aXichem AB (publ), Interim Report January – March 2023
aXichem’s development during the period 2023-01-01—2023-03-31
In this interim report, the aXichem group is presented, which consists of aXichem AB (publ), Incendia Pharma AB and aXichem AS (Norway). Amounts in brackets refer to the corresponding period of the previous year.
aXichem’s development 2023-01-01 – 2023-03-31
Turnover and results
The group's net sales amounted to SEK 554 thousand (SEK 505 thousand).
Operating profit amounted to SEK -3 810 thousand (SEK -3,560 thousand).
The group's profit after tax amounted to SEK -4 761 thousand (SEK -3,560 thousand).
Financial net SEK -951 thousand (SEK 0).
Cash flow and financial position
The group's cash and cash equivalents on March 31, 2023 amounted to SEK 2 712 thousand (SEK 5 262 thousand).
The equity ratio amounted to 72% (96%).
Investments
Investments in intangible, tangible or financial fixed assets have been made so far this year with SEK 653 thousand (SEK 833 thousand).
Depreciation
Depreciation of intangible and tangible fixed assets has been done so far this year with SEK 884 thousand (SEK 837 thousand).
Stock data
Profit as of March 31, 2023 corresponds after tax to a profit per share of SEK -0.29 (SEK -0.22).
Equity per share at the end of the period amounted to SEK 3.88 (SEK 3.19).
Significant events during the period
- On January 3, aXichem announced that the company has received questions from the European Food and Safety Authority (EFSA), regarding its feed additive application. This is a normal and expected part of the process, and questions will be answered by the aXichem team. In accordance with EFSA's process, this means that the legal maximum time for approval is currently set to September 2023.
- On January 25, aXichem announced that Chr. Olesen has added aXiphen® to its official product portfolio. The inclusion of aXiphen in the product line is the first step in a pre-launch marketing program and further validates Chr. Olesen's commitment to providing innovative and high-quality feed solutions to the market.
- On February 1, aXichem announced that the product Muscletech Burn iQ™, where aXivite® is one of the active ingredients, is now available to the market through another strong sales channel, namely the world-leading American retailer GNC (General Nutrition Corporation). GNC is a leading global health and wellness brand that provides high-quality, science-based products and solutions.
- On February 7, aXichem announced that the company has started a production collaboration with the Swedish unit of an established, large manufacturer of chemical substances. The collaboration concerns the manufacture of aXichem's raw material phenylcapsaicin and secures additional capacity for future sales of aXiphen® to the feed market. aXichem estimates that sales worth approximately SEK 60–80 million are possible in the first 12–18 months after market approvals in the EU and in Brazil.
- On February 7, the company announced that it expects substantially increased sales over the next twelve months from sales of the company's natural analog product phenylcapsaicin in the area of dietary supplements and nutrients. Products with aXivite as an active ingredient have been launched at leading retailers such as GNC (General Nutrition Corporation) and Amazon. The company therefore assesses that continued positive development for aXivite can result in revenues of approximately SEK 20-25 million over the next twelve months.
- On February 22, aXichem announced that aXivtie will be launched in three new products in the US market under the best-selling Hydroxycut brand. The new products are a result of aXicem's strategic partnership with Iovate, a market leader in dietary supplement products for exercise and weight control.
- On February 23, the company announced that the board, with the support of the general meeting's authorization, decided to carry out an issue of shares with preferential rights for existing shareholders for approximately SEK 50 million before issue costs. The rights issue is covered to 70 percent by subscription and guarantee commitments. The issue is being carried out to scale up the business in connection with the planned commercialization of aXiphen® in poultry feed and to repay part of the convertible loan taken out in April 2022. The board has also decided to take out a new convertible loan from Formue Nord of approximately 10,53 million SEK.
- On March 3, aXichem published its prospectus regarding the rights issue.
- On March 24, the outcome of the completed rights issue was announced. A total of 4,960,689 shares were subscribed and the rights issue was thus subscribed to 70 percent. Through the rights issue, approximately SEK 34.7 million will be added to aXichem before issue costs. A total of 3,608,646 shares, corresponding to approximately 51 percent of the rights issue, were subscribed with the support of subscription rights. In addition, 1,352,043 shares were subscribed without the support of subscription rights, corresponding to approximately 19 percent of the rights issue, of which approximately 12 percent of the rights issue refers to subscription attributable to issue guarantees.
Significant events after the end of the reporting period
- On April 3, it was announced that aXichem answered and submitted the questions that EFSA asked, and that were announced on January 3, regarding the company's Feed Additive application. The submission is now registered with EFSA and the so-called "clock stop", i.e. the break in the time of a total of six months established by EFSA to process this type of application, has been lifted. The new legal deadline for EFSA's review process is now set to 17 June 2023.
