CA - Microbix Biosystems Inc. (MBXBF) Q2 2023 Earnings Call Transcript
2023-05-16 16:01:02 ET
Microbix Biosystems, Inc. (MBXBF)
Q2 2023 Earnings Conference Call
May 16, 2023, 11:00 ET
Company Participants
Deborah Honig - IR, Adelaide Capital
Cameron Groome - President, CEO & Director
Kenneth Hughes - COO
James Currie - CFO
Magda Gardner - IR
Conference Call Participants
Presentation
Deborah Honig
Good morning, everyone, and thanks for joining us today. We have a very exciting update with Microbix as many of you know, they put out some very, very good news on Kinlytic this morning as well as they reported their fiscal Q2 results last week. With me today, I have Cameron Groome, Jim Currie and Ken Hughes, who I will change your name right now, Ken. Sorry about that.
Cameron Groome
Thanks Deb.
Kenneth Hughes
As well as my…
Cameron Groome
One bald guy, It's just the same as the next.
Kenneth Hughes
I'll be the bald guy with a goatee, whose got the english accent.
Deborah Honig
There you go. Now you're identified. I hope you're a , not a CEO. I'll change that in just a second. Anyway, with the somewhat intros out of the way, I think maybe I'll hand it over to Cameron to discuss the quarterly numbers as well as just give us an update on what's going on with Kinlytic.
Cameron Groome
Absolutely. Thank you, Deborah. We were pleased on May 11 to report our results for the second quarter of fiscal 2023, that's the quarter ended March 31, 2023, is where September 30 fiscal year-end, just as a reminder. And decent top line, we came in at $4.2 million with strong sales of our test ingredients from our test ingredients arm, our antigens sales and decent sales of our quality -- test quality control products, our quality assessment products or QAPs, as we like to call them.
We did not have any sales of our sample collection devices DxTM viral transport medium in the quarter, but still recorded a small profit. So it is a return to profitability for the company due to the sales of those 2 product categories and demonstrating good margins, solid cost control and really moving into the post-pandemic era from the mix that we achieved during the pandemic.
So certainly, we are not a COVID play. And I think this demonstrates that this return to profitability for the company. There are things, certainly, we want to optimize from here, and we'll continue to do so, but it is a solid quarter for us, and in fact, came in slightly ahead of our budgets from a bottom line perspective. Jim, did you want to expand on that at all?
James Currie
Well, sure, I'll give a few highlights of the quarter from a financial perspective. I know people were probably wanting to get to discuss Kinlytic and give Cameron an opportunity to go into the news release today. But I think, as Cameron indicated, from a top line perspective, ex -- without VTM involved, we actually saw a 40% increase year-over-year. Strong performance from our testing ingredients business started to come back on track again post-COVID, which is what we've been saying all along is that we're expecting to see that.
And we had good strong performance from a couple of our -- 2 or 3 of our major customers in the quarter. So we had over $3 million in revenues from that business. QAPs business continues to be positive. It was relatively flat year-over-year, but positive. And from a margin perspective, it was above what we had expected, especially with the weighting of the antigen business. So at 60%, it was good strong performance for the quarter from a margin perspective.
On the operating expenses side, we were actually lower than had been budgeted. We had some funding come in over $200,000 worth of [indiscernible] funding come in from, I guess, 3 sources, which hadn't been necessarily forecasted or expected. So that was a positive $200,000, and that helped to put us into the operating income as opposed to an operating loss for the quarter. So overall, good quarter, certainly an improvement to Q1, which it was definitely a disappointment, and we're on the right trajectory. That's what I've got in terms of an update, Cameron, on the financials.
Cameron Groome
No, very good. Thank you, Jim. And I think worth mentioning as well that we continue to maintain a strong balance sheet with a very solid cash balance of close to $12 million and very good current ratios and debt-to-equity ratio. So we are in certainly no position. We have no absolutely zero need or intention to tap capital markets at the current time and continue to use judiciously our normal course issuer bid to repurchase and cancel shares in order that at a minimum, we're offsetting the use of these regular use of our stock option plan as a part of our employee incentive compensation such that we're in a net anti-dilutive position from a share count perspective.
And operationally, a lot of good things going on with the company continue to move through, whether that's building our customers and our categories but also improving our systems. And Ken, maybe I can ask you to comment a little bit about some of that ongoing work.
