- Cash position: +€10.4 M at June 30,
2016 compared to +€12.4 M at December 31, 2015
- Stability of interim net loss at
-€3.1M
- Strategic decision to focus the
Company's activities on high value-added applications in human
health (antibiotics), nutrition and cosmetic (carotenoids
particularly)
- Strengthening of DEINOCHEM program,
continuation of AVRIL et FLINT HILLS RESOURCES collaborations,
suspension of DEINOL program
- Expansion of antibiotics project, in
relation to The United Nations and the World Health Organization
appeal on September 21, 20161 about the need for new
antibiotics, and mainly DEINOBIOTICS identification of new classes
of antibiotics produced by DEINOVE’s strain library. Selection of a
first chemical family whose efficacy and pharmacological properties
are currently being evaluated
- Decision to convert DEINOBIOTICS
into a wholly owned subsidiary (currently 49% held by
DEINOVE)
Regulatory News:
DEINOVE (Paris:ALDEI) (Alternext Paris: ALDEI), a biotech
company that discovers, develops and produces high value-added
compounds from rare bacteria, including Deinococcus bacteria,
released its interim results for 2016. Meeting on September 27, the
Board of Directors approved the accounts and decided on a strategic
refocus of its activities on high value-added markets of
carotenoids (nutrition and cosmetics) and antibiotics (human
health), with notably the conversion of DEINOBIOTICS' activities
(created in 2012, specialized in research & development of
novel antibiotics, and currently a minority subsidiary of DEINOVE)
into a wholly owned subsidiary through DEINOBIOTICS shareholders’
contributions in kind to DEINOVE.
Since 2009, DEINOVE leads research on the discovery of new
antibiotics thanks to its bacterial platform. The global
antibiotics resistance issue, solemnly stated on September 21 by
the UN and the WHO announcements, should create a favorable new
environment for rare biotech companies able to discover new
antibiotics. Considering the promising results of its minority
subsidiary DEINOBIOTICS (created in 2012, with laboratories in
Lille), DEINOVE plans to expand its antibiotics platform in
Montpellier and Lille, by converting DEINOBIOTICS into a wholly
owned subsidiary. At the same time, due to current unfavorable
context for 2nd generation biofuel development (low oil prices,
industrial actors’ disengagement in the sector, lack of governments
support), and the strong potential of other technologies and
products developed by DEINOVE, the Company decided to refocus its
resources on high value-added applications of new antibiotics, and
carotenoids in nutrition and cosmetics. In addition to
consolidating and expanding DEINOBIOTICS' activities, the teams
will concentrate their efforts on the DEINOCHEM/carotenoids
program, make headway on nutrition projects with AVRIL and FLINT
HILLS RESOURCES and foster other partnerships on target markets of
health and cosmetics for which DEINOVE has developed a program to
identify other compounds of interest within its strain library.
DEINOL program allowed a global mastery of the intellectual
property, the genetics, the metabolism and the fermentation of
Deinococcus, directly benefiting to other projects. Industrial
development of biofuel is suspended until a potential change of the
biofuels market context.
"New antibiotics discovery answers to a priority global medical
need. Few biotech companies can claim discovering new classes of
antibiotics. DEINOBIOTICS research on new antibiotics, from
DEINOVE’s strain library, enabled identification of a first
high-potential lead. DEINOVE's specialty programs, particularly
DEINOCHEM program and projects in animal nutrition lead with our
partners, are progressing as expected, while the 2nd generation
biofuel market is waiting for a rise in oil prices. In this
context, we have decided to bring DEINOBIOTICS and DEINOVE's teams
together and to focus our efforts on higher value-added programs
and those that offer short-term income opportunities, in order to
create more value for our partners and shareholders", announce
Emmanuel PETIOT, CEO of DEINOVE. He adds: "Our 2nd generation
biofuel program has made several advances, including the proof of
concept that Deinococcus can be a true innovative chassis for
biological production. Incidentally, this will give our new
strategy a solid technological footing. We have also built a
cutting-edge integrated genetic, metabolic and fermentation
engineering platform. We will capitalize on these developments by
focusing on applications for which there already is a market;
carotenoids, in particular, have many potential health, cosmetic
and nutrition applications with high added value".
