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

Good morning. Thanks, everyone, for joining us today. We have an update with Microbix. They just put out their Q4 and year-end numbers this morning. So, make sure to check those out. This session will deal specifically with those earnings -- that earnings release rather. With me today, I have Cameron Groome, President and CEO; Ken Hughes COO; and Jim Currie, CFO; As always, this presentation will contain forward-looking statements. If you'd like to know more about those, you can find them on the presentation on the company's website, which will be updated today. And there will be a Q&A session. So feel free to enter your questions in the Q&A box or you can send them directly to me. With that out of the way, thanks, gentlemen, for joining me this morning.

Morning Deborah.

Yes, congrats on the great quarter.

Thank you. Well, it caps a very -- very successful year, I believe, for us. And we'll talk about the year, the quarter and the year to come, or the year we're already in there. But before we get into discussion of the financial results for Q4 and fiscal 2024. I thought I might touch on some of the strategic achievements and focus areas that we've had for 2024 and going into 2025. Our primary focus has been, and very much remains on achieving thought leadership in our areas of the diagnostics industry in ensuring maximum test accuracy, both with our provision of antigens as ingredients and our QAPs test all of the assessment products or test controls as they're called. We've acquired significant new customers -- we're focused -- continue to be focused on acquiring new customers in North America, the EU and Asia and expanding our business with existing customers is a big focus area for us. And with that, we are very much committed to holding our compound annual growth rate of revenues in the 20% to 40% per year band. And in 2024, we achieved the upper range of that band with 40% growth in our ongoing sales for the company, and that compares to our industry, which is usually in the -- 5% to 10% is considered a very good performance. So when we're performing at 4x to 8x the growth rate of our industry, we're pretty pleased with that. And what we're doing that we're also demonstrating some very strong control of our operations by maintaining positive EBITDA positive net earnings, positive cash flow and actively repurchasing shares. So not only are we growing the business, we're growing and well-managing our resources appropriately and not diluting shareholders. In fact, we moved the company to an anti-dilutive overall position. So we very much believe that our actions to advance the revenue-driven business as well as our Kinlytic therapeutics project, which we'll -- I'm sure, touch on as well, are building very much real and sustained value within Microbix for our shareholders and the financial results that Jim will move to summarize are really the reflection of that fundamental and strategic work we're doing to create value. So Jim, why don't I hand off to you and you can give a summary of Q4 and the fiscal year 2024.

Thanks, Cameron. It's a real pleasure actually this year to present the results as it's excellent from a quarterly as well as a fiscal year. It's not always been that way. So I'd say it's great. Yes, Q4 was an excellent quarter. Record revenue, $6.3 million revenues, up 48% from last year's Q4. We saw good growth in both businesses. Androgens were up 50%. And while our QAPs business was up 42%. Again, and that came with some strong margins as well. Margins were 55%, well above where we were last year. And that all led to an 18% EBITDA for the quarter, and it was a great finish to a great year. On an annualized basis, we ended at $25.4 million in revenues, 40% growth. We saw -- gains saw growth from both businesses. Antigens up 44% and QAPs up 38%. And we also had the recognition of $3 million worth of Kinlytic milestone U.S., Kinlytic milestone payments in Q1 of the year. So that contributed to the fiscal year performance as well. Can we go into a little bit more about where we are with the Kinlytic businesses in his discussion. Again, core business margin growth was great, and it went from 40% last year to 53% for the year. And it was just excellent performance, 22%.

Jim, I'll just make a quick note. You're normalizing, of course, in your 40% sales growth and your -- your 53% margins for the year to take out the onetime revenue. The immediate revenues from Kinlytic. So if we were to include Kinlytic, the revenue growth would be 54% for the full year. And the margin be 60.6%. But Jim is already doing a bit of the analyst work and carving that back.

Sorry.

Yes, no worries.

Thank you for clarifying that for us, for me and for the listeners as well. Appreciate that. We also had close to $2 million investment in our facilities, our equipment and acquisition of some core technology during the year as well. So again, utilizing our some of our -- the cash that we have to help support the growth of the business. And as Cameron outlined, we repurchased greater than 2% of our shares during the year. 2.6 million shares, again, to help stabilize our share price over the year. And so overall, an excellent performance for 2024. We're all -- I may not look excited, but I don't get as excited as the other two guys, but I am. So it was a great year, and we've got off to, as Cameron will probably outline, we've gotten off to a good start to the year. We're pretty close to finishing our first quarter for the year and is looking strong as well. So Ken would you like to give us some update on the operations?

