Speaking in a conference call with investors last night, Neptune chief executive Henri Harland said senior executives at the firm are heading to China next month to finalize the details with new joint venture partner Shanghai KaiChuang Deep Sea Fisheries Co (SKFC).
Several locations in Shanghai are being scrutinized
Under a deal announced last September to create a 50:50 joint venture (JV) between Neptune and SKFC called Neptune-SKFC Biotechnology, SKFC will supply all the raw material and Neptune will provide a license to the JV giving it the rights to use Neptune’s production technology in return for an upfront payment plus ongoing royalty payments.
Publicly listed SKFC, which is 43% owned by a government-owned fishing conglomerate, has a large fleet of vessels for krill harvesting in the Antarctic Ocean, which will secure supply to Neptune-SKFC Biotechnology as well as Neptune, said Harland.
“The definititive site of the facility has not yet determined. We’re looking at several locations in Shanghai and expect to begin seeing revenues in 2014.”
Functional food, Nestle and Yoplait
While it had been a long time since Neptune announced partnerships to explore krill oil-based functional foods with Nestle and Yoplait, Neptune was unable to provide much detail on their progress for confidentiality reasons, said Harland.
However, research projects with both partners were now complete, he said. “Even though we have interesting and positive achievements, we foresee we will have to conduct another clinical study to meet Yoplait’s requirements because a technical mistake was made during the recruitment stage of the clinical study. However, we remain confident about the efficacy of Neptune krill oil (NKO) and yogurt with NKO inside.
"We’re currently in communication with Yoplait to define the next stage of our relationship.”
Patent protection
As for patents, Harland said he was confident that all claims in a recently-issued US patent (8,030,348) being re-examined following a request by rival Aker BioMarine would be upheld.
He also stressed that it remained “valid and enforceable” during the re-examination process, which could take two to three years.
He added: “Neptune’s competitors will end up paying Neptune to get the right to sell krill oil in the US market… They will have to negotiate rights and royalties to sell krill oil in the US market. We will be open to do so [negotiate such licensing deals with rivals] if we cannot produce it.”
Asked whether a related patent declared invalid in Europe (a judgment Neptune has appealed) had any impact on the re-examination of the US patent #8,030,348, he said: “No, it’s a different patent. They are both about marine phospholipids but the claims are written differently.”
Production capacity increase
Finally, expansion projects at its facility in Sherbrooke, Québec that will see production grow from 150,000kg/year today to almost 500,000kg in 2014 would also improve productivity and help the firm protect margins while remaining price competitive, he said.
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