Dominique LE BELLER, CEO of DEINOBIOTICS, adds: "The discovery
of new antibiotics with innovative structures is a global public
health issue as cases of resistance to existing antibiotics
continue to heighten. Last week, this major medical need for new
antibiotics was solemnly highlighted by The UN and the WHO, and
governments of 193 countries. Since 2010, no new innovative
antibiotic reached the market, and there were only 3 in the
preceding 5 years. Microorganisms are the most efficient
antibiotics producers of the living world but the discovery of new
antibiotics is challenged by the almost exhaustive use of the same
bacteria; DEINOVE’s outstanding library of bacteria strains never
used for antibiotics discovery, has great potential for accessing
new molecules of therapeutic value. We have already identified
several promising molecules and a first lead is currently
undergoing optimization and advanced preclinical research. The
opportunity for non-dilutive financing, pharmaceuticals agreements
and value creation is significant. By teaming up with DEINOVE, we
gain access to R&D synergy capacities that can accelerate our
projects."
SELECTED FINANCIAL
INFORMATION
6 month period ending 30 June
(in thousands of euros) 2016
2015 Total operating revenues
208 69 Total operating costs
4,344 4,059 o/w Research & Development
costs 3,402 3,141 o/w Administrative and General costs 942 918
Operating profit/loss -4,136 -3,990 Financial
result 15 12
Current pre-tax profit/loss -4,121
-3,978 Non-recurring items 236 -7 Income tax (R&D Tax
Credit) -745 -816
PROFIT/LOSS FOR THE PERIOD
-3,141 -3,170
as of 06/30/16
as of 12/31/15 Net financial position 10,359
12,432 o/w financial investments1 0 0 o/w term deposits
(maturity < 1 year) 0 0 o/w cash instruments (maturity < 3
months) 0 0 o/w cash on hand 10,359 12,432 (o/w financial debts)
0 0
Total assets
14,416
17,327 TOTAL SHAREHOLDERS' EQUITY 12,669
14,593 o/w equity 4,919 8,096 o/w conditional advances
7,750 6,497
1 Excluding loans, liquidity agreement
items (cash and own shares), deposits and guarantees.
FINANCIAL RESULTS FOR THE SIX-MONTH
PERIOD
Operating result
DEINOVE received €208K in operating income for the six-month
period, primarily from grants and R&D partnerships (AVRIL and
FLINT HILLS RESOURCES). At the same time, operating costs rose by
+7% to €4.3m.
R&D expenses, accounting for 78% of the operating expenses
(vs 77% in H1 2015), rose by +8%, in keeping with the increased
payroll (+3 average FTEs) and the expansion of laboratories (rents,
equipment, etc.). Subcontracting expenditure dropped due to the end
of certain contracts (with VTT in particular). G&A expenses
rose slightly to €942K.
The Company pursued its investments over the period, mainly for
the automation and development of the engineering platform, and in
accordance with the growth of the DEINOCHEM program.
Net result
The net loss of the semester is in line with the loss recorded
for the same period in 2015, at €3.1m. It includes a positive
non-recurring items gain of €236k (including a €224k repayable
advance write-off by Bpifrance), and a financial profit of
+€15k.
FINANCIAL SITUATION
Financing of operating expenses in H1 2016 required €4.0m
(excluding depreciation charges) as well as laboratory equipment
investments (including financial leases rents) of approximately
€720k. In addition, DEINOVE subscribed to straight bonds emitted by
DEINOBIOTICS for an amount of €500k.
Over the same period, the Company received €1.5m as a repayable
advance (3rd payment by ADEME under the DEINOCHEM program), and
€140k in grants (Bpifrance/CMI). Late June 2016, DEINOVE also
received the restitution of the 2015 R&D Tax Credit (CIR) for a
total €1.6m.
As of June 30, 2016, the Company's net financial position stood
at +€10.4m vs. +€12.4m at January 1, 2016, namely a net consumption
of -€2.1m over the six-month period.
ADVANCES OVER THE SIX-MONTH PERIOD
& STRATEGIC CONSIDERATIONS
During its meeting of September 27, 2016, DEINOVE's Board of
Directors examined the advances made over the six-month period and
the Company's general environment.
DEINOCHEM program
Studies carried out for the potential applications of
carotenoids validate the interest these molecules have for cosmetic
and health applications, both high value-added markets in which
DEINOVE can project various revenue models either through selling
licenses or by directly producing compounds with partners without
having to make heavy industrial investments.
