Microbix Biosystems Inc. (MBX.TO) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us today. We have Microbix here to talk about their Q4 and Year-End Results for 2025. Before we get into those, I don't believe we're going to work off our presentation today, but I'd like to remind you that this session, as always, will contain forward-looking statements. If you'd like to know more about those, you can find them on the company's website in the presentation. There's disclosures there. I believe the format will be an update from the team on the Q4 and year-end results, and then we'll jump into Q&A. [Operator Instructions] And with that out of the way, I'd like to introduce Cameron Groome, President and CEO; Ken Hughes, COO; and Jim Currie, CFO. Hi, gentlemen, thanks for joining me today.

Thank you very much, Deborah. That's brilliant. Much appreciate the help as always.

Yes. Well, before we get started, I wanted to thank you all for contributing to our fundraiser this year for -- in support of food banks. We're actually at $52,000 that we're raising so far. I could not do 26 webinars in December. So a bunch of them are being pushed to January, but the donations are going in before the holiday season, which I think is really important given the economic situation in certain communities globally. So I appreciate you supporting us, and I'd love to hear, which food bank you decided to donate to.

We supporting the Mississauga Food Bank. I've had the pleasure of meeting some of their executive leadership through at the Board of Trade. They do an excellent job in the community. And as I'm sure is the case in across Canada, the need and the demand for such assistance has never been greater. So we're delighted to be able to make a contribution on that basis. And thank you, Deborah and Adelaide for suggesting this and for you contributing what would normally be your income onto this. So thank you.

Yes, of course, it's been our pleasure. I mean it's been a great year for us as a team. So we thought it would be something that we could do to give back. But before we get started, I know it's been a tough year for Microbix. There's no 2 ways about that. I have to commend the team on the guidance that you provided throughout the year, even early on the year on the obstacles that you were facing. I think the markets really appreciated that. So I just wanted to point that out and say, I think you guys did an incredible job managing through a couple of major obstacles. So for what it's worth, I'm very proud of you and proud to be working with you.

First, thank you so much. And we, in turn, appreciate Adelaide's support and that of all of our shareholders and investors and the confidence they show in our professionalism. Just recapping a little bit of that element, and we'll get into some of the precise numbers for the fiscal year. Folks will recall that Microbix is on a September 30 fiscal year. So we had a very strong Q1 of our fiscal 2025, a very strong Q2. And then we had a slowdown -- abrupt slowdown of sales into China through our distribution partners there for epidemiological reasons, there just wasn't as much respiratory disease this past season, which reduced the need for tests and in turn, our test ingredients. And then we also had a major client very abruptly announced the termination of a multi-hundred-million-dollar instrument development program that we were supporting that occurred at the start of June. And that really impacted our Q3 where we were expecting to see stocking deliveries in Q4, particularly. So we're now in that process of building back with new clients and new projects that we have been working on, but are not all yet ripe to announce. So our results that we've just announced for the quarter and for the year are reflective of that. And maybe I can ask Jim to speak about fiscal 2025 financials before I begin to chat about the many achievements that we've made across the fiscal year, and what our outlook is going into 2026 and beyond. Jim, would you like to comment on the -- on 2025 fiscal?

Sure. Thanks, Cameron. Yes, it was certainly a tale of 2 halves. We started off the year very well and basically hitting and/or exceeding our budget in the first half of the year. And it wasn't until we got the sort of unexpected news, both from our distributor in China as well as on our QAPs business, the loss of business of a key customer for one of their projects that had been canceled, which changed things quite significantly in the second half of the year. Overall, for the year, revenues were down 27%. A good chunk of that actually was -- we had Kinlytic revenues of $4.1 million last year. We didn't have any this year. We didn't expect to have any this year. So that was a good portion of it. Plus, we also had these events in the second half of the year that led to the rest of the decline versus last year. If you look at -- if you took all of those factors out, the Kinlytic out, the China distribution, the QAPs program cancellation, our revenues in all other areas actually increased 12% during the year. From a margin perspective, we were down from last year at 53% versus 61%. Again, a good portion of the last year's strong margin was Kinlytic, which had $4.1 million worth of revenues and very little cost of sales last year. So in comparison, again, we were fairly flat, if not up on last year's gross margin. And that's coming from -- we've had a very good year from a process and yield standpoint on our antigens business. And we've seen yields improve quite significantly on a few of our key products and the number of batch failures declined substantially and, in some cases, 0. So very important for us as we move forward as well. On the OpEx side, we were up 4% on OpEx. Key contributors there were we had lower investment income during the year, again, decline in interest rates led to that. We -- although we did make continued investments in trade shows as well as increasing our R&D spend, predominantly in the QAPs area, but spending more there. It was a profitable first half of the year, unfortunately, a sizable loss in the second half of the year. Our expectation is as we go into 2026, which I think Cameron will focus on a little bit later, we expect to see some improvements in all areas. We did maintain a cash -- we've got a strong balance sheet. We maintained a cash balance of over $12 million at the end of the fiscal year. We made sizable investments in our capital equipment and facilities throughout the year as well. So we're poised to enter -- or we've already entered 2026 at this point in time. We're almost finished Q1, but we're entering it in a strong position and looking forward to our 2026.

