9 August 2018 – Evolva (SIX: EVE) posted its financial results today and provided business highlights for the period from 1 January to 30 June 2018.
- Product sales doubled, reaching CHF 1.8 million in the first half of 2018
- Expanding product range and geographical presence to accelerate growth
- US EPA registration for pest control applications for public health and personal care products remains on track
- Active discussions with leading pest control product companies
- Introduction of new cold-water dispersible resveratrol powder
- R&D partner projects reduced in line with strategy towards fully funded projects
- Total revenues CHF 3.8 million in the first half of 2018, up 6% on last year
- First commercial shipments of EverSweetTM sweetener have been made by Cargill
- Restructuring on track, fully implemented by year-end
- The net loss narrowed to CHF 14.7 million (first half 2017 loss CHF 20.3 million)
CEO Oliver Walker said, “It is great to see Evolva’s transformation is delivering results. The increased focus on commercialization is visible in the doubling of our product revenues in the first half of the year. In this phase of Evolva’s development, we are now focused on accelerating our activities to further build Evolva into a customer-focused business. This is an important step in becoming a viable company with a predictable performance.”
COO Scott Fabro added “Evolva’s product sales are on track to our plan and we look forward to a continued growth trend throughout 2018 and well into the future. We are excited that the first orders of the EverSweetTM sweetener have been shipped and look forward to an acceleration in 2019.”
The PowerPoint presentation and accounts are available on Evolva’s website. Analyst/media call details on page 5.
Nootkatone and valencene in Flavors and Fragrances
Sales of our specialty ingredients into the growing Flavor & Fragrance market are progressing well. Growth is coming from key global customers and from the very large and diverse range of smaller customers via our network of distributors. In the first half of the year, we have expanded our presence into Latin America and Asia.
Evolva has recently expanded its range of Flavor & Fragrance products. We expect this to yield additional growth in the coming quarters.
Nootkatone in pest control
The pest control market represents an additional and substantially larger commercial opportunity for nootkatone. We have been working in close collaboration with the US Centers for Disease Control and Prevention (CDC) on the use of nootkatone against a variety of biting insects. Our objective is that nootkatone can one day be used for the benefit of global public health against a broad range of biting pests in humans and animals, such as the Ixodes tick which transmits the bacterium that causes Lyme disease and mosquitoes that can carry diseases like Zika.
We have filed with the US Environmental Protection Agency for registration and the process remains on track. The commercialization process in this new field of application has started and we are in active discussions with leading companies in the pest control industry.
Resveratrol continues its solid growth trend in 2018. As envisioned in February 2017 when we launched our new brand, Veri-te™ Resveratrol, we have seen a number of jointly branded products launched both in Europe and the US.
In April this year we launched Veri-te™ Resveratrol CWD90, a cold-water dispersible resveratrol powder. This innovative application represents a first in the resveratrol market, and will open up aqueous product development with resveratrol for our customers. Initial interest from customers in this new application has been very positive, and we expect a solid growth in sales over the next several years.
Cargill commercially produces the EverSweetTM sweetener, has started shipping the first customer orders, and is building up inventory. A recent element in their marketing push was the attendance to the Institute of Food Technology Food Expo conference in Chicago (USA) in July. Conversations with conference attendees confirm interest among consumer goods companies.
Update on restructuring
In August 2017, we announced a fundamental transformation plan which included a strategic focusing on our core products, the centralization of Research & Development (R&D) in Switzerland and a substantial headcount reduction across all functions. The major parts of the transformation are completed, full implementation to be expected by year-end. Evolva now enters the next phase of its development with a strong focus on commercial and operational activities.
In line with our objectives, Evolva’s operating expenses decreased by 25% to CHF 16.7 million.
Profit & loss
In line with our full-year guidance, product revenues doubled to CHF 1.8 million in the first half of 2018. Both resveratrol and nootkatone maintained their strong growth momentum.
Revenues from R&D partner projects declined versus the first six months of 2017, in line with our strategy towards fully funded projects. A major part of revenues from R&D is derived from activities funded by US CDC/BARDA around the insect control application of our nootkatone product.
Manufacturing expenses rose, reflecting the increase in sales volume of resveratrol and nootkatone, but at a lower rate than corresponding product sales.
R&D expenses amounted to CHF 9.7 million in the first half of 2018, down 28% on last year, reflecting the impact of the restructuring described above.
Commercial, General and Administrative expenses decreased by 21%. Increasing commercial activities were more than offset by the cost-savings in general and administrative expenses generated in the restructuring.
Within the item “Financial items and tax” the net impact of currencies swung from a negative CHF 1.6 million, to a small positive of CHF 0.1 million. This was related to the strengthening of the US Dollar over the last six months. On the other hand, tax income declined from CHF 2.3 million last year to CHF 1.1 million in the first half of 2018 as a result of the decreased tax rates in the US and their impact on Evolva’s deferred tax position.
Balance sheet and cash flow
The main movements in the balance sheet were related to our stevia project. After the conclusion of the new agreement with Cargill, our future income from the EverSweetTM product will have the character of a royalty stream. The new agreement limits our obligations to Cargill to CHF 17.2 million, which is reflected as an investment under intangible assets. Of the total, CHF 6.8 million was settled in the first half year 2018. The remaining obligation is reported as a short-term liability and due within the next 12 months. In addition, Evolva has recognized CHF 1.2 million development costs related to work on the EverSweetTM sweetener.
Our nootkatone and resveratrol products are maintaining their growth momentum. Given the increasing number of product applications, geographical market approvals and commercial initiatives, we expect our product revenues to continue its current growth trend. In addition, we expect to see first royalty income from EverSweetTM product sales, albeit modest, in 2018. Revenues from non-core R&D partner projects will continue declining in 2018, in line with our strategy of focusing on internal projects.
The cost savings we implemented since August 2017 are clearly becoming visible in the financial result. Overall, we expect to reduce the loss in 2018 following the full implementation of the restructuring.
The pest control market represents an additional commercial opportunity for our nootkatone product (particularly against ticks and mosquitoes). We have filed with the US Environmental Protection Agency for registration and the process remains on track.
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Press/analyst call at 10AM CET on 9 August 2018
Oliver Walker (CEO) and Scott Fabro (COO) will present the results in a call for media and analysts.
Switzerland / Europe: +41 (0) 58 310 50 00
United Kingdom: +44 (0) 207 107 0613
United States: +1 (1) 631 570 56 13
The Powerpoint presentation and the condensed consolidated interim financial statements are available on Evolva’s website. A replay will be available as a podcast for 2 weeks after the call. The link to the podcast will be posted on Evolva’s website.