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Burcon NutraScience Corp
Symbol BU
Shares Issued 108,657,244
Close 2021-11-15 C$ 1.66
Recent Sedar Documents

Burcon loses $1.35-million in fiscal Q2

2021-11-15 18:11 ET - News Release

Mr. Johann Tergesen reports

BURCON REPORTS FISCAL 2022 SECOND QUARTER RESULTS

Burcon NutraScience Corp. has released its results for the fiscal second quarter ended Sept. 30, 2021.

Operational highlights for the second quarter ended Sept. 30, 2021:

During the quarter, Burcon:

  • Recorded a 76-per-cent quarter-over-quarter increase in royalty revenues from its licensee, Merit Functional Foods Corp.;
  • Advanced the due diligence process and negotiations with a number of potential strategic partners on opportunities to commercialize Burcon's innovative plant-based protein technologies through one or more joint ventures and/or collaboration agreements;
  • Worked with a third party engineering firm to identify and plan the buildout of a suitable location in Winnipeg for a new and expanded innovation centre;
  • Announced the appointment of Peter H. Kappel as chairman of Burcon's board of directors;
  • Announced the appointments of Jeanne McCaherty and Alfred Lau to Burcon's board of directors;
  • Received three patents covering the company's novel process for the extraction and purification of soy and non-soy oil seed protein ingredients and the high-purity proteins produced therefrom. The company's IP (intellectual property) portfolio now consists of 299 issued patents in various countries, with 73 in the United States, as well as more than 210 active patent applications, including 34 in the U.S.

During the quarter, Merit Foods:

  • Significantly advanced the commissioning of its state-of-the-art pea protein and canola protein production facility in Winnipeg, Man.;
  • Increased production of its best-in-class lineup of pea and canola protein ingredients;
  • Increased commercial sales of its pea and canola protein ingredients;
  • Worked with a number of consumer packaged goods (CPG) companies to develop innovative plant-based food and beverage formulations incorporating Merit's pea and canola proteins, some of which are already available on store shelves;
  • Continued to expand its sales funnel through an aggressive sales outreach program as a plant-based protein ingredient solutions provider.

Management commentary

"During Burcon's fiscal 2022 second quarter, our team worked diligently to support our JV, Merit Functional Foods, in the commissioning of its state-of-the-art plant-based protein production facility," said Johann F. Tergesen, Burcon's president and chief executive officer. "Merit took significant steps toward optimizing its facility, where it is producing, under license from Burcon, its best-in-class lineup of pea protein and canola protein ingredients. Production capability at Merit's facility has been improving by the week as commissioning challenges associated with the implementation of Burcon's processing technologies have been resolved one by one. We are encouraged by the accomplishments of Merit's operations team during this past quarter, which is on track to meet optimization targets.

"Merit's protein sales increased by 76 per cent during the quarter as compared with the previous quarter, when Merit first began fulfilling commercial sales orders for its best-in-class pea and canola protein ingredients. Merit has been working with and supporting numerous CPG companies targeting solutions that incorporate Merit's novel pea and canola protein ingredients into new or reformulated food and beverage products. Merit's pea and canola proteins offer unparalleled taste, texture and purity, and we are encouraged by the growing interest from CPG companies for Merit's proteins.

"During the quarter, we continued to progress discussions with a number of interested parties for additional partnership opportunities. Those discussions include potential new joint ventures and production facilities. We have also continued to work with a third party engineering firm to assist us in planning and designing a new and expanded technology and innovation centre. We are in the process of identifying and short-listing possible suitable locations for Burcon's new innovation centre. Not only will the new innovation centre provide the commercial production capability to serve as a very small-scale commercial production plant, but would also provide Burcon with additional R&D bandwidth to pursue additional research opportunities in the future.

"We've added three patents in various countries covering our novel extraction processes for producing high-quality protein ingredients from soy and non-soy oil seed starting materials. Burcon continues to bolster its intellectual property portfolio which now consists of a total of 299 granted patents worldwide.