In February, DEINOVE announced that it had increased the number
of accessible molecules and now has five carotenoids produced at
laboratory scale and yields improved by a factor of 6 to 8
depending on the molecule2. In June, DEINOVE validated the 2nd key
milestone of the DEINOCHEM program, which was sealed by the payment
of €1.5m from ADEME3. The achievement of deliverables confirmed
progress made in the development of carotenoids hyperproductive
Deinococcus strains. The main milestones were the sequencing and
annotation of a hundred strains, the strengthening of fermentation
capabilities (x10) and the achievement of targeted production
yields up to five times greater than that of the wild strain.
The Company aims to be able to sell the first batches of target
compounds by 2018.
Moreover, R&D animal nutrition programs run with AVRIL and
FLINT HILLS RESOURCES are progressing according to the partners'
expectations.
Finally, DEINOVE won the start-up phase of the 2nd edition of
the Worldwide Innovation Challenge for DEINOPLAST (R&D program
for bio-based production of muconic acid) for which it received a
€200k grant4. This award acknowledges the quality of DEINOVE's
technological platform.
DEINOBIOTICS program
DEINOBIOTICS' aim is to discover novel antibiotics structures
that can be used to fight against multi-resistant germs.
According to recent estimates, antibiotic resistance could cause
10 million deaths a year by 2050, more than today's cancers (8
million per year). Already some patients with pneumonia,
tuberculosis or gonorrhea, are in a therapeutic impasse because of
the loss of efficacy of several classes of antibiotics5. While Dr.
Fukuda, Deputy Director-General of the WHO, qualifies it as "a real
threat to society6", Dr. Margaret Chan, the Director General of the
World Health Organization,7 recalled in April: "The situation is
bad and getting worse, as I constantly repeat. This is a
slow-motion tsunami that we need to urgently mobilize
against,”.
In response, governments and manufacturers are multiplying plans
and initiatives. The United Nations and the World Health
Organization issued an appeal on September 21, 20168, signed by 193
countries, warning about antibiotics resistance. The objectives are
to reduce consumption, improve the use of existing antibiotics, and
of course to identify and exploit new sources of antibiotics that
will complete the existing armamentarium, thereby raising it to a
level of efficacy equal to the threat.
DEINOVE and its subsidiary DEINOBIOTICS have already been
anticipating this need for several years. Convinced from the start
that its collection of rare bacteria contained strains capable of
producing new antibiotics, DEINOVE has gathered a team of experts
around one of the best French specialists in antimicrobial Research
and Development, and created DEINOBIOTICS in 2012 as a subsidiary9.
Over the past few months, DEINOBIOTICS has made considerable
progress in its research programs in its laboratories in Lille, and
identified in DEINOVE’s strain library new classes of antibiotics.
With novel chemical structures, these new antibiotics are provided
with very interesting activity spectrums, particularly against
pathogens bacteria resistant to existing antibiotics. A first lead,
with a promising antibiotic activity, has already been selected for
preclinical advanced research.
DEINOBIOTICS needs additional resources to continue its research
with a priority on equipment and genetic, metabolic and
fermentation engineering know-how. DEINOVE, with its cutting-edge
technological platform, has such resources and will now put them to
use for these developments. DEINOBIOTICS program will be amplified
in Montpellier and Lille laboratories.
DEINOL program
So far, DEINOVE's teams have managed to:
- select and optimize a Deinococcus
bacterial chassis adapted to industrial production
constraints;
- establish a strain able to produce
ethanol by hydrolysis and fermentation of various vegetable raw
materials;
- produce ethanol with an alcohol content
of 9% wt/v (7.3% v/v) in a 300l-fermentor from a mix of C5 and C6
sugars (representative of the composition of biomass);
- improve the strain's tolerance to
inhibitors common in 2G substrates.
Despite these advances, the prospect of quickly generating
income from this activity does not seem realistic given the
economic factors and the current market structure.
The global context remains unfavorable for the development of
2nd generation biofuels. The continuous slump in oil prices weighs
heavily on biofuel producers' competitive edge and puts even more
pressure on all areas of research: production performance goals are
much more ambitious and difficult to achieve, which lengthens
development time.
