Wednesday, 19 December 2012

BioMedReports Lays Out Case For Neptune Upside

Neptune Technologies & Bioressources

Basic Shares: 60.0 million
Fully diluted: 67.5 million


Long time Neptune follower BioMedReports published an article this morning called “Smart Investors Spot Profitable Upside in Neptune’s Recovery Plan.” This article makes the case for Neptune that recent negative reports of late are not accurate and why “Smart Investors” see opportunity in the stock, which closed yesterday in the US at $1.71.

To quote the BioMedReports article, “Contrary to some recent positions, Neptune is anything but dead in the water. Investors should look at the business from today forward. If investors take an inventory, they will see that the Company has many valuable assets, plenty of cash on hand, two pharmaceutical subsidiaries, and a plan to move forward from the tragedy to rebuild an efficient, growing and profitable business. Neptune's core business, krill oil neutraceuticals, is a growing business that has a large and growing market, growing 70% in 2012 by some estimates, and has been a profitable business segment for Neptune for the last three years.”

Key points outlined in the article are as follows:

  • Management has been active in the development of potential manufacturing partners. These potential partners have been identified and management has engaged in discussions. Management's job number one in these discussions is to find available capacity and supply their current customer base and fulfill the current orders. Due to fulfilling these orders on short notice through other suppliers, Neptune will be able to maintain their revenues, but the margins will be greatly reduced for at least two quarters. The important fact is Neptune should be able to continue its business with minimal issues for their customers until Sherbrooke is ready to go.
  • The current cash position per share is $0.70/share. This is a significant amount of cash to have on hand to bridge the six months until the manufacturing factory reopens. On top of that, the Company also has both property damage and business interruption insurance. In an article released by Reuters, AndrĂ© Godin, CFO of Neptune, stated that the factory was insured for about $20 million and the money would be used to optimize the existing expansion facility at Sherbrooke. Mr. Godin went on to say that the factory would come online in about six months. The business interruption insurance will provide some compensation to the company to help cover losses incurred from the immediate outsourcing needs. These two insurance policies will help limit the impact on the shareholders from this accident, to some extent.
  • A proper valuation analysis, which is not the purpose of this article, would show that the intellectual property of Neptune has substantial value, as the Company has successfully defended and proven the IP's viability and worth in court several times against competitors' claims.
  • More importantly, Acasti Pharma Inc. just released interim data on its Phase II double blinded, placebo controlled clinical study for CaPre®. The data showed a statistically significant 25% (p < 0.05) reduction in triglycerides after eight weeks of treatment in 19 patients with baseline triglyceride levels between 204 and 476mg/dl. CaPre® also decreased Low Density Lipoprotein (LDL), Very Low Density Lipoprotein (VLDL) and non-HDL lipids and increased High Density Lipoprotein (HDL). This news increases the value of Acasti, and as a stand-alone it is possible that Acasti is worth more than the current market cap of Neptune.                                                 
In summation, the BioMedReports article says, “It is reasonable to conclude that the stock price can return to levels prior to the accident over the course of the next 12 months, which would be a very attractive potential ROI for investors from the previous closing price of $1.71/share.”

To read the full article, please click here.