Manufacturer of microalgae products Martek Biosciences has reported revenues of $11.4 million (€12.2m) for the second quarter of 2002, up from $4 million for the second quarter of 2001. The three-fold increase was attributed to sales of nutritional products which increased by more than 250 per cent for the quarter compared to the same period in 2001.
For the six months ended 30 April 2002 the company saw revenues of $17.4million, up from $7.5 million for the same period in 2001. Losses were also down before the one-time acquisition charge relating to the OmegaTech purchase in April this year.
Henry Linsert Jr., CEO of Martek, said: "I am pleased that nutritional oil sales are continuing their rapid growth in infant formula. With the recent OmegaTech transaction, they now are poised for introduction into more general food and beverage products as well."
Martek makes specialty nutritional oils for infant formula, supplements and food ingredients to improve cardiovascular health and fluorescent markers for diagnostics and gene and protein detection.
Before taking into account a one-time charge of $15.8 million relating to the acquisition of DHA producer OmegaTech on 25 April 2002, the net loss for the second quarter would have been $2.1 million or $.10 per share, and the net loss for the six months ended April 30 2002 would have been $5 million or $.25 per share.
Approximately one-third of the OmegaTech purchase price was allocated to research projects in which technical feasibility had not yet been established, said the company, resulting in a one-time charge of $15.7 million under applicable accounting rules.
Including the one-time charge, Martek's net loss for the second quarter was $17.9 million or $.84 per share, and the net loss for the six months ended April 30 2002 was $20.8 million or $1.01 per share.
While sales of the aforementioned nutritional products increased by $8 million for the second quarter, and $11 million or 196 per cent for the first six months of 2002, sales of fluorescent marker products also increased $60,000 or 53 per cent in the second quarter, and by $263,000 or 219 per cent for the first six months of 2002 compared to the same period in 2001. This was attributed primarily to increased sales from a distribution agreement with PerkinElmer Life Sciences, begun in early 2001.
With the sale of the stable isotope product line in November 2001, overall sales of other products decreased 57 per cent for the second quarter, and by 56 per cent for the first six months of 2002, compared to the same period in 2001.
Martek's cost of sales, including costs associated with both ARA and DHA production, increased to 73 per cent of revenues from product sales and royalties for the second quarter, up from 60 per cent for the 2001 second quarter. The company said its gross profit margins are most significantly impacted by the cost of ARA oil (as compared to DHA oil), currently manufactured by DSM.
ARA makes up around two-thirds of Martek's product sales to infant formula licensees. The company is hoping that complete amortisation of the start up costs of DSM (currently included in the cost of ARA) and increased volume purchases will lower the cost of Martek's ARA oil significantly during the third quarter of 2002, and improve gross profit margins.
DHA production costs were high during the quarter because of equipment problems, said Martek. The company also referred to construction at its Winchester plant, begun in October 2001, which should increase its fermentation capacity and double production capacity when finished in the autumn of 2002.
The company expects a manufacturing agreement with FermPro for DHA production to help it meet market demand in the third quarter.
Research and development costs increased by 9 per cent in the second quarter and by 3 per cent over the six month period when compared to the same period in 2001. These costs should decline as development projects move into production stages.Besides the recent acquisition of OmegaTech, Martek also recently announced a non-exclusive licence agreement with a subsidiary of Heinz to market infant formula supplemented with the company's nutritional oils in Australia, New Zealand and certain Pacific Islands. Martek received an initial cash payment and will receive ongoing royalties with use of its oils.
In a statement the company said: "Management believes that while quarterly results may show fluctuations in product sales, the outlook for future revenue growth remains positive and that, in fiscal 2002, sales of nutritional oils into the infant formula and adult food and supplement market will continue to grow.
"Although OmegaTech's historical sales into the adult food and supplement market have been minimal, management anticipates that over the next few years this business will expand and represent a larger potential market than infant formula," it continued.