Establishes New Operating Entity; Enters into Exclusive License Agreement
Vancouver, British Columbia, May 23, 2019 — Burcon NutraScience Corporation (TSX: BU), a global leader in developing functionally and nutritionally valuable plant-proteins, is pleased to announce that it has entered into a joint venture partnership with an investor group to build a new C$65 million pea-protein and canola-protein commercial production facility in Western Canada. The protein production facility, which is planned to initially process approximately 20,000 tonnes of peas per year starting in mid-2020, will produce Burcon’s Peazazz® and Peazac™ pea proteins, as well as Burcon’s Supertein®, Puratein® and Nutratein® canola proteins.
“Today’s announcements constitute a truly transformative event for Burcon, and a new chapter in Burcon’s development focused on bringing the company’s unique plant proteins to market directly as a producer.” said Johann F. Tergesen, Burcon’s president and chief executive officer. He added: “Having the capacity to produce both our unique pea proteins, as well as our canola proteins, in our own production facility is a key pillar of our differentiation strategy. The ability to blend our pea and canola proteins to create nutritionally unparalleled plant protein combinations, while preserving the highly desirable functional properties the proteins naturally possess, will give us a true competitive advantage. We look forward to offering our pea and canola protein products to customers and consumers in Canada, North America and worldwide.”
Highlights of the Production Plant and Joint Venture Agreement
Burcon Functional Foods Corporation
Burcon has established – through a joint venture partnership with an investor group with extensive manufacturing and sales experience in the protein industry – a new operating entity, Burcon Functional Foods Corporation (“Burcon Foods”), which will own and operate the new protein production facility. Burcon Foods has entered into a license agreement with Burcon for the production, sale and distribution of Burcon’s pulse proteins, including Peazazz® and Peazac™ pea proteins, as well as Supertein®, Puratein® and Nutratein® canola proteins (“the License Agreement”).
As a standalone entity, the management, sales, marketing and production personnel of Burcon Foods will be direct employees of the new operating company. Burcon will be responsible for the technology transfer to Burcon Foods, and will also provide assistance (under contract) to support the design, construction and commissioning of the commercial protein production facility.
Burcon has entered into a unanimous shareholders agreement (the “Shareholders Agreement”) dated May 23, 2019 with this investor group to become joint equity owners of Burcon Foods. Burcon currently holds 40% of the issued and outstanding common shares of Burcon Foods and the investor group owns the remaining 60%. Pursuant to the Shareholders Agreement, the parties have agreed that on or before July 2, 2019, they will make capital contributions to Burcon Foods in the aggregate of $10,000,000. The parties have agreed to make further contributions to Burcon Foods on or before September 3, 2019 in the aggregate amount of $10,000,000. Burcon intends to fund its portion of the capital contributions through the net proceeds of an equity offering to contribute $4,000,000 to Burcon Foods on or before July 2, 2019, and a further $4,000,000 to Burcon Foods on or before September 3, 2019.
Burcon Foods funding is expected to include support from Canadian and provincial government agencies and organizations. The investor group has committed to providing up to $16 million in capital contributions. The anticipated funding structure is expected to provide tremendous leverage to Burcon, whereby Burcon’s capital contributions will be limited to only approximately 12.3% of the total project cost, while maintaining 40% equity ownership of Burcon Foods.
Burcon Foods has entered into a twenty-year exclusive License Agreement with Burcon, dated May 23, 2019, to license the technology required to produce, market and sell Burcon’s novel pulse protein ingredients, including Peazazz®, Peazac™ pea proteins as well as Burcon’s canola-proteins Supertein®, Puratein® and Nutratein® (collectively the “Products”). Under the terms of the License Agreement, Burcon Foods will have exclusive rights across all geographic regions and all product uses for Burcon’s pulse-proteins (including pea) and canola-protein technologies. Under the License Agreement, Burcon will receive a royalty on the top-line revenue from the sale of the Products by Burcon Foods.
Advanced Stage of Commercial Development
Over the past twenty-four months, Burcon has worked with a number of fast-moving consumer goods companies (“FMCG companies”) in order to provide those FMCG companies with samples of Burcon’s novel protein ingredients. Some of the initial investigations by these FMCG companies have evolved into product development projects, and through this work Burcon has developed a valuable measure of confidence over both the demand and pricing for the protein products and byproducts that will be produced at Burcon Foods’ new pea and canola protein production plant.
Burcon and Burcon Foods expect to have the production facility built by mid-2020. Burcon has engaged Excel Engineering of Fond Du Lac, Wisconsin to assist the Company with final process design, general site concepts, building structural and architectural systems, and project oversight through to commissioning. This engineering work, which is already underway, is on the critical path of the project timeline and the engineering work completed to date has facilitated decision-making for the final building and equipment specifications.
Burcon expects to provide additional updates on the details pertaining to, and the status of the commercial production plant build-out in the near term.
About Burcon NutraScience Corporation
Burcon is a leader in developing functionally and nutritionally valuable plant proteins. The company has developed an extensive portfolio of composition, application, and process patents originating from a core protein extraction and purification technology. Burcon’s CLARISOY® soy protein — under license to the Archer Daniels Midland Company — offers clarity and high-quality protein nutrition for low-pH beverage systems, and excellent solubility and exceptionally clean flavour at any pH; Peazazz® is a uniquely soluble and clean-tasting pea protein; and Puratein®, Supertein® and Nutratein® are canola protein isolates with exceptional functionality and valuable nutritional profiles. For more information about the company, visit www.burcon.ca.
The TSX has not reviewed and does not accept responsibility for the adequacy of the content of the information contained herein. This press release contains forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements or forward-looking information involve risks, uncertainties and other factors that could cause actual results, performances, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward- looking statements or forward-looking information can be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “project,” “estimate,” “expect,” “believe”, “future,” “likely,” “may,” “should,” “could”, “will” and similar references to future periods. All statements other than statements of historical fact included in this release are forward-looking statements, including, without limitation, statements regarding expectations, intentions and plans contained in this press release. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements or information. Important factors that could cause actual results to differ materially from Burcon’s plans and expectations include the actual results of business negotiations, marketing activities, adverse general economic, market or business conditions, regulatory changes and other risks and factors detailed herein and from time to time in the filings made by Burcon with securities regulators and stock exchanges, including in the section entitled “Risk Factors” in Burcon’s annual information form dated June 18, 2018 filed with the Canadian securities administrators on www.sedar.com. Any forward-looking statement or information only speaks as of the date on which it was made and, except as may be required by applicable securities laws, Burcon disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Although Burcon believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance, and accordingly, investors should not rely on such statements.
CLARISOY is a trademark of Archer Daniels Midland Company.
Media & Industry Contact:
Manager, Business Development
Burcon NutraScience Corporation
Tel (604) 733-0896, Toll-free (888) 408-7960