New York, New York, Sept. 05, 2024 (GLOBE NEWSWIRE) -- Diamond Equity Research, a leading equity research firm with a focus on small capitalization public companies has released an Update Note on BioHarvest Sciences Inc. (OTCQB: CNVCF, CNSX: BHSC). The update note includes detailed information on the BioHarvest Sciences’ financial results, operational updates, business model, management commentary, valuation, and risks.
The update note is available below here:
BioHarvest Sciences September 2024 Update Note
Highlights from the note include:
- VINIA Hot Beverages Off to a Strong Start with Coffee and Decaf Sales Surpassing $1M Milestone - BioHarvest recently announced that its innovative VINIA® Superfood Coffee and Decaf Coffee has surpassed $1.0 million in cumulative sales since its launch in December 2023, demonstrating strong market entry and consumer approval. The product integrates the company’s flagship VINIA® Red Grape Superfood into premium 100% Arabica Coffee. The inclusion of red grape polyphenols is designed to enhance both physical energy and mental alertness through improved arterial dilation and blood flow, suggesting benefits after 90 days of consistent consumption. Packaged in pods compatible with Keurig and most single serve brewing systems, the product has been well-received, evidenced by a superior customer rating of 4.8 out of 5.0 and favorable outcomes in blind taste tests against major competitors in both regular and decaf categories. In blind taste tests, VINIA® Superfood Coffee emerged as the preferred choice for 59% of coffee drinkers (N=76) when compared to a top "Better for You" national coffee brand. Similarly, in tests among decaf drinkers (N=60), over two-thirds (68%) favored VINIA® Superfood Decaf over a leading decaf brand available on Amazon. These results validate BioHarvest’s strategy of extending its nutraceutical success across other product categories that demand enhanced health and wellness benefits. Furthermore, the company is set to broaden its market reach by introducing new products, including Nespresso® compatible options, aiming to capitalize on the growing consumer trend toward functional beverages. The expansion is seeking to further escalate monthly sales and strengthen the company’s position in the competitive functional coffee market.
- Strong Growth with Improving Profitability - In the second quarter of 2024, BioHarvest Sciences reported a significant revenue increase and surpassed our estimates, reaching $6.03 million, a 119% increase from the $2.8 million reported in the corresponding quarter of the previous year, and a 13% sequential increase from Q1 2024. This growth was driven by a substantial rise in both new and total VINIA® subscribers, achieving over 100% year-over-year growth and set against a backdrop of a strategic increase in marketing and sales expenditures, which rose by 43%. In the second quarter of 2024, the company's Amazon business saw substantial growth, generating $1.1 million in revenue, up from $0.2 million in the same quarter of the previous year. The average sales per order increased from $51.5 to $70.7, and volumes grew from 4,492 to 16,725. Gross profit increased by 180% year-over-year to $3.1 million, with gross margins expanding from 40% in Q2 2023 to 52% in Q2 2024. This significant improvement in profitability was attributed to scale efficiencies, enhanced manufacturing yields, and cost reductions in downstream packaging and delivery. The company also recorded a reduction in net loss, which decreased to $0.7 million from $2.9 million in the same period last year, reflecting strong financial management. Looking ahead, management remains optimistic about sustaining the growth momentum, while consistently improving profitability, guiding for third-quarter revenues of at least $6.5 million based on strong subscriber renewals and new customer acquisition rates. The management further anticipates maintaining gross margin in the range of 52%-55% through to the end of 2024, supported by ongoing initiatives aimed at optimizing margins. The company concluded the first half of 2024 with cash and cash equivalents of $5.2 million.
- Valuation - Powered by its Botanical Synthesis Technology, BioHarvest has seen substantial advancements in both its product and service business over the last year. The product division has shown steady growth and continues to expand its range of offerings. Meanwhile, the CDMO services business has captured significant market interest through client acquisitions and is approaching the monetization phase. Multiple advancements across both areas of the business suggest a promising outlook and a significant potential for shareholder value creation. We have updated our financial model accounting for the recent financial results and reassessed our SOTP valuation approach, reiterating a valuation of $18.00 per share contingent on successful execution by the company.
