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Great Basin Scientific, Inc. (OTCQB: GBSN) is a molecular diagnostics company that commercializes breakthrough chip-based technologies. The Company is dedicated to the development of simple, yet powerful, sample-to-result technology and products that provide fast, multiple-pathogen diagnoses of infectious diseases.
The Company recently announced FDA clearance of one of its products. It has received clearance for its Bordetella Direct Test, following a 510(k) submission on February 1, 2017. Clearance from FDA was received on Friday, March 31, approximately 57 days from submission. The Bordetella Direct Test expands Great Basin’s menu of FDA cleared assays to five.
As per management, GBSN has been receiving higher-than-expected demand from its customer base requesting immediate evaluations of the Bordetella Direct. Children’s hospitals, in particular, are seeing a growing call for pertussis testing, while at the same time experiencing a reduction in reimbursements. The on-demand test is fast, easy-to-use, and cost effective, making it a compelling option to meet growing demands.
Also, in addition to Bordetella Direct test, Great Basin has commercial assays available for the detection of STEC, Group B Streptococcus (GBS), Toxigenic Clostridium difficile (C. diff), and a Staph Blood Culture Panel for identifying bloodstream infections caused by MRSA and other Staphylococcus species.
During March 2017, company also announced financial results for Fourth Quarter & full year ended 2016. Fourth quarter revenue increased 39% year-over-year; 2016 revenues increased 42%. Gross margin improved 42 basis points in the fourth quarter compared with third quarter of 2016, marking the greatest improvement in gross margin during 2016. The company expects to recognize revenue growth from six commercially-available assays beginning in second half of 2017, with a continued focus on cost management efforts which would lead to lower cash burn and improved gross and operating margins.
Despite improving business prospects, the company’s stock price has been historically subdued, mainly due to repeated dilution, conversion & splits. However, with the current guidance/outlook, revenues are expected to increase, along with improving cash flows & margins.
Moreover, GBSN has another test with the FDA, a test based on the stool bacterial pathogens, and management expects to get clearance in 2017. If the response is positive, then the same could be a major near term trigger for the stock.
About the Company:
Founded in 2005, Great Basin Scientific (OTCQB: GBSN) is a molecular diagnostics company whose mission is to rapidly and accurately diagnose, reduce misdiagnoses and significantly limit the spread of infectious disease.
It is commercializing breakthrough chip-based technologies and is developing simple, yet powerful, sample-to-result technology and products that provide fast, multiple-pathogen diagnoses of infectious diseases.
Major product pipeline:
Bordetella Direct Test: Great Basin is developing the Bordetella Direct Test, which detects Bordetella pertussis directly from the patient specimen, identifying the bacterium behind the highly contagious respiratory disease commonly known as whooping cough.
Potential market & off take driver: The Centers for Disease Control and Prevention (CDC) estimates that globally there are approximately 16 million cases of pertussis per year, with the disease being responsible for 195,000 deaths annually. Given the gravity of the disease as well as its capacity for contagion, hospitals, health systems and patients can benefit from the rapid detection and timely treatment of pertussis.
Unique differentiating factors of Bordetella: Conventional laboratory based cultures can take 7 to 10 days to report and a negative result does not rule out pertussis infection. On the flip side, Bordetella, employs an integrated disposable cartridge containing all necessary reagents, and a bench-top analyzer that executes the assay, interprets the results and provides electronic output to the clinician.
Some of the key features of Bordetella are:
- True sample-to-result with less than 1 minute of hands-on time
- On-demand testing; no batching of tests that delay results
- Less than 1-minute hands-on time
- Fast differential diagnosis for better patient management
Other product pipelines:
In addition to Bordetella Direct test, Great Basin has commercial assays available for the detection of STEC, Group B Streptococcus (GBS), Toxigenic Clostridium difficile (C. diff), and a Staph Blood Culture Panel for identifying bloodstream infections caused by MRSA and other Staphylococcus species.
Moreover, a test based on the stool bacterial pathogens is in pipeline, and management expects to get an answer form the FDA on this application at some point during 2017.
Key Stock Influences:
Some key influences that might govern future stock price performance include:
- In order to have a meaningful commercial base, GBSN needs to significantly expand its offerings & market size. Therefore, its ability to revamp its sales/marketing strategy and to align with mainstream markets would hold the key over the near to medium term.
- GBSN has another test with the FDA, a test based on the stool bacterial pathogens, and management expects to get clearance in 2017. If the response is positive it could be a near term trigger for the stock and overall business risk profile of the company.
- The company’s costs to manufacture the assays have not reached a break-even point yet & due to high costs, it has been burning cash almost since inception. Therefore, full-fledged outcome of its cost cutting measure is yet to be seen for the company.
- The company has constrained liquidity & financial flexibility. Also, they are expected to continue to incur operating losses for the foreseeable future. Furthermore, these losses are expected to increase as GBSN continues its development initiatives.
- Over the past year, the company has conducted three reverse stock splits in response to NASDAQ compliance notifications. The company continues to have high exposure to convertible notes, warrants and convertible preferred stock.
Earnings Review:
Revenue increased 42% for the year ended December 31, 2016, as compared to the year ended December 31, 2015. Revenue derived from the sale of STEC and SIDR assays began since the products were commercially launched in August and September of 2016. The 42% increase in total sales was attributable to the number of U.S. customers increasing to 244 by December 31, 2016, as compared to 186 at the end of December 31, 2015. In addition, number of analyzers placed with customers rose to 498 at December 31, 2016, as compared to 428 at the end of December of the prior year.
Profitability:
GBSN had negative gross margins of 164.5% and 124.7% during the years ended December 31, 2016 and 2015, respectively and net loss for the years ended December 31, 2016 and 2015 was approximately $89.1 million and $57.9 million. Due to its fixed overhead costs, the company is expected to continue experiencing negative gross margins until it is able to significantly increase sales volume.
Liquidity and Capital Resources:
GBSN has funded its operations to date primarily with net proceeds from its IPO, follow-on public offerings, cash exercises of warrants, sales of preferred stock, issuances of convertible notes, and revenues from operations. At December 31, 2016, it had unrestricted cash of $1.0 million, and restricted cash of $59.4 million.
The company has limited liquidity, and has not yet established a stabilized source of revenue sufficient to cover operating costs based on current estimated burn rate. To finance the ongoing operations and satisfy repayment obligations, it would need to seek additional financing.
Stock Performance:
On Wednesday, April 5th, 2017, GBSN shares declined by -3.80% to $0.00470 on an average volume of 10.01 shares exchanging hands. Market capitalization is 10.04 million. The current RSI is 35.71.
In the past 52 weeks, shares of GBSN have traded as low as $0.00 and as high as $0.01.
The present support and resistance levels for the stock are at $0.0031 & $0.0078 respectively.
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