Burcon shares soar 45% after plans revealed for a protein production plant

Exact location of the pea- and canola-protein production plant is yet to be announced

Burcon
Burcon's plan is to produce powdered plant protein, and to sell it to manufacturers of food and drinks | Burcon Nutrascience

Shares of Vancouver-based biotechnology company Burcon Nutrascience Corp. (TSX:BU) were on fire May 27, several days after the company revealed that it plans to build a $65-million pea- and canola-protein production plant somewhere in Western Canada.

The company’s shares closed trading on May 27 at $1.64, up more than 45%. Shares were trading at $0.75 on May 23, before the company revealed its plans to build the new facility, and have since gained 119% over two trading days.

Burcon’s manager of business development, Paul Lam, would not reveal to Business in Vancouver where in Western Canada the company’s planned facility would be built because he said that it was material information that the company has not yet revealed to investors.

He said that the plan is for Burcon to build the facility by mid-2020, and that future announcements will soon be made to provide more details.

Burcon has hatched a deal with an investor group that will see that group invest up to $16 million in capital contributions.

Lam explained that financing for the project will come in increments with Burcon providing 40%, and the investor group providing 60%.

About 20% of the financing is likely to be loans while other needed capital will come from federal and provincial governments, Lam said.

“We will provide updates at a later date,” he said. “I can’t break down all the numbers right now.”

The production facility will provide a seachange to Burcon’s business model.

So far, the research and development company has developed an extensive portfolio of proprietary technologies, or intellectual property, in the plant-protein niche.

Instead of producing plant proteins, however, its business model has been to license technologies to others.

Burcon, for example, licensed its Clairsoy-branded soy protein to the global food processing giant Archer Daniels Midland (NYSE:ADM).

Burcon's plan for the future is to produce plant-protein powder and provide that powder to manufacturers – potentially ones such as the Coca-Cola Co. (NYSE:KO), PepsiCo Inc. (Nasdaq:PEP) or the fast-growing and newly public Beyond Meat Inc. (Nasdaq:BYND).

During the past couple years, Burcon has worked with various consumer-goods companies and provided them with samples of Burcon’s protein ingredients.

Some of the initial investigations by these consumer goods companies have evolved into product-development projects, and through this work Burcon has developed what it calls “a valuable measure of confidence over both the demand and pricing for the protein products and byproducts that will be produced at Burcon’ future pea- and canola-protein production plant.”

While investors on May 27 revealed themselves to be giddy about Burcon, the company’s most recent financial report warned that there are risks.

At the end of 2018, “the company had minimal revenues from its technology, and had an accumulated deficit of $92,481,436,” Burcon noted in a February filing.

In the nine months that ended December 31, 2018, Burcon suffered a $3,532,150 loss, and it had negative cash flow from operations that totalled  $3,152,879.

“The company has relied on equity financings, private placements, rights offerings, other equity transactions, issuance of convertible debt and a short-term loan to provide the financing necessary to undertake its research and development activities,” Burcon said.

Lam told BIV that such a warning is standard for ventures in the life sciences space.

“I wouldn’t call it a strange thing,” he said. “A lot of biotech companies go on for a number of years – 10 to 15 years or more without revenue. It has to be legally put down as an ongoing concern whether a biotech company can make revenue or not.”

gkorstrom@biv.com

@GlenKorstrom