The various 2G fuel ethanol plants currently in operation are
struggling to deliver on yields and production level expected.
Technological hurdles remain and market players are reluctant to
develop new technologies as long as existing plants remain unsteady
and the price of oil has not recovered. Pavel Molchanov, a Raymond
James & Associates analyst specialized in cleantech energy in
the United States, commenting the sector last June stated: "The
scale-up of 2nd generation biofuel technologies has fallen well
short of expectations. Numerous operational and mechanical
incidents occurred which today result in the near total absence of
production of this type of biofuel.
On top of this, several biotech industry players announced these
last months that they will refocus on specialty compounds,
particularly in the fields of nutrition and personal care
(cosmetics and beauty products), facing falling oil prices and
difficulties in financing their biofuel projects. This is the case
for Solazyme/Terravia, but also for Codexis and Amyris. At the same
time, the main players in the chemical sector have initiated
mergers, as illustrated by the DuPont-Dow Chemical merger.
ABENGOA, the DEINOL program's main industry player, began
pre-bankruptcy procedures in November 2015. Since then, the Spanish
group has decided to focus on its "engineering and industrial
construction" activity and began a vast asset divestiture program
to lighten its debt and finalize an agreement with its creditors.
ABENGOA sold its American biofuel plants10 (its main 2nd generation
plant in Kansas closed in December 201511) and is looking for
buyers for its European sites.
This context has led DEINOVE to review its biofuel strategy and
suspend its DEINOL program.
Technology, Intellectual Property and
R&D
The Company initiated a full overhaul of its strain library,
DEINOVE’s unrivalled biological heritage. This led to the
identification of compounds of interest that match AVRIL and FLINT
HILLS RESOURCES' needs and expectations. Current developments only
use a fraction of DEINOVE's strain library, which is a
high-potential strategic asset and could become a new source of
natural ingredients (in addition to the innovative carotenoids
naturally produced by 400 of the 6,000 strains in the library). The
strain library will be explored further to identify new molecules
of interest.
As part of research carried out under the DEINOL program,
DEINOVE built a platform that is extremely sophisticated in terms
of strain selection, strain design and fermentation engineering.
Other research programs are able to benefit fully from these
technological advances.
To optimize the use of Deinococcus as a new chassis for
biological production, DEINOVE undertook a technological
partnership with Toulouse White Biotechnology (TWB)12 to map the
metabolic fluxes of Deinococcus. The idea is to create an inventory
of all the potential uses of the microorganism in the production of
molecules of interest. This mapping, both qualitative and
quantitative, will serve as a reference to identify and optimize
all the metabolic pathways of the Deinococcus model to rapidly
reach the target yields and productivity of industrial processes
developed by the Company.
STRATEGIC REFOCUSING AND NEW
ORGANIZATION
After analyzing the six-month period trends, the Board of
Directors of September 27, 2016, validated the refocusing of
DEINOVE's activities towards health, nutrition and cosmetic high
value-added applications with the objective to accelerate revenue
generation and focus resources on higher value-added applications.
The Board decided on the following developments:
- The reintegration of DEINOBIOTICS'
operations within DEINOVE: part of DEINOVE's resources will be
reallocated to the development of DEINOBIOTICS' programs, which in
return will share its know-how in the production, characterization
and optimization of secondary metabolites with DEINOVE.
- In legal terms, and subject to (i)
signing of the contribution agreement and (ii) approval of transfer
transactions in kind, and the subsequent decision to increase
capital by a DEINOVE General Meeting, to be summoned in the coming
weeks, DEINOVE will own 100% of its DEINOBIOTICS subsidiary, at the
conclusion of transactions of contributions in kind of
DEINOBIOTICS’ shareholders shares in favor of DEINOVE. The
subsequent dilution of DEINOVE’s shareholders is estimated at about
10%.
- DEINOVE's other resources will be
allocated in priority to continuing the development of carotenoids
(DEINOCHEM program), of programs developed in partnerships with
AVRIL, FLINT HILLS RESOURCES and other more upstream programs, with
partners that have not yet been made public, and which are all
moving towards being scientifically validated. All efforts will be
focused on achieving these programs' objectives and generating
revenue as soon as possible. Specialty compounds are characterized
by shorter development period and higher potential profit
margins.
