People invest in companies for many reasons, I look for clean or disruptive technology, but all investors have one thing in common, we want to make money.
I look for companies at an inflection point, where they have proven their technology, proven their ability to scale, and are ramping sales, awareness, and revenue. Find those things, and in my experience, you have found a winner.
I have used this method to maintain an average peak growth of 318% in my public portfolio. Please know that I am not paid by any company or by my investing community; if I am writing about it, I own it.
Avivagen Inc. (VIV:TSX.V; VIVXF:OTCQB) is now part of my portfolio and one that I expect to do exceptionally well from what I believe to be the bottom or near bottom of the small-cap side of this recession. I am not alone in this assessment. It is currently sitting at $0.14 with a 12-month target of $1.00 from Zaks and $1.00 from Noble Capital Markets.
Avivagen’s product has human, pet, and agricultural applications, but I’ll be focusing on the AgTech side for this article because it provides near-term inflection. To put it simply, Avivagen improves the overall health and production of cows, poultry, fish, and swine
The best part of all of these orders is that animal feed is a recurring business, and Avivagen has never lost a customer. Think about what that means; they understand the benefit and cannot find any other substitute (I love well-written patents).
Avivagen has already been used to treat more than 35 million livestock. I honestly feel there is more blue sky potential with human applications, but most of us are near-term investors, and in all honesty, most people rent their stocks rather than owning them for the long haul.
If you just want to hear about the financial side of things, scroll down a few paragraphs. I prefer to really understand my companies and thoroughly know them inside and out. Since my family is tired of hearing me tell them all about the science or total addressable markets involved, I am here talking to you.
Avivagen has patented OxC-beta; you can consider it to be a new vitamin. It is a fully-oxidized version of beta carotene. The oxidation makes a huge difference, imparting a whole range of anti-inflammatory and immune optimizing characteristics. As mentioned, it can be used in multiple animals and reduces reliance on antibiotics while improving output and general animal health.
The patents themselves are pretty interesting. They cover all carotenoids (there are over 600) and any method of oxidatively transforming them. Again, I am going to focus on agriculture, but I just want to remind you that this could become its own class of ‘vitamin’ and that the human supplement market
The results are impressive: increased milk production in cows, decreased mastitis, less piglet death in swine, and better coloring in poultry. While Avivagen does not market this as a replacement for antibiotics, it has been shown to reduce somatic cell counts.
The global agricultural feed market is over $350 billion USD. The agricultural feed industry is slow-moving and dominated by a few massive players and tight purchasing margins. In order to receive an order in this sector, the ag company typically runs a trial, and because of this, there have been over 40 field and clinical trials done on OxC-beta.
A recent customer-sponsored study showed an increase in milk production of 9.7% in dairy cows, with an increase in milk fat. This is a massive improvement, especially when you consider that the cows are only given 3 grams of OxC-beta a day.
Sustainability
If you know me and my investing style, you know money alone is not enough to move me; the company has to make the world better. How does more milk make the world better?
Greenhouse gas emissions from livestock equal 7.5 gigatons of CO2 equivalent annually, representing 14.5% of human-induced GHG emissions. Dairy cows make up 20% of those livestock emissions. If we were to add OxC-beta to the feed of all 270 million dairy cows worldwide, we would have 9.7% more milk, or better yet, we could use 9.7% fewer cows and cut our GHG emissions by 145,500,000 tons.
No, I don’t think that we will be able to get OxC-beta into the hands of every dairy farmer in the world, but looking at the orders that they have been receiving from major agricultural feed companies, it is clear that the big boys of ag have taken notice.
Recent news releases show the progress.
On August 11th, they announced a 4-ton repeat order from Asia.
August 3rd, they announced a large order for Brazil for trials with several large poultry and cattle producers.
In May, they received clearance to sell in China, the world’s largest commercial animal feed market.
In March, they received an order from an “influential” customer in Mexico.
In October, they signed an eight-year deal with AB Vista as their exclusive distributor of OxC-beta in the U.S., Brazil, and Thailand, all huge markets. The deal includes minimum sales guarantees that ramp up after the first year.
The best part of all of these orders is that animal feed is a recurring business, and Avivagen has never lost a customer. Think about what that means; they understand the benefit and cannot find any other substitute (I love well-written patents).
Are you ready for some math yet?
Last year, it looked like they sold around 10 tons of OxC-beta, hence our current price point. Today’s order from Asia alone is 40% of last year’s total. They have the capacity for 120 tons (which could be quickly doubled to a few hundred thousand), and they have mapped out a plan for 1000 tons capacity.
While the company won’t lay out its pricing for competitive reasons, an examination of its financial reports and its sales over the last year lead me to believe that they are pricing the product at approximately $170k-180k per ton.
Their margins should be 35-40% on the ag side and more than 100% on the human side.
Sales are ramping year over year, and I fully expect Mexico alone to be able to bring in 10 tons a month. I cannot even begin to calculate how much business they could derive from their recent entry into China and Brazil, let alone Thailand.
A clear pattern can be seen: trials = recurring sales.
Avivagen is cashed-up with a private placement that closed on July 6, 2022. (I participated with the StreetSmart Deal Flow group back in May.) For more information, click here.
The chart shows solid accumulation over the past few months, and the price appears to have bottomed.
The real play here is the rapid global expansion with inroads in the largest agricultural markets. Maybe they sell a vertical or the whole company, or better yet, they become a dividend player? Either way, I believe the share price will be moving up dramatically along with sales.
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PennyQueen Disclosures
I have not and will not be compensated for this report in any way. I write reports on my favorite picks; this is meant to be educational and not investment advice, as I am not an investment advisor, just a mom on a mission to make the world better and make money along the way.
Disclosures
1) PennyQueen: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Avivagen Inc. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Avivagen Inc. Please click here for more information.
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