With more fast food chains jumping on the plant protein bandwagon, Beacon Securities analyst Spencer Churchill is liking the opportunity landscape for biotech company Burcon NutraScience (Burcon NutraScience Stock Quote, Chart, News TSX:BU), which just received no-objection letter from the FDA regarding two of its pea proteins.
In an update to clients on Monday, Churchill maintained his “Buy” rating and $2.00 target price for BU, which translated to a projected 12-month return of 55 per cent at the time of publication.
Vancouver-headquartered Burcon on Monday announced that the US Food and Drug Administration had issued a GRAS (Generally Recognized As Safe) no-objection letter for Peazazz, which is geared at the beverage market, and Peazac, which Burcon is targeting at the bar, meat-analogue and baked goods market.
Burcon had already announced in June, 2018, that it received self-affirmed GRAS status from the FDA, a process that allows for commercial sale unless challenged by a competitor or by the FDA. The further step of the GRAS letter of no objection means that the FDA has reviewed all of the submitted scientific data and has no questions or concerns regarding safety.
“We are pleased to have obtained GRAS-notified status for our novel pea proteins,” said Johann F. Tergesen, Burcon’s president and CEO, in a press release. “Receipt of a no-objection letter for Peazazz and Peazac is a significant commercial milestone and is important for the acceptance and use of these proteins by global food and beverage companies.”
Churchill says that while the announcement comes as no surprise, it’s a significant step for Burcon, nonetheless, particularly considering the buzz that plant proteins are currently generating.
The analyst points out that Dunkin’ Brands announced on Monday that it will be launching a Beyond Meat breakfast sandwich nationally in early November, after having trialed the product at 163 Manhattan locations earlier this year.
The news comes after McDonalds’ announcement in late September that it will launch a 12-week trial of a new plant-based burger in select locations in Southwestern Ontario starting September 30.
“While we had little doubt Burcon would receive this approval, it is still an important milestone as it relates to the acceptance and use of these proteins by potential customers (particularly the large global food and beverage companies),” writes Churchill.
“In addition, it is positive to see yet another major QSR go national with plant-based products, a giant like McDonalds get more aggressive and continued investment by industry players, all of which speaks to the strong demand for plant-based proteins,” he writes.
Churchill says that Burcon’s Merit joint venture in a new $65-million pea and canola protein production facility now has its corporate website going live and says that the JV will likely get more vocal in the near term, thus allowing Burcon to leverage some news flow surrounding Merit.
The analyst thinks that Burcon will generate fiscal 2020 revenue and EBITDA of $91,000 and negative $4.5 million, respectively, and fiscal 2020 revenue and EBITDA of $1.6 million and negative $3.1 million, respectively.