- On April 24, a scientific article describing the study "Effects of different doses of phenylcapsaicin on strength training performance, muscle damage, protein breakdown, metabolic response, and estimation of perceived exertion and recovery: A randomized, triple-blind, placebo-controlled, crossover study." has been published in the Journal of the International Society of Sports Nutrition (JISSN). The published study is supported by aXichem, in collaboration with the Spanish companies LIFEPro Nutrition and Indiex Sport Nutrition, and was carried out in 2022 at the University of Pablo Olavide University - High Performance Center (CIRFED)
- On April 24, the company announces that a new order has been received from distributor Res Pharma in Italy. The order concerns aXivite and the ordered volume will be used for the development of consumer products in collaboration with two different producers. The order value amounts to SEK 120,000.
- On April 25, it was announced that aXichem submitted a patent application for aXivite® as a performance-enhancing ingredient in dietary supplements intended for physical training. The title of the patent is "Physical performance aid" and has its background in significant effect data from above all the study described in the recently published scientific article in the Journal of the International Society of Sports Nutrition.
- On May 5, the company announces that a new clinical trial regarding aXivite® has been published in an article in the scientific journal Frontiers, "Effects of phenylcapsaicin on aerobic capacity and physiological parameters in active young males: a randomized, triple-blinded, placebo-controlled, crossover trial ". The results of the study add further compelling evidence supporting the remarkable benefits of aXivite, a breakthrough capsaicin analog with enhanced bioavailability.
CEO’s statement
aXichem exits the first quarter with a number of well executed positive and important events in the areas of finance, commercialization and regulatory.
The result for the first quarter of 2023 amounts to SEK -4 761 thousand. Net sales amount to SEK 554 thousand. The costs for the period amount to SEK -5 392 thousand and are primarily linked to production and transport of produced goods, regulatory work and costs linked to the completed capital acquisition.
Feed Additive application under review
In the regulatory area, we took the next step in the Feed Additive approval process regarding phenylcapsaicin as an ingredient in poultry feed. Just before the turn of the year, we received a number of questions from the European Food and Safety Authority (EFSA). The team working on the application put together answers to all the questions and early in April we were able to announce that EFSA had registered our submission and lifted the so-called "clock stop" that comes in while questions from the authority are answered. We assess that we have good answers to the questions we received and which, among other things, dealt with the substance's environmental impact. In this area, we rely on completed studies as well as on the fact that the substance meets the requirements according to strict, accepted calculation models. Currently, our responses are being reviewed by the authority and the legal deadline for EFSA to complete this review is, according to official information on the authority's website, 17 June 2023. We hope to receive a positive response close to this date, but of course it is not possible to be completely sure.
Together with our distributor in the feed area, Chr. Olesen, during the first quarter we have started working with pre-launch and preparation of activities for the market introduction of aXiphen®. Chr. Olesen is also our partner for South America. Market approval in Brazil is according to information from the review authority there in a final stage. Despite the uncertainty that has framed the regulatory work in Brazil, we now allow ourselves to be optimistic and assume that we will have final approval in the second half of 2023.
An important part of the work before the launch of aXiphen® is production planning to ensure that lead times for orders, production and delivery are optimized. aXichem is in an early commercial phase and it is essential that we maintain high quality in all relationships, both with suppliers and with customers. We also strive to be able to deliver requested volumes as soon as possible after possible Feed Additive approval.
aXvite takes a new position in fitness and training
In recent months, after the end of the period, aXivite® has firmly secured its position as an ingredient in nutritional supplements for fitness and training. Through the two studies published in leading scientific journals, Journal of the International Society of Sports Nutrition (JISSN) and Frontiers respectively, we have placed aXivite® on a new level and received the evidence and arguments required to be credible and relevant. I am very satisfied and proud of that development and of the collaborations we have established within the segment. aXivite® has shown a positive effect in both low and high doses in studies with trained athletes in terms of strength training performance, muscle damage, protein breakdown, metabolic response and assessment of perceived exertion and recovery. In short, it can be said that the subjects were able to do more repetitions in their training at maximum intensity and that the recovery after training was improved. For people training at an elite level, or for the growing group training at a competitive level, this is an essential part of training.
