Neptune Wellness Solutions Inc.
Q3 2015 Earnings Call Transcript

Published: 15 Jan 2015

[Operator:]

Good day, ladies and gentlemen. And welcome to Neptune Technologies & Bioresources Third Quarter Fiscal Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. John Ripplinger, Director of Investor Relations at Neptune Technologies. Sir, you may begin.

[John Ripplinger:]

Well, thanks, Operator, and good morning, everybody, and thanks for joining us today. As mentioned, the purpose of today’s call is to review the results for the third quarter ended November 30, 2014. Joining me today are Mr. André Godin, Interim President and Chief Executive Officer; Pierre Lemieux, Chief Operating Officer of Acasti; Pierre Fitzgibbon, Chairman of the Board of Neptune and Board Member of Acasti; and Jim Hamilton, Neptune's new President and CEO effective February 2, 2015. Pierre will start off with a discussion of some the company's important strategic initiatives. Followed by, Jim, who will make a few introductory comments. André will then review Neptune's operational and financial highlights. Afterwards Pierre Lemieux will discuss Acasti’s operational highlights. We will then open up the lines for questions. Given that Jim has not yet officially joined the company. He will not be in a position to answer Neptune related questions in the Q&A portion of today's call. Before we begin, I want to remind you that today’s remarks contain forward-looking information that represent our expectations as of today and accordingly are subject to change. We do not undertake any obligation to update any forward-looking statement except as maybe required by Canadian and U.S. Security Laws. A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risks. Results may differ materially, details on these risks and assumptions are in our filings with the Canadian Securities Commissions and with the Securities and Exchange Commission. With that, I will turn the call over to Pierre Fitzgibbon.

[Pierre Fitzgibbon:]

Thank you, John, and good morning, everyone. Let me begin by stating that your Board of Directors is very pleased to have delivered on a most important initiative when we recently appointed Jim Hamilton as President and CEO of Neptune. His appointment marks a key milestone for the company. As you know, Jim has a deep understanding of the nutraceutical space, strong industry connections and a proven track record for driving business excellence. He brings complementary abilities to the current management team and he is the right person to lead the corporation forward into the next phase of growth and success. Jim will be getting out to meet many of you once he officially comes on Board in February. We actually have dates lined up for Montréal and Toronto, where I will be with André and Jim, and meet investors and we will soon book in the U.S. Turning to other strategic matters, I’d like to comment on yesterday's announcement to merge NeuroBioPharm with Neptune. The transaction will benefit NeuroBio shareholders by giving them Neptune securities as consideration for their NeuroBio securities. Hence forth they will continue to participate in any value increases associated with NeuroBio activities and will benefit from owning shares in the public company with larger size, scale and liquidity. The transaction also further simplifies our overall corporate structure and reduces costs associated with NeuroBio being a separate legal entity. Neptune holds over 90% of all classes of NeuroBio shares, which is a sufficient number to approve the arrangement. We intend to vote in favor of the transaction. In the coming days, NeuroBio will be sending an information circular to all shareholders on the arrangements, all the details will be then evolves in this circular. Notwithstanding, this corporate re-org, let me assure you that Neptune will want to build on NeuroBio past initiatives, while focusing on the nutraceutical side of the neurological application going forward. Moving along to other matters, our normal course issuer bid or what is commonly referred to as share buyback program was approved by the TSX at the end of October 2014 as expected. To-date, no shares have been purchased in connection with the program. This isn’t because we change our mind as we are ready to act. However, given multiple strategic initiatives under analysis and Jim coming on Board in a few weeks, we felt compelled to wait a bit and conclude on our cash allocation for the coming fiscal year. This will be finalized in February when we will approve our 2015, ’16 fiscal year budget. While André will cover the operating and financial highlights later, let me address some of the key elements of our quarterly results. Aside from our ramp up cost, our results not had any unusual elements. As stated in the prior press release, we reach an annualized capacity of 150 tons in early November. We expect to incur some additional ramp up cost going forward but they will decrease as we complete the sustainability of this production level and introduce production efficiencies. Finally, we are pleased with our progress on the sales front, as we have increase revenue over the last quarter in the same period last year. As stated on our last call, we expect continued improvement with increase revenue sequentially in Q4. Our target remains to sell on the run rate basis our 150 tons of premium krill oil by approximately mid-year 2015. To conclude my remarks, let me provide you with an update on our strategic initiatives highlighted during our last quarterly call. You will recall that we had identified five-value creation initiatives. We made progress since then allowing Jim to refine these drivers when he comes and further plan their execution. On the transition to become a value-added supplier, we made progress in launching new NKO products and we are analyzing new marine biomass sources, as well we are looking to further enhance our investment in the krill benefits of our product portfolio. As an important stakeholder of Acasti, Neptune is committed to offer its full support for the manufacturing the raw material needed by Acasti to conduct successfully a clinical development of CaPre that will translate ultimately in facilitating legitimizing Neptune’s commercials efforts and initiatives promote health benefit of its krill product. We are also continuing to focus on our go-to-market strategy in the key distribution segments. Integrating our supply chain via commercial arrangement or possibly partnerships is very important to better control our sourcing both from a quality and cost perspective. We are engaged into analyzing our alternatives as we speak. Finally, optimizing our Sherbrooke manufacturing facility is necessary to deliver adequate profitability. Now that we are producing at the targeted 150 ton level, we will focus on reducing our process cost under the current production level and increasing the 150 ton level by an incremental targets of 50% with limited capital expenditure. Our focus is to maintain production of high-quality krill at an optimal cost while developing additional markets as we increase production. Although our plant configuration can eventually accommodate 300 tons as previously stated with some additional capital, we will build up extra capacity sequentially as increased demand for our premium krill products materializes. These five drivers are the foundation of our future success. We have accomplished a lot in recent quarters and our goal is to build on this positive momentum as we prepare to execute on multiple fronts in 2015. We look forward to realizing the company's full potential in both the near and the long-term. With that, I’ll turn over the call to Jim.

