Pressure BioSciences Offers Unique Technology - Analyst Blog

Pressure BioSciences Inc. PBIO is a life sciences company engaged in the research, development and commercialization of a novel, enabling platform technology called pressure cycling technology (PCT).

The company’s technology platform is based on high hydrostatic pressure technology, a Nobel Prize winning technology. Percy Bridgman from Harvard University won the 1946 Nobel Prize for his innovative work on the physics of substances under high hydrostatic pressure. Based on Percy’s concept, Pressure BioScience established a patented, novel, enabling platform PCT technology with broad applicability in life science research. The mechanisms of action of the PCT SPS differ significantly from other existing sample preparation techniques. Specifically, cell disruption, or lysis, occurs when samples are subjected to well-controlled, alternating cycles of ambient and ultra-high pressure of up to 35,000 psi in the hydrostatic reaction chamber of either of the two Barocycler instruments. This use of rapid and repeated alternating cycles of hydrostatic pressure at controlled temperatures controls the interactions of biomolecules and induces cell lysis for extraction of cell components.

There are two components of Pressure BioSciences’ PCT Sample Preparation System (PCT SPS). The first is the pressure-generating instrument known as the Barocycler, which subjects a sample to cycles of pressure from ambient to ultra-high levels and back to ambient in a precisely controlled manner. The second component of the PCT SPS is the specially designed, single-use processing containers, PULSE Tubes, which contain the laboratory sample and appropriate processing reagents. The instruments and the consumables together make up the PCT Sample Preparation System (PCT SPS). The system follows the highly successful and profitable “razor and blade” business model.

Based upon the PCT platform, PBI has established a broad range of product portfolio for the sample preparation market. The instruments and consumables, which include PULSE Tubes as well as application specific kits (which include consumable products and reagents), a “razor and blade” model, that form its PCT Sample Preparation System are now gradually recognized by many research labs due to PBI’s focused marketing efforts. We believe user adoption of the PCT SPS will accelerate in the coming years.

We are impressed and optimistic about the company’s novel, enabling platform technology pressure cycling technology (PCT), which has competitive advantages over existing technologies in the sample preparation market. PCT is increasingly gaining recognition by research labs and user adoption will accelerate in the coming years in our view due to the focused marketing efforts by the company.

PBIO operates in the rather large but underserved research products and services market with a current focus on sample preparation for life science research. The research products and services market is a rapidly growing market with a large and immediate need for better technology, which we expect will create a huge opportunity for PBI to grow its business in the coming years.

PBIO has a well clarified growth strategy in place. Short term focus will be the sample preparation market. Longer term, the company plans to expand into other markets, such as pathogen inactivation, protein purification, control of chemical reactions, and immunodiagnostics. International expansion is also planned. We believe this strategy is workable and will provide sustainable growth for the company.

Currently, the company is in the early stage of commercialization of its platform technology. We realized that sales in the past a few quarters have not been impressive, but this is understandable. Pressure cycling technology is quite new to most customers in the sample preparation market, and the costs for PCT are also higher than those for most existing technologies. Therefore, rollout of the PCT platform will take time. However, once customers become familiar with the new PCT platform, and realize its advantages over existing technologies, uptake of PCT and its consumable products by the industry will increase dramatically in our view. We are especially optimistic about the company’s collaboration programs, which will generate great awareness of the PCT platform among researchers in the sample preparation market. With a growing sales force and a clear growth strategy in place, sales should pick up steam in the coming quarters.

We are optimistic about the company’s prospect. With a rapidly growing market worldwide, combined with its unique technology and broad range of product offering, the company is well positioned to boost its top line and bottom line in the coming years. According to our long term financial model, the company’s revenue will grow at a tremendous compound annual growth rate (CAGR) of 69.9% in the next five fiscal years from 2010 to 2015. The company will become profitable in fiscal 2014 with earnings per share (EPS) of $0.04.

We view the current share price as undervalued. We rate the company Outperform. Our price target is $4.50. Risks related to our call include a cash burn concern and competition in the research products and services market. For additional information, please see our initiation report on Zacks.com, or contact your Zacks Institutional Sales representative.

 
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