Kenneth Hughes
Sure. I mean, following up from what Jim said, I mean, we've -- and you've said in terms of not being a COVID play, operationally, we're doing very well. And as the group knows, we've already built a lot of capacity, and we continue to deploy that and the expertise to do that basically fulfilling orders as they come in. At the same time, we're upgrading our systems. We have a go-live for new electronic quality management system next week, and the new ERP system is coming online the following month. If -- the units will be integrated into the system while maintaining our quality management system in full operational form going forward, so we can meet the needs for our customers going forward. So we're in pretty good shape. One comment I would make is it's really enjoyable when people ask you what's your burn rate? And the answer is we don't have one. So because we actually sell stuff and people buy it. So it's just been a good quarter, a little bit of a bounce back, a little bit of a description of not being a COVID play and we're going to grow from there.
Cameron Groome
Very good. Thank you very much, Ken. And it's exciting to see some things going on as well. I'll -- one thing I'll mention, we are starting to now see sales of this very week actually of our first sales in cartridge components, in particular biological materials, in molecular test cartridges, which is a new category of product for us as well. And that adds to our immunologic ingredients program, we now are starting to move into providing molecular test ingredients as well.
And I think that's an exciting development for the company and builds further on our capacity. We'll have to decide which silo to put those revenues -- those new revenues in as that also builds. So some very pleasing results for the quarter. As we'd indicated for some time, we expect a weaker first half this year. Q1, as Jim had indicated, was very soft just due to order timing around customers we've seen in this Q2, a very strong resurgence of our ingredients business that we expect to continue and again, positioning more and more products in the QAPs category, our quality assessment products for launch over the coming quarters, with major international diagnostics companies as our customers for that business.
So I think that concludes our call today. No, I'm kidding. We probably should talk as well about the agreement announced this morning on Kinlytic urokinase and touch on that before we move to questions. As some shareholders -- many shareholders know, a number of years ago, Microbix had identified that it could create a biosimilar to a very important thrombolytic drug been created by Abbott Laboratories and intended to do that as far back as the mid-1990s.
However, years later, following restructurings, there came the opportunity to actually buy the drug master file NDA at the time, BLA now for the actual innovative Abbott drug rather than create a biosimilar to. And that's what became Kinlytic urokinase. Unfortunately, to return that product to all of its indications, systemic and per catheter clearance would have been an investment well north of $100 million less. And Microbix pursued that amount of capital for quite some years and is a small, relatively poorly capitalized company was not unsurprisingly not able to raise those funds.
We under the management more recently undertook to refine this business plan and in 2 directions: One, to look at a specific subindication that it built up the market quite dramatically somewhere between $350 million and $500 million in North America market for clearing blood clots from blocked venous catheters, which is a very -- become a very substantive market to return Kinlytic for that indication using third-party contractors that already have validated manufacturing facilities, we could use our expertise to do that for on the order of USD 20 million to bring the drug back for that indication and achieve about 30 -- about 1/3 of the dollar value of that market which continues to grow quickly.
But that USD 20 million was still beyond Microbix's reach and would be added to probably another USD 10 million in pre-marketing and relaunch costs associated with the product. So USD 30 million total investment to bring Kinlytic back onto the market. but that could realize sales in $150 million to $250 million annual sales range should that occur. Microbix determined we did not want to massively dilute our shareholders to raise that capital and nor did we want to believe the earnings and required growth capital from our very successful diagnostics businesses to .
So we sought to identify a qualified partner that would be willing to commit that obviously would have to due diligence to file technically and from market point of view and decide to commit that 30 million requirement to bring the product back. We identified a party with the capabilities, with the financial backing and with interest and have consequently executed an agreement under which they will provide 100% of funding to bring the product back to market.
And Microbix will assist them on a fully reimbursed basis to manage the technical elements of the file and the filing and the supplement to the biologicals licensing application, the FDA and bring the product back onto the market initially into the United States for the catheter clearance indication, but subsequently expand that to other geographies and other clinical indications where biomicrobics will continue to receive an ongoing double-digit royalties.
So under this agreement, we will receive shortly an upfront payment of USD 2 million. If a renewed FDA consult goes unexpectedly in some wild new direction, the partner has the right to exit the agreement and receive half that money back. So at a minimum, we end up with USD 1 billion. But if things go as expected, we will retain that USD 2 million and following the positive FDA -- a positive FDA consultation, we receive another payment of USD 2 million, we will then receive a further USD 1 million payment upon the acceptance of the supplement to the BLA by the FDA and the approval of the drug and then up to USD 30 million in milestone payments based on sales thresholds that we see being very achievable and then a double-digit royalty that will be ongoing for a very long time as this is a very long-lived biological drug.
Deborah Honig
You mind If I [indiscernible] some questions?
Cameron Groome
Absolutely, please.
Question-and-Answer Session
A - Deborah Honig
So one from the audience, which I thought was relevant to the conversation was just a clarity's sake, Will Microbix be funding any Kinlytic development?
