KEY POINTS:
Sanne Melles has just spent two weeks on the road selling a bright vision to shareholders of loss-making ICP Biotechnology - and asking them for another $10 million to make it happen.
"It's interesting that without exception really, the parties that I have spoken to really support the
business," he said.
That support is interesting, given the bombshell the company dropped on investors in May. The NZX-listed maker of proteins and serum used by the pharmaceutical and biological sectors turned a forecasted trading profit of $6.1 million for the year ending June into an expected $8 million loss.
The turnaround was followed soon after by the resignation of chief executive Earl Stevens and the expected loss has since grown to about $9 million.
"It's purely timing," said Melles to explain the loss. "There is no underlying structural or fundamental problem with this business."
During the previous year ICP had invested in increased capacity and had manufactured goods before securing sales, but production had been scaled back and in future would be more closely tied to demand.
"In reality it's a bit more nuanced because there are certain production timelines you have to observe. You can't really wait until the sale before you initiate the manufacturing process but it's much better aligned right now," said Melles, 36, who became chief executive last month.
Melles has been speaking to shareholders, brokers and investment companies.
"I guess the investment community that we serve, at least the parts that take the most of the company, are professionals who really look at the opportunity going forward rather than being emotional looking back," he said. "They do appreciate the clarity that we now provide as to where the company really is ... the approach we take which is very pragmatic, which is very transparent."
Melles, who was born in South Africa but grew up in Holland, is a process engineer by training and holds a masters in mechanical engineering.
Between 2005 and 2006 he was a director of business development at Dutch biotechnology firm Crucell but settled in Auckland after a nine-month campervan trip in the US and New Zealand.
He refers to ICP's protein manufacturing operation as a start-up. It's a less bullish approach than the company previously had.
"It fits better my management style," Melles said. "It's a relatively no-nonsense type of approach."
A smaller product range has also reduced complexity. "Once the sales are getting through and with the volumes that we expect, we have an ability to ramp up again but we have to be very conscious with the limited amount of cash that we have."
ICP is hoping a one-for-one renounceable rights issue at 5c a share will raise up to $10 million from shareholders, who have seen their shares slip from a year high of 21c, closing up slightly yesterday at 5.7c.
The money is needed to pay bills from building the new facilities and to provide working capital.
However, Melles expected the company to make a profit in the fourth quarter of the 2008 financial year.
The company's business opportunity was enormous, he said. The global market for protein supply was worth between $250 million and $300 million and growing strongly, while the market for serum was larger, at about $1 billion, but flatter.
Regulatory pressure to be more specific about the ingredients used during biological manufacturing was boosting demand for companies that could supply precise protein products.
ICP yesterday announced a distribution agreement with VWR International for plasma protein products for the biopharmaceutical industry covering the US, Canada, Mexico, Puerto Rico, Britain, Ireland and Europe.
VWR said sourcing from New Zealand meant being able to sell products free of BSE and other viruses, while ICP's chromatography process produced high-quality products with less impact on the native protein.
The timing of the distribution deal could not have been better for Melles. "It shows that the pharmaceutical world that we operate in is recognising us as a party to be relevant in this field," he said.
