Microbix Biosystems (TSE:MBX) executives said fiscal 2025 results were shaped by an abrupt demand slowdown in the second half of the year, driven by a weaker respiratory disease season and the sudden loss of support work tied to a major instrument development program. Management emphasized, however, that underlying performance outside of those disruptions improved, and the company entered fiscal 2026 with what it described as strong operational capabilities, a sizable business development pipeline, and more than $12 million in cash.
Fiscal 2025: “A tale of two halves”
Chief Financial Officer Jim Currie characterized fiscal 2025 as “certainly a tale of two halves,” with the company meeting or exceeding its budget in the first half before unexpected events hit in the second half. Management highlighted two core setbacks: reduced respiratory testing demand (which lowered demand for test ingredients) and the abrupt termination of a “multi-hundred million dollar instrument development program” supported by Microbix.
Margins, operating expenses, and cash position
Gross margin declined to 53% from 61% the prior year, which Currie attributed largely to the prior year’s Kinlytic milestones carrying “very little cost of sales.” Outside of that comparison, management pointed to improvements in production performance as a positive development in fiscal 2025.
Executives said yields improved significantly on several key antigen products, and batch failures declined substantially—“in some cases, to zero”—which they framed as important for future profitability and scalability.
Operating expenses rose 4% year-over-year. Currie cited lower investment income due to declining interest rates, continued investment in trade shows, and higher R&D spending, primarily in the QAPs area.
Despite a profitable first half and a “sizable loss” in the second half, Currie said Microbix maintained a cash balance of over CAD 12 million at the end of fiscal 2025 and made “sizable investments” in capital equipment and facilities. Management also highlighted additional liquidity sources, including an undrawn mortgage facility of up to CAD 8 million and an undrawn line of credit that could be up to CAD 4 million, subject to bank formulas.
Operational progress and new product initiatives
On the operations side, executives described improved efficiency and expanded capabilities. Chief Operating Officer Ken Hughes said the company has the capacity to meet market needs “in the next little while” and has continued to focus on operational excellence, including higher yields, reduced failure rates, and ongoing implementation of an electronic quality management system integrated with ERP.
Management also discussed adding recombinant antigen production capabilities alongside its existing native antigen capabilities. Hughes said the recombinant program is progressing well, with the first product “ready for prime time imminently,” and described a pipeline of additional products behind it.
During the call, leadership also outlined several business and collaboration initiatives discussed over the year, including:
- New products related to emerging respiratory threats, including H5N1 and H3N2.
- Collaboration with the Australian Centre for the Prevention of Cervical Cancer to support screening programs in multiple Indo-Pacific countries.
- New collaborations with proficiency testing and external quality assessment providers spanning infectious diseases, oncology, molecular pathology, and genetics testing.
- An exclusive supply agreement tied to access to pathogen collections at the Bulgarian National Centre for Infectious and Parasitic Diseases.
- Launch of the QUANTDx reference materials product line, which management said could become as important to revenue as QAPs.
- Collaborations referenced with Sekisui for U.S. point-of-care tests and with Seegene in connection with cervical cancer screening in Mexico.
Outlook for fiscal 2026: recovery and return to profitability target
Chief Executive Officer Cameron Groome said the recovery began in Q4 and is expected to continue “quarter by quarter” through fiscal 2026. He said the company is targeting a return to quarterly profitability “likely in the fourth quarter of fiscal 2026.”
Groome framed the target as approximately 30% growth from the quarterly low point of CAD 3.5 million in Q3. He added that if revenue were flat across fiscal 2026, it would total CAD 14 million, but said management expects to be “substantially higher” based on already-signed projects, emphasizing the company does not include unsigned opportunities in guidance or expectations.
The company also discussed its normal course issuer bid (NCIB). Management said it had renewed the program and could buy at a higher daily level than in fiscal 2025. Groome and Currie said the company budgeted about CAD 1 million for buybacks in the coming year, with the minimum aim of offsetting dilution from stock options.
Kinlytic update, royalties, inventory, and cybersecurity
Executives provided updates on Kinlytic (urokinase). Hughes said work is ongoing with partner Sequel to update manufacturing to contemporary standards, including reducing animal components and enhancing testing. The company is scaling up processes with two CDMOs—one for drug substance and one for drug product—and expects to return to the FDA early in the new year to provide an update on progress. Management described the FDA interactions as supportive and said Kinlytic is already approved, with the project focused on updating manufacturing and adding to the existing file rather than pursuing new clinical validation.
Groome said Microbix’s participation in the Kinlytic upside includes potential one-time milestones totaling up to $31 million and a “double-digit recurring stream of royalties” on revenues, beginning with a U.S. catheter clearance indication, while also aiming for broader geographies and indications.
On inventory, Currie said the company carried higher antigen inventory than planned due to the sudden China distributor slowdown and the decision to convert raw materials into finished goods. He said there was “no risk of write-down,” adding that antigens do not expire and are stored at -80°C. He also said part of the inventory increase related to investments in seed banks, which management viewed as long-term in nature but are treated as inventory under IFRS; Currie estimated roughly CAD 750,000 of the inventory increment related to seed bank investment.
The company also addressed an earlier cybersecurity incident. Management said the intrusion affected a legacy server, did not disrupt operations, and systems were restored from backups within a couple of days. Executives said they have evidence that some data was exfiltrated, including some employee information, and the company provided credit monitoring and protection for staff. Management said it did not pay, and does not intend to pay, any ransom.
Finally, Currie explained a Q4 increase in royalties was driven by annual reporting tied to rabies-related royalties, which are reported once a year in mid-December; the company had accrued royalties during the year using prior-year results, and the final report showed a stronger year than expected, leading to incremental revenue recognized in Q4.
About Microbix Biosystems (TSE:MBX)
Microbix develops proprietary biological technology solutions for human health and well-being, with about 90 skilled employees and sales growing from a base of over $1 million per month. It makes a wide range of critical biological materials for the global diagnostics industry, notably antigens for immunoassays and its laboratory quality assessment products that support clinical lab proficiency testing, assay development and validation, or clinical lab workflows.
