BLGTY: Update On Second Quarter 2015 Financial Results, BioLight Poised For Growth
Zacks Small Cap Research By Zacks Small Cap Research
By Anita Dushyanth, PhD
OTC:BLGTY
Financial Update
For the three months ended June 30, 2015 BioLight's (BLGTY) revenues were $86k, mostly from the sales of IOPtiMate systems. R&D expenditure amounted to $1.05 million, 40% more than estimated. SG&A expenses, comprising of salaries, PR and IR activity in capital markets in Israel and abroad, marketing and business development, and training sessions in medical centers, came in at around $1 million for the second quarter, which was in-line with our estimates. The net loss for the second quarter of 2015 was approximately $2.3 million vs. $3.4 million in Q2 2014. EPS for Q2 2015 came in at ($0.039).
At the end of the second quarter, BioLight’s cash and short-term deposits amounted to $11.4 million. The strong balance sheet resulted from the company’s capital raise during May 2015.
We continue to look for revenue to show meaningful acceleration in the coming quarters. The company anticipates spending heavily on marketing as they near the launch of the CellDetect diagnostic kit for bladder cancer. We continue to expect that regulatory and clinical trial activities will increase BioLight’s OpEx. We expect the current cash balance of ~$11 million to be sufficient to carry the company through 2017.
Operational Update
During the second quarter of 2015 BioLight signed a strategic partnership with Rock-One International Holdings Ltd. to help maximize its presence within China. Rock-One has a history of successful international collaborations and vast experience and understanding of China’s unique regulatory requirements. As China is the second largest healthcare market in the world after the U.S., and since Rock-One has a reliable domestic distribution and service infrastructure within China, the partnership with Rock-One should help BioLight expand their reach within the country.
In July, with shareholder’s approval, the company announced the changes in ADS conversion ratio. A 1-for-10 reverse split of its ordinary shares, where one ADS represents ten shares.
Product development pipeline…
…IOPtiMate…
To-date, BioLight has installed the IOPtiMate system in healthcare centers in Thailand, Italy, Eastern Europe (Poland, Hungary, and Romania), Turkey, Hong Kong, and China as they sported favorable market dynamics and insurance reimbursement. In August 2015, one system was sold in Peru, following which the company is negotiating additional distribution agreements in South and Central America. BioLight generates revenues for IOPtiMate systems from two channels; from initial sales of the device as well as from the fees customers pay for each procedure they perform using the system.
During the second quarter, BioLight announced their first commercial sales of IOPtiMate system in Hungary as well as in Romania. It was the first sale in Romania using the pay-per-procedure model. Physician adoption is a major driver of revenue for new technologies, and thus far, sales have been nominal as the IOPtiMate systems are still largely in an evaluation stage. As physicians share their clinical experience, we expect adoption and utilization to increase gradually. Since the IOPtiMate system already has a CE Mark, the company is continuing its efforts to accelerate sales in the European Union.
In March 2014, the China Food and Drug Administration (CFDA) approved the marketing and sale of the IOPtiMate system in that country. The devices that were installed in a few medical centers across the country the past year are currently undergoing clinical evaluation. BioLight intends to use the Chinese market as an anchor to enter additional developing Asian territories, such as India, which could be an additional long-term revenue catalyst. BioLight is pursuing regulatory approval in Canada and is in search of a partner in the U.S. to market their device. We see these regions as having potential to meaningfully drive up sales of the IOPtiMate systems.
Clinical trials in the U.S. (Phase I/IIa) involving the EyeD technology are currently underway. While conducting the trials in humans with the prototype (EyeD) device, the R&D team gathered an initial base of clinical experience. Due to a slower than expected enrollment rate and optimizations of the insert’s structure and its insertion procedures the results of the clinical trials are expected during the first half of 2016.
…TeaRx…
In February 2015, the company reported clinical study findings that identified positive statistical correlations between the TeaRx test's diagnostic parameters and widely used benchmark tests for dry eye syndrome (DES). BioLight has initiated a second clinical trial in order to assess the effectiveness of the tests in tears of healthy subjects as well as patients with severe DES. The enrollment of subjects for the trial was completed at beginning of Q3 2015 and the results from this second trial are expected by end of Q3 2015. The process of defining the reliable combination of parameters that are required for the DES diagnostic kit is underway. BioLight will then initiate regulatory approval activities.
