Devgen nv (Euronext Brussels, DEVG) - Business update May 18, 2011
(Thomson Reuters ONE) -
Regulated information
Devgen nv (Euronext Brussels, DEVG) - Business update May 18, 2011
Zwijnaarde, Belgium, 18 May 2011 - Devgen (DEVG; Euronext Brussels) reports
significant progress in each of the key value drivers of its business plan and a
strengthened cash position of Eur 52.9 million[1].
Devgen hybrid rice seed pipeline:
Next Generation Hybrid Rice (NGHR) seeds on track for 2011 expanded testing in
India and the Philippines
One of Devgen's key R&D innovations includes the breeding of a new generation of
hybrid rice for India and Southeast Asia with improved yields, taste, grain
quality and cost of goods (COGS). Devgen started this R&D program in 2005 and
expects NGHR-seeds for market launches from 2013 onwards. Six years into this
program, the company announced positive yield and COGS results on the first
products delivered through this technology. The company is confident in the
potential of Devgen's approach to deliver the Next Generation of Hybrid Rice
(NGHR) to Indian and Southeast Asian rice growers.
Over the next two years the company will continue to test each growing season
hundreds of candidate hybrids in different market segments. Hybrids of superior
yield and quality are then advanced to testing in increasingly larger numbers of
locations, in preparation for market launch.
This process is on track: In Q1 2011, the small scale seed production of
Devgen's research hybrids and candidate product hybrids has been completed
satisfactorily in India and the Philippines. These materials will undergo multi-
location testing in the upcoming July planting in India and in the June planting
in the Philippines. Devgen expects harvests in September 2011 and processed test
results in December.
Progress on product candidates
Devgen is continuously expanding and improving its existing portfolio of hybrid
rice seeds:
- In Q1 2011, one of Devgen's promising hybrids was selected for the second
consecutive year as one of the top 5 yielding hybrids in the "early-medium
maturity" segment of the ICAR[2] government trials in India and is advanced for
its third year of testing. In these trials the India government evaluates
hybrids submitted by companies and research institutions. Hybrids selected in 3
consecutive years may receive the government label of 'notified' hybrid, a
quality label recognized by the growers. Notified hybrids also are eligible for
subsidy in government subsidy programs, an increasing trend in India.
- Another promising pipeline hybrid was nominated in its first year of
government ICAR trials and promoted to the second year of trial.
- Devgen starts selling three new hybrids in 2011 in India: Ganga, a
'notified hybrid' out of Devgen's portfolio, and two other products resulting
from Devgen's R&D.
Biotech traits in rice
In Q1 2011, activities in Devgen's government certified biotech greenhouse
-facility in Hyderabad (India) were further expanded. Devgen scientists
continued to introgress and evaluate different traits in elite germplasm and
started production of biotech hybrid seeds for field trials (targeted as of
2012, subject to regulatory approval). In India, Devgen focuses on insect
resistance and herbicide tolerance.
In Singapore, a new certified biotech greenhouse was commissioned in Q1 2011.
The focus is on candidate trait and event selection for abiotic stress traits.
Market access in India and Southeast Asia
An annually recurring key milestone in Q1-early Q2 is whether Devgen's seed
production in India is on target in terms of quantity, quality and COGS. With
all sorghum and pearl millet, 90% of the sunflower and approximately 80 % of the
rice seed production fields harvested, we are pleased to report that the company
is on target in both volumes and COGS. Hence, the quantities produced should
allow Devgen to realise significant growth in 2011. This assumes normal weather
and market conditions in the course of the sales season.
The main sales season (the Kharif season or summer season) in India for three of
Devgen's crops, rice, sorghum and pearl millet, starts in May and ends in July.
The general outlook for hybrid rice acceptance in India is positive:
- Devgen's four premium products that are in the market today are well
accepted by growers as they have high yield combined with good grain quality.
- In order to promote the use of hybrid rice seeds, the states of Bihar
and Uttar Pradesh in India have expanded in 2011 their hybrid rice subsidy
programs. This is expected to grow the overall hybrid rice seed market but may
put downward pressure on prices of hybrid rice seeds. In this subsidised segment
Devgen is launching its notified hybrid Ganga
The outlook for sorghum, pearl millet and sunflower is as expected.