That's great, Jim. Thank you. I think that's the clarifications that you've made there are excellent. Last -- if we look at our fiscal 2024 and remove the $4.1 million in Kinlytic milestones, we achieved revenues of $21.3 million from recurring product sales and royalties in that year. We were looking to grow beyond the total $25.4 million inclusive of Kinlytic in 2025 based on the outlook we had for all of our different clients. But with 2 major clients falling off the table, we effectively went from $21.3 million down to $18.6 million in terms of recurring revenues and royalties. So again, while it's not what we were looking for, it's a very solid performance from our team. And as you pointed out, Jim, if we remove those variables, we grew in sales of pretty much every category and customer outside of the 2 problematic instances. So very good context on there. And some of the achievements we've made across fiscal 2025, I think they are very good to call out. From the -- I'll think to calendar year because it's in my mind rather than fiscal for the achievements now that we're in December, but we've announced the -- our intention to onboard full recombinant antigen capabilities to add to our long-standing native antigen capabilities, and that program has been moving forward through the year, and I think we'll soon have some progress reports on that. We've continued our strong support of the industry and public health with regards to potentially emerging respiratory pandemics and respiratory illness with new products in H5N1 put to market and as well H3N2 most recently, which is this season's emerged flu strain that is the latest clade that's driving infections. We've announced support for cervical cancer screening in multiple countries all throughout the Indo Pacific through our collaboration with the Australian Center for the Prevention of Cervical Cancer. Our partner on Kinlytic has engaged the drug product manufacturing contract development manufacturing organization to help drive that program forward. Work continues with Ken's firm support on that program, and I'll ask him to speak to that as well as ops generally. We've had multiple new program and product collaborations with our proficiency testing and external quality assessment scheme providers in infectious diseases in oncology, molecular pathology and genetics testing, which broadens out our addressable markets again beyond our traditional strength in infectious diseases in relation to QAPs. We strengthened our supply chains with our exclusive supply agreement to access the more than 100-year-old collection of pathogens at the Bulgarian National Center for Infectious and Parasitic Diseases in Bulgaria. We launched our new QUANTDx reference materials product line, which potentially may become as important for the company on a revenue basis as QAPs has become for us and further test manufacturer collaborations with -- most recently with SEKISUI for point-of-care tests being marketed in the United States and with Seegene with respect to cervical cancer screening in Mexico, a population of 140 million. So tremendous fundamental achievements through the year that I think are important to call out. Ken, what would you most want to talk about from an operations point of view in terms of what we achieved in fiscal 2025 and for that matter, some of what you see for '26.

Well, I think it's quite apparent that we're in excellent shape operationally at Microbix. We have the capacity necessary to fulfill our market desires in the next little while, and we've also built capabilities from there. We have an ongoing focus on operational excellence. We've seen batch yields increase. We've seen batch failure rates reduced, and that, of course, reduces costs and increases margins. And we've also been working hard on further implementing aspects of our electronic quality management system and connecting that with our ERP system to further increase efficiencies. So we're in -- we've added new capabilities. We've talked about the recombinant protein program, in addition to our native antigen program, and that is going extremely well, and the first product will be ready for prime time imminently, but there's a whole pipeline behind that. And that's just a description of the scientific excellence we have at Microbix. And so from a capacity perspective, from a capability perspective, we continue to grow. I don't really have anything negative to say in this regard. All we've seen is increased yields and reduced costs. And I think that's the way it's going to stay, and we'll be able to support our business growth in the future. That's for operations in general. I think we're in really excellent shape right now. And kudos to all the staff for doing that because we're replete with outstanding scientific leadership and scientific support throughout this company and the increased yields and reduced costs are a manifestation of that.