In addition to this exciting data generating a new patent application for phenylcapsaicin as an ingredient in products for physical training, two new products, in the sports and training segment, will be launched in Europe during the year through our Spanish partner LIFEPro Nutrtion. Furthermore, our American partner Iovate has expressed its enthusiasm about the new data presented. These will be an excellent support in the launch of the three new products that Iovate plans to launch under the Hydroxycut® brand, Iovate's "best-seller" in weight loss and training, which we were able to tell you about in February. The inclusion of aXivite® in Hyroxycut products, as well as in the top-selling Muscletech® brand, means increased visibility and availability as leading retailers such as GNC (General Nutrition Corporation) and Amazon sell the products. After the end of the period, in April, we were also able to announce that Res Pharma, our distributor in Italy, placed an order for the development of consumer products in collaboration with two different producers. It is extremely exciting with the activity we are seeing now for aXivite® and we are working intensively to increase interest even more. All in all, this means that, despite relatively modest revenues from sales of aXivite® during the first quarter, we stand by our goal that a continued positive development for aXivite® can result in revenues of approximately SEK 20-25 million during the business year.
Strengthened cash ensures continued positive development
During the month of March, aXichem carried out a rights issue, with the support of the authorization of the general meeting. The issue was carried out to give the company resources to scale up operations in connection with the planned commercialization of aXiphen® in poultry feed and to repay part of the convertible loan of SEK 20 million that was taken out in April 2022. The board also decided to take out a new convertible loan from Formue Nord of approximately SEK 10.53 million. On March 24, we were able to announce the outcome of the rights issue. The rights issue was thus subscribed to 70 percent, which meant that aXichem received approximately 34.7 million before issue costs. Further details about the new share issue can be found under the heading Financing in this report.
I would like to extend a warm thank you to everyone who chose to subscribe for shares in the new share issue, thus showing that they believe in aXichem and the goals we set for the company. I think we are all aware of the economic situation that prevails, not only in Sweden but in large parts of the world right now. With that in mind, I am happy that aXichem's continued positive development has been secured through the issue and with the income we see coming from sales going forward.
Welcome to the annual general meeting in Malmö on June 16
Finally, I hope that as many of our shareholders as possible can come to the annual general meeting on Friday, June 16, 2023 at 10:00 a.m. You can find the notice and all documents on our website. Well met!
Torsten Helsing, CEO
About aXichem AB (publ)
aXichem's business concept is to develop, patent and market nature-analog industrial compounds. aXichem's product is a natural analog substance called phenylcapsaicin, which is a synthetically produced and patented capsaicin. As phenylcapsaicin is synthetically produced and has a number of advantages compared to natural capsaicin, such as controllable quality and production process.
The product has benefits that makes it commercially interesting in several application areas, for example as ingredient in animal feed, as ingredient in dietary supplements, as a bio-enhancer and as a bio-repellent in marine applications. aXichem is currently marketing the product under different brands in two prioritized areas: aXivite® for dietary supplements and aXiphen® for poultry feed. aXiphen® has shown properties as a growth promoter and anti-salmonella ingredient in studies made in commercial poultry production settings. In the market segment for sports nutrition products aXivite® is today included in several products for weight control, improved metabolism and gut health.
aXichem aims to become a global supplier of industrial natural analogue chemicals to players in the chemical industry who manufacture products containing aXichem's raw materials. The company’s share is listed on NASDAQ First North since 2013.
Future prospects
aXichem's commercialization of phenylcapsaicin under the brands aXiphen®, in the animal feed market, and aXivite®, in dietary supplements market continues. The production capabilities and logistics through subcontractors are in place as well as a production process optimized for commercial volumes.
The pace of development in the establishment of the products is determined by obtaining market approvals in the strategically important countries or regions, starting with EU, U.S., Brazil and India.
aXichem cooperates with specialized distributors, who either have their own production or collaborate with innovative leading producers.
The company has market approval for aXivite in the EU and in North America. A continued positive development for aXivite can result in revenues of approximately SEK 20-25 million in the next twelve months.
aXiphen is not yet approved for the animal feed market, but is expected to obtain approval in EU, U.S., and Brazil during 2023. The interest in aXiphen continues to be high and the company expect that sales of approximately SEK 60–80 million are possible during the first 12–18 months after market approval in the EU and in Brazil.
Financing
The board of aXichem decided on 5 April 2022 to take out a convertible loan of SEK 20 million from Formue Nord Fokus A/S. The nominal amount of the convertible loan amounted to SEK 20 million and ran with an annual interest rate of 12 percent and would be due for payment on October 31, 2023, unless the convertibles were converted before then. The conversion rate amounted to SEK 20. In the event that the convertible loan was converted in its entirety, the number of shares in the company would have increased by 1,000,000 and the share capital increased by SEK 200,000.