[Jim Hamilton:]

Thanks Pierre and thank you for the opportunity to be here today to make a few introductory comments and to listen in. I’m very excited both professionally and personally to be joining Neptune in February. From a professional perspective, I’ve worked in nutrition industry for 30 years. First of all in the Roche, then DSM and have a great passion for the health benefits that nutrition products provide. In this respect, I have a special passion for omega-3s and omega-3 krill oils in particular, which offer a number of differentiated benefits. Neptune pioneered the krill oil market and its flagship product NKO offers superior levels of phospholipid omega-3 combinations. I watched Neptune over the years and despite some obvious challenges, I’ve been particularly impressed by the strategic steps they’ve taken in recent history to enhance their business model. And there is still work to be done but I believe we are putting in place necessary ingredients for success. From a personal perspective, Neptune is a leader in omega-3 space and the company has impressive committed management team and board. These prepare important considerations for me. I’ve also known Pierre for many years and have great personal respect for him. He along with his fellow board members are industry leaders with strong track record of value creation in respective areas. And finally, as a Canadian and former Montrealer, I welcome the opportunity to return to my roots. All in, it’s made for a very compelling opportunity. So in closing, I look forward to meeting with many of you in the months ahead. And with that I’ll turn the call over to André for discussion of Neptune’s operating highlights.