Very good, Ken. Thank you. I think that really highlights how we're entering into -- have entered into fiscal 2026 with incredibly strong capabilities with an absolutely marvelous team, great capacity that we have to bring to bear. And I will say as well a very rich business development pipeline, and there are multiple new products and programs that we're working on with both existing and new customers. And I'll just remind everyone that our policy is we announce programs when they are effectively signed, sealed and delivered, not when we're discussing or negotiating with partners on them. So as those come to full fruition and with the consent of our partners, we'll make those disclosures as and when we pull things over the line with our partners. So very good position in that and for our financial goals for fiscal 2026, really what we're seeing, and we've seen in Q4 is this is beginning our recovery from the revenue setback that began in Q3, leading to our below certainly our target full year results for fiscal 2025. And I think across fiscal 2026, we'll continue to build out that recovery quarter-by-quarter and be looking to regain quarterly profitability in the -- likely in the fourth quarter of fiscal 2026 is what -- on the order of what we're targeting. That really represent -- would represent a growth of approximately 30% from the quarterly low point of $3.5 million that we had in Q3. So if we were just flat across fiscal 2026, we net revenues of $14 million. We will not be net revenues of $14 million. We'll be substantially higher than that from everything we see in our current outlook. And this, again, our outlook is based on projects that have already been signed, sealed and delivered, and we can look at, say, what product is going to be ordered in what quarter by what customer. We don't speculate on things that are not yet fully delivered. And some of our work across 2026, we -- as Jim stated, we should emphasize, we continue to have sufficient financial resources to fully execute, and that's both in terms of our cash on the balance sheet, which, as Jim had mentioned, is over -- was over $12 million at the end of our fiscal 2025, September 30, 2025. And I'll just remind folks that we also have an undrawn mortgage facility on our own facility, and that could be up to $8 million drawable off that, plus an undrawn line of credit, which could be up to $4 million dependent, of course, on a loan credit lending formula with the bank. So altogether, at September 30, we could have access to up to $24 million in further funds before we would need to tap $1 of new equity. So that's very much not on the table to issue equity. And in fact, you've seen the recent renewal of our normal course issuer bid. That's the technical name for a share buyback program. And we're actually able to proceed should we choose at a higher level of daily purchases for the renewal than we had available in fiscal -- across fiscal 2025. So again, very positive from an operational point of view and very bright prospects that we're looking at going forward. So I think that would conclude my comments, and I just thank everybody for their engagement and support as we've continued to build the strength of Microbix in terms of our capabilities, our capacity. And I'm just delighted to see more large multinational companies relying on Microbix as a critical supply chain partner for QAPs and for antigens and for more touch points such as our reference materials as they get into assay development. We're becoming much more known across the industry and recognized and respected. And I think that is a great way to continue building value for shareholders. And then, of course, we have the very substantial kicker with Kinlytic that's continuing to advance towards the filing of a supplemental BLA with the United States Food and Drug Administration. And we're continuing to target the advancement of that with the refreshing and renewal and updating of drug substance manufacturing is progressing, and we'll hopefully have some update disclosures from that in the first half of this calendar year that fiscal -- calendar 2026 and that continues to be have tremendous revenue potential through royalties, recurring royalties and onetime sales and regulatory achievement-driven milestone payments that is sort of the turbocharger, supercharger on a very nice V8 engine that we've built and are now putting gas into. So with that, that would be the conclusion of my comments. Jim and Ken, did you have any further comments you'd want to make before Deborah may ask some questions and open it up to those on the call.

The only thing I would add, I forgot to say when I was talking about general operations was we also have a focus on automation, as you would expect, as part of efficiency increments in Microbix and that initiative, both within manufacturing and QC, and the highly scientific disciplines, of course, fed by R&D and engineering ongoing and continuing to drive efficiencies at Microbix on the basic operational side, no doubt we'll get to Kinlytic in due course.

And that's so great because that liberates our staff to do work with their minds more than their hands and gives everybody the potential to do their best work -- the best and most fulfilling work. So Jim, what would you want to flag?

No, I don't have anything else, Cameron, to add to this. I'm more than happy to answer any questions that anyone that's on the line has regarding the financials.

Okay. Thank you. Deborah, what would you want to ask before we open it up to the audience? Any questions that you've had?

I mean, for me, I would just like a bit of a more detailed update on Kinlytic and time lines and catalysts. I know, Ken, you've walked us through the process many times, but it would be good to just kind of hear the updated time lines that you're seeing?

I saw some specific questions in the Q&A. I thought we were going to talk then. I'm happy to open it now if the group would like it.

Sure.

Okay. So it's quite straightforward. The relationship -- as everyone knows, we're working with Sequel and the relationship is excellent, and we're moving forward in updating as per FDA's request at the U.S. FDA's request. production processes to contemporary standards that involves reducing animal components in there and increasing the veracity, if you like, of testing. We're moving forward at a pace. We're currently scaling up processes with 2 separate CDMOs, contract manufacturing development and manufacturing organizations, one for drug substance, the active ingredient, one for drug product, which is the finished and filled and packaged product. These are moving forward at a pace. In fact, we're expecting to be going back to the -- we are going back to the FDA early in the new year, specifically to update them on the work we've done in bringing the process up to contemporary standards because recall, of course, the original Kinlytic process was in the early 2000s, and here, we sit at the end of 2025. This work has gone extremely well, and where we will -- we don't expect to be anything contentious in that. It's mainly an update. They asked us to improve the processes. We have done that, and now we're implementing it at commercial scale along the time lines discussed. So we talked about filings in 2026, 2027. That remains the case, and we're moving forward at a pace. So I really don't have anything negative to say about this. This is mainly an engineering function now, and we're going forward with our 2 CDMOs and with Sequel, as we said we would. So that's really the update. The fact that we have concluded the work in reducing -- in bringing the process up to contemporary standards is a milestone, and it's a milestone that will be reflected in our discussions with FDA.

A small clarification, Ken. you stated filings in 2026 or 2027. I think there will be interactions in '26, but not a filing.

