highlight
Message to ShareholdersDuring the last fiscal year ended on February 28, 2011 and since the beginning of this fiscal year, several components of the Company’s Action Plan were established as a result of the overall Neptune strategy and its subsidiaries. The prime objective of the management team is to contribute to the gradual and optimal value of the Company in order to create wealth and to meet its shareholder’ needs. The management intends to meet this objective in minimizing risks while acting socially responsible, and being concerned about the environment.Actions completed during this period led the Company to:
During the fiscal year 2010-2011, despite the devaluation of the US currency, which is the currency used for the majority of its commercial activities, and despite an increased presence of the competition, the Company’s revenues rose by more than 31.8 % to exceed $16.7M Cdn. The nutraceutical sales which represent most of the Company’s revenues generated a net income of more than $2.1M and EBITDA (earnings before interest, taxes, depreciation and amortization) of $2.9M. The Company achieved a consolidated net income of $0.5M, compared to a consolidated net loss of $1.5M in the last fiscal year. During the last fiscal year, following various financing and options exercise 4,256,129 new shares from treasury were issued for a total proceed of $4,649,000. On February 28, 2011, the number of shares issued and outstanding amounted to 42,490,874. At the date hereof, the Company’s number of shares outstanding are at 48,276 million following the closing on April 25, 2011 of a new financing, amounting close to $12,500,000M CDN. On February 28, 2011, the consolidated balance sheet of Neptune had a working capital of close to $10M. On May 2, 2011, it amounts to more than $20M resulting from the recent financing and the current operation. These amounts are sufficient for further expected developments during the current fiscal year as well as carrying out the current business plan of the Company and its subsidiaries. Acasti Pharma, a subsidiary of Neptune, has also benefited from new financing during the last fiscal year. With warrants exercise and partial conversion of the debenture into shares, this subsidiary collected more than $4.3M for its marketing and R & D activities. Nearly $3.4M from these funds came from the parent company Neptune. On March 31, 2011, Acasti proceeded with the listing of its common shares on the TSX Venture Exchange under the symbol APO. The Company has more than 64 million outstanding common shares from which Neptune and its executives hold more than 40 million. Acasti Pharma is presently preparing a rights offering for all its shareholders including Neptune. Neptune’s shareholders should also benefit from this offering through their holding in Neptune. This offer will allow the rights holder to buy a share in Acasti Pharma, which financing could potentially reach more than $5,7M for a maximum dilution of 15%. The market capitalization of the Company Neptune was at $79,145,920 on February 28 which represented $2.07/share, it has now raised to $102,403,004 on February 28, 2011, which represents $2.41/share. The increase in the Company’s value represents a growth of 29.38% since last year. Organization The Company now operates the five following hierarchical levels: employees, managers, the vice-presidents, the CSO, COO, CFO as well as the president and Chief Executive Manager (CEO). Although most of the positions have been filled, Neptune is currently discussing with potential candidates for some remaining vacant position. To face the numerous objectives and challenges in its business plan, starting with Acasti Pharma’s listing on the TSX-V; with the new production plant project, new developed products, products in development, in validation, in marketing as well as in the geographical expansion on markets, the Company relies on a larger team. During the last year, Neptune revised its organizational structure to adapt it to its needs. Yet, the Company has more than 80 employees of whom more than twenty are Ph. D., M.D. M.Sc, MBA, engineer, C.A. and CFA. Production During the last fiscal year, Neptune constantly improved its platform of production joining various processes and high technologies. The team’s innovative capacity supported by targeted external resources, allowed the Company to pursue the improvement in productivity. This more efficient productivity is not only due to a higher level of the production, quality, reliability, reduce costs, further to its increase capacity during the previous year, but also to the conception and creation of technological, validated and successful innovations. These last ones will have a leverage effect and will serve more as a stepping stone to increase the production capacity on which the Company works; it is planned to be completed during this year. During the next two years, the Company gradually plans to triple its production capacity without slowing down or affecting its current level. Although the Company has various options of localization for this project, it focused on the increase of its existing factory capacity since it will be accomplished in a very short term. Neptune benefits from the funding needed to increase its current factory capacity, which in this context it remains the best decision on both timing and implementation, considering the continuously greater demands. In light of an increasing worldwide demand of its products from both