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Itaconix Plc: THE INVESTMENT CASE

Itaconix PLC: New company with huge potential in polymers

“We are effectively a new business,” says chief executive Dr Kevin Matthews
Itaconix PLC: New company with huge potential in polymers
INVESTMENT OVERVIEW: ITX The Big Picture
The appliance of science: Its products are bio-based and therefore environmentally sustainable

Itaconix Plc (LON:ITX) is essentially a new company that emerged from the shell of Revolymer, the AIM-listed nicotine gum business.

After offloading the gum to Danish firm Alkalon, it retained some of its technology and acquired a US polymers specialist and took its name.

Refinanced with £5.8mln from investors such as top small-cap stock picker, Neil Woodford, follow-on money from one of its original backers, IP Group, and a contribution from City stalwart Henderson Global, it is now a supplier to the specialty chemicals industry.

WATCH: CEO on the potential of the business 

“We are effectively a new business,” says chief executive Dr Kevin Matthews. “That’s why we changed our name.”

Matthews was a non-executive director with Elementis for nine years, so watched its transformation into the £1.4bn giant it is today.

It’s the sort of journey on which he wants to take Itaconix – although he will undoubtedly struggle to match Elementis’ scale (in the near-term at least).

Matthews and his team don’t lack ambition...

They have nine products on the market, although the Itaconix boss is keen to focus in on three where he has partnerships with big boys of the chemicals scene Akzo Nobel, Solvay and Croda (LON:CRDA).

The polymers share three things in common: they are bio-based and therefore environmentally sustainable; but more importantly for the end customer, they are price competitive and the products offer a performance advantage over what they are replacing.

“Everyone wants their ingredients to work better, be sustainable and pay no more,” says Matthews.

The first of the trio is Itaconix CHT, a water conditioner for binding calcium that replaces banned phosphates.

ZINADOR, meanwhile, is used to eradicate smells and forms the basis of a supply and joint marketing agreement with Croda, while RevCare NE is a bio-based, high performance, hair-styling polymer.

The business model is quite straightforward: the company manufactures and supplies polymers to customers such as Croda or licenses their use as in the case of our bleach technology licensed to Solvay.

Potential to generate £12mln in revenue

Having invested US$1mln in manufacturing it has enough capacity at its facilities in New Hampshire in the US to generate revenues of £12mln (US$15mln) a year.

Based on the earn-out agreement struck with the former owners of Itaconix that landmark should be achieved by 2020. The broker N+1 sees this as an “achievable target”.

“We have a pipeline and are happy with its depth,” says chief executive Matthews.

“We are just coming out the development phase into the commercial phase.

“So this year is a year of deals – we already have Croda and Akzo Nobel, and revenue starts, e.g. with initial sales of ZINADOR.

“We are really creating the platform for growth in 2018 and 2019.”

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Itaconix Plc Timeline

CN Video
September 25 2017

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