Cameron Groome
No. That is a key objective of this agreement such that we are not full in capital away from the core business, but continuing to be able to free up capital with this project in this program not consumed.
Deborah Honig
And can you talk a little bit about the time line to bringing Kinlytic back to the market?
Cameron Groome
Absolutely. So what we are looking to do under the project plan is to get -- initially, you redevelop the drug active manufacture, the active ingredient, then you create this finished product package formulation, that's the second step. Then once those are completed, you move to a very comparatively simple and straightforward clinical equivalent study to show that new drug works the way it used to, the newly manufactured drug works it used to.
And then you file the full data package with the FDA. That process is anticipated to be about 2.5 years or 30 months. and then there will be a review process by FDA that will be somewhere in the 6- to 9-month range targeted thereafter. So you're looking at about between 3 and 3.5 years to bring the product back on to the market in the United States with catheter clearance indication.
And we have had that there is the potential to do the same in parallel for Canada, where the drug is also approved, but again, needs new manufacturing to be validated as in the United States. And we actually have had outreach from the European Medicines Agency to Microbix saying please don't forget about us to be to whatever extent possible we would very much like the drug to become available in the European Union concurrent with its return availability in U.S. or other markets that means to be seen to the extent to which that's possible, but it's certainly on the radar.
So initially, U.S. catheter clearance, then look at other geographies and then beyond that once there is in-dated drug back available, Microbix and its partners can begin to look at the systemic indications, things like pulmonary embolism for which the drug was also previously approved; deep vein thrombosis; peripheral arterial occlusion; stroke, et cetera, where this product could be extremely useful on a clinical basis, but it's a longer and more expensive pathway to return to market.
Deborah Honig
And in terms of the European market, do you have any idea of what size that market would be? Would it be comparable to the U.S. market?
Cameron Groome
I would say, roughly speaking, it would be comparable to the U.S. market, but we don't have precise data on the European market. It hasn't frankly, been our focus. We viewed the project. We said this needs to standard fall on the U.S. economics and have presented it to partners as such. And clearly, we have one of the most sophisticated private equity firms in the world in life sciences that is the they who must not be named in this, but I suspect some intrepid shareholders may look at the histories of people involved with Sequel and new American Therapeutics and should be able to connect those dots.
Deborah Honig
And is this agreement with Sequel only for use in distribution in the U.S.? Or is it for -- like is it global?
Cameron Groome
It is global. We and they feel that having 1 manager running this project through and then partnering it on, but we will receive the equivalent proportion of economics for any sublicensee's as well.
Deborah Honig
And you gave us a little bit of background on Sequel. Could you give us some additional [indiscernible] another partner. What other product size or company, et cetera?
Cameron Groome
Sequel is run by a group that is very successfully built specialty pharma companies in the past, built them created a portfolio of assets and successfully monetize those portfolios. So they have extreme level of confidence in their ability to bring analytic back such that a private equity firm is willing to fund well in essence, USD 35 billion put behind this, the USD 5 million in pre-commercialization milestones to Microbix, plus the additional USD 30 million estimated cost of the project 20 for the manufacturing revalidations product creation plus another USD 10 million for remarketing market costs and relaunch inventory, et cetera.
So this is not a trivial exercise. It's certainly remained well beyond Microbix has reached to do it alone without certainly diluting the company to the point where there would be an outright change of control without a premium was not a path we were willing to walk and nor do we think it wise to do so. So this undertakes everything we needed to achieve and for for our shareholders out of this transaction and if at any point prior to the recommercialization of the asset, that our partner does not continue to fund or pursue the project, then can Kinlytic would return in its improved form to Microbix. So there's nothing but upside here by and large.
Deborah Honig
One last audience question about Sequel. Can you please tell us what makes you confident they have the expertise from competency for commercializing Kinlytic? Can you profile other product successes in theirs?
Cameron Groome
I think for that, we should ask shareholders to do some of their own investigations. And hopefully, those dots get connected the same way we have. But this is backed, as I've said, by one of the best regarded and largest life science private equity firms on our small planet, who've done a full workup and due diligence technically and market-wise on Kinlytic.
Deborah Honig
Okay. Great. And going back to exclusivity, will you be able to bring on other partners for, say, Europe or Canada that will pay other milestones and royalty payments?
Cameron Groome
We will see our proportion -- the same proportion of sublicensing fees as we would have royalties. So as the project advances, and I suspect there will be appetite for other markets from sublicensee's. We will continue to gain our proportion just as if those sublicense fees were net sales and get -- Microbix will get in its proportion. But again, this is a project all on its own and could consume -- could consume all of our business development bandwidth and I don't think that's what shareholders would have wanted rather that we continue to build the revenue business at Microbix and have Kinlytic is a very powerful turbocharger on healthy engine rather than divert all our attention on to Kinlytic, which would be the -- which would have been the other pathway.