Jim gets excited in his own way, it just ensures it differentially. So from a scientific and operational perspective, it has been a great fiscal 2024. And -- there's a lot [indiscernible] about it. I've spoken -- we've spoken a lot about capacity building over the years, and we continue -- we've built a lot of capacity, and we continue to build up capacity. We now have three facilities over 34,000 square feet. We opened the last -- another lab 2,000 square feet CL2 [ containment ] QC and R&D, laboratory to build our capacity and our portfolio of product lines going forward, which was opened by Minister Tangri this year. I should point out that we've used a capital that was not too expensive by using support from Fed dev Ontario at the federal level, and from the provincial government from the Ontario to get a fund granting system and we deployed that money, and where we have a reputation for seeing what we're going to do and then doing it. Our new automated filling line is now fully operational in Building 3, which commissioned in the last couple of years. We've implemented our electronic quality management system and our enterprises source planning software. Successfully to build capacity and efficiency going forward and we're adding in augmenting capabilities and integration of those capacities as we speak. Our quality system has been audited. We recertified ISO 9001, ISO 1345. We've done the infectious depend [indiscernible] diagnostic regulation, a very high lift for the European authorities, so we can continue selling medical devices into Europe. We've had a kind audit, several of those, all of which have gone extremely well and speaks to the operational excellence we have at Microbix. We continue to do process development to our manufacturing, our development and our engineering teams to build and improve yields, to improve margins going forward. And we're deploying our unique capabilities in infectious disease diagnostics and other aspects of biomedical science to diversify offerings going forward. And that's in the core business side. Everything is going extremely well, which brings me to commit and Kinlytic. And Kinlytic is also going extremely well. I've said many times, we have an excellent relationship with [ Steel ] Pharma, which is funding this particular program. We have a fabulous CDMO who's doing great work in book grading the systems to contemporary standards. I was in a great meeting with them this morning. And all I can say is the stated time line for 2027 is unchanged. And if anything, it's derisked. Moving forward at a pace and everything is going extremely well. I have no bad news to deliver operationally, Michael, because it's in very good shape and we're just continuing to build.

Brilliant, thank you, Ken. That's great. Well, I know we want to take most of the time today to address shareholder questions. But I'll just make a few concluding remarks before we move over to that segment. One of the things, of course, we're doing is making sure, our little business is growing. And our little business isn't so little anymore. I was reflecting on our Q4 top line of $6.3 million. And that effectively means we are making sales of about CAD 100,000 every single business day. So clearly, there are customers buying what we are selling and what we are selling is providing some real value to them. So we're growing the business very, very well in that respect. And becoming a larger company. As Ken has outlined, with our systems and Jim has highlighted with our financial results. We are also working to expand the total addressable markets that we can tap into. Well infectious disease diagnostics is a tremendous market in tens of billions of dollars. It's not the pinnacle of our ambitions to stay in that silo. So we are adding capabilities and addressable markets. And through the year, you've seen us describing some of our work most recently moving into the area of genetics testing and supporting a pro, one of the first programs I'm aware of for urgent point-of-care genetic testing. And we're right in there supporting it. We're also supporting work in oncology and in fact, molecular pathology in looking at supporting the accuracy of pathologic -- pathology, histopathology and molecular analysis of tissues that may have tumors that have been driven by infections with viruses. So a great crossover between our expertise in infectious disease, and the new mark addressable markets oncology and the emerging feed in the field of molecular pathology as well. So again, this speaks to the kind of thought leadership that we're driving. And getting out front, creating new markets, creating markets alongside our customers and building some real and sustained value for our shareholders. And you see similar skill and diligence with our Kinlytic urokinase project, which were really supercharge an already strong value creation engine as we move ever closer to the approval of that drug by U.S. FDA. So again, a very strong year in fiscal 2024. We're looking for an even stronger year in fiscal 2025 that we've already begun. And as Jim has highlighted, we're off to a great start for fiscal 2025, as we close in on Christmas and the conclusion of our first quarter of the fiscal year. So with that, I wish I have any negatives to report, but everybody is doing superlative work here. I just can't thank our team enough. And we also are very grateful of the support of our many shareholders as well. So Deborah, with that, maybe we can open it to questions about the picture of the company and the results just posted.

Sure. Sounds good. First question is for you, Jim. What's the outlook for gross margins in each segment and for the total company for 2025, if you're able to give us any guidance?

