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Microfluidics International Corp. is a micro-cap equipment company that is running out of money, but it hopes pandemic flu will help turn that around.
As demand for seasonal and H1N1 flu vaccine skyrockets, the Newton-based company is aiming to cash in as one of a relatively few companies experienced in mixing vaccines with adjuvants — substances that may be added to the vaccines to make them work better.
“Microfluidics was founded 26 years ago, and it’s never really grown or made money,” said CEO Mike Ferrara. Ferrara said the company’s technology, a line of high-pressure fluid processors that create a more uniform product by breaking down particles into tinier bits, has had a hard time finding a home. Founder Irv Gruverman bought the technology for the company’s core product, the Microfluidizer processor, from Arthur D. Little Inc. and has sold the fluid-processing systems to a range of industries including paint manufacturers, chemical companies, printer inkjet makers and cosmetics companies.
Microfluidics got into the vaccines business about 10 years ago, and in the past three years sales to the biotechnology and pharmaceutical industries have become the fastest-growing part of the business. Ferrara was brought in as CEO in 2007, and the management team decided last summer to focus on targeting the life sciences industry. When financial markets crumbled in September, Ferrara said, he intensified those efforts, cutting nearly all spending that was not related to the pharmaceutical business.
But despite cuts to sales, research and development, and administrative costs — including 12 layoffs — Microfluidics had only $402,000 in cash on hand on June 30, down from $1.9 million on Dec. 31. During the three months ending June 30, the company had one customer that accounted for 12.8 percent of sales. Further complicating the company’s financial position, the company does not have a line of credit, according to documents filed with the Securities and Exchange Commission.
But Ferrara said that the 50-person company has swine flu-related deals with two of the biggest companies that now have contracts with the U.S. government to provide vaccine. Ferrara declined to name which two, citing confidentiality agreements. But the companies with contracts are France-based Sanofi-Aventis, U.K.-based AstraZeneca’s Medimmune division, U.K.-based GlaxoSmithKline, Switzerland-based Novartis AG, and Australia-based CSL Ltd. Microfluidics has also sold processors to Bristol-Myers Squibb, but neither company will say which vaccine the equipment is used for, or how many machines BMS has bought. A manufacturing official for Bristol-Myers Squibb, who requested anonymity because he is not authorized to talk to the media, said that the product is a superior solution for BMS because it can help add other ingredients to a vaccine that might be needed to help stabilize the therapy. The BMS official compared a vaccine to orange juice and said the Microfluidizer processors make sure there is no pulp left at the bottom of the glass.
Microfluidics booked revenue of $3.5 million for the second quarter, down from $4.4 million for the same period in 2008. The company had a net loss of $177,000 in the second quarter, down from $790,000 during the second quarter of 2008.
The company (OTC: MFLU) narrowed its loss by cutting R&D costs to $393,000 in the second quarter of 2009 from $572,000 for the corresponding period in 2008. Microfluidics cut sales costs to $913,000 from $1.2 million and trimmed administrative costs to $722,000 for the three months ending June 30, versus $1.2 million during the second quarter of 2008. The company burned through $1.4 million in the six months ended June 30.
Company officials say they are ramping up production to meet increased demand and that the company is profitable on an EBITDA (earnings before interest, tax, depreciation and amortization) basis.
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