Yes. Updates and future updates to the file. Of course, Kinlytic is already approved. It's already approved drug with decades of clinical success. And as I say many times here, I've said many times on this type of forum, there's no chance of clinical failure because there's 20 years of clinical success. What we're doing is bringing new manufacturing to bear and adding to the currently approved file. And that's where the interaction with the FDA is going and is going well.

Yes. And just to state that the relationship with the partner is excellent, and it's that partner that's providing and its private equity backers are providing full project funding. So Microbix participates in the upside of that through onetime milestones, nonrecurring milestones that could total up to USD 31 million, plus should -- unless the product completely disappoints in the marketplace, then we'll see a double-digit recurring stream of royalties on all revenues generated from all applications in all markets for the product, starting with the catheter clearance indication in the United States market. But certainly, we hope, and our partner hopes that it will go beyond that, both geographically and in terms of the clinical indications for the product.

And we're working very closely with Sequel and others on the technical and regulatory and market components of this and absolutely the catheter clearance is only the start, and there are many larger indications in geographies outside of North America that we intend to pursue.

Deborah, does that -- I think that's a good summary, and perhaps you can start to guide us through some of the questions in the queue.

Yes, perfect. That covered my questions. A question about it as well as an audience one. So one down. So inventories continue to grow. Is there a substantial amount of antigen intended for China in the inventories -- sorry, let me rephrase that. Is there a substantial amount of antigen intended for China in the inventories that is at risk of being written down?

I think that this is definitely -- I was just going to tease Jim that do you ever look at inventories. Yes, very much on Jim's mind across the board. Jim, can you give full context on that as well as some of the comments on cell bank renewals and how that is treated in inventory?

Sure. From an antigen standpoint, yes, there's no question that we ended up with some inventory that we had not necessarily planned on relating to the China distributor because of the sudden shutdown of the business. And we had also been acquiring raw materials to support the anticipated growth and the forecast that they had been providing us with. So we also chose to convert those raw materials into finished goods as well. And both of those in combination led to an increase in inventory. But no, there's no risk of write-down. Antigens don't -- they don't expire. We fully anticipate being able to sell those -- that inventory during the fiscal year as it comes up. So...

Just for clarity, for antigens, those materials are kept at minus 80 and are -- have effectively an infinite or near infinite shelf life. So...

Effectively indestructible.

Yes. Yes.

The other factor that Cameron mentioned was seed banks. And this was a year of investment in our seed banks and our seed bank inventory. We believe that it was a long-term, and we actually had lobbied to move that into being more of a long-term asset as opposed to inventory. But from an IFRS standpoint, it was deemed that this was still inventory that it is consumed during production. It's just over a much longer period of time. It's important, but there's probably somewhere in the neighborhood of $0.75 million in that increment that belongs to the seed bank.

Maybe I'll just take a moment to explain what that means for folks that aren't too wholly steeped in our industry. It's a little bit literally like -- think of it like a seed. These are the cells, the cells or viruses or bacteria that will start to grow up and propagate to become the finished antigen products. And in some cases, the finished caps active ingredients. And those are literally like the seed corn that one would so at the beginning of the season and then harvest after it grows and propagates. So those stocks of seeds will be used over years, sometimes even over a decade or more and consequently are really a long-term asset in that sense, but they appear in inventory as, I think, in the raw materials category, Jim, and they appear as a current asset under IFRS. So it's a little bit of -- and certainly, we've said it's certainly not intuitive treatment, but it is prescriptive on the accounting standard. So you do see that in the growth in inventory as well. And then just for -- as we increase the number of SKUs as well in QAPs, particularly, we've been laying in materials, biological materials for those programs, many of which are new programs and new products for different customers.

And all of those seeds and cell banks are stored frozen. Cells are generally stored in liquid in [indiscernible] phased liquid nitrogen, which -- and seeds generally are stored at minus 80. So once again, they are pretty much indestructible and there's no chance of them going off. And of course, that frozen state is monitored in real time.

Yes. With uninterruptible power sources in backup and vital seeds are actually stored in multiple locations as further backup and disaster recovery in business continuity planning.

Absolutely.

So literally planting seeds for growth.

Literally, absolutely.

I'll let you hear that.

Yes. And just as our products expand and our capabilities expand and you have one touch point with a major international customer, getting that foot in the door the first time is very challenging, and it becomes a little bit easier each time to gain another product once -- or another project once a customer knows us and likes us. And I'm probably the least likable person here. So the rest of the team shines in comparison.

I wouldn't say that, certainly not to your face, Cameron. Okay. A couple more audience questions here. With the respiratory disease season expected to be stronger this year, do you see any signs of recovery in China?

Our China -- most of our China sales are related to some of the complications downstream of a viral infection. So a viral infection will often lead somebody to then have a bacterial infection in their lungs. So it starts with a cold or flu and then leads to a pneumonia. And a lot of the sales we've made into China are for the immunologic tests to diagnose pneumonia. So we'll have to see how that goes, and we're trying -- it's always tougher when you're once removed from the end-use customer with the distributor. So those clients have to burn through their inventory of tests before they reorder ingredients. So we do see -- and we do have some reorders budgeted for fiscal 2026, but at a lower number. And we're not -- we don't have current plans to build more product than our current inventory of those products.