"We were pleased to announce the appointment of Peter H. Kappel as chairman of Burcon's board of directors. Mr. Kappel was appointed as a director of Burcon in January, 2016, and has been instrumental in Burcon's latest developments. We were also pleased to announce that Jeanne McCaherty and Alfred Lau have joined our board of directors. Ms. McCaherty brings a wealth of knowledge of the global food ingredients industry to the Burcon board and has immediately added value to Burcon's board and management team. Mr. Lau brings extensive financial and business experience to Burcon's board. We look forward to the support from Ms. McCaherty, Mr. Lau and the rest of the board as Burcon transitions to a revenue-generating company and secures additional strategic partnerships for its innovative protein technologies that can sustainably play a role in the growing plant-based food revolution."

Financial results (in Canadian dollars)

Royalty revenues from Merit totalled $32,000 in the second quarter, as compared with $18,000 in the previous quarter. The nominal royalty amounts reflect Merit's commissioning process during the period toward full production capacity.

Second quarter loss totalled $1.4-million or one cent per basic and diluted share. This compares with income of $4.4-million or four cents per basic and diluted share in the same year-ago quarter. Following the investment by Bunge Ltd. into Merit during the second quarter of fiscal 2021, Burcon recorded a dilution gain of $6.4-million.

Merit continued to fulfill commercial sales orders of pea and canola protein products during this quarter, and Burcon recorded its royalty revenue of $32,000 from Merit, with an increase of 76 per cent over the first quarter. Merit recorded sales revenues of $1.6-million during the quarter, representing sales of pea and canola protein products, as well as sales of commodity items and byproducts.

Burcon recorded $159,000 as its share of loss in Merit Foods for the second quarter of fiscal 2022, as compared with $949,000 in the same year-ago quarter. Included in the share of Merit Foods' loss is a recovery of $656,000 to correct a deferred income tax adjustment related to the first quarter of fiscal 2022. After taking into account this adjustment, Burcon's share of Merit Foods' loss is not significantly different from that in the same year-ago quarter. Merit Foods' loss reflects its stage of development as it continued to commission and optimize the flex production facility.

Gross research and development expenses totalled $723,000 for the three months ended Sept. 30, 2021, as compared with $614,000 in the same year-ago quarter. The increase in R&D (research and development) expenses is due mainly to higher stock-based compensation expense, salary increases and staff additions. The company began deferring canola and pea development expenses from the second quarter of fiscal 2020. During the current quarter, Burcon allocated $484,000 of R&D costs to deferred development costs.

Gross intellectual property expenses decreased by $161,000 for the second quarter of 2022, as compared with the same year-ago quarter, due mainly to decreased activity levels and lower maintenance fees for the canola and pea patent portfolios. During fiscal 2022 second quarter, Burcon allocated $172,000 of IP expenses to deferred costs.

General and administrative expenses increased by $100,000 for the current fiscal quarter as compared with the same year-ago quarter. The increase is due mainly to higher stock-based compensation expense, investor relations, insurance expenses and staff additions, offset by lower professional fees.

At Sept. 30, 2021, cash balances totalled $10.9-million compared with $14.0-million at March 31, 2021. Management believes it has sufficient resources to finance its expected level of operations and working capital requirements to May, 2023. This estimate does not take into account potential proceeds from outstanding convertible securities or royalty revenues from its licence agreement.

Conference call details

Burcon will hold an investor conference call and webcast on Monday, Nov. 15, 2021, at 5 p.m. ET.

A link to the webcast of the conference call will be available on Burcon's website under presentations. The webcast will also be archived for future playback.

Investors interested in participating in the live call can dial in using the details below:

Date:  Monday, Nov. 15, 2021

Time:  5 p.m. Eastern Time (2 p.m. Pacific Time)

Toll-free dial-in (North America):  1-855-327-6837

Dial-in (toll/international):   1-631-891-4304

Conference ID:   10016867

About Burcon NutraScience Corp.

Burcon is a global technology leader in the development of plant-based proteins for foods and beverages. With over two decades of experience formulating high-purity proteins that have superior functionality, taste and nutrition, Burcon has amassed an extensive patent portfolio covering its novel plant-based proteins derived from peas, canola, soy, hemp and sunflower seeds. In 2019, Merit Functional Foods Corp. was established between Burcon and three veteran food industry executives. Merit Foods has since built a state-of-the-art protein production facility in Manitoba, Canada, that is producing, under licence from Burcon, best-in-class pea and canola proteins for the food and beverage industries.

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