The Philippines
RH1531, one of Devgen's products grown in India, has performed well in
registration trials in the Philippines in the last 3 seasons. Subject to
positive trial results in the latest dry season, this hybrid may be granted
registration for the country in 2011.
Today Devgen's sales in the Philippines are limited by seed production
capabilities. The company continues to develop an experienced staff and grower
base and subsequently infrastructure and is also working towards supplementing
its volume with hybrid seeds produced in India.
The expected registration in Philippines of RH1531, will give the company more
flexibility to supplement the Philippines with imported seeds from India. In the
coming years Devgen intends to also supplement its seed production of its
Philippine product Masuwerte(®) with seed of this hybrid produced in India.
Devgen and SHS, together with the National Outstanding Farmers Association,
celebrated the positive customer feedback of their hybrid rice DG 1 SHS in
Indonesia
In November 2010, Devgen and PT. Sang Hyang Seri (Persero) (SHS) launched the
rice hybrid DG 1 SHS in key rice growing areas in Aceh, Sumatra, Java and
Sulawesi. An expert team of Devgen product specialists and the SHS marketing
team, who provide training and education to the local farmers, supported this
launch.
The success of the first season was celebrated in a harvest ceremony in Bantul
regency, Java, on April 6(th), 2011. In 2011, Devgen and SHS target to further
increase the supply of Devgen's premium hybrid rice seed to the Indonesian
grower. A team of Devgen Indonesian agronomists was trained in the Philippines
to start pilot seed production in Indonesia in Q2 of registered products as well
as products in registration.
Nematicides
Devgen developed a novel nematicide, an agro-chemical product that protects
crops from damage by parasitic nematodes. Devgen has proven the efficacy and
superior environmental profile of the product in a wide range of edible crops
and situations. This product has been sold since 2009 in Turkey under the
brandname Devguard(®) and since 2010 in the US under the brandname Enclosure(®).
Europe - appointment of distributor and progressing regulatory dossiers
In March, Devgen nv and Cheminova A/S signed an agreement for the distribution
of Devgen's nematicide Devguard(®)( )in Spain, Italy, Greece and Portugal, for
use on vegetable crops cultivated in greenhouses. This is an important market
representing a significant proportion of high value vegetable crops grown in
these countries for both local consumption and export. Few options remain for
the growers to manage plant parasitic nematodes in these crops.
Devgen and Cheminova are actively working together with growers and stakeholders
in Italy, Spain, Portugal and Greece in preparation for market launch of
Devguard(®)( )as soon as necessary approvals are obtained. Last year, upon
Devgen's request, the EU commission added the nematicidal use of the active
ingredient to the Directive 91/414/EC. This was an important milestone to
progress the review of the regulatory dossiers for Devguard(®) which Devgen has
submitted in Spain, Italy and Greece. Initial approvals may hence be expected as
of 2011.
US - Devgen provides another tool with versatile application timings and options
for use within an integrated nematode management plan.
In Q1, Devgen started its second sales season for Enclosure(®) in the US with an
extended label, allowing greater flexibility in application timing for managing
nematodes. It also allows a more flexible use in combination with other
nematode-controlling agents.
South-Africa - In anticipation of regulatory evaluation, Devgen continues to
create awareness in South-Africa of its development in the field of nematicides.
At the 20(th) symposium of the Nematological Society of South Africa (NSSA) on
16-18(th )May, Devgen presented an update on recent efficacy and safety data
obtained and validation in the market.
Financial update for the first quarter 2011
Cash position strengthened with ? 26.8 million
- On March 30th, Devgen raised ? 26.8 million through a private placement.
Cash including restricted cash amounted to ? 26.1 million at the end of the
first quarter. Taking into account the proceeds of the private placement, cash
at the beginning of the second quarter (April 4(th)) amounted to ? 52.9 million,
up from ? 28.8 million at the start of the year. Cash restricted in its use,
included in the above numbers remains at ? 5.9 million of which ? 3.7 million is
available through an overdraft facility in India for financing working capital
requirements. The current cash position places Devgen in an excellent position
to grow its seeds and crop technology business in line with its business plan.
This includes accelerating the growth of its premium hybrid rice seed business
in the Indian subcontinent and South-East Asia and investment in its "Next
Generation Hybrid Rice" (NGHR) and biotech trait technology platforms to develop
increasingly more producible, high yielding and abiotic stress tolerant hybrid
rice seeds.
