Stellar Biotech Reports Second Quarter 2017 Financial Results

LOS ANGELES, May 9, 2017 /PRNewswire/ -- Stellar Biotechnologies, Inc. (Nasdaq: SBOT), a leading manufacturer of a key protein utilized in multiple immunotherapy development pipelines targeting cancers, Alzheimer's, diabetes and lupus, among other diseases, today reported financial results for the three and six months ended March 31, 2017 and provided an update on its business.

During the second quarter, the company announced, among other activities, that it had entered into an exclusive agreement with a biopharmaceuticals manufacturer to supply Stellar KLH for clinical development studies for metastatic breast cancer and other cancers. The company also signed a technology transfer and purchase agreement with a vaccine biotechnology company related to Stellar's proprietary Clostridium difficile technology and licensed rights. Stellar Biotechnologies continues to advance plans to optimize its manufacturing systems for commercial-scale production quantities.

"In the second quarter, we delivered on a number of strategic objectives, including expanding our opportunities for growth," said Stellar President and CEO Frank Oakes. "We continue to closely monitor the progress of our customers as they generate the next set of clinical results and inflection points for our business."

Stellar Chief Financial Officer Kathi Niffenegger reported that expenditures for the first half of fiscal year 2017 were in line with management's expectations and included additional investments to increase the scalability and throughput capacity of the company's KLH production and manufacturing processes. "Our spending in the first half of fiscal 2017 reflects our focus on managing upfront development costs and capital expenditures while investing in the people, processes and resources we need to meet our customers' near and long-term product forecasts," she said.

Financial Results

Three months ended March 31, 2017

Total revenues were $0.06 million for the quarter ended March 31, 2017 compared to $0.33 million for same period last year. The change was due to a decrease in product sales volume. While the company's customer base has not changed significantly, product sales volumes are subject to variability associated with the rate of development and progression of clinical studies of third-party products that utilize Stellar KLH. For the three months ended March 31, 2017, product sales consisted of lower volume orders for pre-clinical studies and immune system assays. For the three months ended March 31, 2016, product sales primarily consisted of higher volume orders for later stage clinical studies. The rate of progression towards later stage studies is expected to continue to affect the timing and volume of future product sales.

Total expenses decreased by $0.21 million to $1.21 million for the quarter ended March 31, 2017 compared to $1.42 million for the same period last year.

• Costs of sales and contract services decreased by $0.20 million to $0.07 million for the quarter ended March 31, 2017 compared to $0.27 million for the same period last year primarily due to decreased product sales.
• Research and development expenses remained relatively unchanged at $0.33 million for the quarter ended March 31, 2017 compared to $0.31 for the same period last year.
• General and administrative expenses remained relatively unchanged at $0.75 million for the quarter ended March 31, 2017 compared to $0.77 million for the same period last year.

For the quarter ended March 31, 2017, Stellar reported a net loss of $1.10 million, or $0.11 per basic share, compared to a net loss of $0.86 million, or $0.10 per basic share, for the same period last year.

Six months ended March 31, 2017

Total revenues were $0.20 million for the six months ended March 31, 2017 compared to $0.81 million for the same period last year. The change was primarily due to a decrease in product sales. While the company's customer base has not changed significantly, product sales volumes are subject to variability associated with the rate of development and progression of clinical studies of third-party products that utilize Stellar KLH. For the six months ended March 31, 2017, product sales consisted of KLH for clinical and pre-clinical studies and immune system assays. For the six months ended March 31, 2016, product orders primarily consisted of higher volume orders for later stage clinical studies. Total revenues were also impacted by a decrease in the number of significant customers who purchased the company's products and services, with two customers representing 88% of total revenue for the current period compared to five customers representing 90% of total revenue for the same period last year.

Total expenses decreased by $0.45 million to $2.77 million for the six months ended March 31, 2017 compared to $3.22 million for the same period last year.

• Costs of sales and contract services decreased by $0.43 million to $0.15 million for the six months ended March 31, 2017 compared to $0.58 million for the same period last year primarily due to decreased product sales.
• Research and development expenses increased by $0.19 million to $0.79 million for the six months ended March 31, 2017 compared to $0.60 million for the same period last year. The increase was primarily due to research and development activities intended to increase the scalability and throughput capacity of existing manufacturing systems; improvements in analytical, manufacturing, and purification processes; stability studies; and formulation development.
• General and administrative expenses decreased by $0.20 million to $1.68 million for the six months ended March 31, 2017 compared to $1.87 million for the same period last year primarily due to reduced legal and professional fees and public company expenses.

For the first half of fiscal year 2017, Stellar reported a net loss of $2.59 million, or $0.26 per basic share, compared to a net loss of $2.49 million, or $0.30 per basic share, for the same period last year.

Working Capital

At March 31, 2017, the company had working capital of approximately $8.92 million. Cash, cash equivalents and short-term investments totaled $8.60 million.

Additional Information

Stellar will file its Form 10-Q for the quarter ended March 31, 2017 with the Securities and Exchange Commission on May 9, 2017. To view the company's filings, please visit the website of the Securities and Exchange Commission at www.sec.gov. To view the company's filings with the Canadian Securities Administrators (CSA), including the Management Discussion and Analysis and related consolidated financial statements, please visit the CSA's SEDAR website at www.sedar.com.

About Stellar Biotechnologies

Based north of Los Angeles at the Port of Hueneme, Stellar Biotechnologies, Inc. (Nasdaq: SBOT) is the leader in sustainable manufacture of Keyhole Limpet Hemocyanin (KLH), an important immune-stimulating protein used in wide-ranging therapeutic and diagnostic markets. KLH is both an active pharmaceutical ingredient (API) in many new immunotherapies (targeting cancer, immune disorders, Alzheimer's and inflammatory diseases) as well as a finished product for measuring immune status. Stellar is unique in its proprietary methods, facilities, and KLH technology. The company is committed to meeting the growing demand for commercial-scale supplies of GMP grade KLH, ensuring environmentally sound KLH production, and developing KLH-based active immunotherapies. Stellar KLH is a trademark of Stellar Biotechnologies.

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