SCN: Actions and Expectations in 2009
The Board and management of Scandinavian Clinical Nutrition AB (SCN) have decided on and negotiated a number of actions and changes to reduce costs and risks and further focus the company’s operations in 2009. The actions will reduce costs with a minimum of MSEK 55 in costs and investments compared to 2008, with full effect from the end of Q2, 2009. In spite of the actions, the turnover is expected to increase in 2009. In addition, the management is also working on reducing the company’s total debt to a maximum of MSEK 10-15.
During 2008, SCN has carried out an extensive investment and cost program of more than MSEK 80, of which the main part (about MSEK 33) has been marketing expenses in connection with the launch of CUUR in USA. In addition, about MSEK 18 have been invested in establishing the subsidiary Scandivir AB, and another MSEK 4 in R&D. Most of these investments have been one-time undertakings, and will not be carried forward in 2009.
The launch of CUUR in USA has generated a lower turnover than expected, but the investment in the CUUR partnership has also enabled SCN to launch the cold product Coldizin in USA, with a different setup. For Coldizin, SCN’s partner is responsible for end consumer marketing, and therefore SCN’s marketing liability in USA in 2009 is estimated to be less than MSEK 3, and only related to CUUR. In addition to this, SCN is also negotiating with leading American mail order companies, who are interested in licensing CUUR.
The establishment of the subsidiary Scandivir AB has been a success, and the last transaction when SCN sold 9% of the company’s shareholding for MSEK 7.2 in February sets a total market value of Scandivir to about MSEK 80. This sets the value of SCN’s shareholding in Scandivir (45.2%) to about MSEK 36. SCN has great expectations on the development of Scandivir during 2009. The company’s initial funding commitments of MUSD 3 will be fulfilled by the end of April. SCN has promising indications that Scandivir will be able to obtain enough funding to carry out its objectives.
In spite of the weak sales during Q4, SCN is counting on increased turnover during 2009. So far, the company has orders worth about MSEK 16 to be invoiced in 2009. The company is not counting on any marketing costs during 2009 except for the maximum expected amount for CUUR in USA (MSEK 3). The management of SCN has already cut the company’s costs substantially during Q1, and the cost reduction program is expected to give full effect by July, 2009.
On the product side, the company is increasing its focus towards obtaining OTC registration for the cold product TroxCold24 (working name for a new product based on troxerutin). The total remaining investments to obtain an EU OTC registration is expected to be about MSEK 15 within the next 2-3 years, with only a small risk for a negative result. The upside for an OTC registered cold product is expected to be significant, since the size of the market in the US alone is about USD 45 billion (according to Nutrition Business Journal) and there are few new products on the market.
SCN is also working on converting parts of the company’s debts, and news about this will come shortly. SCN does not have any bank loans.