Thursday, 31 May 2012

A Summary of Neptune’s Conference Call

Neptune Technologies & Bioressources
Basic Shares: 48.2 million
Fully diluted: 53.9 million

At 4:30pm ET today (May 31st), Neptune Technologies held an investor conference call to provide investors with a corporate update.

The call was hosted by Henri Harland, President & CEO of Neptune Technologies & Andre Godin, CFO.

Here’s a summary of the call.

Production Capacity and Expansion
  •  Current production capacity is 150 000 kg/year and it will increase to 300 000 kg/year at the completion of Phase I scheduled for the first quarter calendar 2013.
  • To increase to 500,000 kg/year at the end of Phase II a year later.
  • At the end of the expansion, starting in 2014, the Sherbrooke Plant will be in a position to support approximately $80 million in sales per year.

Chinese JV Partner – SKFC
  • Now reviewing the IP evaluation recently completed by Ernst & Young, which will need to be agreed by both Neptune and SKFC in order to finalize the deal.
  • Neptune will be receiving an up-front payment as well as royalties. Management expects this deal to go through and to be fully operational by the end of 2014, which will generate another 300,000 kg/year for the Asian market.

Sales & Marketing
  •   Primary focus during the year
o   Continue to expand in new emerging markets in strategic locations worldwide
o   Fully penetrate the North American market with nutraceutical products
o   Ensure that NKO® and EKO would be found on the shelves in all major retail stores
  •   NFL Hall of Famer, John Elway has signed in to be the brand public figure partner for Neptune Krill Oil. His efforts have generated a great deal of attention to NKO and to the company.
  • Two major distributors in the US represent close to 30% of the US dietary supplement mass market making Neptune Krill Oils available in over 20,000 stores.
  • In Canada, Jamieson has almost completely rolled out the product to its network of 7,000 stores under the Omega Super Krill brand with NKO® logo on the label.
  • Jamieson has also committed to full scale advertising and promotional campaigns.

Intellectual Property Status
  • The first patent (‘348) patent is undergoing a re-examination before the USPTO. “Nonetheless, the patent remains valid and enforceable, and we are confident that at the end of the re-examination process, the validity of our claims will be reconfirmed.”
  • Recently, the Australian Patent Office issued a patent for a krill oil composition and process to one of Neptune’s competitors. “This patent has no impact on our position as the leading krill oil provider to the Australian market and has no bearing on our business. We firmly believe that the patent is invalid.”
  • Neptune is confident that the Australian Patent Office will reconsider its grant and declare the claims to be invalid.

Functional Foods and Clinical Studies
  • Obtained interesting and promising clinical results with NKO® for Alzheimers disease and for joint health.
  •  “Given the strong positive signals achieved we are now evaluating different avenues to conduct larger studies to statistically validate the effects observed in these clinical studies. We are now conducting with a new European partner another clinical study on Joint health following Yoplait’s recommendation even though Yoplait would not be collaborating.”
  • “Nestle officially informed Neptune that even though it would be interested to learn about Neptune’s further developments. Nestle renounced, for reasons internal to Nestlé, to enter into a formal negotiation with Neptune.”
  • “Neptune takes also this opportunity to announce that for the near future, because of the success escalating demand and return on investment in the dietary supplement market for its products, EKO and NKO krill oils, Neptune will mainly focus on the dietary supplement markets.”

  • Close to being able to dividend to Neptune’s shareholders, units comprising shares and warrants of NeuroBioPharm. In the process of filing the prospectus and should expect to hear from the regulatory bodies very soon after filing.

Acasti Pharma
  • During US FDA review of the pre-IND package submitted by Acasti, it was proposed that a 4g dose of CaPre is evaluated in a phase II clinical study. (Writer’s note: It is our understanding that the 4g addition will allow for a direct comparison to 4g results obtained by Lovaza and Amarin from its clinical fish oil related studies).  
  • In order to comply with the FDA demand, Acasti has recently implemented, after Health Canada acceptance, a 4g dose arm in the open label trial.
  • Expect to be able to communicate clinical trial results by the end of this year. Enrollment of both clinical trials is ongoing and progressing well. 
  •   Plan to have Acasti shares listed on a US exchange before the end of the year.

2012 Year End Financial Results
  • “Neptune reported a record $19 million in revenue for the fiscal year ended February  29,  2012. This represents an increase of 15% compared to fiscal 2011 Neptune also reported an increase in revenue of 32 % in Q4 2012 from Q4 2011. The increase is attributed to our worldwide key distribution partners as well as the rollout of our NKO and EKO krill oil across the United States. In the production front, Neptune has reached a new high of 140, 000 kg per year in 2012 and has maintained its gross margin above 50 %.”
  • “I am pleased to report that on the nutraceutical side of the business Neptune recorded a net income of $2.4 million compared to $1 million last year.  The consolidated group, including Acasti Pharma and NeuroBioPharm resulted in a loss of $4.6 million due mostly to the subsidiaries’ R&D programs, including the two Phase II clinical studies by Acasti Pharma.”
  • “Neptune’s consolidated working capital is currently over $24 million and since Neptune nutraceutical business is profitable, we have sufficient fund to support all our activities and projects.”