Chembio Diagnostics Inc. on Thursday reported its losses spiked in the April-June period compared with a year ago because of a one-time tax provision and fewer sales of its rapid tests for HIV and syphilis.
The Medford-based manufacturer said it lost $8.3 million in the three months ended June 30, compared with a loss of $664,000 a year earlier.
Nearly $6 million of the recent loss was due to an accounting practice called a “full valuation allowance on a deferred tax asset.”
The tax asset was created as a result of previous losses at the company, and it could be used to reduce future tax payments when the company earns a profit. But executives said the company would likely not use the tax asset “in the foreseeable future.” So the value of the asset was removed from the company’s balance sheet in the second quarter.
Accounting rules stipulate that the tax asset comes with a deadline, CFO Richard J. Larkin said recently. The company does not believe it can meet the deadline to use it, he said.
In the quarter, Chembio’s sales fell 51 percent to $3.3 million, year over year, because it was outbid by a competitor to provide some point-of-care tests to Brazil, and made fewer sales in Africa. Another factor in the decline was that Chembio assumed responsibility for U.S. sales of its HIV tests from an independent distributor, executives said.
CEO John J. Sperzel said the company is optimistic about the sales potential for its Zika virus test and a companion results reader in South America and elsewhere.
“We are hopeful that this product will receive U.S. government funding as well as approval following submissions to numerous regulatory agencies,” he said.
Two weeks ago the test was approved for sale in 17 European countries and parts of the Caribbean.
Chembio has reported losses for the past two years. Earlier this month it raised $12.5 million by selling additional stock to the public.
Chembio shares closed down 28 cents to $6.46 on the Nasdaq market on Thursday. In the past year the stock has advanced $1.68 per share, or a gain of 35 percent.