So do you actually believe ALL of this (from yesterday's shareholder's meeting) is BS, or are you just irrationally upset that the PPS hasn't leaped to $1+ before the major investors have moved in?? I'm in at an average of over .40/share and while I'm certainly disappointed that it has taken longer than everyone hoped it would for a major player to become invested, I'm CERTAIN this is not BS, and equally confident the HEPI/ZIVO has never been positioned better for a major player or two to buy in!
...In early June of this year, after considerable research, we engaged BioPharmaDev, a biopharmacological research group based in Southern California, to conduct a data-integrity and process review to make sure we were approaching the characterization in a manner that would yield us the best answers in the shortest possible timeframe. In preparation, our R&D director, Dr. Amy Steffek, spent a couple of months compiling and re-formatting hundreds of pages of both analytic and pre-clinical validation data we’ve generated in just the last 22 months so that BioPharmaDev could begin its work, while still managing all of the ongoing research – a significant undertaking in its own right. We’re expecting results of the review to coincide with negotiations regarding options or licensing of these bioactives after closing the bovine and canine studies. This shouldn’t create meaningful delays for the registration or marketing of the algal biomass, its extracts or a combination product as a feed ingredient.
I’ve mentioned that the algal biomass and any extracts derived are closest to market pending the results of ongoing studies. However, we are not in a position to produce algal biomass or process it on a scale our largest customers may require. The capital requirements to ramp up production haven’t changed since we presented the concept last year – easily $30 million or more to get started, plus marketing. We’ve explored creating our own, affiliated contract grower and processor. We’ve presented the concept to potential investors, potential customers and prospective partners. What we’ve taken away from this extensive effort is that production partners will likely materialize when research sufficient to register the product as an animal feed ingredient is concluded, even ahead of any deal with a large customer. The demand for algal products appears to be strong enough to warrant that kind of interest.
Our investigation into our own large-scale production ended with the following conclusion: A., we’re most comfortable in our position as an R&D entity that derives its income from out-licensing intellectual property; B., there are competent, well-funded entities out there with good track records that can produce the biomass, and C. there is financing available for production once the product is registered as a feed ingredient and being actively marketed.
We did, however, create a business entity, Zivo Biologic, while we were exploring the production possibilities. The name is owned by the Company, as is the corporate ID package, which was developed a few years back. We also formed a private Delaware C Corp which is now a wholly-owned subsidiary. The name and logo resonated quite well with many of the people we contacted, and so it was placed before the shareholders that we give Health Enhancement Products, a new name – ZIVO Bioscience, and a new ticker symbol: ZIVO (pending FINRA approval) to put the finishing touch on this 2-year transformation into a bona-fide life sciences company.
As you may have heard from previous reports, we’ve closed inefficient operations, ramped up research and attracted funding to keep us moving forward. The management team is determined to present a strong, credible presence not only to potential licensees and partners, but the financial community, as well, given our status as a publicly-traded entity.
Last year, we were fortunate to attract board members John B. Payne, Thomas K. Cox and Christopher D. Maggiore to help shape the Company’s vision for the future. Today, I’m honored to introduce our newest board member, Nola B. Masterson, a pioneer in the biotech industry. Since 1982, she has been the Chief Executive Officer of Science Futures Inc., an investment and advisory firm, and is currently Managing Member and General Partner of Science Futures LLC, Fund I and Fund II, which are venture capital funds invested in life science funds and companies. Ms. Masterson also serves as Board Chair of Repros Therapeutics, Inc. Ms. Masterson was the very first biotechnology analyst on Wall Street, working with Drexel Burnham Lambert and Merrill Lynch, and is a co-founder of Sequenom, Inc., a genetic analysis company located in San Diego and Hamburg, Germany. Ms. Masterson is the Chair Emeritus of the Bay Bio Institute, a 501(c)3 affiliate of BayBio, which promotes science education, workforce development and best practices as well as supporting entrepreneurs in the bio-economy. Her business career began at Ames Company, a division of Bayer, and was followed by eight years at Millipore Corporation in sales and sales management. Ms. Masterson has 33 years of experience in the life science industry. She received her Masters’ degree in Biological Sciences from George Washington University, and continued Ph.D. coursework at the University of Florida.
Ms. Masterson joins us at an important juncture in the Company’s evolution. Her extensive knowledge and experience in life science finance and operations is an invaluable resource, and her experience as an analyst, investment advisor, executive and entrepreneur will greatly benefit the Company.