Deborah Honig
And has Sequel already secured funding to advance Kinlytic? Or will it need to do so after the FDA approval?
Cameron Groome
It is already secured. It already has funding committed to fund all the expenses associated with Kinlytic And for some reason, if it's under elected not to do so, then again, the asset would return to Microbix in its improved form.
Deborah Honig
And can you give us any indication of what the percentage of royalties is?
Cameron Groome
We've indicated a double-digit percentage of royalties and that would be where we are going, and it is at that level.
Deborah Honig
And you mentioned time line, but when do you expect the updated consultation with the FDA to happen for the second million...
Cameron Groome
Second $2 million, you mean? Yes.
Deborah Honig
Sorry, yes [indiscernible].
Cameron Groome
Within 6 months. So this is -- go ahead, Ken.
Kenneth Hughes
The consultation is really a recapitulation of the very strong meeting we had with the FDA in 2017. Obviously, it's 5 and a bit years later, and it's basically a case of going back and asking the same questions and expecting to receive the same response, which was very supportive. When you ask a meeting of this type, it only takes a few months. I mean, you're at the mercy of their schedule, but there are limits on that.
So 6 months would be on the outside. And then probably less than that, and it would really just be a recapitulation of a strong meeting we had in 2017 anyway. Anyway, So we're quite relaxed about the outcome. No guarantees, of course, because the world is what it is, but science remains there. And of course, Microbix has a long and deep history in the scientific and regulatory elements of Kinlytic. We will provide counsel and guidance on that, fully reimbursed, of course, but it won't interfere with our core business.
Cameron Groome
Yes. And from an accounting point of view in the near term, Jim, can you comment just on the treatment of the initial $2 million payment, then the second $2 million payment and the book value of Kinlytic?
James Currie
Yes, I can try. As you know, it's been more of a challenge than we thought it was going to be. from an accounting treatment and IFRS. But certainly, the expectation is that the upfront payment of $2 million, at least right away, $1 million of that will be recognized as revenue, The other $1 million will be deferred until the decision on the FDA guidance. At that point in time, we will receive another $2 million in cash, and we'll recognize that $2 million as well as the deferred $1 million as revenue.
And as Cameron indicated, we're sort of expecting that to happen within the next latest it can be in the next 6 months. So we don't know at this point in time whether that will be a -- if it is the 6 months, -- some of it will fall into Q1 of next year. If they are able to get the guidance sooner rather than later, it could happen by the end of September for Q4. But that awaits to be seen.
We will also -- we also have an asset that we wrote down a few years ago of $3.1 million, which we will be writing back up. That write-up will happen coincident with the FDA guidance when that is received. And it will then be amortized over a period until FDA approval. We've also got some fees that were associated with the signing of the agreement that will be capitalized and amortized over a period up until the FDA approval.
Cameron Groome
Perfect. Thank you so much. Jim, I hope that clarifies for -- there may be some analysts on the call thinking about what this means for subsequent quarters. So I think that's very helpful just to get that accounting treatment dealt with at the different near-term entries. That's great. Deborah, are there any other questions that we want to address.
Deborah Honig
I have one question left related to Kinetic, and then I think we'll go back to questions about the quarter and the other business lines. you may need to help a little bit with this, Cameron. It's the third question, if you want to pull up in the box, I don't fully understand it. Is there any sign of awareness at the agency of the original attributes of the drug?
Cameron Groome
Certainly, I can speak to the FDA who is very supportive when Microbix met with them in 2017, of course, a pandemic kind of intervened in the middle and in the middle of a health -- public health urgency, we weren't going to be breaking down FDA's door to say, "Hey, know, you guys are really busy. We don't really have anything new to discuss, but would you mind giving us some comfort that nothing has changed" That would not have been an effective use of their time.
But the FDA knows this as a safe and effective drug. This is not getting approval for a drug that we are looking for. It is approving a new manufacturing site for the drug and validating that the newly manufactured drug works as it's supposed to. That is the extent of the pathway of what we're doing with this project. There is also -- we had a very, very positive and supportive call with the European Medicines Agency. As I mentioned, saying, please don't forget about us.
To whatever extent possible, we would like to work with you in order to get the drug on to the European market where it had never been previously and get Kinlytic urokinase into the EU as well. So I have no reason to believe anything, but supportive regulators, but of course, it's a prudent thing on the part of our partner to just triple check that before they spend on the order of CAD 50 million on this project.