[André Godin:]

Thanks Jim. On behalf of management and employees, I would like to personally welcome Jim to the Neptune family. We are creating a strong foundation for the future and we look forward to building on past successes under Jim’s leadership. Turning to the operation, our business model continues to strengthen with the company achieving a number of important milestones during Q3. Most importantly, we completed the ramp-up of production at our Sherbrooke plant, resumed shipment of Neptune manufactured krill oil and of course announced the appointment of Jim as our new CEO. With the plant operating at full production capacity of 150 metric tons annually and demand expected to be in line with this by around mid-2015, we have implemented a special program to enhance plant output incrementally. This includes looking at increasing plant efficiencies and optimizing processes using as little capital as possible. On top of this, as part of our ongoing strategic review, we are looking at possibly strengthening our supply chain. We expect sales momentum to continue to build which should have a positive impact on future quarter revenues and profitability. Going forward, revenue expansion will be supported by our new condition specific formulations and expansion into new territories. Production of our new formulation should get underway in Q4 and we should begin to generate revenues from them in the following quarter. Turning to our intellectual property, the inter parties review proceedings before the U.S. patent and trademark office regarding certain claims of Neptune 351 composition of matter patent took place in fall 2014. And a decision is expected to be rendered by mid-March 2015. We continue to believe that we are well-positioned to succeed. As previously announced, Neptune's royalty bearing license agreements with Aker BioMarine and Enzymotec are dependent on the outcome of the USPTO review. The USPTO decision has no impact on our agreement with Rimfrost. Now turning to the financial. I’d like to remind you that our results are in Canadian dollars and today's remarks may contain forward-looking statements as well the Sherbrooke incident render as you realize difficult analyst goal comparisons between year-over-year results. As usual, my comments today will focus on the quarterly results for our nutraceutical business. Consolidated information can be found in our press release and Neptune's consolidated financial statements and related MD&A available on SEDAR, EDGAR and the investor section of Neptune's website. Turning to the results, nutraceutical revenue for the third quarter were $4.7 million, up from $2.6 million the prior quarter and $4.4 million in the prior year. Revenues for the current quarter were largely derived from the sales of Neptune manufactured krill oil and partially through the sales of oil obtained through Neptune's third-party supply agreement. The adjusted gross margin as a percentage of revenues was 27% for this quarter, up from 14% the prior year when sales were derived entirely from the sales of commodity krill oil. The adjusted margin for the current quarter exclude incremental cost related to the plant ramp-up of $854,000. We expect plant ramp-up cost to continue to decline going forward in line with us reaching the 150 ton level and through the introduction of production efficiency. Year-over-year quarterly adjusted EBITDA also improved, coming in at negative $2 million versus negative $4.2 million in the prior year. The improvement is largely due to the lower professional fees of approximately $1.7 million relating to the protection of the company's IP. Neptune recorded a quarterly net loss of $3.2 million for the nutraceutical segment improving over the net loss of $6.9 million for the prior year. The improvement is due to a decrease in stock-based compensation expenses and professional fees, along with a foreign exchange gain resulting from the weaker Canadian dollars versus U.S. Switching to liquidity, our quarter end consolidated cash and short-term investment totaled $34.6 million. Of this, $19.6 million related to Acasti. Now, I will turn the call to Pierre Lemieux for a discussion of Acasti’s operational highlights.

[Pierre Lemieux:]

