Shares of Pressure BioSciences (OTCQB:PBIO), a life sciences company focused on developing its pressure cycling technology (PCT), have been described as "deeply undervalued", according to Zacks Investment Research analyst Grant Zeng, when looking at the company's fundamentals.
As the last company discussed in a report detailing six biotech stocks on which Zeng is bullish, published on Thursday, he says Pressure BioSciences is a research products and services provider that operates in a "rather large but underserved market", with a current focus on sample preparation.
"The research products and services market is rapidly growing, with a large and immediate need for better technology. We expect this will create a huge opportunity forPressure BioSciences to grow its business in the coming years," the analyst notes.
"We are impressed and optimistic with the company's patented, novel, enabling platform technology: pressure cycling technology (PCT). The PCT Sample Preparation System (PCT SPS) has competitive advantages over existing technologies in the sample preparation market," he adds.
Based on the PCT platform, the company has established a broad product portfolio comprised of instruments and consumables, which the analyst highlights are recognized in "many research labs" due to the company's "focused" marketing efforts. "We believe uptake of the PCT SPS will accelerate in the coming years."
But, the analyst takes note of the fact that the company is one of the most "undervalued biotech companies", based on two major factors - improving financial results and business development, as well as a "very attractive" valuation.
As back up for his arguements, Zeng notes that Pressure BioSciences recently reported record product sales for the third quarter. Revenue from sales was $297,867, compared to $217,734 for the same period in 2011—a 37% increase.
"We are especially happy to see increased sales of consumables for the quarter. Sales of PCT-based consumables generated revenue of approximately $28K for the three months ended Sept. 30, 2012, compared to approximately $21K for the same period in 2011, an increase of 33%. We expect the sales of consumables will continue to grow in the coming quarters," he says, adding that he believes consumables are important to Pressure BioSciences' long-term sustainable growth as a recurring source of revenue with higher margins.
Consumables are also associated with the installation of PCT equipment, and when more equipment is installed, more consumables will be used.
The analyst notes that though revenue from consumables currently accounts for only a small portion of PCT product sales, at about 10%, this number will become larger and soon make a "meaningful contribution" to the top line.
In terms of valuation, Zeng describes Pressure BioSciences' shares as deeply undervalued, with the company's shares trading around 30 cents, with a market cap of about $3 million.
"We understand that the market discounts the value of the company because it has a limited revenue base and has been losing money since its inception. We also understand that the company has a relatively weak balance sheet, and further financing will be needed soon.
"However, when we look at the industry in detail, we recognize that this is a company with huge opportunities. With a rapidly growing market worldwide, combined with its unique technology and broad range of product offerings, Pressure BioSciences is well positioned to boost its top line and bottom line in the coming years," he concludes.
Just yesterday, the life sciences company, whose PCT system has several applications including forensics, said it plans to expand collaboration with key forensic groups to speed up the launch of a PCT-based rape kit processing system as scientists unveiled further progress in developing an improved method for the kit.
Scientists from Florida International University (FIU) reported further advancements in their goal to develop an improved method for rape kit testing based on the PCT platform at the recent annual scientific meeting of the American Academy of Forensic Sciences (AAFS), the South Easton, Massachusetts-based company said in a statement on Thursday.
Their method is based on the unique ability of PCT to break open and release DNA from one type of cell contained in the rape kit swab, such as a sperm cell from the perpetrator, while leaving a second type of cell in the swab intact, such as an epithelial cell from the victim.
The resulting unique DNA profile of the sperm can then be compared to the millions of DNA profiles contained in various DNA databases around the world, in an attempt to determine the identity of the perpetrator.
“The backlog of untested rape kits is a national travesty," the statement quoted Dr. Nate Lawrence, VP of marketing and sales, as saying. "It is imperative that improved methods be developed as soon as possible to help ensure that testing of rape kit samples be completed promptly."