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You must have a lot more respect for the work of journalism than I do.
My late friend described them as "kiddie scribblers", often with very good justification.
The 3 unknowns are why the Yahoo Fool journo used the word " Should ".
Just how long is that piece of string ?
It's an imponderable, but, as the AA will lapse, it may be indicated in future reports how much of the cake PXS received. Or it may not, disclosure would give clues to others tied in with DSM.
Production is outsourced, and production quantities have been ordered for Fruitflow+ before, so no worries in that respect. Logistics outsourcing should be equally straightforward. Sales and marketing to drive up sales, persuading larger brands to come on board is a major challenge. As you say welly, SAMR approval, followed by volume orders from By Health, would provide the basis for global expansion of marketing reach.
What will happen to DSMV in their new, merged, mega company? Another imponderable, but I see no reason for a fire sale, they still retain an important collaboration with the new, standalone, Provexis.
Tend to think all the challenges re supply chain, finance, etc. with this deal pale into insignificance post SAMR
" it is currently expected that this would result in some significant orders for Fruitflow, potentially at a multiple of current total sales values."
W$
Good thoughts BB.
As far as I can tell there are 3 unknowns that make it difficult to workout the financials after the AA
1/ The profit split. 50/50 would be a good guess as that, IMO, would be worst case for PXS under the new agreement. I had always hoped that we were getting as much as 50% of the profit but in real terms this could have been lower meaning our share of the profit under the new agreement could more than double "assuming like for like sales and margins"
2/ The royalty payable to DSM on the gross profit. This is a big unknown.
3/ The fixed level of overhead deduction from sales. Again an unknown but this obviously stops under the new agreement although we are in discussions with "third parties seeking to progress new sales and distribution opportunities" and there would be a cost to this.
My guess is the company will start to see a profit in calendar year 2023 onwards and that's without factoring in any possible sales to By-Health.
BWTFDIK. DYOR. etc. etc. etc.
fwiw - some further thoughts on the financial implications of, effectively, allowing the AA to lapse ...
For the last FY, our share of the profits was 358k, up from 235k the year previously.
For H1 of the FY 2021/2022, our share was 135k, down from 172k
Total revenue for the full FY 2021/22 was 426k, down from 505k. I would guess that most of the drop was down to a drop in the profit share from DSM, so our share of the AA might be somewhere between 250k and 300k ?
Plainly we don't know what the profit split is, but, if, for example, it was 50/50, then, all other things being equal, once the AA came to an end, we'd be looking at an extra 250 to 300k coming through to our bottom line. But all things aren't equal because we know we'll be paying a royalty to DSM based on sales / gross margin ( reducing in years 2 to 4 ), so, we should, hopefully, be pushing close to break even in calendar year 2023 ?
To add something on what Bella mentioned. We'll be responsible for maintaining the inventory on Fruitflow as an ingredient, which, while not directly affecting profitability, could, depending on how often manufacturing runs are made, give us cashflow issues. If we can manage that cashflow within our existing net cash ( roughly 900k as of end March 2022 ? ) and / or borrow against expected cashflow, then there's no need for another placing. To be honest, given what we know now, I think the million previously raised was at least partially raised for the scenario now unfolding
BB
everhopeful, am I reading the same RNS as you?
As not once is the word "should" included in it.
It does say "From 1 January 2023 the net profit accruing to Provexis on sales of Fruitflow in the calendar year - on a pro-forma basis, assuming like for like sales and margins - would be materially ahead of the net share of the profit that would have accrued to Provexis with like for like sales and margins under the existing 2010 Alliance Agreement; on the same pro-forma basis,"
wellsite, agree there are still plenty of unknowns and there are no answers to the points you highlight.
1/ DSM haven't been binned as such and will still be involved in the sale of Fruitflow along with a new partnership.
2/ Good question. I take it if they think there investment will go up from here then they will hold but if the want to invest in another Co then who knows.
3/ Depends on the patent and results of the study. DSM are interested in it.
4/ The million dollar question is when.
gix
personally feel we are in limbo.
1/ Did we bin DSM or did DSM bin us. Erring on the former - what do they say doing the same and expecting a different outcome is a sign of ?
2/ What will happening to DSMV shares - hold, fire sale or transfer
3/ New Patent - we've already got loads of patents, will one more make any difference
4/ SAMR outcome
All of the above SP changing unknowns shall be answered before profit comes in, plenty of time to trade.
WS
"Says the agreements should lead to a substantial increase annual sales and net profit."
"Should" , if DSM couldn't get more sales and were happy to let go then it doesn't smell of roses. I am hoping BH have said that they don't like the agreement as it muddies the waters for M&A.
Strangely quiet here (Volume wise) considering the recent news and the fact that we could start seeing a profit from 1/1/2023 onwards.
Every day is a school day
https://www.theguardian.com/society/2021/jul/11/unlocking-the-gut-microbiome-and-its-massive-significance-to-our-health#:~:text=Your%20gut%20microbiome%20weighs%20about,genes%20than%20the%20human%20genome.