Thanks, André. Good morning, everyone and best wishes for 2015. During the third quarter, we continue to make progress on our clinical development program. We received full data for our recently completed Pharmacokinetic or a PK trial, and final results for our Phase II TRIFECTA trial are expected to be available by the end of February 2015. The receipt of full TRIFECTA data in February will not impact our clinical program with the TRIFECTA results already known. In short, CaPre successfully met the trial’s primary endpoint, achieving a statistically significant mean placebo-adjusted decrease in triglycerides from baseline in patients with mild-to-severe hypertriglyceridemia without any safety concerns. An expectation of full TRIFECTA results being available soon, we have gone ahead and ask U.S. FDA for a meeting to discuss and express, leading towards pivotal Phase III trials in North America. The meeting is expected to take place in Acasti’s first quarter ending May 31, 2015. Following this, we should be better placed to provide with details on our next steps to finding the path forward. In anticipation that we would eventually receive approval to conduct a Phase III trial, we are ramping up our production of CaPre clinical material, respecting of post current good manufacturing practices to ensure that the quality of product in sufficient quantities is available. This will allow us to avoiding the delays due to inventory shortages. Now, switching tracks for a moment, I’d like to speak about the NASDAQ Notification we received in November 2014 regarding minimum bid price requirements. As previously highlighted, this has no immediate effect on Acasti’s NASDAQ listing. To regain compliance, Acasti’s shares must close at $1 per share or more for a minimum of 10 consecutive business days. The company has until May 6, 2015, to meet listing requirements. If Acasti does not regain compliance by May 6, it may be eligible for an additional 180 calendar day expansion. The corporation is currently evaluating all available options to resolve the deficiency and regain compliance with the Minimum Bid Price Rule. In closing, I would like to highlight that it is well recognized that developing a new drug candidate is a long-term commitment that is not without challenges and constraints. Moving from the clinical testing stage to the marketplace will require that safety and efficacy as confirmed. Fortunately for Acasti, clinical trials conducted today have shown efficacy without any safety concerns in hypertriglyceridemia patients. In addition, Acasti is protected by strong intellectual property. In short, we appear to have the necessary ingredients to reach our final goal, the commercialization of CaPre in the U.S. We still need to meet a number of significant clinical and regulatory milestones ahead. Fortunately, with an experienced management group and a team of specialists, both deeply committed to comprehensive and meticulous pharmaceutical development program, we are well positioned to succeed. With that, I will turn the call back to, over to John.

[John Ripplinger:]

Thanks, Pierre. This ends our formal remarks for today. I will now turn the call over to the operator for the Q&A portion of the call. Operator?

[Operator:]

Thank you, sir. [Operator Instructions] We have a question from Robin Cornwell from Catalyst Research. Your line is open. Please go ahead.

[Robin Cornwell:]

Good morning and special welcome to Jim. Look forward to meeting you soon. I guess, the first question I really have is the plant expansion. And going forward when you mentioned that you can, first of all improve the process or the efficiency of the existing plant but what about the -- also the steps of going forward to marginally increased production beyond the 160? And also as a follow-up to that is your expectations for margins were 27%. Are you still comfortable with moving, I think it was to the 35%, 40% level, so correct me if I’m wrong there?

[Pierre Fitzgibbon:]

Okay. Let me -- this is Pierre Fitzgibbon. Let me start with answering the question, then I will turn over after to André who can provide a little bit more detail. I think first, let’s go back. The plant configuration was build the blocks, so to speak was built to provide the capacity for 300 tons. However, the equipment that were put in were for 150 and that’s been stated a while. We as you know have reached the 150 level, sort of late in the year and the focus right now is really to work. Now that we’ve got the production about 150 is to work the process improvement, try to reduce our costs because the focus was to ramp up and this is a brand new plant. So there are some work to be done and I would say there is few months ahead of us and where we’ve launched under André’s leadership, a program to reduce that cost because it's a very, very important element for your last part of the question. After that, how do we get to the 150 to 300 is a key question and I think there's an issue of cost of capital and an issue of market. On the cost of capital, we've discovered true, playing without toys, so speak that. There are some low hanging fruits out there whereby with minimal capital and I can’t give you a precise answer on that right now. With minimum capital, we can ramp up this production from 150 to over 200, slightly over 200 and we don’t know exactly the level. And that obviously is going to be done because it’s going to provide a more volume to be sold, but equally important allocate our fixed costs over larger volume, hence using our costs. So also we are going to be benefiting from that increased pool. Now to move from that level, call it 210, 215, 220, 225, to move from that level to 300 will require more significant capital and I think that's the time where we need to really look at the market and make sure that we're lounging in the market premium oil that we can get the pricing for. And I think that’s something that through Michel’s effort, Timperio, we will be watching very, very closely. Just like in my remark, I said that we will build sequentially but our first focus is to reduce costs to 150. Second focus, to get up as much as we can with low capital and then after that we have to really look at the market because as you know, we're rebuilding our market because we were out of markets for kind of year and a half. And lastly, to your question of margins, there is no question that our oil has unique capabilities or USP or unique and that we are working very hard and now we are back in the market to get that premium and the premium that we think we can get should get us to increase our margin because the margin we are having right now obviously include a blend of third-party oil and our own oil. So as we reduce our costs that will have a benefit of course of increase margin and as we also find new customers with our premium oil that will also allow us to move margins. André, I don’t know if you want to add to that?

