2010 - Aker BioMarine's best year so far
Group operating revenues from continued operations in the fourth quarter of 2010 totaled NOK 87 million, compared with NOK 47 million in the fourth quarter of 2009. The increase is largely attributable to SuperbaTM Krill and QrillTM sales growth. Operating profit before deprecation and amortization (EBITDA) amounted to minus NOK 13 million in the fourth quarter of 2010, up from minus NOK 31 million in the fourth quarter of 2009. EBITDA development was influenced by Saga Sea carrying costs in the quarter without harvesting which causes substantial effects associated with changes in inventories. Cash flow reflects the period's profit and increased accounts receivable due to underlying sales growth and repayment of accounts payable. After gains on sale of Trygg Pharma, the net profit of the Aker BioMarine Group amounted to NOK 299 million in the fourth quarter of 2010 and NOK 178 million for the year 2010 compared to a loss of NOK 304m in 2009.
As previously announced and discussed in the third‐quarter 2010 report, Aker BioMarine announced on 3 September 2010 the sale of 50 percent of its shareholding in Trygg Pharma Holding AS, a company that owns Natural Nutrition Development AS and Trygg Pharma AS. The agreement with Lindsay Goldberg was completed in November 2010 and yielded a NOK 393 million gain. Because the transaction was completed in November, the aforementioned businesses were reclassified and reported as held‐for‐sale operations for one month; for the remaining two months of the fourth quarter, Aker BioMarine's share of the joint venture's profit is reported. All figures appearing in this report to shareholders reflect the reclassification unless otherwise stated. Accordingly, as of 2011, Aker BioMarine's financial investment in Trygg Pharma Holding AS will be reported as a share in the joint venture.
Harvesting and production
Krill harvesting ended in October. The Saga Sea produced a total of 13 040 metric tons (MT) of QrillTM in 2010, up from 5 715 MT in 2009. In addition, Saga Sea produced 1 544 MT of Nutra meal for SuperbaTM production in 2010 compared to 521 MT in 2009. The increase is attributable to favorable weather conditions in the Southern Ocean, good krill catch volumes, a vessel upgrade completed in the fall of 2009, and the factory trawler's highly skilled crew.
The 2011 harvesting season has begun. In early February, an acoustic research study was completed in cooperation with Norway's Institute of Marine Research. Findings will enhance understanding of the krill population in Antarctic waters and help ensure long‐term sustainable fisheries. After completing the research expedition, Saga Sea began krill harvesting and initial harvesting reports are promising.
Production of SuperbaTM Krill is proceeding as planned. The company's working partner now has an annual production capacity that exceeds 400 metric tons of SuperbaTM, and production capacity will increase further in 2011.
Fourth‐quarter 2010 sales growth rate was affected by general seasonal variations and customers' optimizing their inventories toward year‐end. Overall, Aker BioMarine has succeeded in maintaining high SuperbaTM Krill sales volumes and continues to experience favorable developments among current and potential customers. A total of 51.4 MT of SuperbaTM Krill were sold in the fourth quarter of 2010, compared with 51.3 MT in the third quarter of the year and 24.9 MT in the fourth quarter of 2009.
In the fourth quarter of 2010, Aker BioMarine established a market presence in Asia, featuring our own sales and marketing organization. Although sales volumes remain modest, the region is regarded as offering considerable potential for SuperbaTM Krill. Aker BioMarine's main focus in the Asian market is to identify and enter into agreements with the right partners and initiate the necessary regulatory processes. The company is well underway in these efforts.
In 2010, Aker BioMarine sold a total of 177 MT of SuperbaTM Krill, compared with 50 MT in 2009. Price levels have remained stable compared with 2009.
Late in the fourth quarter, Aker BioMarine received the 2010 Growth Award from the Nutrition Business Journal for our achievement as the fastest‐growing dietary supplement in the United States. NBJ is the leading dietary supplements industry magazine in the USA. The award is a recognition of the company's fast‐paced development in the US market and achievements that compare favorably with those of international biotechnology companies.
Aker BioMarine continues to benefit from the resources it has committed in recent years to research relating to Antarctic krill oil as a dietary supplement. Another milestone was passed with the fourth‐quarter 2010 publication in a recognized scientific journal of the first clinical study documenting SuperbaTM Krill's superiority compared with alternative omega‐3 sources.
More publications which are expected to drive further growth are forthcoming.
Aker BioMarine is noticing increased demand for its QrillTM feed ingredient, particularly among existing customers, as a result of documented benefits at fish farms.
Fourth‐quarter 2010 sales of QrillTM were 3 119 MT, slightly more than double the sales volume of 1 470 MT in the fourth quarter of 2009. Aker BioMarine sold a total of 10 830 MT of QrillTM in 2010, up from 7 066 MT in 2009. Demand for QrillTM is strong and the market has absorbed a significantly greater QrillTM production in 2010 than in 2009. On average, Aker BioMarine achieved higher sales prices in 2010 than in 2009, and prices showed a rising trend throughout 2010. Aker BioMarine is establishing a presence in additional market segments in order to further enhance and realize the value potential of QrillTM.
Royalty revenues from licensed CLA/Tonalin® amounted to NOK 4 million in the fourth quarter of 2010, compared with NOK 4 million in the fourth quarter of 2009. The Group's 2010 royalty revenues totaled NOK 15 million, which is on a par with the level achieved in 2009.
Trygg Pharma joint venture
As discussed in the third‐quarter 2010 report to shareholders, Aker BioMarine announced on 3 September that it had agreed to partner with a company associated with the US private equity firm Lindsay Goldberg LLC. The agreement, which was completed in November, resulted in a NOK 393 million accounting gain for Aker BioMarine.
As consideration for its 50 percent shareholding in Trygg Pharma Holding AS, Lindsay Goldberg agreed to pay up to NOK 280 million. Of this amount, NOK 140 million was paid upon the execution of the transaction and up to NOK 140 million is payable upon the achievement of certain developmental milestones. The first of these milestones was reached in the fourth quarter of 2010, for which Aker BioMarine received a NOK 25 million increment.
In October 2010, Trygg Pharma began recruiting patients for a clinical Phase III study to evaluate the effectiveness of AKR 963 for treating patients with severe hypertriglyceridemia (elevated blood triglyceride levels). AKR 963 is an investigational candidate drug developed by Trygg Pharma. The study is a key step in the development of the company's research and development portfolio. Additional study details are available at: www.clinicaltrials.gov.
Trygg Pharma purchased Epax, considered the world's foremost producer of high‐concentrate fish oils, in November 2010. The Epax acquisition was made pursuant to an agreement signed when Lindsay Goldberg agreed to buy 50 percent of Trygg Pharma Holding from Aker BioMarine. The new joint venture company's experience with development, production, and sales will uniquely position it for developing new patent‐protected high‐quality omega‐3 products as well as new, differentiated products in cooperation with partners. Initially, Trygg Pharma will focus on both capacity‐expanding measures at Epax' production facilities in Ålesund, Norway, and further growth in production and sales of existing Epax products.
In the fourth quarter of 2010, Aker BioMarine also carried out a private pre‐emptive rights share issue to finance its commitments associated with Trygg Pharma's acquisition of Epax.
Gross proceeds from the share issue were approximately NOK 250 million. The subscription period, which ended 14 October 2010, was oversubscribed by some 25 percent. The terms and conditions pertaining to the private placement were fulfilled in November 2010.