Two Months of Good News and Execution Shows Neptune's Run May Just be Getting Started Print E-mail
By Michael Morhamus, Contributor   
Tuesday, 12 June 2012 07:40
icon_bio-baggerNeptune Technologies & Bioressources Inc. (Nasdaq:NEPT), is one of the established leaders in the development and commercialization of Krill Oil and other Krill based products.  Neptune's first commercially available product, Neptune Krill Oil (NKO┬«), is the only clinically proven and scientifically acknowledged marine omega-3 phospholipids with cardiovascular, cognitive and anti-inflammatory benefits.   Neptune researches, develops and commercializes proprietary bioactive ingredients and products with superior added-value and clinically proven health benefits.

A clinical study of the effects of Krill Oil, using NKO, was conducted to assess the effects of krill oil on blood lipids, specifically total cholesterol, triglycerides, low-density lipoprotein (LDL), and high-density lipoprotein (HDL).  The results were published in November of 2004.  The study conclusions stated the following:  "The results of the present study demonstrate within high levels of confidence that krill oil is effective for the management of hyperlipidemia by significantly reducing total cholesterol, LDL, and triglycerides, and increasing HDL levels. At lower and equal doses, krill oil was significantly more effective than fish oil for the reduction of glucose, triglycerides, and LDL levels.  The results of this clinical trial demonstrate that daily doses of 1-3 g krill oil are significantly more effective than 3 g EPA/DHA fish oil in the management of hyperlipidemia. Furthermore, a maintenance dose of 500 mg krill oil is significantly effective for long-term regulation of blood lipids. The unique molecular composition of krill oil, which is rich in phospholipids, omega-3 fatty acids, and diverse antioxidants, surpasses the profile of fish oils and offers a superior approach toward the reduction of risk for cardiovascular disease."

Neptune has spun-out a company, Acasti Pharma, Inc., to realize the pharmaceutical benefits and develop and commercialize products for the prescription drug market in relation to this study.  Acasti is focusing initially on treatments for chronic cardiovascular and cardiometabolic conditions within the over-the-counter, medical food and prescription drug markets.  Acasti is currently in a Phase II double blind, randomized clinical trial with their lead drug CaPre.  Acasti could release top-line results from this study as well as results from an open label study for CaPre by the end of 2012. 

Recent Positive News

Over the past two months Neptune has made several positives announcements.  On May 25th Neptune reported year-end fiscal 2012 results with record revenues of $19,113,000, a 15% year-over-year gain.  The Company subsequently announced preliminary 1Q 2013 revenues on June 5th in the range of $6,000,000 to $6,200,000, a 40-45% year-over-year gain and nearly a 20% gain quarter-over-quarter.  Michel Timperio Vice President of Global Sales commented on the strong quarter, "The krill industry as a whole is vibrant; delivering double digit growth.  Krill Oil is the fastest growing ingredient in the whole Omega-3 market, which is great news as it reflects greater awareness from the consumers. Neptune's NKO, being first in its class, is gaining momentum worldwide in Asia, Oceania as well as Europe, while continuing great progression in the US mass market where Neptune's products, while dominating the health store channel, can now be found in large retail chains. We are thrilled and are foreseeing sustained growth in the upcoming quarters.''

During a conference call with investors, management discussed Neptune's capacity expansion progress.  Current production capacity is 150,000kg/year; completion of the Phase 1 expansion project is scheduled to be completed by the first quarter of calendar 2013, bringing capacity to 300,000kg/year.  Capacity should further increase to 500,000kg/year at the beginning of 2014 with the completion of the Phase 2 expansion. 

Other recent news includes the following:

Neptune has also had positive news on its patent front with the U.S. Patent & Trademark Office (the "USPTO") allowing one of the Company's continuation patent applications, number 13/189,714, which claims the benefit of Neptune's U.S. Patent No. 8,030,348 ("the '348 Patent"). This continuation application contains claims to further embodiments of the inventions that were disclosed in the '348 Patent; specifically to krill extracts comprising a phospholipid suitable for human consumption.  This continuation further strengthens Neptune's patent position in the United States. 

 Neptune recently became the only Krill Oil manufacturer to be certified "Friend of the Sea."  This allows Neptune to use the FOS label on all of their packaging. 

Dr. Harlan Waksal, Executive Vice-President, Business & Scientific Operations of Acasti Pharma Inc. was appointed to the Neptune's Board of Director.  Dr. Harlan Waksal is a retired physician, founder of Imclone System Inc. in which he has been involved as the President, Chief Executive Officer, Chief Operating Officer and Executive Vice-President from 1987 to 2003. Imclone System has developed and obtained approval for a new targeted biologic cancer therapy known as Erbitux and was later acquired by Eli Lily for $6.5 B US in October 2008. Dr. Harlan Waksal currently seats on the Board of Directors of Oberlin College and Senesco Technologies, is the author of over 50 scientific publications and has been the author of multiple patents and patents applications. Furthermore, Dr. Waksal is currently the Executive Vice-President, Business & Scientific Operations of Acasti Pharma Inc, Neptune's subsidiary.

Neptune is currently trading around $3.60.  With all these positive developments, it is easy to understand why Rodman Renshaw rates the Company with a Market Outperform and a $7 price target and Roth Capital Partners rates the Company a Buy with a $9 price target.  The Krill Oil market segment is growing double digits and Neptune's capacity is scheduled to increase over 200% in the next 18 to 24 months, Neptune's revenue growth seems poised to take off.  Neptune's management has positioned the Company for significant success along many fronts.  Investors are beginning to see the benefits of Krill Oil as an investment and as a supplement to their individual health.  With more positive news on the way for Neptune, now is the time to consider all the benefits of this company and its products.

After watching Amarin Corporation's (Nasdaq:AMRN) stock run as their company focused on improving the treatment of cardiovascular disease last year, we are convinced that Neptune shows significant scientific and fundamental evidence to support the idea that their own firm is poised to continue to penetrate and impact several substantial billion dollar+ markets and return huge gains for early investors over both the short and long term. The risk profile here is far lower than most of the ones we see in biotechnology and the upside potantial is tremendous. When one considers the still discounted market cap for the company, the investment looks even more attractive.

Disclosure: None

[Author Michael Morhamus is also a contributor at Seeking Alpha. His firm provides investment products and solutions for institutions and individual investors. He pays particular attention to small and mid-cap companies in emerging markets.]

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