889 |
|
|
|
15,282,463 |
|
|
|
|
|
OTHER
LIABILITIES: |
|
|
|
Long-term operating lease
liabilities |
|
5,877,063 |
|
|
|
5,976,151 |
|
Long-term finance lease
liabilities |
|
115,943 |
|
|
|
139,678 |
|
Long-term debt, net |
|
16,126,833 |
|
|
|
17,589,003 |
|
TOTAL
LIABILITIES |
|
36,150,728 |
|
|
|
38,987,295 |
|
|
|
|
|
STOCKHOLDERS’
EQUITY: |
|
|
|
Preferred stock – 10,000,000
shares authorized, none issued or outstanding |
|
- |
|
|
|
- |
|
Common stock - $0.01 par
value; 100,000,000 shares authorized; 30,086,283 shares and
20,223,498 shares issued at June 30, 2022 and December 31,
2021, respectively |
|
302,727 |
|
|
|
301,050 |
|
Additional paid-in
capital |
|
167,041,203 |
|
|
|
165,772,636 |
|
Accumulated deficit |
|
(146,746,597 |
) |
|
|
(131,009,860 |
) |
Treasury stock 41,141 shares
at cost as of June 30, 2022 and December 31, 2021,
respectively |
|
(206,554 |
) |
|
|
(206,554 |
) |
Accumulated other
comprehensive loss |
|
(485,967 |
) |
|
|
(592,372 |
) |
TOTAL STOCKHOLDERS’
EQUITY |
|
19,904,812 |
|
|
|
34,264,900 |
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ |
56,055,540 |
|
|
$ |
73,252,195 |
|
CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS
ENDED(Unaudited) |
|
|
|
|
|
|
|
|
|
June 30 |
|
June 30 |
|
|
|
2022 |
|
2021 |
|
|
Net cash used in
operating activities |
|
(4,802,145 |
) |
|
|
(15,908,660 |
) |
|
|
Net cash used in
investing activities |
|
(1,135,332 |
) |
|
|
(1,299,012 |
) |
|
|
Net cash provided by
financing activities |
|
(74,089 |
) |
|
|
(69,488 |
) |
|
|
Effect of exchange rate changes on cash |
|
76,127 |
|
|
|
(144,947 |
) |
|
|
DECREASE IN CASH AND
CASH EQUIVALENTS |
|
(5,935,439 |
) |
|
|
(17,422,107 |
) |
|
|
Cash and cash equivalents - beginning of the period |
|
28,772,892 |
|
|
|
23,066,301 |
|
|
|
Cash and cash
equivalents - end of the period |
$ |
22,837,453 |
|
|
$ |
5,644,194 |
|
|
|
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