Hofseth Biocare sees “accelerating sales mix” in Q1 despite COVID-19 disruptions

18 May 2020 --- Norwegian biotech company Hofseth Biocare (HBC) has published its Q1 financial results. In collaboration with its distributor Prinova Europe, the company anticipates profitability this year, with its first US orders booked. Moreover, the company is investing in its long-term R&D with several initiated, ongoing and approved research projects. Continuing its conversation from last week, the company tells NutritionInsight that it considers its first quarter results as positive and improve the company’s position to deliver environmentally sustainable marine ingredients.

“The Q1 numbers show an accelerating sales mix into higher-margin products, which therefore translates into improved gross margin. Sales are growing year-on-year on an underlying basis. That was despite the annual maintenance shutdown down for two weeks that occurred early January this year. Nonetheless, current revenues and growth do not yet show the company’s full potential,” James Berger, Head of Investor Relations & Strategy Hofseth BioCare, tells NutritionInsight.

“Sales for the first quarter of 2019 included approximately NOK 5 million (US$494,000) in revenues from rental income at Berkåk, which is no longer present in 2020. If you strip that out from the 2019 results and try and compare apples with apples as it were, we have NOK 10 million (US$987,000) of revenues in Q1 2020 compared with NOK 9 million (US$889,000) of revenue in Q1 2019,” he notes.

In Q1, HBC focused largely on using OmeGo in the treatment of steroid-resistant asthma, states the report.The company reports operating revenue of NOK 18,5 million (US$1.8 million), despite cash and cash equivalents decreasing by NOK 27.1 million (US$2.7 million) and net financial items reached a negative NOK 1.9 million (US$188,000).

Berger further notes that manufacturing production volumes have accelerated dramatically, exiting out of the quarter. “So much so that we are already annualizing our medium-term targets for processing 20,000 metric tons of raw material but as early as in Q2.” 

Collaboration provides “optimistic outlook”
In March, HBC signed a distribution contract with Prinova Europe. The agreement is a European exclusive distribution contract for branded marine products. The management of Prinova Europe point to an optimistic outlook for product demand for the rest of the year, considering the category shows resilience in the face of a pandemic and economic malaise. 

“The unique selling points and health benefits of our portfolio of products are going down well with prospective clients that are looking for something new from sustainable, functional foods and supplements,” Berger affirms.

HBC further identifies collaboration with its distributors as key to success. “We need to see a progression from Prinova to see profits. A [distribution] contract [with Nestlé-owned] Garden of Life is still very much part of our base case scenario. We expect further news flow here in the short term and it will not take much to see the business become profitable – potentially this year. Direct finished product sales are also accelerating at a fast pace right now,” he maintains.

Despite COVID-19 disruptions to various trade events originally planned for April and May, the partnership is still on plan to prepare the way for broad distribution of all products into the European market immediately. Moreover, the company states its first purchase orders have already been made and sooner than expected. Berger also notes that the demand for fish has resulted in more fish waste for HBC to process and upcycle for its products. 

HBC further identifies collaboration with its distributors as key to success.Post-period highlights
Hofseth’s spotlighted R&D endeavors include its ongoing trials in iron deficiency anemia treatment; hair, nail and skin health treatment; healthy weight loss; as well as gastrointestinal health for its salmon protein hydrolysate (SPH) ProGo and CollaGo. The company has also initiated research projects in its acne treatment and asthma co-treatment with its salmon oil OmeGo. The latter is additionally being tested for its potential in an improved age-related eye disease study (AREDS) formulation for age-related macular degeneration (AMD) treatment in an approved study.

In May, HBC made an agreement to initiate its research collaboration with the Stanford University School of Medicine on a multi-year pre-clinical and clinical program towards a necrotizing enterocolitis and inflammatory bowel disease label claim for SPH.

This month, HBC Berkåk also received Orthodox Union (OU) kosher approval. Brilliant Salmon Oil brand was launched in the US and contracts with new US distributors are signed for delivery from the end of May. “The Brilliant Salmon oil launch in the US and the ongoing success and growth of that finished product in China also gives us cause for optimism,” adds Berger.

“The R&D announcements should open the door to new investors who are beginning to see the biotech and ultimate pharmaceutical and medical nutrition end uses in the not too distant future,” Berger concludes. 

By Anni Schleicher, with additional reporting from Katherine Durrell