Provexis (PXS) has signed two agreements with DSM relating to Fruitflow, an ingredient that helps normal blood flow and circulation. This will boost the profit of the AIM-quoted company and initially made Provexis the best performer of the day before the share price fell back to 0.95p (0.9p/1p), which is still a 10.5% increase.
There has been an alliance agreement with DSM for more than a decade and this is being changed into a transfer of business agreement that means that DSM customers for Fruitflow will become direct customers of Provexis at the beginning of 2023. DSM will assist with the transfer of the outsourced supply chain and production.
DSM will still receive a royalty on the gross profit of Fruitflow sales to customers it transfers to Provexis for four years. DSM Venturing has a 6.5% stake in Provexis.
The deal means that, assuming like-for-like sales and margins, Provexis would make a higher net profit in 2023 and it would increase in subsequent years. There should also be new direct customers added.
Microbiome
Provexis is partnering with DSM on a gut microbiome patent. The gut microbiome is the current focus of DSM, which will have preferential access to use and sale of Fruitflow-based products using the patent. The results of a gut microbiome human study will be submitted for publication in a scientific journal. This patent application says that there are health benefits beyond those relating to the heart.
Provexis will sell Fruitflow as an ingredient to DSM for use in its products, which would be sold on to its customers.
Chinese partner By-Health is working on a regulatory submission for the use of Fruitflow and its heart health benefits. This could help to multiply the sales in China.
Results
Provexis is a consistently loss-making business. Figures for the year to March 2022 should be announced in September. Revenues are estimated at £426,000 and the underlying operating loss of £173,000 is the lowest ever.
Angle (LON: AGL) reversed the Fruitflow business into Nutrinnovator in June 2005, so Provexis has been losing money for a long time. The all-share deal gave Angle a stake in the enlarged group that was worth £5.9m at the time.
There was £982,000 in the bank at the end of September 2021. Taking on the supply chain for Fruitflow could require additional working capital and losses will reduce the cash pile. Another fundraising may be required.