[André Godin:]

Sounds quite a very complete answer but if I may add, like-to-like Pierre mentioned, yes, I did put in place a committee that is fully dedicated in working on improving efficiency and reducing costs. So it is a top priority at Neptune obviously to work on this model. And in terms of margin, yes, the answer is obviously yes. We expect to reach 35% to 40% margin when we’re going to be fully efficient and maybe a little bit more. But the target is to get back as close as possible to 40% after everything we are working on is done.

[Robin Cornwell:]

Okay. Thank you. And can you give us an approximate percentage of sales this last quarter that were from NKO total sales?

[André Godin:]

I think that and maybe Mike Timperio can correct me if I am wrong. But I think it was more or less about 50-50 percent ratio.

[Robin Cornwell:]

So it would be 50% from the NKO…

[André Godin:]

From third party and 50% from NKO.

[Robin Cornwell:]

Okay. Thank you. And just further update on marketing, you had mentioned the marketing of your new I guess products, Flex and Beat et cetera. Can you just give us an idea what your plan is in marketing?

[John Ripplinger:]

Yes, Michel can address that question.

[Michel Timperio:]

Yes, certainly. We have identified obviously a few players that we think we want to work with. And not to name one, one is a major one, is already committing to taking possibly two of the formulation in the health food store segment. So in terms of a mass market, we are obviously contending to meet some key major players. In terms of our marketing effort, since we’re going into production, we needed to wait thus creating demand in terms of awareness, I should say creating awareness. From a marketing standpoint, we needed to make sure that we’re close to launching before we obviously venture into doing a lot of spending in the product marketing wise. We are just -- we have started some social media campaign, which are very active, order be it on Twitter or our Facebook, and as well obviously we are attending some exhibition where we are pushing now effectively the product because the intention is to launch in terms of availability, the Engreda, ExpoWest used to be called ExpoWest Exhibition in March. So that’s when our marketing in action will be even more enhanced at that point.

[Robin Cornwell:]

Okay. Thank you. And I guess my second question is on Onemia potential I guess for Pierre. Can you just update us on Onemia? We haven’t heard about Onemia for another while. And you did mention in your commentary that you had a plan for Onemia going forward, new marketing program, basically I guess direct commercial in U.S. I am not sure about necessarily new, but can you give us an idea of what your plan is now for Onemia, and possibly, if it’s going to be introduced into Canada?

[John Ripplinger:]

Pierre Lemieux

[Pierre Lemieux:]

All right. So first of all, Onemia is already being marketed in Canada with our distributor, our only distributor called the XYMOGEN. So this is still ongoing. In terms of update there, we are still depending on XYMOGEN to distribute our products throughout the U.S. and we are working hard right now to lower the cost of our product. So I think it’s a matter of improving our cost of goods in order to improve sales of Onemia. I think right now there is more competition in the market. Pricing is the name of the game and we need to improve the costing, although Onemia is again a top-notch product. We use Onemia at Acasti really to pave the way for CaPre. Keep in mind that CaPre -- Onemia is more like a marketing tool for us to really educate the physicians, and this is still ongoing. So we are still distributing samples of Onemia to let the world know that this product is a great product, expensive product though, it’s a niche product. But it makes a lot of sense for us still to carry that product and educate as I say the physician who are CaPre eventually in the marketplace. So this is what I can say here for them.

[Robin Cornwell:]

And would you be getting results from these physicians that we can potentially or you can potentially share with us as to the effectiveness?