And I had a follow-on question, which was about your China distributor. Are they shut down permanently or just for the past?

No, no, no, not shut down at all. This is just -- they've seen, and we've seen a decline in customer orders from that market, but we don't have any indication that the market has gone away, nor has our distributor indicated any plans to exit that market.

Got it. And your royalties were up quite a bit this quarter from recent quarters. Can you talk a little bit about that and the reasons why?

Sure. Well, there are 2 categories of royalties, and I'll ask Jim to go into that without being too prescriptive on names. But we have royalties on antigens that we sell to other parties from which they make their own caps, and that's the historic legacy. And then we also have a royalty stream from prior inventions of Microbix that are used by others specifically. And I think this has been disclosed previously the target of that, Jim. But this being a rabies vaccine technology on which Microbix receives royalties on an ongoing basis. Jim, do you want to comment on the -- how that -- the accounting of that is treated?

Sure. Yes, the one related to the selling of antigens, it's been fairly consistent. So the increase in Q4 has nothing to do with that. It is through the rabies royalties. We only get a report once a year. And as it turns out, it comes in December 16 of every year, we get the final report. So during the year, we accrue for royalties based upon -- historically, we've used the prior year's results as what we accrue based upon. As it turns out, when we got the royalty report this year, it was a much stronger year than last year, and that's why we had some incremental revenues that were booked in the fourth quarter. And we will -- as we move forward, we'll be utilizing that information for accruals for fiscal 2026. So that should be an increase year-over-year as well.

No, that's great, Jim. And just this is a technology for creating oral rabies vaccines for feral and wild animals and control of rabies in wildlife and such animal populations. And it's an invention of Microbix going back a number of years that is used commercially by others to create products and support those programs.

Well, I always learn something new on a Microbix call. I do not expect a bull market for rabies to me today some including us.

Yes.

Who would have thought? I guess be careful out there.

Absolutely. It's a biological world.

Okay. So here's a question. How will AI affect your business? Are you seeing any implications? Or on the flip side, are you able to benefit from any of the advances in AI?

Well, we try to find intelligence in all corners, and sometimes we do. No, for AI, Ken, do you want to touch on that, like...

Absolutely. I mean we have an IT department. So of course, we have an IT -- an AI interest. So I mean, AI is being deployed in data analytics. It's being deployed in documentation development. We have to be absolutely sure that our AI tools that we use are protected. So we're not putting our information out there in the worldwide web for people to enjoy, and we're very sensitive to that. But there's a whole load of efficiencies you can bring to bear based on use of AI in understanding the marketplace, understanding operations, understanding efficiencies and all of these are being deployed. I mean, like I say, we have a very active IT department and their plans for 2026 are substantially oriented to further implementing AI efficiencies.

Well, that's great. I'll just mention something for those that are [indiscernible] such as myself. Some of the AI, you have to be careful with your use of it. If a free software tool says, this looks like a long document, would you like us to summarize it for you? If you click yes, your document is ported up and becomes the property of that free service provider. So just be very careful in what tools you permit yourself to use on this. And we've developed and are developing the appropriate policies with proprietary tools that do not jeopardize the proprietary or confidential nature of our documentation.

We are fully integrating all our systems, as I've said many times, and we're using AI tools to facilitate that. And obviously, we have developers on staff who know what they're doing, but they know how to deploy these tools. And we deal with third-party people that do that as well, again, under the appropriate confidentiality provisions. So yes, AI is unavoidable and will facilitate efficiencies in the future.

Yes. And we already use some of those, for example, in sequence construct design and some of the deep data analytics that Ken is speaking to. So those are tools we're already familiar with. Jim, anything you'd want to highlight with regards to AI and ERP or some of the other areas?

No, nothing. I don't want artificial intelligence in our financials thinking. But certainly, there's opportunities for AI to be utilized within our ERP solutions. And it's like Ken identified, it's an area with our IT department that we're continuing to review.

We have quite sophisticated expertise in that regard actually. Yes.

Yes. Very good. Deborah, why don't we roll on?

Yes, sure. For QAPs, is there a client or clients that you expect to be as big with regards to revenue as the major client that terminated the program this year? And when do you expect that client or clients to move to commercial launches?

Well, it's proven to be perilous to try and predict when clients will move to commercial launches even based on their own internal targets and expectations. So I think I'll be once burned, twice shy on any such predictions of that nature. But I can say that we're working with many -- most but not all of the largest diagnostics companies in the world currently on programs and projects. And as those tip over, we'll start to see some of those, if we secure the business which we're chasing and targeting and deeply engaged with, some of those, yes, can absolutely be as large as -- or larger potentially than the program that was canceled in 2025. So yes, there's a lot of potential here, and we're pushing hard on that. And this is really where you have to have the capabilities to be at the table and you've got to have the capacity to be at the table. So those are the investments that we've made in systems and people and that enable us to have these conversations and now locking in the business is going to be the next step.

