In 2007 Devgen laid the cornerstones to become a forward integrated traits and seeds company with a focus on important Asian food crops. Devgen combined its in house technology with newly acquired technology and obtained direct market access through the acquisition of a hybrid seed business in India. Devgen accelerated its nematicide programme worldwide and prepares itself for submission of regulatory dossiers in 2008 and 2009 in South Africa, the US and Europe. The company is working on a plan to allow the pharma unit to further develop independently and focus entirely on its agro division. These strategic moves will allow Devgen to fulfil important societal needs by helping farmers to increase their productivity in an environmental friendly way and is as such creating a sustainable growth path to generate value for its shareholders.
Financial highlights 2007 • Revenue, including first sales of seeds in India and Pakistan for an amount of EUR 0.3 million, at EUR 7.9 million in 2007 as compared to EUR 9.3 million in 2006 • Investments in R&D up 17% with successful execution of programs for nematicide field trials and rice breeding in Kenya and India • EUR 49 million new capital raised in 2007 • Cash position at EUR 43.9 million at end of December
Business highlights 2007 • Acquisition of hybrid rice, sorghum, pearl millet and sunflower seed business in India as of November 1, 2007 • Worldwide and accelerated implementation of the nematicide program • 5-year R&D and technology exchange agreement with Monsanto • RNAi-technology scientifically published • Further progress on the pharma side with the inflammatory programs • First steps towards separating agro and pharma business activities
The acquisition of a hybrid rice, sunflower, sorghum and pearl millet businesses in India, Pakistan and the Philippines represents a forward integration step allowing Devgen to capture a larger amount of the value chain created by its technology. Next to immediate market access with a range of high quality products for the above mentioned crops, this acquisition enables the company to make full use of its formerly built-up breeding capacity.
Nematicide field trials showed further positive results allowing Devgen to accelerate its nematicide development program for the US and Europe as well as for tropical countries. The business and product development team was strengthened in EMEA (Europe, Middle East, and Africa) and the US. Operational issues such as product sourcing, trademarks and implementation of the distribution strategy were addressed to ensure maximum value creation for the company. Devgen expects to finalise data packages for submission in Europe and US for a number of core crops in 2008. The company plans additional field tests in 2008 and to prepare registration dossiers for more crops and new mixtures and formulations to further grow the business.
Devgen and Monsanto entered into a five-year research and development (R&D) agreement and a five-year technology exchange agreement. These agreements enable the parties to identify potential product candidates derived from technologies being developed by both companies. The new R&D agreement commits additional funding from Monsanto for Devgen's research and is coupled with an agreement which will broaden the relationship so that both companies can explore technology applications in their crop areas of interest. Devgen will leverage Monsanto's work in rice and small cereal grains, especially in Asia. Monsanto intends to initially leverage Devgen's technologies to its core crops of interest such as corn, cotton and soybeans.
Monsanto and Devgen scientists described a novel application of RNAi technology to provide farmers with a new in-the-seed option to protect crop yields. The results of the companies' research were published in the November edition of the peer-reviewed scientific journal Nature Biotechnology. Devgen's Human Therapeutics division has made significant progress in 2007 in developing first-in-class therapies derived from an innovative inflammation platform. The company is in intense contact with third parties in order to spin-off its pharma unit.
Key figures 2007
EUR 000 (except for earnings per share) H1 2007 H2 2007 Y 2007 Y 2006 Revenue 4,282 3,594 7,876 9,307 EBITDA -6,142 -7,459 -13,601 -8,671 Loss from operations -6,713 -8,191 -14,904 -9,730 Net of financial income/cost 479 552 1,031 240 Net loss -6,216 -7,658 -13,874 -9,490 Basic earnings per share (EUR) -0,38 -0,45 -0,83 -0,64 Cash and cash equivalents[1] 47,291 43,863 43,863 23,780
2007 revenues amounted to EUR 7.9 million, a decrease of 15% compared to the previous year. Earnings before amortization, interest and taxes (EBITDA) decreased by EUR 4.9 million to EUR -13.6 million, while net loss for the year amounted to EUR -13.9 million, as compared to EUR -9.5 million in 2006. The cash position of Devgen NV amounted to EUR 43.9 million at the end of 2007.
Details of 2007 results
Revenue
Of the total revenue, EUR 7.3 million was generated by the Devgen Agro division as compared to EUR 8.9 million in 2006. Income from the new Research and technology exchange agreement with Monsanto and first sales of product in India and Pakistan could not offset yet the reduced partnering income from other sources (completion of the Pioneer collaboration at the end of 2006). Grant income was substantially lower (-EUR 0.7 million) compared to 2006, when it was exceptionally high. Product sales in India and Pakistan accounted for EUR 0.3 million realised in November and December. The seed business is characterised by strong seasonality with the high season, starting in April and lasting till August and the low season, running from November to February.
In Human Therapeutics revenue of EUR 0.60 million was generated, as compared to EUR 0.45 million in previous year, entirely coming from government grants.
Results
The net loss for 2007 was EUR 13.9 million, compared to the loss of EUR 9.5 million last year, an increase with EUR 4.4 million. Next to reduced income as described above R&D costs were significantly higher in accordance with the plan to accelerate the nematicide development program and rice breeding program. Total research and development expenses in 2007 amounted to EUR 17.3 million as compared to EUR 14.8 million last year, an increase of 17 %, mainly due to the increase of outsourcing expenses for the above mentioned programs.
