Executive Summary / Key Takeaways

• Biomerica, Inc. ($BMRA) is undergoing a strategic transformation, pivoting towards diagnostic-guided therapy (DGT) with its flagship inFoods® IBS product, which offers a personalized, non-pharmaceutical approach to Irritable Bowel Syndrome (IBS) symptom management.
• The company's inFoods® IBS test has demonstrated statistically significant clinical efficacy, notably as the only targeted therapy showing benefit for IBS-M patients, and is now bolstered by a significant marketing partnership with healthcare giant Henry Schein, Inc. (HSIC) in the U.S.
• Despite a 24% year-over-year decline in net sales to $1.38 million for the three months ended August 31, 2025, Biomerica achieved a substantial improvement in gross margin to 31% from 16%, driven by a favorable product mix and operational efficiencies.
• Biomerica faces significant liquidity challenges, with recurring operating losses and management expressing "substantial doubt about our ability to continue as a going concern," underscoring the critical need for successful commercialization and additional financing.
• The company's future hinges on securing U.S. government and private payer reimbursement for inFoods® IBS, expanding its commercial reach, and leveraging its technological differentiators against larger, well-resourced competitors in the biomedical diagnostics market.

A Legacy Reimagined: Biomerica's Strategic Shift in Diagnostics

Biomerica, Inc., established in 1971, has a long history as a global biomedical technology company, developing and marketing advanced diagnostic and therapeutic products. Historically, its focus has been on immunoassay technology for analyzing patient samples to diagnose various diseases, food intolerances, and other medical complications. The company's products are sold worldwide, primarily to clinical laboratories and point-of-care settings, with many holding Conformité Européenne (CE) marks and U.S. FDA clearance.

In recent years, Biomerica has embarked on a significant strategic pivot, emphasizing diagnostic-guided therapy (DGT) products, particularly for widespread gastrointestinal (GI) diseases like Irritable Bowel Syndrome (IBS) and other inflammatory conditions. This strategic evolution positions Biomerica in a competitive landscape dominated by formidable players such as Abbott Laboratories (ABT), Roche Holding AG (RHHBY), and Thermo Fisher Scientific (TMO), all of whom possess significantly greater financial and technical resources. While these larger entities offer broad diagnostic portfolios and integrated healthcare solutions, Biomerica aims to carve out a specialized niche through targeted, personalized medicine.

Technological Edge: Personalized Diagnostics for Unmet Needs

At the core of Biomerica's revitalized strategy is its patented inFoods® IBS technology. This innovative diagnostic-guided therapy utilizes a simple blood sample to identify patient-specific foods that, when removed from the diet, may alleviate IBS symptoms such as pain, bloating, diarrhea, and constipation. This approach represents a significant departure from broad, difficult-to-manage dietary restrictions, offering a precision-based solution tailored to an individual's immune response.

The tangible benefits of inFoods® IBS are underscored by robust clinical data. A multicenter, double-blinded clinical study, published in the June 2025 issue of Gastroenterology, demonstrated statistically significant outcomes. Specifically, 59.6% of patients who eliminated identified trigger foods achieved the FDA's endpoint for abdominal pain reduction, compared to 42.2% in the control group. For the IBS-C subgroup, the treatment group showed a 67.1% response rate versus 35.8% in the control group, and for IBS-M patients, the response was 66% compared to 29.5%. This makes inFoods® IBS the only targeted therapy to demonstrate efficacy specifically in IBS-M patients, a subgroup historically underserved by existing treatments. The clinical results are considered "clinically significant and for certain endpoints is similar and, in some cases, better than the current drugs in the market."

Further enhancing this technological differentiator, Biomerica has launched the inFoods® IBS Trigger Food Navigator, an AI-backed digital companion tool designed to improve patient dietary compliance and treatment success. This tool identifies, on average, two to four specific food triggers, empowering patients with actionable guidance and potentially leading to greater adherence and symptom relief.

Beyond IBS, Biomerica's technological pipeline includes hpdetect, an FDA-cleared diagnostic test (December 2023) for Helicobacter pylori bacteria. H. pylori affects approximately 35% of the U.S. population and is a leading risk factor for gastric cancer. This test provides physicians and medical centers with a reliable tool for diagnosis and monitoring treatment effectiveness. The "so what" for investors is clear: these differentiated technologies address large, unmet medical needs with personalized solutions, potentially commanding higher average selling prices (ASPs) and better margins, thereby strengthening Biomerica's competitive moat against more generalized diagnostic offerings.

Financial Performance and Operational Realities

Biomerica's financial performance for the three months ended August 31, 2025 (first quarter of fiscal year 2026), reflects a company in transition, balancing strategic investments with cost-cutting measures. Consolidated net sales decreased by 24% to approximately $1.38 million, down from $1.81 million in the same period of 2024. This decline was primarily attributed to reduced retail market activity, lower international over-the-counter (OTC) sales (partially due to tariff impacts), and decreased demand under certain contract manufacturing agreements. The company also experienced continued volatility in clinical laboratory demand.

Despite the revenue contraction, a notable operational achievement was the significant improvement in gross profit, which rose to $424,000 in Q1 FY26 from $289,000 in Q1 FY25. This translated into a substantial increase in gross margin, from 16% to 31% year-over-year. This improvement was primarily driven by a more favorable product mix and enhanced production efficiency, including a reduction in direct labor costs following a Reduction in Force (RIF) implemented in the prior fiscal year. Operating expenses also saw a modest decrease of 2% to $1.33 million, reflecting the company's ongoing focus on cost reduction and operational efficiency.

