Good news for Krill oil is good news for Neptune Biosciences (TSXV:NTB), says Byron Capital Healthcare analyst Douglas Loe, even if Neptune isn’t the one selling it.
This morning, Norwegian fishing and seafood processing company Aker Biomarine Group reported its Q1, 2012 results. While the company’s overall revenue was up only slightly, to €10.9 million from €9.2 million in the same period a year prior, Aker says the bulk of its gains were made on the back of its single Krill oil harvesting vessel in the Antartica. Aker says it sold 68 tonnes of their Superba branded Krill oil in Q1, an increase of 20% over the 56 tonnes it sold in last year’s Q1.
Loe says the Krill oil market is not mature, so Aker’s success is more likely to reflect Krill’s overall growth than anything negative Neptune is doing. He believes growth in Superba demand is a positive for all Krill oil forms “…including Neptune’s NKO/EKO that generated record revenue in recent quarters”. In a research update to clients today, Loe maintained his BUY rating and $6 twelve-month target on Neptune.
At a manufacturing facility in Sherbrooke, Neptune Biosciences manufactures Krill oil. Krill are shrimplike crustaceans that are the primary food source of marine life such as salmon, whales and rockfish. Recently, fish oil from the tiny algae and plankton eaters has come to be prized as a dietary supplement for human consumption. A 2007 study in the Journal of the American College of Nutrition showed the oil, which is extremely high in omega 3, decreased inflammation and arthritic symptoms in cardiac and arthritis patients. Other studies showed it was effective in raising HDL, or “good” cholesterol, and lowering triglycerides.
Loe believes the rising tide of omega-3 oil adoption will lift all Krill oil boats, or at least the leaders. This means that both Neptune and Aker, who have been entangled in an ongoing patent dispute on fish oil, may emerge as the winners in a burgeoning niche. Loe believes Krill oil will rise from its current position of 4.8% worldwide market share because it has superiority bioavailability over other over triglyceride-based marine oil forms.
Share of Neptune closed today up .6% to $3.12.