I am very pleased to have this opportunity to report on the key events and milestones that characterized Neptune’s 2012 fiscal year, and to provide an overview of our central objectives in fiscal 2013. By any measure, in fiscal 2012 we made very substantial progress in virtually all aspects of our business and significantly improved our international profile and market positioning in the very competitive and dynamic nutraceutical and pharmaceutical industries. Additionally, our two subsidiaries, Acasti Pharma Inc., which is focused on cardiometabolic health, and NeuroBioPharm Inc., which researches and develops proprietary active pharmaceutical ingredients for cognitive and neurological conditions, both made substantial progress during the year. The various initiatives we have been pursuing are helping to fortify the fundamental strength of the company’s structure and strategic vision. We are building a business that enables us to have significant control over the processes and procedures—from sourcing, research and product development to clinical studies, patent protection and manufacturing—that more efficiently generate our products and formulations. This extensive vertical integration sets us apart from many of our competitors in the industry.
The recovery of the global economy continued to struggle over the past year, and the U.S. dollar—which is the currency we use for most of our commercial activities—lost ground against its Canadian counterpart. Despite these factors, Neptune’s financial results were the best in its history. For the year ended February 29, 2012, revenues reached $19.1 million, up from $16.6 million in the previous year. Our nutraceutical sales represent our main revenues, generating income of $2.4 million, compared to $1 million in the previous year. Nutraceutical EBITDA reached $2.7 million compared to $2.8 million achieved in the previous year. Neptune’s consolidated net income was $4.6 million, compared to $1.7 million in the previous year. On February 29, 2012, Neptune had working capital of $24 million.
Other financial milestones achieved during the year included an oversubscribed private placement financing, which provided total gross proceeds of approximately $12.4 million. Our subsidiary, Acasti Pharma Inc., also had an oversubscribed rights offering that generated gross proceeds of approximately $8.1 million. Neptune subscribed to Acasti’s rights offering by subscribing to approximately 2 million shares, investing close to $2.5 million in the company.
Finally, in February 2012, Neptune acquired 750,000 newly issued Class “A” common shares in Acasti as part of a private placement that raised approximately $2 million. Neptune continues to maintain majority ownership in Acasti.
Neptune advanced its corporate objectives on a number of fronts over the past year. First, we raised our corporate profile and improved our share liquidity by having our common shares approved for listing on the TSX. Neptune also trades in the United States on the NASDAQ.
Additionally, Acasti was granted permission to begin trading its shares on the TSX Venture Exchange.
We also brought additional expertise and managerial acumen to our executive team by engaging Michel Chartrand as our Chief Operating Officer. Mr. Chartrand has extensive experience in operations management, business development and strategic alliances, and integration. Our subsidiary, Acasti, also strengthened its management structure by welcoming Dr. Harlan Waksal as Executive Vice-President, Business and Scientific Affairs. During the current year we will continue to add to the strength our executive team.
A third very important initiative was the inauguration of Phase I of our expansion project for our production facility in Sherbrooke, Quebec. The plant will undergo a 40,000 square-foot expansion in two phases; when both phases are completed, the facility will be able to produce up to 500,000 kg of Neptune krill Oil™ products per year. The project will also allow us to introduce new process improvements, which will streamline and enhance our manufacturing and ensure we remain competitive.
Finally, Neptune and its krill products successfully completed a comprehensive environmental review conducted by NSF International, a not-for-profit organization that certifies products and claims for food, water and consumer goods. It remains our priority to adhere to the highest standards for traceability of the biomass we exploit and for protecting the marine environment.
Increasing Our Market Penetration
Neptune also made inroads into both new and existing markets in the past year by expanding its complement of global strategic partners. Our presence in the Food, Drug, Mass and Club Distribution networks in the U.S. was also greatly strengthened when we finalized agreements with two major distributors to sell NKO® through their networks of national retailers and wholesalers. With these agreements we measurably increased our share of the omega-3 market.