The company reported a net income of approximately $2,000 for the quarter, a stark contrast to the net loss of $1.32 million in the prior-year period. However, this positive net income was largely attributable to a one-time, non-recurring $1.10 million cash refund received from the IRS related to Employee Retention Credit (ERC) claims from 2021. Excluding this one-time benefit, the underlying operational performance still indicates a loss, highlighting the ongoing challenge of achieving sustainable profitability.

Liquidity, Capital Resources, and the Going Concern Question

Biomerica's financial health presents a significant concern for investors. The company has incurred recurring operating losses and negative cash flows from operations, accumulating an approximate deficit of $53.2 million as of August 31, 2025.

While cash and cash equivalents stood at approximately $3.05 million and working capital at $4.21 million as of the same date, management has explicitly stated that "our current cash and cash equivalents are insufficient to meet our operating cash requirements and strategic growth objectives for the next twelve months."

This assessment has led management to conclude that "these factors raise substantial doubt about our ability to continue as a going concern." The company's future viability is dependent on the successful execution of its strategic plans, securing additional near-term financing, and ultimately achieving profitable operations. To address these capital needs, Biomerica is actively pursuing strategies to increase sales, reduce expenses, sell non-core assets, and seek additional financing through debt or equity. During the three months ended August 31, 2025, the company raised $912,000 in net proceeds from an At-The-Market (ATM) offering, which is earmarked for general corporate purposes, including sales and marketing, clinical studies, and product development.

Strategic Initiatives and Outlook: Catalysts for Growth

Despite the financial headwinds, Biomerica is aggressively pursuing strategic initiatives to drive future growth and enhance shareholder value. A pivotal development is the marketing services agreement with Henry Schein, Inc., announced on October 16, 2025. This partnership will leverage Henry Schein's extensive nationwide distribution network, comprising over 400 medical field sales and telesales representatives, to market the inFoods® IBS test across the United States (excluding New York State). This collaboration is a critical step in accelerating the adoption of Biomerica's non-drug, personalized solution for IBS management.

A key catalyst for revenue growth lies in securing reimbursement for inFoods® IBS. Biomerica is actively applying for U.S. government payment or reimbursement through the Medicare system, with plans to pursue private payer insurance reimbursement if successful. Management believes that if patients can access the product at no cost or with a small co-payment, it "will dramatically increase our revenues from this product."

Internationally, Biomerica continues to expand its footprint. The United Arab Emirates (UAE) Ministry of Health and Prevention recently approved the company's Fortel® Ulcer Test and Fortel® Kidney Test for home use, broadening access to these diagnostic tools in the region. Furthermore, Biomerica is expanding its Contract Development and Manufacturing Organization (CDMO) services, leveraging its over 40 years of expertise, ISO 13485 certification, CE-mark expertise, and FDA-registered cGMP manufacturing facility to provide end-to-end support for other diagnostic and biotechnology companies. This initiative aims to capitalize on increasing market demand for specialized development and manufacturing capabilities.

Competitive Landscape and Positioning

Biomerica operates in a highly competitive biomedical diagnostics market. While its inFoods® IBS technology offers a unique, personalized approach, it faces direct competition from industry giants like Abbott, Roche, and Thermo Fisher. These competitors possess vast resources, established global distribution networks, and broad product portfolios that span various diagnostic areas. For instance, Abbott's strong global presence and diversified product lines provide significant scale advantages, while Roche's extensive R&D investments and integrated solutions enable faster innovation cycles and wider adoption. Thermo Fisher's comprehensive service offerings and technological expertise allow it to dominate high-throughput laboratory solutions.

Biomerica's competitive advantage lies in its agility and specialized focus on niche diagnostic-guided therapies. The clinical efficacy of inFoods® IBS, particularly its unique benefit for IBS-M patients, provides a strong differentiator against more generalized treatments. However, Biomerica's smaller scale and financial vulnerabilities, including lower revenue growth and profitability compared to its larger rivals, pose significant challenges. Its ability to compete effectively hinges on the successful commercialization of its innovative products and securing the necessary reimbursement to drive widespread adoption. The company's strategic partnerships, like the one with Henry Schein, are crucial for expanding its market reach and overcoming the distribution advantages of its larger competitors.

Conclusion

Biomerica, Inc. stands at a pivotal juncture, driven by its innovative diagnostic-guided therapy for Irritable Bowel Syndrome. The inFoods® IBS test, with its clinically proven efficacy and personalized approach, represents a significant technological differentiator addressing a substantial unmet medical need. Strategic partnerships, such as the recent agreement with Henry Schein, are vital steps toward unlocking the commercial potential of this technology. The company's future growth is heavily reliant on securing U.S. government and private payer reimbursement, which management anticipates could dramatically increase revenues.

However, the path forward is fraught with challenges. Biomerica's recurring operating losses and management's explicit "going concern" warning underscore the urgent need for successful commercial execution and additional financing. While cost-cutting measures and recent capital raises provide some near-term liquidity, sustained profitability remains elusive. Investors must weigh the significant potential of Biomerica's differentiated diagnostic technologies and strategic initiatives against the backdrop of intense competition from well-capitalized industry leaders and the company's precarious financial position. The successful commercialization of inFoods® IBS and hpdetect, coupled with the ability to secure long-term funding, will be paramount in determining Biomerica's long-term viability and its ability to deliver on its promise of personalized healthcare solutions.