VIVXF: More Favorable Business Conditions Likely in 2022…

By David Bautz, PhD

OTC:VIVXF

READ THE FULL VIVXF RESEARCH REPORT

Business Update

Business Conditions Likely to be More Favorable in 2022

Avivagen, Inc. VIVXF is developing products to support animal health, which includes replacing antibiotics in livestock feeds with proprietary compounds that promote the growth and overall health of the animal through support of the host's innate immune system. Avivagen discovered that β-carotene polymerizes with oxygen into a unique class of compounds (oxidized β-carotene, OxBC) that promote immunological health and are the basis of Avivagen's OxC-beta™ technology. Numerous studies conducted by Avivagen and its partners has shown that supplementation of feed with parts-per-million levels of OxC-beta Livestock can be used as a replacement for growth-promoting antibiotics while offering the same or better growth and health benefits without contributing to the development of antibiotic resistant organisms.

The COVID-19 pandemic has presented a very challenging business environment for Avivagen and many of its customers. One negative repercussion for Avivagen has been the need to push back the contracts originally signed in May 2021 with two of its customers in Mexico, Industrias Melder and Transformadora. We anticipate that orders of OxC-beta Livestock will begin shipping to both of them at some point in 2022, but it may be at reduced rates compared to the amounts in the original contract. Avivagen is in discussions with both companies and we anticipate an update in the coming months.

Avivagen has announced that many of its customers are ready to ramp up activities in 2022 following a pull-back in 2021 and we are confident this will lead to a gradual increase in OxC-beta Livestock sales as the year progresses. In addition, the company is continuing to run trials with OxC-beta technology and we anticipate additional information regarding these results later in 2022. Avivagen is also continuing the process of attaining regulatory approvals in multiple jurisdictions and is in active discussion with potential distribution partners and customers in those locales in anticipation of being granted approval. Investors should expect updates on regulatory approvals during 2022.

As a reminder, Avivagen signed a land-mark eight-year deal with AB Vista in October 2021 in which they will become the exclusive distributor of OxC-beta for use with poultry, swine, ruminants (dairy and beef), and aquaculture in the U.S., Brazil, and Thailand. The deal includes minimum sales guarantees that are "modest" in the first year but then ramp up in subsequent years. Trials are already underway with many AB Vista customers and we anticipate the first sales from this partnership in 2022.

Leadership Change

On January 25, 2022, Avivagen announced the appointment of James Nickerson, PhD as President. Mr. Nickerson previously was Vice President of Business Development and Innovation for Avivagen, a role in which he was in charge of identifying and establishing important customer and distribution partner relationships for the company. He has been with Avivagen since 2007 and over the previous 15 years has held progressively senior roles, including Director of Biology and Director of Commercialization Sciences. He is co-author on six scientific papers on Avivagen's oxidized carotenoid technology platform and is listed on seven patents.

Financial Update

On January 19, 2022, Avivagen announced financial results for the 2021 fiscal year that ended October 31, 2021. Revenues for the twelve-month period ending Oct. 31, 2021 were CAD$1.3 million, compared to CAD$1.2 million for the twelve-month period ending Oct. 31, 2020. The slight increase was primarily due to sales of OxC-beta product sales in the Philippines. Operating expenses for fiscal year 2021 were CAD$4.7 million compared to CAD$3.9 million for fiscal year 2020. The increase was primarily due to a decrease in government grants in fiscal year 2021.

Avivagen exited fiscal year 2021 with approximately CAD$1.4 million in cash and cash equivalents. The company will need to raise additional capital soon. As of October 31, 2021, the company had approximately 57.0 million shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of 75.3 million.

Conclusion

The ongoing COVID-19 pandemic and world-wide supply chain disruptions have been a damper on Avivagen's growth story, however we believe there is "light at the end of the tunnel" in regards to both the pandemic and global slow-down and are confident that sales of OxC-beta should begin to increase throughout 2022. We look forward to updates from the company in regards to regulatory approvals, additional commercial partnerships, and trial results as the year progresses. Due to the slow-down in sales we have reduced our estimated sales forecasts, which has decreased our valuation to $2.00 per share.

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