In mid-June 2015, BioLight announced their collaboration with Ora Inc., a world-leading independent, full-service ophthalmic contract research organization (CRO) and product development firm, to aid in the commercial development of TeaRx. The two companies have agreed to fund the clinical study and other activities required to obtain U.S. 510K regulatory approval for TeaRx as well as to incorporate the test kit in other clinical trials sponsored by third parties and performed by Ora.
…OphRx…
OphRx offers a unique drug delivery technology that is based on the principle of molecular transport across cell membranes using liquid crystals. The technology creates a basis to load different molecules and release them in a controlled mechanism to the target location. BioLight believes that this technology could be utilized for ophthalmic drug delivery for front and/or back of the eye diseases. The company is currently working on developing a novel formulation for the molecule that is most effective to deliver the correct dose, follows a predictive route, and releases the drug, either in a controlled or sustained pattern, according to the pathophysiology and course of the targeted ophthalmic disease. Once the formulation is completed, management anticipates commencing pre-clinical trials.
…CellDetect…
A large unmet need exists in the U.S. and Europe for non-invasive screening of bladder/cervical cancer. Studies have shown the incidence/mortality rates as well as the costs associated with the disease detection to be high.
Bladder Cancer - Management reported successful results from their blinded, multi-center clinical study using the CellDetect technology. The primary endpoint of effectively detecting the recurrence of bladder cancer in subjects with a history of the disease was achieved. BioLight is pursuing an Israeli AMAR approval, pending which the company hopes to launch in Israel by Q1 2016. The company is now focused on building awareness of the product to facilitate broader roll-out in Europe using distribution agreements in CE Mark territories. Eventually, the long-term goal is to initiate discussions with the FDA for an approval to market the product in the U.S.
Cervical Cancer - Proof of concept has been completed for cervical cancer detection and identification using the CellDetect kit. CE Marking was granted for marketing CellDetect in Europe and Israeli Ministry of Health approved the marketing of CellDetect in Israel. The product also received CFDA approval for marketing in China. BioLight is scouting for possible distribution channels in China and India to commercialize the CellDetect technology for the detection of cervical cancer. The company is also actively pursuing strategies to accelerate sales with their existing distributors in other geographical regions.
In July, the U.S. and European patent office issued patent for the CellDetect technology, intended to identify cervical cancer cells, which will be in effect until 2027.
…BRONJ…
BRONJ is a severe side effect from the use of biophosphonate drugs, prescribed to metastatic cancer patients and osteoporosis patients, causing necrosis of the maxillary bone. This side effect has a prevalence rate of up to 18.6% among multiple myeloma patients, 1.2-12% among breast cancer patients, 6.5-7% among prostate cancer patients and up to 0.1% among osteoporosis patients treated orally. Over 15 million prescriptions for biophosphonates, administered orally or by way of infusion, are issued in the U.S. alone.
At Tel Hashomer Medical Center, Israel, a study was conducted to identify the unique genetic profile that enables the assessment of risk among cancer patients to develop BRONJ and results were reported in May 2014. In order to validate the findings from this study, another trial was performed at the Florida University in the U.S., and at the Tel Hashomer Medical Center, Israel, using diverse patient populations from the U.S., Europe, and Israel. The trial involved 125 subjects who were treated with bisphosphonate drugs, of which 108 were multiple myeloma patients, 13 were breast cancer patients, and four were patients suffering from other cancers. Of the total number of subjects, 69 patients developed BRONJ and the remaining 56 did not. In August 2015, the company announced that they are developing a novel SNP assay (licensed technology from the University of Florida) to detect individuals, with a unique genetic profile, who are 10 times more susceptible to develop BRONJ. Eventually, the company anticipates developing a test kit that will allow categorizing the risk of developing BRONJ in patients who are treated for cancer.
Valuation
Several catalysts in the pipeline have the potential to drive up shareholder value. IOPtiMate systems have yet to be fully launched in Europe. We anticipate a significant increase in system/procedure sales in 2015 and 2016 as demand grows for state-of-the-art technologies in glaucoma surgery. We are looking forward to the results from the clinical trials employing the TeaRx and EyeD technology. OphRx’s molecule, a nascent-stage product in the pipeline could be a potential source of revenue in the long term.
We believe in BioLight’s strategy of diversifying its portfolio, particularly in ophthalmology. We continue to like the story as the company continues to execute its growth strategy. We maintain our Buy rating.