We don't typically provide guidance forward outlook, I think what I can say is that we are continually working on our pricing as well as the cost structure of the organization to improve our margins. And we've always indicated that our margin target for the organization is somewhere in the 60% range. So I would suggest that continues to be our target. But I can't really speak to specifics at this point in time.

Yes. I think certainly, we'll be looking at -- we're certainly targeting higher gross margins in all product lines, and we pursue operational efficiencies, as well as intelligent pricing, that works for both us and our customers. So I wouldn't look for 2025 gross margin to be down. I would look for it to keep up. And the question is how close to that an ultimate target do we get in each quarter. And there's always going to be a bit of fluctuation quarter-to-quarter depending on mix between antigens and QAPs and product mix within those categories as well. So there'll be a bit of quarter-to-quarter fluctuation in margins. But you've seen through our fiscal 2024, some fluctuation in margins quarter-by-quarter as well. And it's only been a swing of a few points if you normalize for the Kinlytic milestones.

I would also comment, we've got that critical mass now to address these issues in terms of operational efficiency. I can't speak highly enough of our development, quality control and engineering teams and the manufacturing as well. Addressing all opportunities to maximize yields, minimize costs, reduce batch failures, because we're in a biological world, things go wrong, they're going to run less and less and less and we get more and more and more success. So we're going to be building margins just through operational excellence as well. And that's -- and we have the critical mass to do that now by design.

Yes. Switching gears to revenue. So a comment from the audience, congrats on such strong revenue growth. Going forward, do you expect the growth rate in the antigen and QAPs businesses to taper off at all? Do you have a target growth rate range?

First question, do we expect growth to taper off? No, we don't. We expect growth in both categories. Our antigens business is realizing much of the potential we hoped for it and intended and directed into -- we're seeing some very strong sales growth into Asian markets, where -- which we have looked at as being the growth market, primary growth markets for the antigen business, but we're also seeing some solid growth in North America and Europe as well. So very strong there. QAPs continues to grow very strongly as well. And these two business lines really pace each other incredibly well. Through fiscal 2024 with both of them up in -- well into the upper end of our target growth range. And I think that compound annual revenue growth rate that we're targeting for the business is in that 20% to 40% growth per year that we're aiming for. And certainly, we'll control our financial projections and our cash management to the lower end of that range, but we'll certainly be targeting to get to the upper end of that range or beat it if we can. But it's up to investors and analysts to really decide where they believe we'll land, we don't provide pinpoint guidance outside of that broad range.

Talking specifically about the growth in antigens. I was under the impression that antigens is sort of a GDP growth rate business, at least in Europe and the Americas or North America. What's driving that additional growth are you capturing orders from customers? Could you maybe elaborate a little bit on that growth?

Absolutely. We certainly are not missing growth opportunities within our native antigens business in North America and Europe. But that does tend to pace population growth as well as a bit of -- not so much GDP, but population growth. Where we are seeing some very nice opportunities emerging is in markets where these tests have not been done historically or not been done in the frequency. But as countries become wealthier, people want better health care. Well, they certainly deserve it and they want it and they can get it finally. And we're right in the midst of that transition. And those are markets, if you go by population that are potentially much larger than the European and North American population. So it really gives us some very strong growth opportunities in the antigen business. And we have been investing as Ken has noted in the operational excellence of our antigen business and its efficiencies and capacity. And certainly, we'll be targeting as well to add to the breadth of technology that we're able to bring to bear on that business and maximize its growth opportunities going forward. So expect to hear more from us on that.

I had some more specific questions about antigen grocery. These are coming from multiple sources. So I'm trying to aggregate them.

Better, you do the aggregating, we'll do the answer.

So still talking about antigen growth. Do you think this was driven by a catch-up in orders following weaker pandemic years? Or do you think this level is the new baseline?

I think this level is the new baseline. And we'll -- from which we will be building.

And were there any onetime shipments that boosted the quarter but will hurt next quarter? This is specifically antigen as well? Okay. And I don't see anything else on the antigen, ohh no here we go, what is the growth rate in antigen's in established markets, U.S. and Europe? Is all the growth in emerging -- that question was already sort of answered. Okay. Let's just move on to -- let's talk about operating leverage. Is it reasonable to expect operating leverage given the revenue growth forecast? Or should we just see more investment in infrastructure and SG&A to offset it?

