X-ray technology company Micro-X (ASX: MX1) has posted stronger-than-expected first quarter results as orders for its mobile x-ray system grow “substantially” in response to coronavirus-stimulated demand.
The company said the rapidly growing COVID-19 pandemic has generated a “major shift in the global market for mobile x-rays” including a surge in demand for its Carestream DRX Revolution Nano (Nano) x-ray system.
Purchase orders for the units amounted to $3 million in the first quarter of 2020, which was “significantly higher than the company’s expectations” and compares to the $800,000 of Carestream cash receipts recorded in the December 2019 quarter.
Micro-X on Tuesday added a further $600,000 in new orders, taking the total Nano orders since February up to $3.6 million.
This includes the first major orders for Australia totalling $1 million from New South Wales government agencies and Melbourne’s The Alfred Hospital.
According to Micro-X, the COVID-19 global pandemic has prompted government health agencies to use “emergency procurement processes quite different from the normal purchasing or tendering cycles of 8-12 week delivery”.
This means delivery times are required to be less than four weeks to meet the urgent need for imaging of infected patients, the company said.
“These units are being progressively shipped and whilst new demand is difficult to estimate, the $0.6 million of Nanos already ordered in the June quarter is highly encouraging,” Micro-X stated in its quarterly report.
Ramping up production
In response to the increased demand for Nano units, Micro-X said it has made a “strategic decision to become better positioned for the changed market conditions” by scaling up the capacity and readiness of its Nano production line.
The company has planned a staged increase in production inventory and manufacturing from May to July 2020 to shorten delivery times to less than four weeks and lift the production line rate to two Nano units per day.
In order to achieve this, it said considerable work has been undertaken to increase volume in the company’s supply chain with an increased commitment of $1.1 million to buy and hold further parts and inventory.
Micro-X has also moved x-ray tube manufacture from a temporary facility to a new, purpose-built cleanroom facility next to the main assembly facility in Tonsley, South Australia.
This has allowed further expansion with an additional $600,000 to be spent in the June quarter on capital equipment for end-of-life testing.
Micro-X managing director Peter Rowland said the tremendous surge of Nano orders is strong recognition of the company’s technology.
“This rapid growth in orders has brought new challenges and opportunities for the Micro-X team with a rapidly evolving environment and market,” he said.
“We are excited that our Australian innovative technology is being used to assist medical teams with their response in affected countries from the COVID-19 pandemic. Our whole team is working extremely hard to ship more Nanos as quickly as we can to meet the global demand for our product,” Mr Rowland said.
During the quarter, Micro-X appointed Kingsley Hall as chief financial officer and co-company secretary.
According to the company, Mr Hall is a highly experienced financial and operational leader with a strong commercial leadership and strategic background.
Effective this week, the company also welcomed former Santos (ASX: STO) boss David Knox to the board as a non-executive director.
Micro-X chairman Patrick O’Brien said Mr Knox’s commercial expertise domestically and internationally, as well as his strategic experience in public markets, will be an “invaluable resource” for the board.
“We are very pleased to welcome David as a director of Micro-X especially at this pivotal time as we seek to build on our technology platform and continue to expand our commercial activities internationally in healthcare, defence and security markets,” Mr O’Brien said.