Akers Biosciences (AKER) Q2 Loss Narrows Y/Y, Stock Gains

Shares of Akers Biosciences Inc. AKER increased almost 3% to close at $3.17 on Aug 11, after the company reported second-quarter 2016 results. We note that the company posted a loss of 19 cents per share in the quarter, narrower than the loss of 41 cents reported in the year-ago quarter, primarily buoyed by higher product revenues.

Quarter Details

Product revenues surged 28.4%, thanks to massive China and U.S. sales for the PIFA Heparin test segment. The company sold about $880,000 PIFA Heparin tests, up 57% from the year-ago quarter. However, as the company had no contribution from License fees, total revenues dropped 1%.

Notably, Akers Biosciences won an order worth $2.5 million from Novotek in China for PIFA Heparin test in the previous quarter, of which $0.5 million has been shipped in the reported quarter. Meanwhile in the U.S., sale of PIFA Heparin is being exclusively strategized to gain market share, by utilizing the ‘Integrated Delivery Networks’ (the regional healthcare providers).

AKERS BIOSCIENC Price, Consensus and EPS Surprise

AKERS BIOSCIENC Price, Consensus and EPS Surprise | AKERS BIOSCIENC Quote

Sales in the MPC product section decreased 73% from the prior-year quarter. However, the year-ago quarter figure included a significant order in Great Britain worth $146,000 for the BreathScan Alcohol Breathalyzer. Taking this into consideration, the net MPC Sales surged a notable 100%.

In the reported quarter, Akers Biosciences fortified its market position, courtesy ‘Akers Wellness Platform’. The company also signed a deal with Aero-Med to distribute BreathScan OxiChek, an exclusive product from this platform. Notably, the initial orders from the deal have been shipped.

Strong focus on product development was another key positive in the reported quarter, as the company has made promising advances in the development of the Chlamydia test. Here we note that the company has formulated a highly exclusive, rapid, finger stick blood test for Chlamydia, the most prevalent sexually transmitted disease in the world.

Margin Details

Gross margin expanded a massive 630 basis points (bps) to approximately 71% of revenues. Consistent focus on core business, successful execution of sales price increases and stringent control on cost of production resulted in the margin improvement.

Operating expenses for the company declined 38.2% on a year-over-year basis, thanks to 360 bps and 550 bps reduction in ‘sales and marketing’ and ‘research and development’ costs, respectively.

Our Take

We are impressed with Akers Biosciences’ innovative product pipeline that includes hassle-free rapid test solutions. The company’s efforts to ramp up PIFA Heparin sales in the U.S. and overseas through new distribution partnerships are also encouraging.

We are also positive on sales in China (Novotek), meaningful contributions from the wellness platform and stringent cost control in all key areas of business.
    
However, the modest second-quarter results are likely to keep investors on the sidelines for the moment.

Stocks to Consider

Stocks that warrant a look in the medical sector are NuVasive Inc NUVA, Baxter International Inc. BAX and Quidel Corp. QDEL. All the stocks sport a Zacks Rank #1 (Strong Buy).

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