If by operating leverage, we mean -- it's meant driving a higher proportion of profit I think that's where we're striking a balance between where we feel the best intercept for value creation is. We could certainly -- we could certainly minimize reinvest in the business and investment systems capacity and excellence, and drive a whole lot more profit to the bottom line. Where we're balancing is between maximizing revenue growth, customer capture, new opportunities, new addressable market areas. And demonstrating control of the business. So that's, I think, the balance we'll be looking to strike in 2025. And in driving that. And that's where we feel the maximum value creation for the businesses and be very, very healthy. EBITDA strong, strong earnings and cash flow, and we'll be even more aggressive, I think, going forward on our share repurchases and the cancellations. But it's not 100% slam as much to the bottom line. We're not polishing the business up for a quick sale. We're building it on the fundamental value.

Provide an update on the CapEx outlook, which investments are now concluded and which costs from 2024 are going to will drop out going forward? And can we anticipate any new ones coming into the calculation?

Well, I'll give a bit of a summary on that, and I'm going to defer to Jim as to how specific we want to get. We'll certainly be making CapEx investments at a strong rate in 2025. And from my memory, we're certainly above $2 million in capital investments planned for the year. So -- in terms of categorizations, Jim, how would you want to break them into categories?

I guess in terms of categories, I mean the investment in 2025 will probably be less so on what I would call facilities or labs or et cetera. We will have some investment in labs, but a lot of it's on equipment, additional equipment, replacement of equipment. We've always got aging equipment that requires replacement, and we want to have our products and our inventory secure. And so that's where the investment seems to be going for next year. And as Cameron, you indicated, our initial capital plan is in the $2 million range. But as always, our staff knows that they -- it's not signed and approved. They've always got to go through and do the proper justification from the investments that they're making.

Yes. A lot of it is actually capacity building as well. I'm just looking at our schedule, Jim, from the Board package. So a lot of things that we are, some of the equipping of additional lab upgrades to lab spaces, additional capacity-driven equipment and capability-driven equipment as well. So it's a very healthy mix, but it's all supported within our cash management plans.

Yes. I mean we're continuing to build capacity to build this business to a much bigger business, and we need that capacity to do that. We're moving away from the kind of bricks-and-mortar capacity to the skills, capacity and the execution capacity, that's the way for a business to grow. Obviously, we're not going to overinvest -- but we're going to make sure we're ready to accept the opportunities we've been building towards and reap the benefits of the thought-leadership position in the various areas we're in going forward.

I have a couple of QAPs questions. Sorry to jump around a little bit. I should have got antigens-QAPs in general, but I think I tried myself up with some issues in the questions. So for QAPs, are you able to share approximately how much of the QAPs revenue in 2024 was generated from QuidelOrtho?

QuidelOrtho is an important customer for us, and we are doing a reasonable level of revenues from them, but they are not our biggest QAPs customer, they are a meaningful one, but they are not the only one or they're the largest. So a lot of our work with QuidelOrtho is continuing to support the development of assays on the Savannah. The comments in Quidel's Q3 presentation, and their recent investor presentation that was December [ 5th ], described their outlook for Savanna in that they are continuing to prepare or the respiratory virus panels with the view that for a late 2025 approval and to drive additional panels. They already have a respiratory panel approved in Europe. A general ulcers panel approved for North America, and they're looking at the newer respiratory virus panel for Plex and an STI panel as the next assays they are targeting approval on that platform. The platform itself already being approved, of course. And our work backs up from that. So obviously, there has to be inventory ready to support any launch of a new assay. And so you can count back 3 to 6 months from any timelines of theirs for them to have inventory in hand to support product launches. And then, of course, that has to be built -- designed and built prior to that. So our revenues actually track back further in the build of product build of inventory and then approval and launch. So we do see them being a significant customer in 2025. But again, not our largest QAPs customer, nor our only one.

How much visibility do you have for QAPs growth this upcoming year? How much revenue could be at risk due to customer delays?

Not a huge amount of our revenues, QAPs, revenues for 2024 for the full year. As you've seen in the news release disclosure this morning was on the order of CAD 7 million. We're looking for that to grow double digits, certainly well within our guidance band for fiscal 2025, and we have a growing list of customers, any one of which, having a breakout will drive revenue growth in caps and also margin expansion. A lot of our work in the external quality assessment and proficiency testing industry with QAPs are very complex products but small runs comparatively speaking. And those serve to depress the margins of that segment. So as some of these breakout from proficiency testing schemes into full commercial launches with major international companies, those manufacturing run sizes expand dramatically, and that should lead to margin expansion in that category as well.