[Pierre Lemieux:]

Sure. I mean, this is what we have done in the past. We had collected some actually around 50, 75 cases from those physicians, again all justifying of the quality and the efficiency of the product. This is something that we stopped doing to be honest with you. So we didn’t engage into a Phase IV, so-called the Phase IV after post-marketing, but this is something that we keep an eye on. It may be part of our strategy into future going forward.

[Robin Cornwell:]

Yes. So I think that would be very positive to see some of the results for the impact of what CaPre might, what we expect from CaPre going forward in trials. Thank you very much. I will let someone else.

[John Ripplinger:]

Thank you, Robin.

[Operator:]

Thank you. Our next question comes from Rick Schottenfeld from Coyote Capital. Your line is open. Please go ahead.

[Rick Schottenfeld:]

Hi, guys. First of all, I just wanted to tell you how pleased I am with the management changes that have taken place, the clarity and professionalism on these calls is a stark contrast to what was going on in the past. And I look forward to the continuation of that. In terms of my question, you talked in your prepared remarks about initiatives to strengthen the supply chain. And I was wondering if you could elaborate on these comments a little bit?

[Jim Hamilton:]

Yes, well, and again now the way to what I am going to say. I think there are two issues. One is the quality of the Krill resource has a direct impact on our production cost given the yield that it derives. And I think we are working much closer with fishery’s companies to make sure that we have as close to the pond as possible to the boat access or ability to get the best Krill possible. So that’s all you do that, while I guess you can let your imagination that you can go to commercial arrangement facility partnership. And I think we are actually and André has been leading that. I think we are working very, very closely with this company to see how can we integrate so to speak better that not to be done through corporate integration but certainly through commercial integration. And also link to that is a price because obviously pricing at Krill is a key component of raw material of our end product. So therefore, it’s control of quality, control of price. So obviously working perhaps with less people, with having a continuum in terms of our sourcing allows them to manage their fleet a different way. So maybe André you should elaborate a little bit more, but I think we -- that’s a focus that is paramount to our success. André do you want to explore a little bit more?

[André Godin:]

Yes, I mean, obviously in the past the way we force Krill, we were using many different company from many different countries. So we’ve got closer and closer to few of them. And like you had said, it is critical for us to get the best price and the best quality. So there is steps that we can work with our fishermen to get back. To get by concentrating our volume, making sure though that we have exclusivity and we have supply agreement for long term. Then we can work on price, we can work on mechanics to improve the quality of what we are best. So there is a lot of discussion going on. Obviously, it’s a little bit early stage right now to elaborate too much on that because a lot of disinformation, it remains confidential but there is a lot of efforts towards that front because it’s a big-big part of Neptune success to integrate these operation to Neptune’s future. So remain assure that we are doing everything we can to make sure that we have the best quality, the best partner at the best price.

[Rick Schottenfeld:]

And we’ll do everything we can but short of buying a boat. We’re not going to buy a boat of fish ourselves.

[André Godin:]

No. We’ll not go that far yet. Exactly.

[Rick Schottenfeld:]

Okay. Thank you, guys.

[Operator:]

Thank you. Our next question comes from Doug Loe from Euro Pacific. Your line is open. Please go ahead.

[Doug Loe:]

Great. Thank you very much. And thanks for the overview on the quarter, Pierre and André. So just a couple of things for me, one just kind of a housekeeping item. In your MD&A, you did go to some detail on what your clinical plans still are for MPL XI in mild cognitive disorder and ADHD. I was just wondering if you had any sort of tangible expectations that you might advance either of those program sometime over the next quarter or two or is it still just kind of in the to-do list, Pierre Lemieux?

[Pierre Lemieux:]

Well, regarding this trial, I think, what’s going on with NeuroBioPharm right now. We really need to regroup and better define the plan going forward. So right now I think, we had a couple of proposals and synopsis but we’ve put that on hold for a while just to make sure that with the avenue of Jim, that will be -- that we’ll have the time to discuss and really pick the right group there to work with and the right program.

