The Banglaore-based Evolva Biotech announced the acquisition of Fluxome’s resveratrol programme, consolidating its strengths in yeast fermentation technologies and capabilities.
Panchapagesa Muthuswamy Murali, CEO Evolva Biotech echoes Neil Goldsmith, CEO of Evolva who said, “We see this as a highly attractive asset acquisition on terms that work well for Evolva shareholders. Resveratrol is an on-market functional ingredient that perfectly fits our focus area of health, nutrition and wellness. It has particular benefits in areas such as vascular inflammation, an area of great interest to many companies and one we understand well given our knowledge from EV-077. Like our current product portfolio, resveratrol is produced by fermentation in yeast, and there are many technical similarities to our successful vanillin programme. This added product significantly advances Evolva’s portfolio and we expect significant operational and technical synergies from this transaction.”
In late August 2012, Evolva announced its plan to raise CHF 10 – 20 million in new equity. The company, and its financial advisors, are in active discussions with potential investors regarding financing and expect to complete the transaction in the first quarter of 2013. They have received a non-binding investor commitment to fund the resveratrol activities for the next 18 months.
Applying IFRS standards, revenues in 2012 are expected to reach c. CHF 7 million, slightly lower than the earlier indicated range of CHF 8-10 million in 2012 (2011: CHF 11 million). Based on current partnering discussions, the company expects revenues in 2013 to increase significantly relative to 2012.
The company maintains their expectation of a net loss for 2012 at the same level as in 2011 (CHF 22.9 million) and a net cash outflow for 2012 of approximately CHF 13 million (2011: CHF 17.5 million). This includes the impact of the resveratrol acquisition. Based on the current cash position and the above projections, Evolva expects to be financed through year-end 2013 without further financing.
Resveratrol is a naturally occurring potent antioxidant produced by grapes, associated with some of the documented health benefits of red wine. It has been shown to have beneficial effects against several health conditions related to ageing. As an on-market high value ingredient made by yeast fermentation, the product is expected to make a positive contribution to Evolva’s cash flow starting 2014.
According to a 2012 Frost & Sullivan report, sales of resveratrol at an ingredient level (for all applications) were around $ 50 million in 2011, with double digit growth rates expected. Low purity Japanese Knotweed extracts, primarily from China, dominate the market. One company markets a synthetic product.
Fluxome’s resveratrol is a 98 per cent pure, natural trans-resveratrol. It is contaminant-free and has no noticeable taste, colour or odour. It is used in a variety of dietary supplement products as well as in chewing gums, beverages and anti-ageing moisturising creams. It has self-affirmed GRAS (Generally Regarded As Safe) status in the USA and is European Novel Foods approved. However, due to high production costs and selling price, market uptake was slower than anticipated, ultimately bringing Fluxome in a distressed financial position.
Evolva has agreed to acquire all of Fluxome’s scientific and technical assets related to resveratrol and hire a small number of its employees, integrating the programme into Evolva’s Danish operations. Evolva will not take over Fluxome’s US sales and marketing organisation but will instead focus on working with distributors and major consumer goods companies to drive sales of the product, including in Asia. The transaction does not include Fluxome’s poly-unsaturated fatty acid programme. Evolva expects to leverage its own technologies to reduce manufacturing costs and further enhance the competitive advantages of Fluxome’s resveratrol.
As payment for the assets, Evolva will make an upfront payment of CHF 0.25 million in cash and provide 1.077 million Evolva shares (0.6 per cent of currently issued capital). It will also pay up to CHF 0.8 million in cash and/or shares over the next 12 months; as well as pay a single digit percentage royalty on resveratrol sales until cumulative resveratrol sales by Evolva reach c. CHF 65 million -after which point, no more royalties will be due.
Copenhagen Life Science Advisors assisted in the preparation and execution of the transaction between Fluxome and Evolva.
This acquisition includes a non-binding investor commitment to fund resveratrol activities for next 18 months. The transaction also supports a financing round -expected to complete Q1 2013. Evolva will also streamline it portfolio, with an internal focus on vanilla/ resveratrol and stevia/ saffron pathways.
Fluxome Science A/S (Fluxome) is a private Danish company established in 2002 based on the work of Professor Jens Nielsen, a world renowned pioneer of metabolic engineering. Fluxome has been developing nutritional ingredients, notably resveratrol and certain poly-unsaturated fatty acids, using metabolic engineering and yeast fermentation methods which are synergistic to the Evolva platform.
Evolva’s mission is to discover and provide innovative, sustainable ingredients for health, nutrition and wellness. Evolva uses biosynthetic and evolutionary technologies to create and optimise small molecule compounds and their production routes.
EP News Bureau