Can you talk about the replacement value of Microbix and how investors should think about that in the context of current enterprise value?

Yes. This strays into the realm of opinion, of course, Deborah, and we all have some very firm opinions on this. But for us to -- for somebody to try and start this business with the legacy of knowledge, capability, the seed banks that we've talked about that are all clean title and royalty-free, the history of knowledge and the diversity of skills that we've mastered, both in terms of classical virology, bacteriology, upstream and downstream production methods, synthetic biology now moving into recombinant. I can't imagine that you could even start the business from a cold start in less than 5 years, probably 10 or more to get anywhere with unlimited money. So you're looking at a replacement value to me well north of $100 million, maybe even hundreds. It's really extraordinary when we look at the breadth of capability the company has. Ken, would you want to...

I would have answered that exactly the same way. We have in-house expertise, proprietary information and materials that people just don't have, and the title free seeds is a big part of that, but also the years of experience with native antigens and native viruses, native proteasomes, native bacteria added to the recombinant and synthetic biology capabilities. These are nontrivial lifts we have deep, deep expertise and history here. So I think it will be extremely difficult for anybody to recreate a Microbix in their backyard. And I think we should be pretty comfortable with that reality. So I would have answered pretty much exactly as you did, Cameron. We have a lot of proprietary expertise here.

Jim, you participate in a lot of our strategic discussions. Do you have any perspective you'd like to share on this?

Yes. I think both you and Ken have identified the key ones. I think in terms of our ability, the stocks, the seed banks and the importance of those as well as the people and the knowledge and the know-how and the expertise are all the keys to the value that this company has. And it's all these intangibles that are beyond what sits on the balance sheet. They're strategically important to the organization and its value...

And not only are we making the stuff, we've got the depth of expertise to make it better. We've talked about yield increases. We've talked about understanding the hardwares and the software. So we have far fewer batch failures and some -- and over this year, 0 batch failures in really complex processes. And that's a description of the expertise in-house. And again, I can't speak highly enough of the scientific and technical staff at Microbix. And we have a low turnover of those staff members because we have a certain environment, and they appreciate the excellence and the way the excellence is brought to bear. So yes, we're in a really strong situation here, and that should kind of be trumped a little bit in my view.

I think certainly, that's been one of the frustrating elements about TSX and capital markets as they now exist where investors, particularly those individuals with accounts at bank-owned dealers, for example, are actively discouraged from owning individual small-cap industrial companies. So we have a small market, a generalist-oriented market or resource-oriented market, and we're global specialists in this industry. And I think our peers really are recognizing much more what we have than perhaps the capital markets are right now.

A couple of questions on your cash level. Do you expect this to remain stable moving forward? Or will your increased investment eat into the balance of the course of the year until you regain profitability?

Yes. We'll see some reduction of cash through fiscal 2026 as we move towards regaining profitability, but we will not go through -- we will not be anywhere near to going through our cash reserves in 2026 based on our current outlook.

How will that affect your usage of the NCIB?

It's a great question. Last year, we were able to buy what was the number, Jim, 12,373 or something a day.

Yes.

And this year, I don't have the final digit in my mind, but it's about 20,000 shares a day.

Yes.

Yes, a little over 20,000 a day. Our goal with the NCIB is at a minimum to offset the ongoing use of the stock option -- the rolling stock option plan of 2% per year and go beyond that. And we bought back -- what did we buy back in percentage terms this past 12 months, Jim? It was close to -- closer to -- well over 3% and close to 4%, I think.

Yes, I don't have the exact number off the top of my head...

It's in our MD&A filings and financial statements. So effectively 250 trading days a year or close to that, 20,000 shares a day, it would be about 5 million shares roughly that we would be buying back at that sort of run rate of 20,000 a day. We've budgeted about $1 million in spend for the share buyback for this year, this coming year. And we could certainly go higher than that if we see it to be a prudent use of capital. But I think that would be the minimum spend we'd look at.

I suppose it's a bit of a trade-off, right, buying at these levels before the recovery starts to set in versus preserving cash and waiting and buying.

Absolutely. And as -- we'll refresh this with our quarterly Board meetings as well and -- and the Board on this and see based on -- as we bring in and secure projects that we're working on, I think we'll have ever-growing confidence in that and kind of become more aggressive. But it is striking a balance right now between making sure that we retain a very healthy cash balance in a volatile global environment and effectively using that NCIB.

Got it. Makes sense to me. Is there any update on the cybersecurity incident and what was actually stolen?