There are other developments that bear mention. In April of this year, we entered into an agreement with Spearhead Capital, LLC a boutique investment advisory firm to assist us in approaching a targeted investor base and gauge the interest of family offices. This effort also helped sharpen our story and value proposition to potential sources of capital.
We engaged RedChip, a well-regarded investor relations firm with national reach, to get our story out and help put some new eyes on the company. From what we’ve seen in the first two months of the engagement, the firm is delivering on its promise.
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And, the Company also engaged Babiarz and Associates, a Michigan PR and business communications firm, to raise our profile with the instate business and investment community, given that we moved the company from Arizona to Michigan just 2 years ago.
Beginning in late January of this year and continuing for the foreseeable future is an internal effort to approach funding sources that can take the Company to the next level. Notwithstanding the incredible support provided by long-time shareholders and our friends at HEP Investments, we’re approaching a watershed moment where in order to realize monetization events, we must add to the investor base that has funded the company for the past few years.
Last August and again in March of this year, we stated our capital funding target of $4.5 million to achieve near-term monetization events for the algal products group. Although the target hasn’t been fully met as yet, and operating expenses continue to be incurred, we continue to do research and push forward. The response from potential investors and intermediaries to our capital campaign has been positive. Our story of tiered revenue opportunities, of near-term monetization events not normally associated with biotechs, and our novel platform strategy is resonating.
We have a compelling story to tell. We’ve just presented the science, touched on the markets and highlighted some of the competition. The demand for the algal products is global. Multinational corporations are getting into this field. The demand for the specific applications we intend to bring to market is global. As noted previously, bovine mastitis is the number one health problem affecting not just the 9 million dairy cows in the US, but 244 million dairy cows worldwide. Canine joint health is the largest single segment of the pet supplement market, generating $300 million in annual sales for this single product category in the US alone. The Company appears to be properly positioned to benefit from these market conditions.
Just as important and compelling is our business model. In my talks with funds and advisors, there’s been positive response to our tiered monetization strategy, where we push for the earliest possible revenue opportunity with speed-to-market nutrition products, which may then help to offset capital demand for the more complex and time-consuming therapeutic products that hold even greater revenue potential. This isn’t lost on life science investors who routinely observe biotech and biomedical companies go through several rounds of financing before revenue is realized.
This chart, simple as it may be, presents the near-term revenue-generating products – bovine feed, canine supplement, porcine feed and human supplement, and the longer-term revenue-generating products – bovine medicinal, canine medicinal and pharmaceutical lead compound, in the priority we intend to address them. It’s unambiguous. It also follows a strategy that has us developing nutrition products first, securing the appropriate registrations and filings so that nutrition products precede any filings for medicinal or therapeutic products. The NDI, or New Dietary Ingredient filing, always precedes the IND, or Investigational New Drug filing, regardless of the target specie or application.
So, when we plot out potential monetizing events for animal products, the results may look like this, where the nutrition products in the unregulated space are closer to the closing date of capital funding, and the medicinal or therapeutic products in the regulated space are further away.
The other topic that resonates well with potential investors is the WellMetris metabolic testing platform acquired last August, where we’ve been able to show forward progress with minimal funding. In our March report, we pointed to dramatic decreases in manufacturing costs, a human factors design initiative to reduce or eliminate the “ick” factor associated with urine testing and the ongoing development of a completely virtualized, end-to-end solution for capturing, transmitting, storing and analyzing wellness data, supporting test administrators and managing an outside sales force.
I also stated that we were re-developing dry chemistry for three (3) key biomarkers. We’ve since filed patent applications for two of the three and expect to file the third in the following month. Within the last month, we’ve filed a patent app for a novel urine collection device and updated filings on our dairy cow stress test. The norming study, final software release, our FDA submission package and product launch have moved forward incrementally because for the past year most of our resources have been trained on our two primary objectives – the bovine collaboration, and the canine joint health opportunity.
But, we can still point to progress. I hold in my hand a fully-functional, production-ready analyzer that plugs into any Windows PC, laptop or tablet that can download our reporting and analysis software from the cloud, and in my other hand, I hold one of 20,000 test strips we’ve had manufactured to our specifications here in the US at an FDA-licensed facility in California.