Okay. And then for 2025 -- the 20% to 40% revenue growth rate target, is that based on 2024 revenues, including Kinlytic or excluding that milestone?

We would be looking at the baseline revenues from 2024 and growing off of that baseline. So our growth if one removes the Kinlytic milestones, we were $15.1 million in fiscal 2023 in terms of ongoing sales revenue and $21.3 million in fiscal 2024, and we'd be building off that base of sustained revenues now Kinlytic will kick in, we believe, quite dramatically towards the end of calendar 2027 with both approval and sales-driven milestones as well as royalties on sales, and that will have a dramatic impact at that point for our business. And we'll be growing like hell in the interim.

I assume the same for gross margins. When do you say they're going to increase year-over-year, that's excluding the milestone, correct?

Correct. Yes.

Okay.

Got you. I make such a terrible politician. I'm answering yes and no to questions rather than going through some verbal redirect.

I like it. I mean short and sweet, get to the point. Okay. Going back to QAPs, has QuidelOrtho reached the performance that they feel they need in the new panels, so low development risk? Are they still working towards getting the performance they want, so some development risk?

Certainly, I'm not going to speak to their development risk. We're supporting them extremely well. And they have capable teams developing these assay panels. There are, of course, clinical validations and regulatory filings that need to be made. So you're looking at multi-variant equations. So I'm not guaranteeing their performance other than saying it's a great company, and we're very pleased to be working with them.

With Kinlytic proceeding so well, is there any chance of expanding the geography and indication of the current partner agreement prior to the formal FDA approval of the [ SBLA ].

I'm going to go with another political answer on that one and say, yes, yes, we are certainly looking at with our partner and certainly encouraging them to consider moving forward aggressively on both clinical label expansion, things like catheter prophylaxis and the resuming systemic programs, but that's their funding decision at the end of the day. We're going to provide the best technical support we can and certainly encourage them as we strongly believe in the clinical utility and clinical importance of the product as well as the economic -- very attractive economic drivers on that. Ken what would you want to add to that?

Yes, there's absolutely there's absolutely no desire to stop after Kinlytic clearance in the North American market. It's Kinlytic clearance in Europe is Kinlytic prophylaxis everywhere. And then there's the bigger indication, which are bigger markets for indications related to pulmonary embolism like, prophylaterial occlusive disease, stroke, even cancer indications associated with this product and there's every intention to pursue all of these opportunities going forward. .

Yes, no. We see Kinlytic very much as a -- as just an opportunity that continues to broaden and broaden both from clinical indications and geography. And I believe we've said previously, we have had the European Medicines Agency reach out to Microbix, and say, please don't forget about us. When you have a package to provide we want to engage with you and see if this can be brought into Europe. Now Kinlytic was never approved in Europe. So it's not precisely the same pathway as it would be in the United States and Canada, where it had been previously approved, but there's really been a tremendous openness on the part of the European regulators to engaging with us to see how it can be expeditiously brought into the European market, because there's a screaming need there as well.

All right. There's a question I can answer. Are you interested in buying blocks with the NCIB. Yes, call me or call the company if you have upward for sale. Anything to add there, Cameron?

Absolutely. We did engage a block in -- we were made aware of a block in October. And we said we're willing to buy the entire block under the NCIB. And then Deborah advised us that might upset a few current shareholders. So then we have demand from current shareholders for more than the entire block. So we had to said off in the middle and the NCIB ended up buying back 1.1 million shares of that 3.3 million share block, but we will absolutely react to any blocks and continue to view our shares as undervalued based on the fundamentals of our business. I see companies in our area that have no sales, no cash, are losing lots of money and are pure concept that have a higher market cap in some instances than our growing healthy, operating profitable business that has well north of 100 customers, multiple products, generating revenues, cash flow. We have, we ended the fiscal year with close to $13 million in cash on the books and shareholders equity -- growing shareholders' equity of $28 million, even while we're buying back shares, which reduced our shareholders' equity. So we're in a great position, And we will absolutely be aggressive in buying back stock.

Can you please expand on the opportunities you're seeing for controls in the oncology and genetic testing areas that you recently entered any thoughts on breaking out cap sales into these three segments in the future as they mature in addition to infectious disease controls?