- DEINOVE's launch of a vast program to
screen its strain library should result in the identification of
specialty compounds in the fields of health, nutrition and
cosmetics. This program is currently in an in vitro screening phase
to identify positive hits that will be sent on for more in-depth
efficacy testing to validate their interest for these sectors.
- The Deinol program is suspended, as
well as its associated partnerships. DEINOVE will however continue
to examine all possible avenues to create value from the assets
related to this program.
- Reorganization of DEINOVE:
- Dominique LE BELLER and his team will
report directly to DEINOVE;
- A Preclinical Study Project Manager
will join the antibiotics development team;
- The teams previously assigned to the
DEINOL project and the Biomass platform will join the DEINOBIOTICS,
screening, fermentation and analytical teams.
- The number of DEINOVE’s employees after
DEINOBIOTICS integration will stay stable compared to current
situation
DEINOVE will now concentrate its research on high value-added
applications in the following fields:
- Health, by researching and developing
new antibiotics echoing to a strong global medical need, and by
exploiting the therapeutic properties of other compounds such as
carotenoids that can be of interest for inflammation, ocular
health, skin disorders and other applications…
- Human and animal nutrition, with
molecules with coloring, antioxidant and nutritive properties;
- Cosmetics and personal care products,
with molecules with antioxidant and anti-ageing properties,
texturizing agents, etc.
DEINOVE's aim is to become a cutting-edge biotech firm that, by
drawing on its biological heritage and technological platform, can
deliver radical innovation to fields that are of high added value
for the entire company.
About DEINOVE
DEINOVE (Alternext Paris: ALDEI) is a biotech company that
develops production processes of specialty ingredients for health,
nutrition and cosmetic markets.
These production methods offer a sustainable, competitive
alternative and represent a new source of innovative natural
ingredients.
To do so, DEINOVE draws on its library of 6,000 rare bacterial
strains, mainly Deinococcus, and its platform for genetic,
metabolic and fermentation engineering.
Based in Montpellier, DEINOVE employs approximately 50 employees
and has nearly 170 international patents. The Company has been
listed on Alternext since April 2010.
For more information go to www.DEINOVE.com
The 2016 half-year report is available on the Company’s website:
www.DEINOVE.com/fr/espace-investisseurs/centre-documentation/rapports-financiers
Membre de l’indice EnterNext© PEA-PME 150 et
EnterNext Tech 40
1
http://www.who.int/mediacentre/news/releases/2016/commitment-antimicrobial-resistance/fr/2
See Press Release of February 8, 2016.3 See Press Release of June
14, 2016.4 See Press Release of May 24, 2016.5 WHO’s antibiotic
resistant fact sheet:
http://www.who.int/mediacentre/factsheets/antibiotic-resistance/en/6
http://www.laprovince.be/1676400/article/2016-09-20/nouveau-fleau-planetaire-les-super-bacteries-resistantes-aux-antibiotiques-qui-r7
Speech on April 18, 2016 by Dr. Margaret Chan before
representatives of the UN Member States:
www.who.int/dg/speeches/2016/antimicrobial-resistance-un/en/8
http://www.who.int/mediacentre/news/releases/2016/commitment-antimicrobial-resistance/fr/9
The subsidiary is 49% owned by DEINOVE, soon to be 100%, subject to
(i) signing of the contribution agreement and (ii) approval of
transfer transactions in kind, and the subsequent decision to
increase capital by a DEINOVE General Meeting, to be convened in
the upcoming weeks.10
www.ethanolproducer.com/articles/12988/abengoa-announces-plan-to-sell-first-generation-biofuel-assets11
www.biofuelsdigest.com/bdigest/2015/12/03/abengoa-shuts-down-hugoton-colwich-st-louis-hq/12
See Press Release of May 9, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160928006410/en/
DEINOVE ContactsEmmanuel
PetiotCEOPh.: +33 (0)4 48 19 01
28emmanuel.petiot@DEINOVE.comorJulien CosteCFO and Director
of AdministrationPh.: +33 (0)4 48 19 01
00julien.coste@DEINOVE.comorALIZE RP, Press
RelationsCaroline Carmagnol/Wendy RigalPh.: +33 (0)1 44
54 36 66DEINOVE@alizerp.comorCoralie MartinCommunication and
Investor RelationsPh.: +33 (0)4 48 19 01
60coralie.martin@DEINOVE.com