How maker of drug tests Intelligent Bio Solutions builds its business on people’s tendency to lie

The percentage of employees whose workplace drug test showed signs of tampering has reached a 30-year high, warns Quest Diagnostics, one of the largest independent laboratories in the U.S. To deceive employers, test-takers substitute urine specimens, use synthetic alternatives, or mix samples with additives. The micro-cap Intelligent Bio Solutions (INBS), with a market capitalization of less than $6 million, believes its rapid drug screening solution — which detects drugs through sweat collected from fingertips — can solve this problem. With the product already commercially available in over a dozen countries, the company is now preparing to enter the world’s largest screening market — the U.S.

The scale of the problem

The percentage of employees testing positive for marijuana, along with the number of people attempting to cheat on employer drug tests, is increasing, according to Quest Diagnostics data cited by the Society for Human Resource Management (SHRM).

In 2023, Quest conducted millions of tests on behalf of employers, analyzing their employees’ urine, saliva, and hair samples. 4.6% of them returned positive for illicit drugs — a rate that has been flat for the last three years. However, Quest is more concerned about the rising number of employees cheating on their drug screens. The company found that some workers were tampering with tests by replacing urine specimens with someone else’s urine or synthetic samples found online, or mixing samples with additives, rendering accurate analysis impossible.

“Workers are cheating on drug tests at the highest rate in more than 30 years. Some workers are going to great lengths to attempt to subvert the drug-testing process,” Suhash Harwani, a senior director of science at Quest, told SHRM. 

This is costly to businesses. In 1989, the U.S. Postal Service (USPS) released the results of a study examining the link between drug use and employee productivity. In the study — “the most compelling ever conducted” and relevant to this day, according to the consulting firm Current Consulting —  USPS tested every new hire for drugs over ten months and then monitored them for about two years. The study showed that employees who tested positive during hiring had higher turnover and absenteeism rates, and took more leave. USPS estimated that avoiding the hire of such individuals could have saved $52 million over two years. Based on this data, Current Consulting calculated that a company with 500 employees can save $25 for every dollar spent on pre-employment drug tests.

A drop of sweat instead of urine

The screening industry is battling drug test cheating while looking for simpler, faster, non-invasive, and more cost-effective solutions, INBS notes. The company believes its product, which fits the description of what the industry is after, will revolutionize portable drug testing. Instead of urine or saliva, its technology uses fingertip sweat to quickly test for common drugs, including opiates, methamphetamine, cocaine, and cannabis.

The system consists of disposable cartridges and a portable analysis unit. The cartridge is inserted into a reader that displays test results within 10 minutes. For context, laboratory analysis of urine samples typically takes one or two days. The results from the INBS system can be printed, integrated with employee medical records, stored for statistical analysis, or sent to a third-party laboratory for confirmation.

The speed of testing is especially important for employers in safety-critical industries, the company notes. Its technology is used by manufacturing, transport and logistics firms, law enforcement agencies, rehabilitation centers, and forensic experts, among others. INBS’s customers include Auctus Management Group, an infrastructure construction company, and chemical manufacturer Robinson Brothers, both from the UK. As of the end of March 2024, the UK remains INBS’s primary market, accounting for 93% of its revenue.

From diabetes to drugs

In its current form, INBS came about in 2023 through the merger of U.S.-based diagnostic test developer GBS and UK-based maker of drug tests Intelligent Fingerprinting Limited (IFP).

Before the merger, GBS worked on a biosensor platform for saliva-based laboratory tests, according to INBS’s financials for the fiscal-2021 full year (ended June 30, 2021). This device, comprising an organic strip with sensors, can be adapted to detect various elements depending on the disease being tested for. Results can be viewed on a smart device and stored in the cloud.

The biosensor was invented at the Priority Research Centre for Organic Electronics at the University of Newcastle, Australia. It was later licensed by the local company Life Science Biosensor Diagnostics Pty (LSBD), which held a 42.6% stake in GBS (as of 2021). LSBD sold the proprietary rights to the biosensor technology in several countries to its subsidiary, which focused on developing a glucose biosensor as a non-invasive alternative to tests offered by Bayer, Abbott, and Roche for diabetes patients. Shortly after, it began working on a test to detect COVID-19, which was running rampant at the time.

