GBS: GBS’ Prints Are All Over It

By John Vandermosten, CFA

NASDAQ:GBS

READ THE FULL GBS RESEARCH REPORT

GBS Signs Exclusivity Agreement for Fingerprint Drug Detection Company

In a June 16th press release, GBS, Inc. (NASDAQ:GBS) announced that it had entered into an exclusivity agreement to acquire Intelligent Fingerprinting Limited (IFP), a UK-based device company that is developing a fingerprint reader for drug screening and detection. GBS management is now conducting due diligence on the private company that offers numerous synergies to GBS’ legacy platform. Some of the primary synergies that can be shared between the two companies are:

➢ GBS’ regulatory experience with FDA

➢ GBS’ capital and cash balance

➢ GBS’ geographic experience in Oceania and Asia-Pacific

➢ IFP’s commercialization and research & development experience

➢ IFP’s manufacturing facilities

➢ IFP’s experience securing the CE mark

➢ IFP’s full ownership of technology rights

➢ IFP’s revenue and potential cash flow generation which may reduce the need for a capital raise

➢ Concentration of assets in the non-invasive diagnostic space

In return for the exclusivity period, GBS will enter into a Bridge Facility Agreement to provide IFP with an unsecured loan facility of $500,000 which is repayable prior to year-end. Ladenburg Thalmann is the financial advisor to GBS, and ArentFox Schiff is legal advisor. Bristows LLP is legal advisor to Intelligent Fingerprinting.

Next steps for GBS management is to complete the due diligence process which is expected to conclude prior to the August 31st end of exclusivity. Management will be reviewing the product and technology, including sensitivity and specificity of the system, cost and opportunity for the device and cartridge combination. It will also perform a financial review. If the acquisition is consummated, GBS will take next steps for commercialization in the Asia Pacific region and begin efforts to obtain FDA approval either via the de novo or 510k pathway. Since the product does not have a distinct predicate device, it is likely to require de novo approval in the United States.

According to Grandview Research, the size of the drug testing market was $8.1 billion in 2020 and is expected to grow at 4.9% per annum until 2028. GBS has indicated that IFP’s growth rate is in the low double digit range off of a small base.

Intelligent Fingerprinting

Intelligent Fingerprinting offers a point of service, 10 minute test that uses skin fluids to screen for a number of drugs. The testing kit is used to collect and analyze traces of eccrine sweat contained in fingerprints to screen for the presence of drugs and their metabolites.

The company offers a selection of products including the DSR-Plus drug screening device which accepts the fingerprint drug screening cartridge. The cartridges that collect the sample use lateral flow assay technology and fluorescence-labelled antibodies to detect cocaine, cannabis, opiates (methadone, benzodiazepines, buprenorphine) and methamphetamines. The technology behind the four panel test can reveal the drugs or their metabolites in a portable, rapid approach that does not require special facilities. The company highlights applications in construction, transportation & construction, drug rehabilitation, post mortem analysis and offender management among others.

The drug screening system provides an on-the-spot, 10-minute test that works by analyzing fingerprint sweat to screen for recent drug use. The noninvasive system consists of a portable reader and single-use disposable cartridges. The cartridge is a self-contained unit that can either be read on-site with the accompanying IFP reader or be sent to the lab for analysis. The cartridge can be sealed and secured after the subject has provided the sample and includes an integrated buffer for maintaining pH.

We see a number of synergies between GBS and IFP. Both companies inhabit the non-invasive diagnostic testing space employing an improved collection method for analytes used in frequent testing. They can share regulatory development experience in both the US and EU. No information has been shared on how close IFP is to generating positive cash flow, its revenue levels or incremental margin; however, the asset may be able to contribute to the R&D budget of the company in the near term reducing the need for future capital raises.

Upcoming Milestones

➢ Upgrade existing fabrication facility – 1Q:22

➢ Equipment delivery – 2Q:22

➢ Secure site of manufacturing facility – 2Q:22

➢ Launch of plasma-saliva time-course correlation study – 2Q:22

➢ Equipment delivery for manufacturing facility – June 2022

➢ Initial data from time-course correlation study – mid-2022

➢ Preliminary biosensor response study – 3Q:22

➢ Biosensor algorithm development – 4Q:22

➢ Saliva glucose sensor FDA/TGA submission – 1H:23

Summary

GBS continues to advance its clinical work to develop the glucose biosensor and has now opened the door to adding a complementary technology and product to its portfolio. We expect to hear additional news on next steps for IFP in the next two months. In the meantime, GBS will continue its work with the time-course correlations study to measure the relationship between glucose levels in blood and in saliva. Trial duration should be short with first patients enrolled in the second quarter and first results a few months later. We maintain our price target of $4.50 per share.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.

________________________

1. Source: Intelligent Fingerprinting website accessed June 2022.

2. Source: GBS March 2022 Corporate Presentation

COMMENTS

WORDPRESS: 0
DISQUS: 0