[Doug Loe:]

Okay. That’s fine. And then just kind of a bigger picture question for anybody who wants to answer, maybe from Jim's perspective on this. And certainly, our sense with the overall omega-3 nutritional supplement category experienced a little bit of market compression over the last couple of years. And I think that it was a few factors that could have played into that and concluding Amarin’s FDA advisory panel review on its anchor study. And of course, select data on associated omega-3s with prostate cancer risk, I think it might have been a contributing factor. Just sort of wondering from anyone who wants to answer, just how you think the industry overall is being addressing the elements from those clinical studies as it relates to the omega-3 category? And to what extent do you think that they might continue to still be the limiting Omega-3 growth overall? And just sort of your sense on our recent clinical data has been impacting Omega-3 as a nutritional supplement class would just be kind of interesting for us, just a kind of think about how NKO and EKO revenue ramp could progress independent of your own manufacturing issues? And I’ll leave with that. Thanks.

[Pierre Lemieux:]

Very good question. I think, we’ll get Jim to work here. So just I think he will provide your macro perspective and then Michel, you can give him more precise that to perspective after.

[Jim Hamilton:]

Yeah. Thanks, Pierre. Doug, that’s a really great question. I think from a consumer market perspective, there is a mantra that I have used before, where science leads market follows. And I think in the consumer nutrition space in particular, the market is very reactive, that’s the news of the day. When we as an industry and we as a company, I have to do with, sometimes take half a step back and look at the magnitude of the science. And of the reasons why I said in the prepared remarks earlier that I love the space of Omega-3, just because the overwhelming science is just a wonderful, wonderful argument there for this market for consumers and individuals. I think, the challenge of the industry in the broader consumer Omega-3 business is lack of brand leadership in market communications. Now there is work going on right now through industry, consortiums and if you follow this, there is quite a number of industry players, including Neptune who are contributing to consumer PR efforts. And I think, you’ll find with continuing a positive science and improved communications, rebound or more robustness in consumer demand that we’ve seen last -- retrospectively last year or so.

[Doug Loe:]

Great. That’s helpful. Thanks very much, Jim.

[Pierre Lemieux:]

Michel, you want to add something to this.

[Michel Timperio:]

Well, I think, on the macro point of view, I think, Jim really responded to basically the pressure of the CaPre was under based on some allegation from me, clinical that was quite disputed anyway in terms of its protocol and its results so. And that point, I think, I don’t have anything to say beyond what Jim said.

[Doug Loe:]

Okay, good. Thanks.

[Operator:]

Thank you. And your next question comes from Dan Trang from Stonegate Securities. Your line is open. Please go ahead.

[Dan Trang:]

Okay. Most of my question have been answered but one just kind of on my mind is you mentioned focusing on reducing process cost. I was wondering when we should expect to see those reduction in process cost be reflected in your P&L?

[Pierre Lemieux:]

André, you want to answer that.

[André Godin:]

I mean, obviously, this is an ongoing process than we’re expecting to be fully efficient. Let say, by -- I would say, at the latest by Q2 and of next fiscal year. But sooner -- it could be sooner. I mean it is a priority. It is obviously, even though it’s the same process as the old plant, its still an improved process, different equipment, different machinery. And we’re trying to be more efficient. We’re trying to get the best quality oil. So there is a lot of testing going on. That is part of the process to get to the optimal level. So I expect this to be done as quick as possible, maybe next quarter but I would say, in worst case scenario, the quarter after that we should be fully efficient.

[Dan Trang:]

Okay. All right. Thank you.

[Operator:]

Thank you. I’m showing no further questions at this time.

[John Ripplinger:]

Well, thanks, operator. And thank you everybody for joining us today. I think this ends our call for the quarter then. Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may all disconnect and have a wonderful day.