Well, we've got to be a little bit careful just how much we break things out, because as a public company, we've got to keep shareholders informed but then also telegraphs or moves to potential competitors. Now we've had some sit downs with different competitors, and some of them have just said, you're so far ahead of us, we're not going to catch up. Could you -- would you consider working with us -- so that's high praise, indeed. But we have to be careful what we telegraph, so we'd just remind everybody our disclosure practice is when something is done, we announce it, we don't announce our intentions, our ambitions, our hope streams and aspirations, we announced when a project is completed to a measurable milestone. Some of the ones we've announced recently, one of the extraordinary our first genetic test control. And this is for a genetic test that identifies the patients far greater susceptibility almost to the point of certainty, that treatment with a certain class of antibiotics will result in profound irreversible deafness in that patient. And there's some cases, particularly in pediatrics where an urgent antibiotic intervention is needed. And thus far, that's really been, "Oh my gosh, I'm so sorry, I went deaf. We should have -- perhaps we should have chosen a different antibiotic that might have been -- but that would be less effective. This is a point-of-care genetic test that in an emergency context determines is a patient at risk of that side effect, yes or no, bang, then you can treat with the certainty that you've got the right risk benefit for that antibiotic class. So that's the kind of innovative work we're doing our work in formal and fixed Parafon embedded tissue sample mimetic for oncology, boy, there's a big, big multiple of words, effectively looking at when a pathologist is looking at a tissue slice and doing both conventional pathology analysis and molecular diagnostic testing on that, there are effectively no standardized controls for that, which leaves a lot of subjectivity in room for error in diagnosis of cancer, and particularly in virus-driven cancers like HSV and HPV, we're starting to provide those controls. So an area that is arguably out of control is being brought into greater test accuracy directly by work Microbix is doing. So we're working with thought leaders around the world on that, and that will form a whole new class of test controls and we're right in the thick of that as well. So there's many, many of these opportunities that we see, and all of those as they mature drive real revenues to microbic. So some years down the line, yes, perhaps we'll start breaking those out. Right now, I think it would be both telegraph and our moves a little bit more than we want, and those revenues are just starting now. They'll be breaking into 6 figures in 2025 in these different categories and probably break into 7 figures in 2026 and maybe -- maybe 8 figures, 2027 and beyond, but great opportunities for us. And just again, as more and more customers are working with us, it becomes easier to acquire the next one, and it's the best thing to do is build the base of the breadth, and size of product revenues with each existing customer as well.

Moving on to tariffs. So specifically, how much revenue was from the U.S. market, in fiscal 2024? How much is anticipated in 2025 and beyond? What could a 25% U.S. tariffs mean for Microbix's business and future growth prospects?

Great question. The tariff issues. If we take them at face value, it should be an incredibly easy thing to address. There's hundreds of billions of dollars of cross-border trade just between , and I think it's $600 billion or something just for Ontario. With the U.S., never mind Canada as a whole. The incoming administration in the U.S. as they have concerns about the illegal immigration and drug smuggling, let's just strengthen the dam border, why is this even a conversation? So -- but if that -- if there isn't that leadership at the Canadian federal level to do it or at the Canadian provincial level to do it, then those tariffs may come on. And even if for a short time, that's going to hurt both the U.S. and Canadian consumers. For us, as a supplier of critical materials, these are so sticky and so regulated. There is little alternative for our U.S. customers, but to pay those tariffs in the certainly in the immediate term, and we certainly hope that there'll be adults in the room to make sure that if they do come on in January, that will be a short-term thing. In terms of the proportion of our U.S. sales, some of our U.S. sales are currently rooted through the U.S. and Asia. Obviously, we would change that routing. And bring those into Asia directly. So that would immunize us fully against any impact on that segment of our business. And for U.S.-centered customers, they would have little choice but to continue with us for over that short term and absorb that disruption. So -- our products are both critical, complex and sticky. And this gives us a very good advantage, and there's no easy substitution to be made. Jim, anything you'd want to supplement on that? Or Ken?

I mean we have unique capabilities that a lot of people don't have. We are a global leader in the antigen area and the QAPs area. So to Cameron's point our products are very, very sticky. The regulatory hurdle is to change is not worth the effort. So in the short term, as you see, you have the -- sorry, the American customers will have to deal with that, we hope again, that sensible minds will prevail quickly, and we'll go back to the appropriate trade. But we do have opportunities to distribute us to move distribution out of the U.S. and into Europe or Asia. And that will -- but the bottom line is we're a global leader here, and our products are very, very sticky. So I doubt this will have much of an effect on us at all.