On February 23, 2023, the company announced that the board, with the support of the general meeting's authorization, decided to carry out an issue of shares with preferential rights for existing shareholders for approximately SEK 50 million before issue costs. The rights issue is covered to 70 percent by subscription and guarantee commitments. The issue is carried out to scale up operations in connection with the planned commercialization of aXiphen® in poultry feed and to repay part of the convertible loan taken out in April 2022. The board has also decided to take out a new convertible loan from Formue Nord of approximately SEK 10.53 million. On March 24, the outcome of the completed rights issue was announced. A total of 4,960,689 shares were subscribed and the rights issue was thus 70 percent subscribed. Through the rights issue, approximately SEK 34.7 million will be added to aXichem before issue costs. A total of 3,608,646 shares, corresponding to approximately 51 percent of the rights issue, were subscribed with the support of subscription rights. In addition, 1,352,043 shares were subscribed without the support of subscription rights, corresponding to approximately 19 percent of the rights issue, of which approximately 12 percent of the rights issue refers to subscription attributable to issue guarantees.
Incentive program – Employee stock options
At the annual general meeting on May 31, 2022, it was decided on an option program of series 2022/2026 for employees and key persons in the company comprising 400,000 options with the right to subscribe for 400,000 A shares. As of the balance sheet date, 270,000 options were allocated to staff and key persons, of which 33,750 were vested.
The employee options are earned over 4 years, with a quarter each year, provided that the participant is employed by or otherwise engaged in the company on the grant date. The staff options are awarded free of charge. Earned employee options can be exercised during a three-year period, however no earlier than three years after the respective grant date. Each employee option gives the right to subscribe for 1 A share at a subscription price that corresponds to 140 percent of the volume-weighted average price for the company's A share during the five trading days immediately preceding the day on which the employee options are awarded. The subscription price and the number of A shares to which each employee option entitles may be subject to recalculation as a result of a bonus issue, split, issues or similar measures. In order to enable the delivery of shares according to the incentive program, it was also decided to issue a maximum of 400,000 warrants.
Certified Adviser
Västra Hamnen Corporate Finance is aXichem’s Certified Adviser.
Ownership structure
For information about the company's owners, see the company's website www.axichem.com. under Investor Relations/investor structrue. For information on insider trading, see the Financial Supervisory Authority's register.
Number of shares
The number of shares and votes in the company as of 31 March 2023 was 16 535 636 and the company’s share capital amounted to
3 307 127.2 SEK. The company has only one class of shares, shares of series A, with 1 vote per share. The quota value is 0.20 SEK per share.
During March, the company carried out a rights issue, which was registered in April. The rights issue increased the number of shares in aXichem by 4,960,689 shares from 16,535,636 shares to 21,496,325 shares and the share capital increases by SEK 992,137.80 from SEK 3,307,127.20 to SEK 4,299,265.
Personnel
The group had as of 31 March 2023 seven employees.
Significant risks and uncertainties
Regulatory issues are considered to be the single largest risk for the company. The effects of Covid-19 still have some impact on the company’s operations in Asia. The changed security situation in Europe and the tragic development in Ukraine do not currently affect aXichem’s operations, but we are following the development closely in order to be able to manage any possible effects.
Review
This interim report has not been reviewed by the company’s auditor.
Financial calendar
Annual Report 2023-05-26
Annual General Meeting 2023-06-16
Q2 Report, Jan – June, 2023 2023-08-23
Q3 Report, Jan – Sept, 2023 2023-11-22
Year End Report 2023 2024-02-21
The Board of Directors and the CEO assures that the interim report provides a fair overview of the company’s operations, position and results, and describes the significant risks and uncertainties that the company faces.
Lund, 24 May 2023
The Board of Directors of aXichem AB (publ)
The information was submitted, by the contact person, for publication on May 24, 2023, at 08:30 AM CET. The report is published on the company's website under Investor Relations. Direct link to the report: https://www.axichem.com/investors-relations/#financial-reports
Torsten Helsing, CEO, aXichem, Ph+46 70 686 33 55. Email: torsten.helsing@axichem.se
aXichem’s business idea is to develop, patent and market natural analogue industrial compounds. The Company primarily works with phenylcapsaicin a structural analogue of capsaicin with a wide range of applications, such as feed additives, nutraceuticals and certain pharmaceutical areas. aXichem’s shares are listed on NASDAQ First North Growth Market under AXIC A. Certified Adviser: Västra Hamnen Corporate Finance, www.vhcorp.se. Read more about aXichem at www.axichem.se