EZZ Life Science seeks to build long-term value position in genomics

EZZ Life Science (ASX: EZZ) has published financial results for the first half of the current financial year (H1 FY2022), with co-founder and interim chief executive officer Mark Qin saying the company is continuing its value-creating strategies.

Mr Qin, who is also interim chief operating officer, said EZZ Life Science’s management team is confident about its strategic focus, as well as its research and development (R&D) and manufacturing activities propelling the company to strong performance in the mid-to-long term.

EZZ Life Science debuted on the ASX in March last year, via an oversubscribed initial public offering (IPO) that raised $6 million.

The IPO was partially enabled by EZZ Life Science securing an exclusive distribution deal for Eaoron-branded skincare products in Australia and New Zealand.

Since 2020, the company has added its own health and wellness brand with a focus on longevity,  weight management, human papillomavirus and Helicobacter pylori.

Currently, its entire product range is being sold via multiple e-commerce platforms across the Asia Pacific region and its website with a prime focus on China, Australia and New Zealand.

H1 FY2022 revenue

In the first half of the financial year, EZZ Life Science generated $6.2 million in revenue.

Net profit after tax for the period was $99,800 and the company had zero debt – closing out H1 FY2022 with a strong cash position of $8.9 million.

According to the half-year report, gross margin decreased from 58% to 48% due to the revenue mix towards lower margin EZZ-branded products. The average gross margin from EZZ-branded products decreased from 87% to 67% due to the promotion of new products being priced with a lower margin.

Meanwhile, the average gross margin on Eaoron-branded products increased from 22% to 32% primarily due to business partner Australian United Pharmaceuticals conducting promotional pricing on selected products and the company’s focus on distributing higher-margin products from the Eaoron range.

Despite the operational challenges, the company’s best-selling products were its NMN 150,000, coffee jelly and JTN Immunity Plus health supplements while from its Eaoron range, the most popular products were the hyaluronic acid collagen hydrating face mask, collagen essence and a youth resorting skincare cream.

Dealing with challenges

Domestic revenue from branded products increased, while total revenue decreased for several reasons, the company said.

First and foremost, the effects of the COVID-19 pandemic disrupted supply chains in several key countries thereby adversely affecting the retail industry.

Lockdowns introduced by the Australian and New Zealand governments adversely impacted retailer operations across both countries thereby hampering sales revenues.

As part of its half-year report, EZZ Life Science also referenced a “cooling down” of Tmall Global’s transaction volume at the Double Eleven e-commerce shopping festival in mainland China.

Looking ahead

Speaking at an industry conference in Sydney earlier this month, EZZ Life Science non-executive director Glenn Cross explained that his company has committed to transition into “genomics” with a focus on adding innovative genomics products to its healthcare product range.

The company is focusing on growth in new jurisdictions by developing more than 10 products over the next year and earmarking more than 7,000 new distribution points across the Asia Pacific.

Mr Qin stated the company intends to invest in future growth through the ongoing development of technical capacity and expanding inhouse e-commerce capability. In addition, the company is seeking to bolster its “data-backed analytical capability” to enable data-driven decision making and efficiencies of scale.

Moreover, the half-year report further clarified EZZ Life Science’s operational expectations for the coming year. The company is seeking to employ strong management teams to “drive long-term earnings growth and deploy best practice principles in operational execution while continuously improving working capital efficiency”.

As a means of bolstering shareholder returns, the life science company confirmed it will ensure a highly disciplined approach in capital expenditure and intends to only invest in opportunities with a return exceeding the cost of capital.