Kenneth Hughes
I think it's probably worth mentioning and restating perhaps that the European regulators actually reached out to us, not the other way around, asking for us to bring Kinlytic to them because of the need of the market and the market is changing in the sense that there are more clots around these days. And there's really a single incumbent in TPA and that goes for Europe as well as North America.
And so I think in terms of the technical aspects, we're in really good shape, but there is a market pull here, and we're looking to satisfy that market pull. And to answer the question, FDA is very sophisticated and has a long history with Kinlytic, which was previously called and there's decades of clinical experience with this drug, there's no chance of clinical failure. Let's put it that way.
And what we're looking for is setting up a new manufacturing site to produce an old product with decades of safe and efficacy.
Deborah Honig
Okay. Great. And I hate to pull a little switcheroo on you gentlemen.
Cameron Groome
No worries.
Deborah Honig
But I'm trying to balance a virtual and in-person line. So unfortunately, I have something in-person coming up on the hour. So my colleague, Magda, who actually accompanied Microbix to Bloom Burton this year is going to finish off the Q&A, if you don't mind. And I do apologize to the audience and management and [indiscernible].
Cameron Groome
It's okay, Deborah, you're breaking up anyway. So...
Deborah Honig
We're breaking up.
Cameron Groome
Yes.
Kenneth Hughes
Magda's screen anyway.
Deborah Honig
Six years of one , and that's it.
Cameron Groome
Yes, yes No, no, no.
Deborah Honig
I'll hand it over to Magda. She's got a clear mic anyway.
Cameron Groome
Okay. Very good. Thank you, Deborah.
Magda Gardner
Hello again, Cameron and Ken and nice to meet you, Jim. So I think we have one more question on the new -- where will manufacturing take place?
Cameron Groome
Manufacturing will take place in the United States. We expect for the discussions we've had thus far with contract development manufacturing organizations, CMOs or CDMOs, there is strong interest in manufacturing the drug active or the drug substance for Kinlytic in a FDA CGMP certified U.S.-based manufacturing facility. And then in terms of the drug product, there remain to be some decisions on the exact final packaging formats that our partner selects and we have a few different options of that as well, likely also U.S.-based. Would have loved to manufacture in Canada, but the financial backing for Canada was not forthcoming, so you get what you paid for.
Kenneth Hughes
We have a number of well-qualified CMO candidates that, of course, the new partner can continue with or not. If they have their own candidates, that's great, too, and we'll provide technical guidance and oversight on that as we move forward. But we already have nicely out CMOs to produce the work for this project.
Magda Gardner
Got it. And we have a follow-up question. TPA remains as costly and controversial as ever. Is there any chance that competed -- competition may be on the horizon?
Cameron Groome
We haven't seen any competition for TPA. This is tissue plasminogen activator, which is a clot-dissolving biological mechanism is not entirely dissimilar to Kinlytic. TPA retains a monopoly for the catheter clearance indication we are targeting. And broadly speaking, we'd be looking at coming in at some level of price discount for -- from TPA with a in some ways, superior product with better stability, room temperature stability as well as a better product format in terms of the device packaging for that.
So we would look to capture about 1/3 of the dollar value of the current market as a reasonable target and that's a market that continues to grow with a combination of increased need in terms of increased usage as Ken was indicating more catheters, more clots as well as a history of pricing increases by the owners of TPA.
Magda Gardner
And what is the patent situation for Kinlytic?
Cameron Groome
Kinlytic is a biological. So in fact, there is no patent on Kinlytic, and there is no patent on TPA anymore. These are about the very particular knowledge of how to make the product and having the existing regulatory approvals are in the value. So unlike a small molecule pill where the minute the patents off, the product goes to the price goes down and there are many generic competitors. There has never been a generic competitor to TPA and there has never been a generic competitor to urokinase for very specific reasons now.
Just for a lack of confusion, we're talking when we speak about urokinase, we're talking about the cell culture-derived low molecular weight urokinase that we produce that's very consistently and safely made. There is high molecular weight urokinase that is still grandfathered in some countries that is collected from massive pools of human urine and that is not a product that is going to see approval in the United States or most countries in the world.
Kenneth Hughes
And really disapproved in Europe now as well for obvious reasons.
Cameron Groome
Yes and is a different molecule, in fact.
Kenneth Hughes
Yes, yes. And there are -- I mean, there are high, high technical hurdles associated with producing low molecular weight urokinase as we started on Microbix a long time ago and a biosimilar strategy or a generic biologic as it was called at the time. That's how long ago it was. The technical hurdles were extreme to the point where we ended up buying the file and there is a good reason for that. They are closely held trade secrets in the drug master file associated with what is now BLA, It would be very prohibitive to anybody coming in, in this regard and key reagents, which are a matter of closely health trade secrets as well, as well as all the scientific expertise that goes with that.