“Lots of things that people don’t think about, like depression or anxiety, are very clearly modified by your gut microbes. Appetite and ability to digest food are modified by gut microbes. The key finding recently is the link with the immune system. Basically, the gut microbiome is controlling it, sending signals, because most of your immune system is in your gut, helping you fight infections, such as Covid and early cancers, that the immune system is picking off.”
W-looking-forward-to-patent-$
If the financial outlay is greater than the additional profits it is a loss situation.
Won’t know as stated, until year end results year 23/24 in all probability.
Bella. I won't continue this circular discussion. I believe everyone can appreciate that, if this company gets ALL the profit, it can't be a loss situation,
Let's hope they gain £173k plus,might make a profit for the first time in 13 years
"A number of DSM's customers for Fruitflow which are set to be transferred to Provexis have been Fruitflow customers for several years, including some distributor customers which sell Fruitflow on to third parties. The Company greatly looks forward to progressing these existing sales relationships, and confirms it will be able to generate new customers for Fruitflow outside the royalty arrangements with DSM, in addition to its existing supply and distribution agreement for Fruitflow with By-Health. The Company is in discussion with a number of third parties seeking to progress new sales and distribution opportunities for Fruitflow, and it can be contacted for all Fruitflow sales enquiries by email at fruitflow@provexis.com."
If the customer is looking for specific formulations then I guess they would still go through dsm.
" Provexis will sell Fruitflow as a straight ingredient to DSM exclusively for use in DSM's Premix Solutions (www.dsm.com/human-nutrition/en/customized-services/customized-solutions/premix-solutions.html) and Market-Ready Solutions (www.dsm.com/human-nutrition/en/customized-services/customized-solutions/market-ready-solutions.html) businesses, with DSM then looking to sell the resulting Premix and Market-Ready Solutions products on to its customers."
Alfista...you're missing the point...DSM is throwing the burden of costs/receivables back to Provexis. They just want to buy it in now as a raw material. It's a portfolio filler for them. As you well know, selling is not just about 'we have it so they must want it' and Fruitflow has always been a hard sell. In the short term yes PXS will see an increase in profits but are they geared up to carry the paper, service the clients, talk formulations etc...Will they be able to carry the paper for the likes of Bi-Health as and when it comes good. These are serious questions shareholders should be asking the company. The new PXS Distributor was asked to pay upfront...that's smart but most companies work on terms. PXS has not exactly made a huge success of FF+O in the UK.
Updated cashflow plot. Losses are << DSM PSA, plenty of cash.
Is if wasn't for
"short term lockdowns and other COVID-19 disruptions in some of the growing markets for Fruitflow in the Asia Pacific region, leading to more erratic demand in the short term"
Could have been in profit
https://postimg.cc/BPFpMcWP
W$
Bella.
I buy and sell things for a living.
If DSM supplied the product, and made a margin on the cost price, of course that would make the product more expensive to Provexis. DSM gave back a share of that profit, but kept the rest of the profit for themselves.
Now, Provexis will buy from source, therefore the profit will be much greater, not less. We are gaining, not losing.
Basic logic.
Bella6532, RE: "Who makes FF+O caps and box them for PXS...Gixer didn't we think this was a service provided by DSM?"
Yes, IMO the capsule is a generic DSM product but it could be packaged anywhere. By DSM or here in the UK for PXS.
"PXS gets a percentage in the current AA for the FF content of their own FF+O caps. This will be lost in the new deal."
Not sure thats an issue as we will be selling FF to DSM in the first place.
"Servicing existing accounts with FF might not be too difficult but growing new ones will be a hill to climb with existing PXS personnel"
Just thinking out loud but we know there are "prospective customers" in the background ", including some prospective customers which are part of global businesses". Maybe cost has been an issue with some of these prospective customers and with DSM out of the equation a cheaper product may bring them onboard. Who knows????
BB
You might be right, but the supplier contracts would be as useful to BH as they are to PXS - as presumably PXS would operate as a subsidiary to BH in europe if they took us out. ......
Beginning to think IF has treated DSM very well. We didn't have to give them the patent (their track record with FF ain't good) and the income from existing DSM clients may become relatively small very quickly - given "significant multiples of existing" still being used. Sign of a good businessman
W-wtfdik-$
Alfista...at the moment PXS gets a % share of the profits (we don't know how much of course) of all sales of FF made by DSM this includes the sales of FF to PXS for PXS's own FF+O...so each Order PXS places for their own FF+O gets a % share of DSM profits on the FF content. From 1 Jan 2023 PXS will be responsible for all the raw material purchases, production and sales costs on one hand and they will be taking on the Receivable too. They will no longer get the % share of profit back against their own orders for FF+O but one would hope they will see (as you rightly point out a greater share of the FF profit themselves. It's a loss against the current AA not necessarily a loss under the new agreement. It's all peanuts though considering the new costs and receivables PXS will be taking on.
That was hardly worth saying once by me, never mind twice !