Wednesday, 2 October 2013

Neptune & Acasti Pharma – Two Very Positive Developments


Neptune Technologies and Bioressources
TSX: NTB – NASDAQ: NEPT
Basic Shares: 60.0 million
Fully Diluted: 67.5 million

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Extremely important and much anticipated news was issued on two fronts this morning as Neptune and Acasti Pharma announced they had reached a settlement and an agreement, which happened to be with the same group!

Part One:

The first piece of news covered the settlement of a patent infringement action against North Carolina based, RIMFROST USA, LLC, a joint venture of Avoca Inc. and Norwegian Olympic Seafood AS. The “Settling Respondents”, (Rimfrost USA, LLC (“Rimfrost”); Olympic Seafood AS; Olympic Biotec Ltd.; Avoca, Inc.; and Bioriginal Food & Science Corp.)

In many respects, the joining of hands came together very quickly as it was only early this year that the U.S. International Trade Commission (ITC) launched an investigation related to infringement of Neptune’s composition of matter patents.

No financial terms were disclosed but the “Settling Respondents” 1) agreed to pay Neptune a royalty amount for the manufacture and sale of krill products prior to the settlement date and 2) Neptune has granted a world-wide, non-exclusive, royalty-bearing license to the Settling Respondents, allowing them to market and sell within the nutraceutical market products containing components extracted from krill.

While it is not yet publicly known what this will mean for Neptune’s coffers in the future, this victory adds to the company’s arsenal as NTB is still facing down its number one collective competitor that is also the subject of the ITC investigation: Aker BioMarine AS; Aker BioMarine Antarctic USA, Inc.; Aker BioMarine Antarctic AS; Enzymotec Limited and Enzymotec USA, Inc. (collectively “Aker and Enzymotec”).


Part Two:

Clearly, there was a lot being discussed when all of the parties gathered around the negotiating table. Once the patent infringement item was resolved and the tone turned positive, Neptune opened the door on a rather important item, being the future supply of krill oil. Neptune and Rimfrost reached terms on a strategic non-exclusive krill oil Manufacturing and Supply Agreement giving Neptune the right to purchase, at a preferred price, up to 800 metric tons of krill oil during the first three-year term of the renewable agreement.  

This agreement ensures NTB will have adequate supply for its 150 metric ton per year plant at Sherbrooke, Quebec that is set to go into production by next February following the horrific explosion in 2012 that devastated the facility. Sherbrooke will focus on producing the premium “NKO®”. The remaining tons under the supply agreement will be further processed into Eco “EKO™” krill oil.

We found the quote from Henri Harland, President and CEO of Neptune very interesting as it suggests there may be more to come in the future. “Today’s announcement, which is now in effect, is another important step in our action plan to secure and increase our krill oil supply chain through third party agreements. By moving from a centralized to a diversified production model we are further strengthening and safeguarding Neptune’s operations.”