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We’ve approached government officials, union pension funds and insurers to gauge their interest in a low-cost, pre-clinical wellness screening program that can be conducted just about anywhere – the office, the shop floor, the walk-in clinic at a drugstore, and the response to date has been overwhelmingly positive. This screening tool can help focus early intervention and wellness initiatives when and where it does the most good – before the onset of disease or disability. The often-quoted axiom that a dollar in prevention saves three dollars in medical care down the road is made possible when that prevention is properly focused. The WellMetris Profile wellness screening platform helps make that a reality.
Further, this testing technology can be applied to athletes, professional and amateur, as well as military personnel, where constant monitoring of overexertion, hydration and inflammation can help shape a conditioning regimen and help guard against overtraining and the resulting health consequences.
And this product, like the algal products, has global potential. In the Middle East and India, diabetes is rampant. A low-cost, non-invasive, culturally acceptable screening tool for metabolic syndrome – the precursor to full-blown diabetes, can help stem the tide of this debilitating disease. In countries where access to medical labs is limited, where personal health records management is nearly impossible, our testing platform may be able to virtualize the process and fill an immense void.
With regard to follow-on products, we’re already moving forward on a next-generation product concept – the personal nutrition and wellness analyzer. I hold in my hand a solid model of a small, inexpensive reader device that plugs directly into your iPhone, porting the results of your antioxidant status, stress levels, inflammation and other parameters into popular health tracking apps. You can shape your diet, your supplementation and exercise regimen based on the results your personal analyzer provides and track your progress towards a healthier you in the privacy and comfort of your home. We intend to price this at or below FitBit devices. One of several provisional patent applications has been filed.
In order to launch the WellMetris product line, this subsidiary requires its own funding of nearly $5 million in order to fully activate and begin generating revenue. There is staff to be hired, filings to be entered, inventory to be ordered and marketing that needs to be initiated. We have an extraordinary opportunity to be first to market. And, with the creation of a free-standing subsidiary, we believe we have a funding scenario that is attractive to outside investors, but doesn’t place current HEPI shareholders at a disadvantage.
The same approach can be applied to any other intellectual property we’re investigating, or any addition to the current products contemplated for either the HEPI algal products platform or WellMetris. We’ve recently optioned a potential breeding enhancement product for swine. This would be part of a free-standing subsidiary which would also require its own funding of roughly $5 million if proven to be viable in the initial testing.
Our forward progress can be greatly accelerated with new capital – which brings us back to positioning the Company and its products to potential investors. We must make the Company attractive to investment. The science story is compelling, the potential markets are global, and the timeframe for early partial monetization isn’t a far-off, someday event. But, we’re operating within a set of givens that make new investment difficult, and that includes our current capital structure. To that end, the management and the board are considering the possibility of a reverse split to boost the per-share price and return the share base to a more easily managed number.
Yes, we understand that the capitalized value essentially remains unchanged and the new share price is just a multiple of the current share price. But, the reverse split does allow us to spread any incoming option payment or licensing fee across fewer shares, increasing the earnings per share and helping us maintain a multiple typical of a promising biotech. It’s a perceptual thing, but it does influence investing decisions.
We would like to attract new shareholders to the Company. The change in business model, the collaboration agreement, successful studies, potential licenses, exciting products, a name change that aligns the company with its stated purpose, a restructuring of the capital base to attract new investment – all of this together helps create momentum and investor interest. And we hope that interest will translate into capital to achieve our stated objectives.
The Company is positioned for growth. The plans are in place, the opportunities identified. Our target customers are the largest international nutrition companies and the largest animal health companies in the world. We’re contemplating global markets for every single one of our products. Our near-term monetization events may provide the cash flow needed to offset capital requirements for larger, longer-term objectives with even greater revenue potential – a strategy intended to build value from within.
We can’t make up for lost time or lost opportunities because funding wasn’t in place, or because we didn’t have the resources in hand. Over the last year, we have increased our level of research and development. We’ve been able to show good results, which correspondingly increased the level of investment. But now, more than ever, we need to move aggressively to attract the kind of investment that can fuel explosive growth. I’d like to return here next year with a revenue story, a license agreement, a successful product launch – validation that the thought and effort that went into re-imagining this company is finally being realized.
Thank you for your attention. I’d like to invite our board chair and chief financial officer, Philip Rice, back to the podium. We’ll begin taking questions shortly.
By: /s/ Andrew Dahl
Andrew Dahl
President & CEO
Health Enhancement Products, Inc.
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