GBS later planned to branch out into immunological and hormonal testing and use the biosensor to identify tumor markers, as stated in the company’s financials for the fiscal-2021 full year (ended June 30).

In 2022, GBS decided to broaden its scope and acquired UK-based IFP. The latter had a “revolutionary point of care fingerprint sweat-based drug screening technology” and a client base spanning multiple countries, while GBS had the biosensor. The synergy between the two companies was expected to expand GBS’s client base, accelerate revenue growth, and build long-term shareholder value, the company noted in its fiscal-2022 financials (ended June 30). GBS paid for the acquisition with its own shares and changed its name to Intelligent Bio Solutions.

New phase

The merged company immediately targeted the largest drug screening market — the U.S. — which INBS has long sought to penetrate. For example, the company has met with the FDA to determine the necessary steps for bringing its biosensor to the U.S. market, though it has yet to register it.

In December 2024, INBS submitted an application to the FDA to sell its drug screening systems. The company’s study showed that a simple fingerprint sweat sample, collected without intrusive procedures, can provide quick and accurate drug screening results, reported Zacks. If approved by the FDA, sales are expected to begin in 2025, as stated by the company. INBS noted that entry into the U.S. market will support its global expansion, presenting opportunities for revenue growth, market share acquisition, and strategic partnerships.

Research Nester expects the global drug screening market to grow from $7 billion in 2023 to $63 billion by 2035, growing at a CAGR of 20%, with one third of the global market held by North America (the U.S. and Canada). In its calculations, the research firm had included sales of consumables, rapid testing devices, instruments, and services. The growth is driven by an increasing number of drug users: between 2011 and 2021, the number of people using illicit substances grew 23% to 296 million worldwide, or one in every 17 people aged 15-64, according to the World Drug Report 2023 by the World Health Organization. The report also attributes about 600,000 deaths per year to drug abuse — a number that is just below the population of Detroit or Seattle, which are among the top 20 largest cities in the U.S. 

This has led to an increase in demand for drug testing, Research Nester notes. In the U.S., for instance, workplace drug testing for existing employees is not universally legal, while pre-employment drug testing is permitted in many states — and even mandatory in some of them, according to Current Consulting.

For investors

Since its inception, INBS has primarily financed its operations through equity and bond offerings, as stated in its fiscal-2024 financials.

In late 2020, GBS (as it was then called) went public on the Nasdaq, selling 1.27 million shares at $17 apiece and raising $17.7 million in net proceeds (after deducting placement costs). Since then, the stock has dropped nearly 92% to $1.40 per share — and that’s even after a 1-for-20 reverse stock split announced in 2023. In fiscal year 2024, the company raised about $14.6 million through private and public equity offerings.

Despite these efforts, the company has yet to achieve profitability and cautioned investors that there are no guarantees it ever will. For fiscal year 2024 (ended June 30), the company reported a net loss of $10.3 million, down 5% year over year, and revenue of $3.11 million, up 148%.

Another risk for investors is that Australia-based LSBD, which licensed the biosensor technology to INBS, is currently undergoing liquidation. As a result, the intellectual property rights to the technology have reverted to the University of Newcastle. INBS is in negotiations with the university, but these talks are still in the early stages. Losing the license can have a negative impact on its business.

For now, INBS is working on refining its technology. It is exploring the potential for new rapid tests, including those for tumor markers, hormones, and allergies. The company also plans to improve its reader by making it more compact, extending battery life, and refining the touch-screen interface. However, it states that its primary focus is on enabling existing cartridges to detect a wider range of substances, including ketamine, tramadol, oxycodone, and fentanyl. According to MarketWatch, the one analyst covering INBS has a “buy” recommendation, with a target price of $12 per share, more than 8.5 times the current market price.