Yes. We -- it's interesting when you have these meetings. We had one cybersecurity meeting and somebody said, well, if you could deploy 20 people from your IT team, we could do all this in really short order. We're going, yes, if we had 20 people on our IT team, that would be great. So we've been progressing as quickly as we can on hardening systems and porting them. And I give kudos to Ken and Jim and Mark Luscher, Alex [ Gostein ] and others on this. So we had fully hardened our e-mail servers and ported that out of company hands into cloud-based technology there. Likewise, our upgrading of our ERP system to NetSuite, which is also cloud-based international company system. Likewise, our digital quality management system, master control. So all of those were completely unaffected. Where we were penetrated was effectively a legacy server and that would have potentially some worksheets and files saved over, but it did not in any way disrupt our operations. So we were -- we recovered that system from backups and recovery within a couple of days. We were fully back operational with no disruptions whatsoever. But we made the news release alert really because what was -- you have a ransomware attack, it's blocked, you're then trying to identify what, if anything, was exfiltrated. So we have now received evidence that some data was exfiltrated, and that included some employee information. So we've moved forward with credit monitoring and protection for all staff. And we just wanted to alert our customers and our shareholders of the event, of course, and that everybody can be more vigilant. But when I talk to peers, I've talked to peers at companies 100x our size and so they say, "Oh, yes, we got nailed." Some of them -- sometimes they pay, sometimes they don't. Sometimes they're able to recover as readily as we were able to. Other times, companies have been massively disrupted. I think there was the example of the entire car dealership network software was hacked and shut down sales and service for the whole industry for a time. Fortunately, we didn't have that. And just for clarity, we did not and have not and do not tend to pay any ransoms on a -- for this event or going forward.

And we continue to upgrade our systems, update our systems and continue with retraining and retraining of staff to make sure that we mitigate the risk as best possible. I mean we live in the real world here, but we are continuing to monitor the dark web. We're continuing to upgrade our systems and train our staff, and that's what you have to do.

Yes. And it's a double-edged sword. You pick up the efficiencies from moving it would be impossible to scale our business the way we want to purely on paper-based systems. And then as you move into more reliance on software, you've got to then harden the systems appropriately. So it's unfortunate, but this is life in the big city, 21st century. And I think companies of our size have been targeted on in some cases, because they have a heightened obligation, if they have patient-specific medical information, there's a liability associated with that. We don't handle that kind of information, but it may have been one of the reasons why we were targeted with somebody thinking maybe we did.

Well, again, going back to my initial comments, I commend you on your rules around disclosure because a lot of companies would not have put out that press release.

Well, thank you. Thank you, Deborah.

Okay. Two more questions. So if anyone has any more, feel free to get them in, and we'll try and wrap by the hour. A bit of a blast from the past, any progress on VTM sales in Ontario with the new provincial focus on buy Ontario? Is there anything in the forecast for that?

Our forecast only include some sales to private industry, and this is more in the control elution buffer category, different utilization of similar product formulations. We continue to engage with procurement authorities, but it is -- it does seem to be a riddle wrapped in a mystery surrounded by an enigma in terms of what some of the practices and motivations are.

Yes. It is good that we hear about buy Ontario and buy Canada, and that's great. And when we see a manifestation of that in real life, that will be great, too. Talk is cheap. We continue to work in communication and showing the excellent -- the global leadership that we have in this area. And hopefully, Canada and Ontario will buy our stuff soon. We continue to knock on the door.

Correct. Yes.

One last question here. It's an interesting one. With the current U.S. administration focus on deregulation and ease of doing business, do you foresee any possible improvement on time line for either BLA approval or return to market, especially as this is already an approved drug?

Well, this is specifically in relation to Kinlytic.

Kinlytic.

I think all of our interactions with FDA have been very supportive and very appropriately scientifically oriented, responsibly oriented and constructively oriented. So really, we have nothing, but I think, positive and complementary comments to make about our FDA interactions. I've not attended those meetings personally, just full disclosure. But from what I'm -- what information I've received from Ken and from our partners who have attended those meetings, it's just been superlative. So if it gets better from that, great, but no complaints so far.

I think it's -- I mean this is a really great question. I mean, at the end of the day, we're going to update our file and provide data, and FDA has to review it and they'll take their time. What the feedback we've had is they are now oriented to the market dynamic and the reality of this is an approved product. Let's remember that the current market is served by a monopoly, a single product, and that goes down, you have nothing, and people are...

Which it has, which it has...

And it has gone down. So the FDA is well aware of this, and we expect them to continue in the positive they have previously. And if that facilitates the process so much the better. It's also worth remembering that the European regulators reached out to us to ask us not to forget about them because they have the same monopoly situation. So regulators are well aware of the market dynamic here. So I don't think we're going to have a negative interaction with it, of course, whereas we have to follow through their mechanism and their system once we make our necessary filings. But as we sit here today, the interactions with those regulators has been excellent, and we hope they will be as expeditious as it's possible to be.

Yes. And I think those are 2 questions because there's the positivity of the interactions and then there will be the question about what is the speed of the review. So there can be a very positive interaction and then a slower review, but the interactions have been very positive, and we'll see in due course in terms of what the review time of the file is. Part of that will be dependent on the excellence of the submissions, the awareness of the individuals reviewing and their resources and prioritizations.

Absolutely.

I had one audience question sneak-in. We're just up on the hour. Can you guys go a few minutes over.

Absolutely.

Okay. Great. So the question is which KPIs should we keep an eye on in Q1 fiscal '26? And I think I'd like to expand that just beyond KPIs, also catalyst and maybe we can talk about full year.