Yes, it's a great point, Ken. And just looking at where we are in the overall value chain of testing. Our products are a few percentage points of the overall value of a test. So even if a tariff were to be applied on our products, if you're looking at adding 25% to a nickel that's not life changing for the customer either. So it gives us a good position there.

In VTM, any update on VTM or what used to be the VTM lines?

VTM, we are building the VTM rebuilding the VTM. Principally, we've been using it is elution buffers or reagent sales are transforming into elution buffers for our controls business, particularly in our onboard kits. The government procurement continues to be what was the [indiscernible] a mystery wrapped in a nice surrounded by a riddle or something like that. So the government procurement, no, private industry sales, yes.

And two more sort of, I would say, more corporate general questions. One, I have been a shareholder for many years, and over that period of time have seen very little change in the Board of Directors. I think it's about time new blood be brought into the business, what plans do the company have to make these changes?

Interesting commentary. I think we demonstrated with over the past several years with a tripling of sales and with going from consistent losses to profitability that we have a very good board. We have a board that hold certainly management to account and management that holds ourselves to account, and we have moved as well to specific performance-driven goals and milestones that the senior managers are measured against, and our performance really reflects that. With regards to board renewal, our most recent addition of Director was Jennifer Stewart, who brought some very strong skills in the government relations field, where we're positioning ourselves to really have a strong voice policy development at the federal level and working with others in the provincial side as well. So that's been strong. And I think you'll see board renewals as we go forward. Certainly, some of our directors will ultimately want to retire and we'll see board renewal through the Human Resources, Governance and Compensation subcommittee of the Board. As we go forward. But we're not on some DEI train or renewing just for the sake of renewing, we are very much looking at what are -- what skills our board has and how it functions.

No obvious areas that you're lacking in terms of skill sets?

Not that we see. Joe Renner brings tremendous experience in the pharmaceutical side Mark Cakran public policy and health care, Peter Blecher, clinical medicine Jen Stewart Government Relations, [ VaneroPaneloni ] on Audit Committee and financial matters. We've got a very good breadth of Board skills on that.

If you're successful in your moving to genetics and oncology is that an area that you would look to potentially add?

Question whether -- yes, sorry, I didn't mention our Chairman, Mark Marino, of course, that has tremendous skill across the pharmaceutical and legal side as well. Sorry, just on the oncology side. Some of these areas absolutely, we are developing strong relationships with thought leaders in that field in clinical medicine as well as the technical side. Question whether those are positions or not is an open. Do we start to formalize a scientific advisory board where we have tremendous -- but informal relationships now or do we add somebody on the board side. And adding on the board, perhaps if we were to add, it might be somebody with specific diagnostics industry acumen as well, more on the commercial operational side there and just look over our shoulders a little bit. But I think we're performing much better in the past 5 to 7 years in spite of all the volatility that was introduced by the pandemic, which certainly upended many plans, and we successfully adapted into the pandemic, during the pandemic and out of the pandemic. And I think if you look at many industrial players in our industry, we're less successful on all three fronts.

Another comment from the audience, Cameron, just suggesting that you could use a capital markets person on the board and maybe you could give a little bit of your background, too, because I think you fill that role?

Sure, sure. I've been in the life science industry for more than 3 decades now, and half of that was spent on the sell side of the financial business as both an equity research analyst, where I spent a decade and as an investment banker where I spent half a dozen years leading the practice of a major Canadian dealer in the space. So I do have some good capital markets experience and expertise. And we also involve others, including [ Deaver honing ] and Adelaide Capital debris background for those of you that may not know us institutional equity sales before she started Adelaide Capital so we do look to maintain that visibility.

Cameron has a series of four life decisions that led me to relations.

I did actually say that.

One last question for you, Cameron. Is M&A still on the table? Is this something you're still considering?

