Thursday, 3 October 2013

EuroPac Analyst Doug Loe’s Perspective on Neptune’s Supply Agreement & Patent Settlement

Neptune Technologies and Bioressources
Basic Shares: 60.0 million
Fully Diluted: 67.5 million
EuroPac’s Health Care Analyst, Doug Loe, has increased his price target on Neptune Technologies to $8 from $6, based on yesterday’s news that the company signed a new krill oil manufacturing/supply agreement with Rimfrost USA and the favorable ITC settlement.

He states, “The Rimfrost Agreement should be immediately accretive to Neptune’s revenue/EBITDA, with only modest margin compression. The three-year agreement obliges Rimfrost to provide Neptune with up to 800 MTs of processed krill oil until Q4/C16, though Neptune is not obligated to purchase that amount of material.”

Because the royalty figure was not disclosed in the news release due to competitive reasons, Mr. Loe also estimates that the royalty is in the “single digit range, but is probably higher than the 1%-3% level that would normally be ascribed to a conventional patent licensing deal.”
In regards to the patent settlements with Rimfrost, Olympic and Avoco, which was also announced yesterday, Mr. Loe says that he believes there is an enhanced probability that Aker and Enzymotec will do the same.

To read, his full report please contact Doug Loe directly.