4 June 2015
Provexis plc
Enhanced terms to the DSM Alliance Agreement for Fruitflow®, Trading Update and PrimaryBid.com
Provexis plc ("Provexis" or the "Company"), the business that develops and licenses the proprietary, scientifically-proven Fruitflow® heart-health functional food ingredient, is delighted to announce that the Company has agreed significantly enhanced financial terms for its long-term Alliance Agreement with DSM for Fruitflow®.
The Company's Alliance Agreement with DSM Nutritional Products for Fruitflow® includes a financial model which is based upon the division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales.
Under the revised terms which have been agreed for the Alliance Agreement, the fixed level of overhead deduction from sales will permanently decrease with effect from 1 January 2015, backdated, thus increasing the profit share payable to the Company.
The Company announced on 1 June 2010 that it had entered into the Alliance Agreement for Fruitflow® with DSM. If the revised fixed level of overhead deduction from sales had been in place from the inception of the Agreement, the underlying profit share payable to the Company in Euros would have been 101% higher than the actual profit share that was payable to the Company over the three and a half year period ended 30 September 2014.
The Company stated in its interim results on 30 December 2014 that the fixed level of overhead deduction from sales in the Alliance Agreement was set to decrease contractually from 1 January 2016, but the decrease announced today exceeds the decrease which had been envisaged, to the Company's advantage, and consequently the 1 January 2016 change will not take effect.
Provexis remains responsible under the Alliance Agreement for contributing scientific expertise necessary for successful commercialisation, and the Company remains responsible for filing and maintaining patents and trade marks for Fruitflow®. The Company will continue to pursue its existing strategy to strengthen the breadth and duration of its patent and trade mark coverage, seeking to maximise the commercial returns that can be achieved from Fruitflow®.
The revised commercial terms of the Alliance Agreement reflect the continued strength of the long term relationship between Provexis and DSM. DSM Venturing BV, the corporate venturing unit of Royal DSM NV, continues to hold an unchanged 9.1 per cent shareholding in the Company. All other commercial terms of the Alliance Agreement remain confidential between the two parties.
Trading update
The Company is also pleased to provide an update on trading following the end of its financial year on 31 March 2015.
In its preliminary results statement expected in early September, the Company expects to report on another strong year of progress, building on the low overhead strategy which was adopted in 2013. The Company's Alliance partner DSM Nutritional Products has continued to develop the market actively for the Company's novel, patented Fruitflow® heart-health ingredient in all global markets, with over 35 regional consumer healthcare brands now having been launched by DSM customers. DSM's total revenues for Fruitflow® for the year ended 31 March 2015, which are denominated in Euros, grew strongly by more than 73% year on year, reflecting strong interest in Fruitflow® and the success of the powder format which is being used in an increasing number of new product launches.
The powder format of Fruitflow® has broad potential applications in tablet, gel capsule and dietary supplement products. Interest from potential customers for this format remains strong.
An increasing number of further commercial projects have been initiated by DSM with prospective customers, including some prospective customers which are part of global businesses, with good prospects for these projects to be launched as consumer products. Interest in the technology exists in all major global markets.
In its preliminary results statement expected in early September the Company expects to announce revenues for the year ended 31 March 2015 of £38k (2014: £5k). Revenues for the first half of the year to 30 September 2014 were £8k, largely due to high scale-up costs in the initial Fruitflow® powder manufacturing setup phase, which were reduced significantly towards the close of the quarter ended 30 June 2014.
A further significant reduction in production costs for Fruitflow® powder was identified in late 2014, and this started to take effect in the first calendar quarter of 2015.
The Company expects to report an underlying operating loss from continuing operations for the year ended 31 March 2015 of approximately £410k (2014: loss of £578k), a 29% year on year reduction which continues to reflect the cost reduction actions taken in 2013.
In November 2014 the Company signed a two stage collaboration agreement with the University of Oslo to undertake further research into the relationship between Fruitflow® and blood pressure regulation. Recent work undertaken by the University has shown that the Company's Fruitflow® technology has a potential new bioactivity, leading to blood pressure lowering effects which would be of relevance to a large number of consumers and patients with a wide range of cardiovascular conditions.
The first stage of the collaboration agreement has been laboratory based, focussing on developing the science, with major areas including fractionation, testing, dosage and further IP development. Preliminary results from this first stage of the project have been encouraging, and work is ongoing.