Key financials
- Revenues for the first quarter amount to ? 3,791 ('000) compared to ?
3,032 ('000) over the same period last year. Revenue from research collaboration
agreements was complemented with revenue from seed sales during the early season
(mainly sorghum). The principal sales season starts in May-June in time for
start of the planting season. The nematicide sales season similarly starts in
spring.
- EBITDA at the end of the first quarter comes at ? -711 ('000) compared
to ? -591 ('000) at the end of the same period last year. Higher revenues and
subsequently higher gross profit were offset by higher G&A expenses due to
increased presence in new geographies, with sales and marketing expenses and R&D
expenses at the same level as last year.
- Net loss for the period amounts to ? -1,416 ('000) compared to ? -
1,168 ('000) at the end of Q1 2010. Net loss was negatively impacted by foreign
exchange loss resulting from the fluctuation of the EUR/USD and SGD/INR
conversion rates.
- Devgen confirms the guidance given in March 2011 and continues to expect
significant top line growth for its seed business.
About Devgen nv
Devgen's mission is to deliver the next green revolution in rice to growers that
cultivate 60m ha rice in India and S.E. Asia.
Devgen uses advanced biotechnology and molecular breeding technology to develop
the Next Generation Hybrid Rice (NGHR) and crop protection solutions with a
superior environmental profile:
- Devgen developed the next generation of hybrid rice, improving yield,
seed productivity, grain quality, and tolerance to biotic and abiotic stress
factors. Devgen strongly believes that this hybrid rice technology has the
potential to drive the accelerated conversion of varietal rice to hybrid rice.
- Anticipating the need to increase insect resistance and drought/heat
tolerance in rice to a level that is beyond what can be achieved with classical
breeding, Devgen created a portfolio of biotech traits using own technology as
well as in-licensed technologies.
- Devgen established an integrated seed business in India and Southeast
Asia through which its rice crops and technologies reach the market.
- In India, Devgen complemented its hybrid rice business with geographically
and seasonally complementary crops: hybrid sorghum, pearl millet and sunflower.
- In its Crop Protection unit, Devgen developed a novel nematicide, an
agro-chemical product that protects crops from damage by parasitic nematodes.
This product is sold in Turkey and in the US.
- Devgen innovates in crop protection research and environment induced
stress tolerance for its own crops and providing technology to corporate
partners.
Incorporated in 1997, Devgen has offices in Ghent (Belgium), and has
subsidiaries in Singapore, Hyderabad (India), Yogyakarta (Indonesia), General
Santos (Philippines) and Delaware (US), totaling about 280 employees.
For more information please contact:
Thierry Bogaert, CEO Monika Van den Haute, IR
Tel. +32 9 324 24 24 Tel. +32 9 324 24 24
Thierry.Bogaert(at)devgen.com Monika.Vandenhaute(at)devgen.com
Or visit: www.devgen.com
This press release may contain forward-looking statements containing the words
"anticipates", "expects" , "intends", "plans", "estimates", "may" and
"continues" as well as similar expressions. Such forward looking statements may
involve known and unknown risks, uncertainties and other factors which might
cause the actual results, performance or achievements of Devgen to be materially
different from any future results or achievements expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, among others: agricultural risks and difficulties,
including weather factors, diseases and pests, the costs and requirements of
regulatory compliance and the speed with which approvals are received; public
acceptance of biotechnology products; political, economic and social
developments in countries where Devgen operates and other risks and factors
detailed in the company's most recent annual report.
These forward looking statements speak only as of the date of publication of
this document. Devgen disclaims any obligation to update such forward looking
statements in this document to reflect any change in its expectations,
conditions or circumstances on which such statement is based, unless required by
law or regulation. This document does not constitute, or form part of, any offer
or invitation to sell or issue, or any solicitation of any offer, to purchase or
subscribe for any securities issued by Devgen nv.
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[1] After closing of a private placement on April 4th and including ? 5.9
million restricted cash.
[2] Indian Council of Agricultural Research
PR ENG :
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[HUG#1517013]
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Datum: 18.05.2011 - 18:30 Uhr
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News-ID 54801
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