Selling, general and administrative expenses in 2007 increased to EUR 5.2 million, as compared to EUR 4.7 million in 2006, representing an increase of 13%. Staff costs increased by EUR 0.8 million, mainly due to extra headcount resulting from strengthening the agro team and to the increase in share based compensation. Other corporate expenditure including external advisory services decreased with EUR 0.3 million.
Marketing and distribution expenses related to the Indian seed business amounted to EUR 0.1 million.
Cash flow and cash position
The cash used in operations in 2007 amounted to EUR 12.7 million, as compared to EUR 10.4 million in 2006. This is due to the net operating cash outflow (operating loss + amortization and depreciations + share based compensation) of EUR 12 million, and EUR 0.7 million changes in working capital.
Cash used in investing activities amounted to EUR 23.2 million in 2007 as compared to EUR 0.4 million in 2006. This includes EUR 18.9 million cash paid for the seed business acquisition in 2007, mainly consisting of intellectual property rights and other intangible assets, inventory and equipment. EUR 1.1 million was invested in property, plant and equipment for the research facilities in Ghent, and a EUR 5 million short term cash investment was made (classified as financial assets for sale).
Cash flow from financing activities amounted to EUR 51.6 million in 2007 as compared to EUR 0.2 million in 2006. This cash flow in 2007 included the net proceeds from capital increases of EUR 31 million through private placement in February 07 and EUR 18 million of new capital placed with Monsanto, totalling 49.1 million in 2007 as compared to EUR 0.8 million in 2006, and the net proceeds from financial debt of EUR 2.4 million in 2007 as compared to net financial debt payments of EUR 0.6 million in 2006.
As a result from these operational, investing and financing cash flows, a net increase of EUR 20.1 million in cash, cash equivalents and financial assets for sale was recorded during 2007.
Devgen's cash and cash equivalents, including restricted cash of EUR 5 and another EUR 5 million of financial assets for sale amounted to EUR 43.9 million on December 31, 2007, as compared to EUR 23.8 million on December 31, 2006.
Consolidated balance sheet
The balance sheet at 31 December 2007 remains solid, with a strengthened solvency ratio (equity vs. total assets) of 80 % (vs. 70% at December 31, 2006), allowing the company to fulfil all its existing financial obligations and to further deploy its strategy.
2007 segment reporting
The primary segment information is presented in accordance with Devgen's dual business model. Since 2005 the 2 segments are presented as Crop protection and Human Therapeutics, as such reflecting the internal management organisation and reporting structure.
BUSINESS UNIT Revenue Costs Operating result in '000 EUR FY 2006 FY 2007 FY 2006 FY 2007 FY 2006 FY 2007 Human Therapeutics 448 593 5,580 6,986 -5,132 -6,393 Crop protection 8,859 7,284 9,463 10,800 -605 -3,516 Not allocated 3,993 4,995 -3,993 -4,995 Total 9,307 7,877 19,036 22,781 -9,730 -14,904
Staffing
Per 31 December 2007, Devgen employed 159 staff. Compared to 2006, this is an increase of 47 % in headcount. The acquisition of Devgen India is the main reason for this increase. Devgen has been successful in attracting additional experienced people in accordance with its business needs.
Corporate highlights • Pol Bamelis was appointed chairman of the board July 1, 2007. Pol Bamelis replaces Pierre Hochuli, who chaired the board since 2003. • Subsidiaries were created in Hyderabad, India and Delaware, US to create the structure for further implementing Devgen's agro strategy. Conference call and webcast
Devgen will conduct a conference call on Friday, March 14, 2007 at 11 am which will also be simultaneously broadcasted via internet. The event is open to the public and is accessible via www.devgen.com and via telephone at +32 (0)2 290 14 07. To ask questions during the Q&A session, please join the event via telephone 10 minutes prior to the start of the conference call. A recording of the event will also be made available at www.devgen.com shortly after the call.
Financial calendar
May 16, 2008 Business update H1 2008 June 2, 2008 Annual Shareholders' Meeting at Devgen's offices August 27, 2008 H1 2008 Results November 14, 2008 Business update H2 2008
Financial statements
More complete financial statements of 2007 are available for downloading in the investor section of www.devgen.com.
Auditor's report
The auditor has confirmed that he has accomplished substantially all of the audit work and that, as a result of the audit, no meaningful corrections need to be applied to the financial information as included in this press release.
The Statutory Auditor DELOITTE BEDRIJFSREVISOREN Represented by Gino Desmet
About Devgen
Devgen is a public agricultural biotech company focused on developing and commercializing: • biotech traits and hybrid seeds to meet the growing needs for high yielding, high quality hybrid rice, sorghum, millet and sunflower in India; • a novel generation of biotech products to protect a wide spectrum of crops from damage incurred from pests; • safer and more environmentally friendly agro-chemical products to protect crops from damage inflicted by plant parasitic nematodes. Devgen's biopharmaceutical division develops a new class of preclinical drug candidates, based on novel therapeutic concepts, for treatment of a range of inflammatory and metabolic disease (diabetes, obesity) and arrhythmia.
Incorporated in 1997, Devgen has offices in Ghent (Belgium), Singapore and Hyderabad (India), with a total work force of about 160 people, including Devgen seeds and crop technologies, India. Devgen is listed on Euronext Brussels (ticker: DEVG) since June 2005. For more information on Devgen, please visit the company's web site: www.devgen.com.
Contact information Devgen: Thierry Bogaert, CEO Wim Goemaere, CFO Tel. +32 9 324.24.24 Tel. +32 9324.24.24 Thierry.Bogaert@devgen.com Wim.Goemaere@devgen.com