In December 2014 we were pleased to announce that Professor Asim Duttaroy, the original inventor of Fruitflow® had been re-appointed to the Company's Scientific Advisory Board. Professor Duttaroy is Group Leader of Chronic Disease at the University of Oslo's Faculty of Medicine, and he is leading the University of Oslo's research team for the Company's blood pressure project.
Marketing efforts for Fruitflow® have seen the product being promoted at several major trade shows. The product has been featured in numerous publications and it has been the subject of several trade seminars and presentations, some of which are available to view in the news section of the Company's website www.provexis.com.
Marketing initiatives in 2015 have included a new DSM product video for Fruitflow® which is primarily targeted at potential business customers for Fruitflow® in the consumer healthcare sector. The video makes reference to the US Food and Drug Administration's guidance in May 2014 concerning the use of low dose Aspirin, which remains a strong opportunity for Fruitflow®.
The product video has been a good opportunity to promote Fruitflow® more widely, and it has been viewed by a wide variety of current and prospective customers for Fruitflow®, with further bespoke versions of the video likely to be released in due course. The video is also available to view via the Company's website www.provexis.com.
Some of the underlying scientific studies for Fruitflow®, to include the Company's Aspirin Comparison Human Trial for Fruitflow®, will be submitted for publication in the coming months in appropriate scientific journals. Publication of the studies is also expected to be a significant opportunity to promote Fruitflow®.
The Company is in the process of launching a high quality dietary supplement product containing Fruitflow® which will be sold initially from the Company's website on a mail order basis. The new dietary supplement product is expected to provide the Company with an additional income and profit stream, and the Company is seeking to minimise setup costs for this product with the use of appropriate approved outsourcers. Publication of the Fruitflow® studies should give the Company an opportunity to promote this new product strongly, on a particularly cost effective basis.
The Company is in the process of redesigning its website, in part to accommodate its new ecommerce channel, with the new website expected to be launched in the coming weeks.
Darwin Equity Financing Facility and PrimaryBid.com
The Company used its equity financing facility to draw down £45k in April 2014 to strengthen the balance sheet, and help fund the Company's patent and trade mark costs for Fruitflow®. The Company raised a further £125k using its Equity Financing Facility in December 2014, which has helped to fund the collaboration agreement for blood pressure regulation with the University of Oslo.
The Company's cost base and its resources continue to be very tightly managed, and the Company remains keen to minimise dilution to shareholders. The Company currently has in excess of £200k cash at bank and it is focussed on moving into profitability as Fruitflow® revenues increase, but while it remains in a loss making position it will need to raise some further working capital and consequently the Company is pleased to announce it has joined PrimaryBid.com (www.primarybid.com), the online platform dedicated to equity crowdfunding for AIM-listed companies.
PrimaryBid.com provides a new channel for the Company to raise equity from investors, allowing investors to bid directly for new shares in the Company at prices of their choosing, subject to certain limited restrictions.
PrimaryBid.com will provide the Company with ongoing access to an aggregated book of bids submitted by prospective investors, with the Company having full discretion as to whether or not to proceed with a share placing to raise capital through PrimaryBid.com.
Should the Company wish to proceed with a share placing this would be done by issuing new shares, in order to satisfy any number of the bids presented through the PrimaryBid.com platform. Shares may only be issued to the extent that the Company has the requisite shareholder authorities to fulfil the issuance. Full details can be found on www.primarybid.com.
The Company's existing 10 September 2013 equity financing agreement with Darwin Strategic Limited has been cancelled, as a result of the Company joining PrimaryBid.com.
Dawson Buck, Chairman of Provexis, commented:
"We are delighted to announce the revised terms which have been agreed for the Alliance Agreement, which will permanently increase the profit share payable to the Company. The revised commercial terms of the Alliance Agreement reflect the continued strength of the long term relationship between Provexis and DSM.
We are pleased to join the new and innovative PrimaryBid.com platform which will allow us to access funding directly from investors in a way which has traditionally been very restrictive. The platform provides us with the potential to access capital flexibly and quickly when the Company should need to do so, and it will give private investors who have been supporting the Company the ability to participate in potential future fundraisings.
The Company's trading update today includes a number of very positive developments for the business, and with the Company's low operational costs we are well positioned to drive value for shareholders, and we remain positive about the outlook for the business."
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For further information please contact:
Provexis plc Tel: 07917 670260
Dawson Buck, Chairman [email protected]
Ian Ford, Finance Director
Cenkos Securities plc Tel: 020 7397 8900
Bobbie Hilliam