- Operational Updates Indicating Progress on Multiple Fronts - Significant operational achievements and strategic advancements marked the second quarter of 2024. The period saw a 116% increase in revenue within the product division, surpassing our revenue guidance. This growth was largely driven by robust sales of VINIA®, including the newly launched VINIA® Superfood Coffee, contributing to a record five quarters of over 10% revenue increases. Notably, monthly sales orders reached $2 million in May 2024, marking a 101% increase compared to the previous year, with June sales exceeding this milestone as well. Near-term growth is anticipated to be fueled by the expansion of the core nutraceutical product and the introduction and further scaling of "VINIA Inside" products. The company plans to further diversify its hot beverage offerings by introducing Nespresso® compatible coffee pods and a range of teas available in both Keurig-compatible pods and tea bags. The launch of VINIA Superfood Tea Bags has the potential to be a significant contributor to revenue growth. Similar to Superfood Coffee, VINIA Superfood Tea provides distinctive health benefits, significantly enhancing its appeal to health-conscious consumers. This appeal is further strengthened by blind taste tests where VINIA's English Breakfast Tea was preferred by 66% of participants over a leading market brand, demonstrating its superior flavor and potential for market success. Additionally, VINIA's Signature Fine Cut Green Tea also outperformed a leading organic green tea brand in a blind taste test, with 59% of participants favoring VINIA's offering. Concurrently, the company’s Contract Development and Manufacturing Organization (CDMO) Services made substantial progress on its two contracts, one with a Nasdaq-listed pharmaceutical company to develop complex molecules for drug development and with a leading player in the food nutrition industry to create molecules for the non-nutritive sweetener market. This division not only furthers research and development capabilities but also opens potential revenue streams through royalties from future commercial sales of developed molecules. The company's products division has shown record performance and continual margin improvement, which is driven by a roadmap of near-term product launches. These efforts are complemented by steady progress on contracted research projects and the strategic expansion of the B2B sales pipeline.
- Potential Uplisting to Nasdaq for Enhanced Investor Visibility and Capital Access: The management anticipates maintaining this strong growth trajectory and expects to successfully uplist to the Nasdaq exchange by the end of the year 2024. The company has completed an SEC review and received approval for its 20-F filing, establishing BioHarvest as a foreign private issuer in the U.S. under the Securities Exchange Act of 1934 (the '34 Act). BioHarvest has also submitted the Form 6-K in preparation for its application to list the company’s stock on the Nasdaq Stock Exchange. Uplisting to Nasdaq offers significant benefits, including enhanced visibility and credibility among investors, increased liquidity of shares, and potential access to larger capital pools. This strategic move can also provide a broader platform for attracting institutional investors and gaining global exposure.
About BioHarvest Sciences Inc.
BioHarvest Sciences Inc. specializes in botanical and cellular-based health solutions through its patented Botanical Synthesis technology, focusing on nutraceuticals, pharmaceuticals and CDMO services.
About Diamond Equity Research
Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Disclosures:
Diamond Equity Research LLC is being compensated by BioHarvest Sciences Inc. (OTCQB: CNVCF, CNSX: BHSC) for producing research materials regarding BioHarvest Sciences Inc. and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however, the views in the report reflect that of Diamond Equity Research. As of 09/05/24, Diamond Equity Research LLC has been paid $35,000 for research services, payable in two installments for the initial year and not applicable to renewals. The first installment of $17,500 ($17,490 post bank charges) was paid within a month after signing the agreement. The second installment of $17,500 ($17,490 post bank charges) was paid after a management content draft version of the initiation of coverage report was provided electronically to BioHarvest Sciences Inc., but prior to the release of the actual initiation of coverage. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually does not exceed $5,000. The issuer has not paid us for non-research related services as of 09/05/2024. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities including the complete loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for BioHarvest Sciences Inc. Please review update note attached for full disclosure page.
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