The Genedrive (LSE: GDR) share price slumped in early deals this morning after publishing its results for the six months to 31 December. The diagnostics group reported total revenues of £400,000, down from £600,000 in the prior-year period.
As a result, Genedrive’s operating loss rose to £2.9m from £2.6m. Cash at 15 March was £2.8m with an R&D tax credit of £1m still outstanding.
Lacklustre results
These results were, in a word, lacklustre. The firm has been beset by delays, holding back sales of its core product lines. For example, pandemic headwinds continued to weigh on the growth of Genedrive’s contract with the US Department of Defense and the hepatitis C assay.
The company has also suffered delays with the development and commercialisation of its 96 SARS-COV 2 kit. When the organisation first announced that it was developing these tests, the Genedrive share price jumped in value. This is the business’s attempt to produce a fast, accurate and deployable solution for PCR coronavirus testing.
However, progress has been slower than expected. It’s still waiting for regulatory approvals from the World Health Organization and the US Food and Drug Administration. Timings for approvals are “uncertain.”
Still, despite these challenges, the group is expecting a better second half. A contract with Beckman Coulter Life Sciences and the ongoing opportunity with the European Ministry of Health are expected to bring in low double-digit millions of pounds in revenue.
The contact with Beckman is already yielding results. Last month, the two parties moved to a commercial distribution deal in Europe and the US last month. The first purchases of Genedrive’s 96 SARS-CoV-2 kit under the agreement have yielded $400,000 in revenues for the producer.
The falling Genedrive share price
It seems to me that the Genedrive share price is falling today because the corporation is failing to live up to expectations. The company’s flagship coronavirus test hasn’t matched the market’s lofty expectations. As a result, the stock has re-rated lower.
But I don’t think that means investors should write off the business. There’s more than one string to Genedrive’s bow. As well as the initiatives outlined above, the company is also working to progress the commercialisation of a hearing loss test for babies.
Unfortunately, there’s no guarantee these products will become large revenue streams for the business. That’s the biggest challenge facing the enterprise right now. With losses running at nearly £3m every six months, and less than £2.8m in the bank (excluding the tax credit), Genedrive needs to start earning money.
The company is generating revenues, but these aren’t enough at this stage. If the organisation continues down this path, it may either run out of cash, or will have to raise money from investors.
As such, I’m planning to avoid the Genedrive share price. While I think the company has potential, the business needs to prove it can operate sustainably before I can invest. Despite the recent pullback, I wouldn’t buy the stock today.