A number of other companies have tried synthetic alternatives and other thrombolytic drugs, they've all failed in clinical trials or in just in cost analysis because of lack of efficiency and basically lack of a price point it wouldn't be competitive. This has been a duopoly for many, many, many years, and it's going to continue that way. But it's a monopoly right now. That's why we'll bring it back.
Cameron Groome
Yes.
Magda Gardner
Okay. And can you elaborate on the 1/3 of the market estimate?
Cameron Groome
Yes. We'd be looking roughly speaking, at coming in at 80% of the cost of the incumbent and capturing 40% unit market share. So if you look at that, it comes to about 32% or approximately 1/3 of the dollar value of the market. and that gives some price relief to purchasers. It gives them security of -- better security supply that they're not just dependent on one market.
And quite frankly, the logical -- the only logical economic response to the incumbent on that point is to do nothing. And we believe that, that is the reaction the incumbent would have to the entry of Kinlytic in that.
Magda Gardner
Got it. And we have some more questions about the quarter. Did you want to go into those now? Or...
Cameron Groome
Sure. Absolutely.
Magda Gardner
All right. With only 4 months left in the year, how comfortable are you in hitting your goal of greater than $10 million QAP revenue for the fiscal year? This would imply $8 million in the next 2 quarters.
Cameron Groome
It's a great question. It is definitely going to be a photo finish. Our big purchase and supply agreement is broadened out quite dramatically in terms of the number of SKUs that we are supporting. And frankly, we're looking now, we're engaging with that partner about the launch timing and restocking for a number of the QAPs that we are delivering for that. And those are predominantly outside of the respiratory viral field, although the first one of those is a respiratory viral for 4-plex followed by a whole series of other viral categories.
So as we gain visibility on just how much needs to be delivered by September 30, we'll know with that $10 million target still looks reasonable to us. But it will be certainly back-end that it will be well in the north -- it will be about 50%, 60% of that will be delivered in the fourth quarter. So that always gives you an inherent risk if it's something just misses the Q4 closeout window. It's all about shift dates at that point, but the directionality is certainly not in question.
Magda Gardner
Got it. And QAP sales have been relatively flat year-on-year. Expectations have been for double-digit growth. How will MBX achieve the expected QAP growth?
Cameron Groome
Great question. We've seen them relatively flattish as it's been shifting from a higher weight of COVID to a broader class. I think you will see more work going on over the coming quarters in fields such as sexually transmitted infections as well as cancer screening such as the human papillomavirus work that we're doing. There are a number of areas such as extended genotyping HPV panels. This is where Microbix is able to provide effectively all of the high-risk HPV types. There are 14 in total. We don't have the full 14, but we're working through that.
To our knowledge, Microbix is the only company that is able to provide those And then for other products where it may be antimicrobial resistance testing and swab based -- FLOQSwab-based controls point of care, these are areas where we have unique access to technology and patented technology at that. So we see those as being some of the big drivers.
Magda Gardner
Okay. And now some VTM questions. With 3/4 of zero VTM sales, what can shareholders expect in the future? Was this product a short-term COVID play? How much space and investment was allocated?
Cameron Groome
Great questions. With DxTM VTM, we identified the need, and we move forward on that project with 50% of the funding provided as grants from the government because they also saw the need -- the acute need for supply and for secure high-quality domestic supply at that. So our initial investment for the overall project, scaling it was about $2.9 million, of which 50% was covered by grants.
So you're looking at $1.5 million. And then we sold approximately $10 million of product at reasonably good margins. So we have made back multiples of our investment in that program as profit. And if we never saw another dime out of the DxTM, it would be absolutely worth having done because we helped a lot of Ontarions stay healthy and made money doing. Where we are right now is there's a disconnect between the strategic objectives of the political leadership and the economic objectives of the procurement leadership. So you have the political leadership saying, never again, will we be caught short and we've want price competitive, but high-quality domestic production whereas procurement has gone back to buying everything from overseas.
So we are certainly working at the political levels to see if we can align these to discrete and contradictory objectives, but we're caught up in a much broader story with regards to these matters. And at worst -- what would be the situation at worst is will we dedicate that filling line to producing other products and services that will be useful as well. But it means there's a gap in our production.
And one of the great learnings we've also had is Microbix used to think it was challenging to fill 100,000 files a year pre-COVID. And as a result of our work with VTM, we developed skills and the capabilities to fill 100,000 files a week reliably and not have that backbreaking. And with the equipment we're laying in, we would have the potential to do that.
