Avivagen Inc. (VIV:TSX.V; VIVXF:OTCQB), a developer of non-antibiotic feed supplements for optimal livestock productivity, has reached an eight-year global supply agreement with a major global distributor to exclusively represent its OxC-beta™ technology in three major geographies.
AB Vista, a division of AB Agri, will represent OxC-beta™ technology for use with poultry, swine, ruminants, and aquaculture in the U.S., Brazil, and Thailand. The announcement comes at the culmination of a search for a distribution partner among five interested parties, including some distributors that would consider only a global deal with Avivagen, rather than the limited geography announced last week.
"Once sales begin to ramp up, we believe it will be just a matter of time before interest in acquiring the company outright begins to increase.” — David Bautz
Avivagen’s “OxC-beta technology is a first-in-class source of beta carotene oxygen copolymer compounds that convey a variety of immune-supporting and non-vitamin A benefits,” Kym Anthony, CEO of Avivagen, told investors on a recent conference call. OxC-beta provides an alternative to antibiotics in livestock feed. Reducing antibiotic-resistant bacteria is an issue in global health, he said.
AB Vista is a global animal nutrition technology company with operations in 47 countries and over 118,000 employees around the world. AB Vista, a leader in feed additives — particularly enzymes and other health and productivity-enhancing products for livestock — has several direct relationships with some of the largest customers in the areas covered by the agreement and is positioned to increase market share in those areas. AB Vista is a division of AB Agri, which is a unique community of agricultural businesses operating globally across the food chain.
The agreement, which grew out of the realization that “our former (distribution) arrangement in the U.S. was not working,” led to many months of intense discussions, resulting in the selection of AB Vista. AB Vista’s industry-leading technical knowledge and know-how set it apart from the competition and is expected to drive considerable adoption and growth for Avivagen, the company said.
Deal Covers U.S., Brazil & Thailand
These three geographies — the U.S., Brazil and Thailand — will provide OxC-beta the opportunity to gain access and adoption in some of the largest feed production markets in the world. “The U.S. is arguably the largest market in the world, Brazil number three, and Thailand represents a large diverse market for AB Vista’s technical salesforce and sub-distributor relationships” to flourish, while Avivagen will maintain many of its existing customer relationships, he explained. The exclusive does not include the nutraceutical product, nor companion animal products, which AB Vista may sell but does not have an exclusive.
All the potential distribution partners wanted to include Europe, which was carved out of the geography, Anthony said, although it is antibiotic-free. The company plans to enter the European market at some point; however, the process for obtaining regulatory approval there is expensive and time-consuming, and COVID has compounded the problem.
And, while China is also a top market, it carries some challenges. “AB Agri has a large presence in China; AB Vista does not,” while Avivagen is talking to potential distribution partners in China and Vietnam.
COVID has impacted operations, slowing down some of the company’s trials and slowing down shipments to two weeks in some cases rather than five days. “So, it is an irritant, but it is not lethal or critical,” he said.
Commercializing OxC-Beta as Demand Builds
The company says demand for its products is high from veterinarians, farmers and producers, pet owners, and retailers, and it is seeking collaborators to help commercialize its products throughout the world.
Analyst David Bautz, PhD, at Zacks Small-Cap Research, wrote bullishly on the deal in his October 11 report on Avivagen. The AB Vista deal “could be a game changer for the company as Avivagen now has a global partner that gives immediate credibility to the OxC-beta technology…Once sales begin to ramp up, we believe it will be just a matter of time before interest in acquiring the company outright begins to increase,” Bautz wrote.
Anthony summed up the impact this way: “A deal with AB Vista puts us in a position where, in addition to having some important clients and customers using our product, now we have a major global distributor that is backing us and bringing us the credibility of their…very large organization,” he said, adding that they are very excited and optimistic about being part of their sales process.
He estimated the sales would be modest in the first year and, as they get out into the field and educate the salesforce, sub-distributors, and clients, years two, three, and four should show “a significant ramp up in (sales) minimums, to the point where we will be working with our supplier to increase capacity.”
Anthony declined to be specific about the timing for the company to turn cash-flow positive, saying that the sales pipeline and timing could be impacted by COVID. He was willing to say that “there is a line of sight on cash-flow positive.”
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