consumers and distributors, the management is pursuing other steps and negotiations to conclude an agreement on the construction of a factory abroad in association with governmental authorities and from multinational industrial partners. The management aims at finalizing the negotiations and presenting its recommendations to the Board during the fiscal year, as the agreements are required in order to begin in the short term the realization of this expansion project, which will allow the Company to develop and to ensure better market requirements. Clinical studies, products and allegations Neptune has always maintained a competitive position. It continues to do so by supporting the development of its strategic assets, which also consist of innovation and intellectual property. So far, it has the clinical results “see section Company Profile in the annual report” it needs that show the unrivalled efficiency of its products and particularly of its lead product, NKO® belonging to the Neptune Krill Oil family which is clinically proven powerful to improve cardiovascular, neurological and inflammatory diseases including arthritis and premenstrual syndrome. These clinical results have important implications since many regulatory organisms such as Health Canada, US-FDA and EFSA in Europe, influence not only the maximum daily intake allowed in nutritional supplements and functional foods but also the clinical evidence required in order for health claims to be used for the promotion of the benefits and health specific advantages of nutraceuticals to targeted consumers. Hence, Neptune continues to develop its clinical knowledge. Recent clinical research revealed that Neptune’s omega-3 phospholipids generated a higher absorption level (bioavailability) compared to all other omega-3 preparations already on the nutraceutical and pharmaceutical markets. These clinical results further confirm the superiority of Neptune’s omega-3 phospholipids. Neptune pursues other targeted clinical studies to show new medical benefits of its products for various medical applications. The Company always gives priority to obtaining regulatory approvals which allows the use of claims that are specific to the Company and are linked to health benefits generated by its products in order to market them more efficiently on the main market. Through its last fiscal year, Neptune obtained the approval from Health Canada allowing the commercialization of Neptune Krill Oil in Canada, which claims are described in the Company Profile. The Company is currently validating other active ingredients extracted from other different marine biomasses other than krill such as new rich marine biomasses rich in phospholipids, omega-3 and/or antioxidants. The current validation should demonstrate, for the new products that have met the stages of extraction and development, potential health benefits from active ingredients for health condition in North American, European and Asian population. Market and Marketing The market for active ingredients stemming from marine biomasses grows systematically and very quickly. As for example, the market of omega-3 in the US only, $1.7 billion of the retail sales in 2010, will amount to more than $3.5 billion in 2015 according to Frost and Sullivan. Krill oil is made of marine phospholipids, omega-3 and antioxidants, in competition within the omega-3 market, although it is growing faster. Krill oil is in the first rank of its category leading in several aspects amongst which for its superior efficiency. Although it is more expensive, krill oil the demand is continuously increasing as the consumer becomes better informed. The consumer is becoming more selective and more demanding and will non privilege the best omega-3 product, for his health by choosing krill oil among all krill oil, Neptune Krill Oil “EKO™” and “NKO®”. The Company benefits, as to date, from the regulatory approvals presented in the section “Profile of the Company" within the annual report. This allows the Company to market the products within the following countries and continents: Canada, United States, Australia, Europe and some Asian countries. During the last fiscal year, Neptune increased its efforts to penetrate within already exploited markets in North America, Europe, Asia and Oceania as well as to geographically expand within new markets on a worldwide scale, as in South America, in Mexico, in Africa and in India. The Company capitalizes on a successful entrance within different commercial networks on the market in the United States, in Europe and Oceania. These breakthroughs have been realized under several different brands. Neptune products NKO® and EKO™ are offered on these markets by the biggest retailers via important distributors who make the promotion and the sale under their respective trademark. For those who choose to sell Neptune Krill Oil, NKO® must sign a distribution agreement and the NKO® logo and trademark must necessarily appear on each product label. This requirement of Neptune does not however apply for the distributors who choose Neptune krill oil, EKO™. Furthermore, no distribution contract is required with the distributor who wishes to distribute EKO™. At the end of the previous fiscal year, Neptune also introduced to the United States, in association with Bayer Healthcare LLC, its product NKO® under the brand "Arctic Wonder". The initial launch in the direct sales network was intended to be more an exploratory market test. The recent launch of Arctic