So says Vaughn Embro-Pantalony, president and CEO of Microbix Biosystems (TSX:MBX), referring to the company’s livestock semen sexing technology, LumiSort, and its manufacturing of infectious disease antigens for diagnostics test kits.
“The company’s LumiSort technology has the potential to dramatically impact the dairy and beef industries,” he says in an interview with BioTuesdays.com.
“The primary product of the dairy farmer is milk and to get milk you need pregnant cows,” he adds. “Also, older cows are less efficient milk producers, so typically 30% of a dairy herd must be replaced annually so the offspring of these cows is the secondary product.”
For this reason, farmers purchase semen with genetic characteristics known to produce high quality “milkers”; but 50% of the time they get male calves. These are generally of no value as it is not financially viable to raise a male dairy calf for beef consumption.
“LumiSort Sexed Semen will enable the dairy farmer to preselect not only the genetic characteristics of the offspring but also the sex,” he points out.
According to Mr. Embro-Pantalony, most dairy cows are artificially inseminated (AI) with semen of known genetic merit in units called “straws” that are purchased from an animal genetics company. These cows need to be constantly bred in order to keep producing milk. This global AI market currently represents $1.2-billion annually in semen straw sales, of which only about $100-million is sexed semen.
There is only one sexed semen product currently available, but it has many deficiencies and, as a result, it is not widely adopted. “LumiSort addresses these deficiencies and we expect LumiSort Sexed Semen will become ubiquitous in the industry,” he says.
LumiSort is a next generation, instrument based technology that is designed to improve the yield and quality of sexed semen, while increasing the speed of the operation.
“LumiSort will enable livestock breeders to pre-determine the sex of their herd prior to conception,” he contends. “Our technology will significantly increase livestock fertility rates, compared with conventional sexing technology, making the dairy and cattle industries more efficient and improving producers’ margins.”
In addition, he says, “LumiSort has the potential to triple the yield of sexed semen straws, making our instrument far more economical and leading to wider usage in the marketplace. That, in turn, has the potential to double the livestock semen market to more than $2.5 billion-a-year.”
Mr. Embro-Pantalony explains that the existing semen sexing technology subjects delicate livestock sperm cells to rapid pressure changes, electrical charges, and high velocity impacts, which damages the sperm cells leading to lower fertility rates.
“This is very costly to the dairy farmer as a missed pregnancy means lost productivity, making widespread use of currently available sexed semen untenable,” he adds.
Mr. Embro-Pantalony says that LumiSort represents a more careful and precise process of single cell analysis and sorting in an enclosed flow system that avoids the damaging forces used today. In addition to this gentler processing, LumiSort’s production rates will be 10 times faster than the current technology, providing the animal genetics companies with significant productivity improvements.
He explains that sexing of cells is performed with conventional DNA dyes to determine the presence of the X or Y chromosome by total DNA content. Cells of the undesired sex are rendered infertile, one at a time, using powerful laser light, while the desired cells are not affected.
“The result is a sexed semen product with high yield and high fertility,” he says. “LumiSort changes the economics of semen sexing, increasing sperm cell yields to 90% of the targeted sex from about 30% using the existing technology. We expect farmers will pay a higher premium for better quality sexed semen, converting the market away from unsexed semen.”
Farmers currently pay twice the price for sexed semen, which is lower quality than what LumiSort will deliver, compared with unsexed semen.
Toronto-based Microbix has already negotiated term sheets with 25% of global livestock genetics companies. “While our business model is still under consideration, we see the potential of licensing our technology or partnering with select livestock genetics companies to commercialize the technology,” Mr. Embro-Pantalony suggests.
The company has engaged Lathrop Engineering of San Jose, CA to design, build and test a prototype instrument by the end of 2014. In 2015, Microbix hopes to scale-up the technology to a pre-commercial instrument that would be used to conduct field trials.
“We plan to conduct field trials starting in mid 2015 to confirm that we can achieve higher fertility rates, which is important to dairy farmers, and higher yield and productivity, which is key to semen distributors,” he adds.
Mr. Embro-Pantalony, who was hired in 2012, led a financial turnaround of Microbix last year that included renewed growth of its high-margin virology manufacturing business and elimination of some non-core assets.
Earlier this year, for example, Microbix extended a contract with an existing, long-term customer in its virology unit, which Mr. Embro-Pantalony figures will add $10-million of new business over the next five years.
The financial turnaround seems to be working. In fiscal 2013 revenue rose to $7.6-million from $6.7-million and the company turned a profit for the first time in nearly a decade. In the first quarter of fiscal 2014, the company’s revenue doubled, while generating more profit than in all of fiscal 2013.
“We have been cash positive and profitable in four of the past five quarters. That has put us on the road to regaining investor confidence,” Mr. Embro-Pantalony says.
Tony Pullen, a long-time investment banker in Canada, says he has always wondered why the company’s market cap is a paltry $26-million and the three assets in Microbix are worth at least $50-million each. “They’re cash flow positive now, so we’ll see how that goes,” he adds.
Microbix’ financial turnaround has not only allowed the company to advance the development of its LumiSort technology, but also to support plans for its VIRUSMAX technology.
VIRUSMAX is a technology that increases influenza vaccine yields by doubling the output of traditional egg-based vaccine manufacturing processes. Microbix’ technology is protected by patents in major markets, including North America, Europe, India, China and Australia.
In January, Microbix successfully defended 100% of its VIRUSMAX patents in Europe against a challenge from Novartis, a global vaccine manufacturer. Also, the company filed an action in Texas earlier this year alleging patent infringement against Novartis.
“After successfully defending our VIRUSMAX patents at the European Patent Office Tribunal earlier this year, we have shifted our focus to enforcing these patents in 2014,” Mr. Embro-Pantalony says.