NEW YORK – Chembio Diagnostics reported after the close of the market on Thursday that its third quarter revenues dropped 1 percent year over year.
For the three months ended Sept. 30, Chembio reported revenues of $9.7 million compared to $9.8 million in the prior-year quarter, short of analysts' average estimate for $9.9 million.
Its Q3 net product sales rose 2 percent year over year to $8.5 million from $8.3 million. R&D, milestone, and grant revenues fell 25 percent over year to $971,980 million from $1.3 million, and license and royalty revenues rose 4 percent year over year to $238,330 from $228,553.
Chembio also said on Thursday that in Q3 it inked an agreement to acquire Orangelife, a Brazilian point-of-care diagnostics company, enabling commercial expansion into the state, private, and pharmacy markets in Brazil.
In other Q3 highlights, Chembio received World Health Organization (WHO) prequalification approval for its Sure Check HIV Self-Test, a single-use immunochromatographic test for the detection of antibodies to HIV types 1 and 2, permitting the commercialization of the product across Africa.
Chembio also received WHO prequalification approval for its Malaysian manufacturing facility, allowing the production of Stat-Pak HIV 1/2 tests in that country.
The firm entered into a collaboration with Takeda Pharmaceutical, a global pharmaceutical company, to develop a quantitative point-of-care test to detect an undisclosed biomarker, and strengthened its balance sheet by closing a $20 million term loan with Perceptive Advisors.
The company's CEO John Sperzel said in a statement that total revenue during the third quarter was impacted by lower product sales in Africa. He added that the firm saw "significant product sales increases in the United States, Latin America, and Asia Pacific," and that the firm anticipates "the Orangelife acquisition will provide another growth vehicle for the company."
For the third quarter, the firm's net loss widened to $3.8 million, or $.22 per share, from a loss of $2.3 million, or $.16 per share, in the prior-year quarter, and missed the analysts' average estimate for a $.17 loss.
Chembio's Q3 R&D spending rose 16 percent to $2.2 million from $1.9 million a year earlier, while SG&A expenses increased 50 percent to $4.5 million from $3.0 million.
At the end of September, Chembio had cash and cash equivalents of $21.9 million.
Under the terms of the agreement to acquire Orangelife, Chembio will make an upfront payment of $150,000 in cash and offer 153,707 shares of common stock. Chembio said it will also enter into certain consulting agreements that could include payment of up to 497,288 additional shares of common stock based on the achievement of certain sales and regulatory milestones between 2020 and 2022.
"We consider Brazil to be the largest and most attractive market for infectious disease testing," Sperzel said. "The acquisition of Orangelife will allow Chembio to expand its commercial presence by offering its high-quality products to the state, private, and pharmacy markets in Brazil, in addition to providing local support to Bio-Manguinhos."
Orangelife will be renamed as Chembio Diagnostics Brazil and operate as a wholly-owned subsidiary of Chembio.
The transaction is expected to close during the fourth quarter of 2019.