Well, we have budgeting cycle going into early fall sort of August, September into October time frame. And then we have a Board -- an annual Board offsite meeting in November to review critique and approve those budget objectives where we inform -- fully inform the Board of what's happening and what we pose and plan for. And then there is the approval of that and then our KPIs get reconfirmed based on that. What we're, again, really looking to achieve is to bring those -- bring the capabilities and capacity we've built to bear and grabbing hold of new programs with major multinational diagnostics companies is something that's key for us, continuing to build our presence with the PT and EQA provider companies growing -- continuing to grow that piece of our business, continuing our, again, the B2B theme to engage with more major international and multinational diagnostics companies on programs, particularly oriented in QAPs. I think that will be something we'll look at. And then we're broadening out the tail as well. A lot of our sort of B2C sales to end user clinical laboratories. We're not that -- we're not decades into this business. So the awareness of our company amongst end users has been more limited than amongst businesses. But we're starting to see those more retail level sales to labs become a significant portion of our business as well, whereas a major international company might order hundreds of thousands or millions of dollars of product from us, a lab might order hundreds or thousands or maybe tens of thousands of dollars from us for one lab in one site in one city, but we're starting to see much more of that regular inflow of orders. And that has a strategic value in diversifying our client base as well. So I think we'll see -- we'll see a progression of announcements with -- should we succeed with our objectives in landing new business with major clients. And then we'll see a more regular flow of business from end users as well. Ken, what would you want to highlight as some of the deliverables in 2026?

Well, I talked about the capacity and capabilities of the business, and I expect to be able to support all of those trajectories. They are necessary. We've added the recombinant capabilities now to -- further to our synthetic biology capabilities, which obviously synergizes with our native antigens and natural virology and bacteriology expertise. So that's going to continue on from there. We're going to see progress in the Kinlytic file, and I expect to see much progress in 2026 and lots to be happy about. And of course, 2027, hopefully, will be even better. And so those are natural KPIs. But in terms of supporting the core business, I think we're in really good shape. And to Cameron's point, we're going to be building that business and really the operational excellence here is going to maintain the necessary margins to drive to profitability. We're also going to see some reduction in costs, I think, or at least in proportion to sales because of the efficiencies we've brought to bear. The electronic quality management system and ERP integrations and the role of quality assurance in that is going to really increase efficiencies as well. So these are all the operational side in support of business development. And it shouldn't be understated. I mean we have really excellent people doing good work to make sure that we maximize every dollar that we've taken in.

Jim, what would you want to highlight?

Well, I think one of the key ones for us is the bounce back in revenues in terms of seeing the revenues and the fruits of our labor over the last number of years in both businesses and seeing that revenues get back up to where we believe that they should be. And I think Ken has identified the costing side of things is that we need to be more -- continue to be more efficient and effective and maintain the levels of yields that we have seen in fiscal 2025. They are biological, so it's sometimes difficult to predict. But I think we're getting from a research and manufacturing perspective, a little bit more stable in terms of our yields and our efficiencies.

No, that's a great point, Jim. And I'll emphasize as well the capabilities and the capacity that we brought to bear, all these efficiency matters really drive that ability to scale and credibility to scale to land business with major customers. And one of the things I'll mention as well is the QUANTDx product line. This is the reference materials, higher price point, earlier engagement with assay development -- with counterparties when they're developing assays and determining limits of detection and doing that development work. This has been an excellent initiative. You'll see some good description of that in our MD&A and in our AIF that will be filed shortly. And that's already broken into a 6-figure revenue category. It won't be yet separated out from the QAPs business from reporting. But I think we're very satisfied with the engagement level on that new product line already that is generating material revenues for us, and just yet another touch point of technical excellence with customers and showing real value added for them. And just reflective of the scientific and strategic excellence of our team, which we can't speak highly enough about.

I think that gives us a good outlook for next year. I don't see any other audience questions. I have run out of my own questions. Was there anything you guys wanted to discuss today that we didn't get a chance to cover? Any last thoughts for the audience?

I would just thank everybody for your support of our management team and the commitment of your capital. We're building our business for real. We've built real substantial value. And I think we've talked about just how great that value is and now it's on us to drive the revenue growth to substantiate that thesis, and that's what we're doing and what we're dedicated to doing. So whether it's our diagnostics operations, antigens as ingredients, quality control materials in our quality assessment products and QUANTDx lines and Kinlytic's. So these are all real tangible value that we're building, and we look forward to seeing that more fully reflected in our stock price across 2026, and thank everybody again.

Well, thank you, Cameron, Ken and Jim. I appreciate your time. Thank you to the audience members for your time and your questions. And yes, I guess we can leave it there. I hope you all have a very nice Christmas, New Year's, Hanukkah, whatever you celebrate, Happy holidays, and thanks again for supporting the food bank drive.

No, thank you, Deb. Great initiatives. Delighted to do...

Thanks, Deb. Take care.

Thanks, everyone. Take care. Bye.

Bye-bye.