NKO® is gaining momentum as a superior choice among krill oil products, both for its potency and efficacy. We are also positioning our newly introduced Eco Krill Oil (EKO™) as an alternative choice for distributors who seek a price-competitive product without having to compromise on quality. Increased market exposure for Neptune’s krill oil products has heightened consumer awareness about the distinct advantages that both NKO® and EKO™ offer over competing omega-3 products.
We also made significant global inroads by selecting an agent for the Asian and Indian markets. These vast markets hold enormous growth potential; indeed, within the next five years we anticipate that they might represent more than 25% of our total revenues.
Finally, subsequent to our fiscal year-end, we signed a landmark deal with Jamieson Laboratories, the largest manufacturer and distributor of dietary supplements in Canada. With this agreement, Jamieson has begun to commercialize NKO®—as Jamieson Omega-3 Super Krill—in the Food, Drug and Mass Market retail channels across the country. Additionally, we were delighted to sign renowned NFL Hall-of-Fame quarterback John Elway as our official NKO® spokesperson. This exciting partnership will further accelerate our brand penetration throughout North America.
Protecting and Enhancing Our Competitive Advantages
Neptune’s success depends upon its ability to continually innovate in order to develop and produce unique new products that will capture and maintain strong market share; to acquire approvals for those products from the various regulatory bodies around the world; and to protect the intellectual property related to our innovations.
As such, our R&D activities are of primary importance. We are currently engaged in developing our pipeline of omega-3 phospholipid products, which are derived from krill. Among a number of initiatives, in 2011 Acasti began to commercialize Onemia™, a pharmaceutical omega-3 phospholipid concentrate classified as a novel medical food, regulated by the FDA with clinically proven safe and effective ingredients for the management of unmet medical needs associated with chronic cardiometabolic disorders. In 2011, Acasti initiated two Phase II clinical studies with CaPre®, a prescription drug candidate developed for the treatment of hypertriglyceridemia. The first is a double blind placebo controlled and the second is an open-label clinical trial in Canada, both designed to evaluate the safety and efficacy of this omega-3 drug candidate. The potential market for CaPre® is considerable: in the United States alone, the number of people with moderately high to very high levels of triglycerides exceeds 40 million, so this represents a market with a great deal of potential for Acasti.
Conducting or participating in targeted clinical studies also helps us substantiate the claims we submit to various regulatory authorities in North America, Europe and Asia. The regulatory environment in our industry is becoming increasingly stringent. This is essentially a positive development, as it lends credibility to our industry and helps to distinguish our science-based products from placebo formulations.
Protecting our intellectual property is also critical. Neptune is constantly expanding its intellectual property portfolio and in 2011 we were granted two new patents by the U.S. Patent and Trademark Office, bringing the number of patents issued to Neptune worldwide to 80. In addition, we filed two complaints against major competitors in the U.S. for patent infringement.
Neptune’s strategic direction has produced solid results. In the current fiscal year, we will continue to focus on developing innovative products and formulations, adding more expertise to our management team, further improving our manufacturing processes and procedures, building our patent portfolio, and engaging new distribution partners in North America, Europe, Asia and the Middle East.
We anticipate that Phase I of our plant expansion in Sherbrooke will be completed in the fall of this year, and should increase our annual Neptune Krill Oil™ production capacity by more than 150,000 kg. Neptune also expects to conclude a joint venture transaction with a Shanghai-based company that would enable us to further augment our manufacturing capacity.
In the current year, we expect to receive regulatory approvals that will enable Neptune shareholders to receive a dividend in shares of NeuroBioPharm.
Neptune remains committed to supporting the operations of Acasti and NeuroBioPharm as they continue to advance their research and product portfolios towards the commercialization stage, and will continue to seek out strategic partnerships and alliances with key pharmaceutical and nutraceutical companies around the world.
I would like to take this opportunity to thank our employees and management team for their ongoing commitment, and our shareholders for their support. I also wish to thank our Board of Directors for their guidance and the many contributions they have made.
Our success comes as a result of the efforts and support of all our stakeholders. Neptune is proud to be involved in an industry that seeks to ameliorate cardiovascular, inflammatory and neurological conditions and to improve the overall health of the population, and we look forward to growing together in the months and years ahead.