Yes. M&A cuts two ways. For ourselves we've looked at some businesses and we included they were additive rather than firmly synergistic. So with our share price, we didn't feel particularly enthusiastic about diluting shareholders for an acquisition opportunity that nearly added size and adjacent revenue lines. We will consider and continue to consider things that are strongly synergistic and accretive for our business. And one of the things we'll be looking to is to make sure we're properly prepared for such opportunities, if and when they emerge. So that's something we're looking at. And now with our ERP system fully ERP upgrade, fully operational in our EQMS digital quality management system work and advancing more quickly to completion now, it becomes more sensible to consider our ability to successfully integrate an acquisition. It's not just about doing a deal. It's what happens the day after the deal closes. That's the big element of concern. The other side of the M&A coin is, okay, gosh, we are still in a market where fast-growing healthy small cap companies such as ourselves are not necessarily getting their value fully appreciated in the marketplace. And that's certainly not lost on our competitors and private equity firms that have expressed, Hey, guys, would you sell or gosh, we're hoping you'll stumble and we'll be able to buy you without a change of control premium, there's still folks expressing that level of interest in our response remains consistent that we're not in trench managers, but if somebody seriously wants to do something in transacting to take Microbix out, you better come with a change of control premium that is sufficiently interesting and something a level we're not going to be at for 2 or 3 years. And the closer and closer Kinlytic comes as well. The more interesting that asset becomes and the greater the reality of Kinlytic will be reflected in our share price. So we see a business going from strength, from strong to stronger, and that puts us in a very good position to shareholders to keep maximizing value. So yes, we get frustrated too, about the share price and we joke about it that we could, announced that we cured cancer, colonize Mars, and solve death and the share price to move $0.01 or $0.02. But ultimately, we'll just keep winding the spring. And 1 day, all that will unfold and be reflected.

Well investors keep saying that they want profitable growth, right? And that's what you're seeing?

Yes, yes. absolutely. And the other thing, sometimes I'll joke that the best cure for low share price is to go buy some shares. And all of our management, our material shareholders, and we continue to add to our holdings. And nothing that moves the share price than a few shareholders going out and buying more.

Great. We don't see any more audience questions. There's one here. Yes, there was one, sorry. What is the next major milestone for Kinlytic?

Ken, do you want to talk about that?

No, I would say the obvious one is the contracting of the supply of the CDMO for the money for the product. The off-line finished drug were required at the moment to upgrade to contemporary standards, the drug substance, which is the purified protein urokinase protein, that's going forward at a pace. We have major international [ CDMOs ] to drug products now being evaluated to where one will be selected to be the final producer of product. We expect that happened in the first quarter of 2025 -- first half of 2025. It's not in the critical path right now, but we have excellent candidates already jumping at the bit to work with us there. So that's probably the next major milestone. Then of course, we'll be building the manufacturing capacity and going to the FDA for approval. To relaunch in 2027?

Yes. And we have to strike a balance to be respectful with our partner that is a private company, and their druthers would be to say nothing and just pop on to the market one day. But they do respect the need for us to -- as a public company, it's material for us, and we have to keep our shareholders up to date on the progress of that, but that means we can't be issuing a new Kinlytic news release every time somebody sneezes, so it's only once or twice a year when we have a material milestone such as engaging one of these major contractors that we can provide the updates beyond our continuous disclosure.

Yes. And the project is going very, very well. The CDMO on the book substance is doing superlative work and the way we go.

Okay. Well, now I don't see any questions, so we might actually be done. And just on the hour or 2. [indiscernible] your wonderful marketing person just informed me that the presentation is on the website now. So any investors looking for an early Christmas gift. You're welcome. You can check that out. There's no significant changes. I don't think just updating the financial information in a couple of tweaks. Yes, I mean, Cameron, was there any closing comments that you wanted to have for the session? Anything that we missed that you wanted to discuss?

I think I would just say to -- we are very grateful always to our shareholders for their trust and support in the management team of Microbix and our management team are very appreciative of them as well as our Board of Directors. And just the wonderful the staff we have, our senior management team, our managers, our staff. Everybody is just doing fantastic work. And it's just a real pleasure to be able to be the spokesperson coach for such a wonderful team. So thank you, Jim and Ken. Did you have any concluding comments you were making.

My only comment is that obviously, we're looking quite pleased with a really good year in 2024. But we're no way complacent. We've been building capacity to build this business way beyond $25 million. And so we're going to be pedal to the metal to do that in the next little while to realize that shareholder value and to Cameron's point, we're all shareholders and we want to enjoy that in the future. So there's going to be no take in the foot off the gas anytime soon. But we do have a great team. We have the right team to do this work.

Yes. We're not resting on our laurels at this point in time. It was a very strong 2024, but we've already switched to 2025 and looking forward to another very successful year.

Yes. 2024 was a record year, and I think we'll see the same for 2025 with new records for revenues, margins and so forth.

Well, thank you all for participating. Thanks to the audience for your participation and your great questions. I think we had about 30 questions today. So like seeing max I don't have to come up with my own, so I appreciate the -- and yes, everyone have a great holiday season. And reached, if you have any additional questions or would like a one-on-one. See you all next year.

Thank you. Thank you, everybody.