Wonder, further to the positive results obtained during the last year, illustrates the commitment of Bayer in the marketing of Neptune Krill Oil - NKO® under the trademark "Arctic Wonder". At the end of the year 2010, Neptune accentuated the penetration of the market in South America and Asia including India, following the commitment of representatives in these continents. Neptune multiplied its efforts to finalize, through its representatives, strategic partnerships for a better penetration on these new geographical markets. Various agreements are under negotiation and Neptune is actually supporting many demands for regulatory approvals in some of these countries in these new continents. Finally, the Company plans a steady growth of its income by a strong expansion of its activities on the Asian market. Intellectual Property The Company will systematically pursue its efforts to expand its intellectual property and will take the necessary measures to protect and defend its rights. In line with this, additional legal actions are imperative considering the emergence of other companies in the same market that do not respect and openly infringe Neptune’s rights and patented intellectual property. Neptune took actions against certain companies she accuses of infringement and on which she has compelling evidence. Neptune intends to maintain a policy of intolerance against companies that do not respect its rights and/or patents, and will take new actions in order to maintain the respect. Environment The Company will continue to invest more in environmental protection and preservation of a healthy planet. For this purpose, she is dedicated to be fully involved in maintaining the planet’s ecological balance and the sustainability of resources and biomasses to be exploited while having a follow-up of the traceability from the biomass exploited up to the finished product. The Company is also raising employees and partners’ awareness to the importance to this crucial concern for the survival of the exploited species. Neptune dedicates financial and human resources in order to collaborate with various organizations specialized in marine biomasses. Therefore, the Company shares with specialists in this field scientific evidence that she considers in its active research. Regarding the exploitation of krill, the main marine biomass currently exploited by Neptune, the Company hardly uses a thousandth of 1%, and all this for the benefit of human health. Subsidiaries In 2008, Neptune opted to develop the pharmaceutical market through subsidiaries: Acasti Pharma Inc and NeuroBiopharm. During the last fiscal year, these subsidiaries pursued the implementation of their strategic plan. Acasti Pharma Inc. Recently listed on the TSX Venture under the symbol APO, Acasti is actually negotiating strategic partnerships for the exploitation of its platform Vectos over-the-counter markets. The Company introduced the marketing of a new product, Onemia™, as a medical food. Furthermore, Acasti is carrying out, with her product, , Capre™ – the prescription candidate – a Phase II clinical study which she’s expecting to receive a non-objection to the Clinical Trial Application (CTA) from Health Canada soon. Acasti already has study results showing the superiority of its products Capre™ and Onemia™, against certain products which are being validated by companies in the cardiovascular field and also against omega-3 products recognized for the improvement of the cardiovascular health and currently available under prescription on the market. NeuroBioPharm Inc. NeuroBioPharm exploit pharmaceutical neurological applications. Its business plan is comparable to Acasti. It currently participates, in association with a multinational partner, in a clinical study to show the health benefits of its product used as medical food (MF). This subsidiary has, in the course of the financial year, not only developed new products and validated their safety, but also pursued the demonstration of their effectiveness. Its various neurological applications concerned products in the over-the-counter segment, medical food (MF) and drug prescription (Rx) on the pharmaceutical market. On February 28, 2011, NeuroBioPharm also proceeded to the reorganization of the share capital and the evaluation of the Company’s value. On April 12 2011, NeuroBioPharm proceeded to a 2 on 1 consolidation in order to have a rolling capital on its Class A shares. In May 2011, Neptune should deposit a prospectus qualifying NeuroBioPharm shares to declare a dividend per share. Nutrigenomics Since its creation, Neptune contributes directly and/or indirectly to the development of the nutrigenomic field. Neptune will contribute to the progress of nutrigenomic field, which evolved drastically in the last decade. Indeed, we understand more and more how nutrition affects health at the molecular level through its influence on genetic expression and/or structure. In conclusion, we would like to thank most sincerely our colleagues in Neptune and those in our subsidiaries Acasti Pharma and NeuroBioPharm for their support as well as the members of the scientific council for their invaluable advice and direction. Furthermore, we are taking this opportunity to thank our customers for their loyalty, our employees and the management team for their dedication and strong performance in 2010. Also, we would like to thank the Board of directors for their advice. At last, we are thanking you, dear shareholders, for your long-standing confidence.
|