And that starts to open up whole new for us in terms of what we can do for customers. And I was on the road last week meeting a large Microbix customer, and I could tell you that they are -- they were looking, going, "Oh my gosh, we didn't know you could do this, let's get you to do that, let's get you to do that." So there's a lot of business, I think, we see coming our way over the coming months or quarters, and there is no downside to continuing to improve our systems and to expand our capacity so that we're relevant to these large customers and not an manufacturer. And Ken, maybe you can tell just before the meeting a little bit about some progress on some of our systems upgrades that I think is pertinent as well.
Kenneth Hughes
Yes, I'll talk a little bit about that, but I did want to make a comment about the grant that was received for VTM because people kind of think of this in isolation. But the grants we actually received the 50% graph that we matched also for expansion of QAPs capabilities as part of it.
Cameron Groome
Thank you. Great point.
Kenneth Hughes
A general move forward. And we've done that, and those labs are still being deployed and can be deployed for all manner of opportunities, including the ones outside of respiratory virus as Cameron was talking about earlier and as well the suite that has the automated machinery for VTM, some of that machine can be automating liquid QAPs production, but also filling lines that could be directed into all sorts of different products for that. space is potentially multifactorial and has multiple uses. And we're going to -- we have developed expertise, manpower and systems to be able to address that in that high throughput environment. So basically, we've got a grant to build capacity, delivered a whole load of product, which more than covered it put that money in the bank, and now we have a much bigger concern to address the opportunities coming down [indiscernible].
So this was a really successful opportunity. Now that [indiscernible] potentially and of course, lots of viral transport medium opportunities down the line. But to Cameron's point, if you never sold another drop, it was still an excellent leg up for Microbix in its pursuit of QAPs antigens and further [indiscernible] realities going forward. Now up now back to the original point that Cameron was making that led to was we raised some money to put in new systems. We've got a little critical mass now where the all [indiscernible] system, were just too cumbersome to allow our growth and we intend to grow to be at $20 million to $50 million to $100 million. We have lots of opportunities to do that. So right now, we're implementing a software as a solution, cloud-based electronic quality management systems and enterprise resource planning software. We've been moving forward. It's a lot of work. It's a heavy lift.
But on the other side of this, everything would be much more efficient and much more cost effective, that's why we do this. And just as a matter of interest, next week, we will be going for the full go-live of our master control eQMS quality management system as we move what was formally paper-based manufacturing records into fully digital records, which -- and all the supporting systems around that, which one creates efficiency and two, minimizes mistakes because you can't advance in the digital space unless you get it right.
So there's no end there's not a thing to do. there's nothing can be forgotten. I think that's something which is going to increase [indiscernible] the I don't think and I know it. It's going to increase efficiency. It's going to drive us to the next level. And that's part of the investment we're doing right now. And once that is done we're going to be a very different as these opportunities come in, and we use all our capacity with things like that grant more TF on VTM drove to address many opportunities around the world. I think it's very exciting to be pursuing that.
Cameron Groome
Yes. And as most of the work that Microbix is doing for major diagnostics companies, we are a critical sole source supplier to these companies. And they want to know we have state-of-the-art quality systems to be manufacturing these products, and we'll let them down. And that's where we've got to be certain that we're operating at that very high level.
Magda Gardner
Thank you. And possibly a follow-up question. So how do you plan to use the new plant built for VTM now that COVID have slowed down? Will that transform into a QAP plant?
Cameron Groome
Absolutely. There's any number of products we can put into the filling line vials that are coming off there. It -- from a point of view of the line, this is a certain file size and what you put in those vials, the mind boggles with the number of options of products you put into them.
So as we get that validated and continue our product line discussions with different customers, those opportunities will emerge in that [indiscernible] agents diluent associated with different tests. And it's, in fact, very handy that these files are expressly designed to withstand the snapped off segment of swab. Those swabs go certainly in a variety of different [indiscernible]. So you're not limited to just COVID testing.
Kenneth Hughes
I think the group is probably aware that -- and we've discussed this before, that we build modular labs. So modular labs are easy to reconfigure for different situations as necessary. I mean, that labs, they are going to be used for multiple purposes. And the floor and the air quality is already there. So we have many, many opportunities to put new products in the space that we have if we need to, although, of course, we can fill multiple products, and that's a focus as well.
We're also building up additional capacity and CSL -- I think we talked about BSL-3 suite. We've talked about new QAPs manufacturing. All of that is moving forward as we continue to grow.
Cameron Groome
Yes. And that's not to say we are not and will not be continually engaging with certainly Ontario government and other governments about the need for secured domestic supply. I think it's just been a little bit of a surprise to us and even to others within the government, just how quickly they've reverted to past practices and how quickly the never again was forgotten.
Magda Gardner
And one more question about VTM. Is the VTM business then And is there a new momentum in the antigen business, so that MBX is at post-COVID play?
Cameron Groome
I think there is -- I wouldn't count DxTM out quite yet, although it's certainly the problem child in the portfolio with revenue suspended for the moment. The antigen business, absolutely, as Jim had indicated, has come roaring back by 40%, well, from quarter-to-quarter from $1 million to $3 million is a pretty big jump between Q1 and Q2. It will certainly continue, I think, in the $2.5 million to $3.5 million range in the coming quarters. Just there's inherent variability just on ship dates and wet lands on either side of the quarter end.
But certainly, we're much closer towards the $1 million a month that we were seeing in the Ingredients business pre-COVID and then the level of activity in our QAPs business, again, it's just about timing of realizing these revenues with the number of development projects we have ongoing with different diagnostic customers there. It's just wild and unprecedented. We have more than a dozen projects, for example, currently ongoing with the large customer with whom we signed the purchase and supply agreement at last August, and that continues to accelerate, not just with them, but with others. So again, we keep winding the spring and creating this potential energy and when that all unleashes it becomes very, very good.
And that's one of the reasons why we did not want to be sucking capital out of our growth businesses to fund the Kinlytic project, even though it would have taken more than we could have pulled out to do Kinlytic, but then we have capital available to show our customers, we have sustained power and they have the confidence to give us those big contracts earned contracts.
And that we can continue to fund growth initiatives as needed and continue to grow our business now on an anti-dilutive basis such that we will not be financing and constantly increasing the shares outstanding, but rather curating the number of shares outstanding, very carefully.
Magda Gardner
Thank you. And Microbix has said that it hopes to have $100 million in revenue 5 years from now? Is this number much higher now that Kinlytic is moving forward?
Cameron Groome
Well, frankly, we hadn't factored in Kinlytic in that calculation. So I would say that, that could give us a little bit of a tailwind in years 4 and 5 in that project. But that objective to be fair, did not include the tailwind from Kinlytic.
Magda Gardner
And possibly a follow-up question. You will be flushed with cash, what are you going to do with it?
Cameron Groome
Well, we will not light it on fire and dance naked around in the Street. I can promise you that. We will use that cash very carefully, and that will be for funding further well-reasoned growth initiatives, but we very much remain committed to a profitable growth model, and we will add capacity as it's justified and will continue as well with our normal course issuer bid by which some portion of capital is used to repurchase and cancel shares as well.
But I think, by and large, we'll aim to stay above CAD 10 billion cash on our balance sheet for the near term in order that prospective customers really can have the greatest level of confidence in an unstable market environment that we're not going anywhere without.
Magda Gardner
Thank you. And that's about our audience questions we had. Is there anything else you wanted to mention?
Cameron Groome
Well, I would just -- I will do a shout out to a couple of groups, one: I want to acknowledge our founder, Bill [indiscernible], who was retired in 2020. And just to say how pleased and proud we are to demonstrate that, yes, that vision was correct. There's tremendous value in Kinlytic urokinase and opening the route to bring that back to market as a very clinically important drug. So thank you, Bill and family for all the work that's gone into creating these foundations.
And second, I'd like to thank a lot of long-term shareholders that maybe were looking originally at urokinase and saying, "Gosh, why isn't this potential getting realized." Thank you for sticking with us as we found the right pathway forward to bring the drug for a clinical indication that was fundable and was within the scope of what's attainable.
So thank you for shareholders. Thank you to Bill [indiscernible] and family. And also thank you for the team here that's just done a great job, certainly, Ken and Jim and other of our partners, both on the operating businesses and on Kinlytic. This is absolutely a team sport, just thrilled to have such a great team over here at Microbix. And most days, it's a lot of fun.
Magda Gardner
Thank you so much for the update and for taking the time to go over all these questions. If anybody has any questions that did not get answered, please e-mail us either at debra@adcap.ca or magda@adcap.ca and we'll work to get them answered. Thanks again, and everybody, have a great rest of your day. take care. Bye, bye.
Cameron Groome
Thank you very much, Magda. Thank you Jim, Ken and everybody for taking the time to join us.
Magda Gardner
Thank you, everyone.
Kenneth Hughes
Thank you.
Cameron Groome
Okay. Bye.
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Microbix Biosystems, Inc. (MBXBF) Q2 2023 Earnings Call Transcript