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Itaconix defining the route to market

Itaconix (LON:ITX) (US OTC:ITXXF) has announced the mutual agreement to terminate its distribution partnership with Nouryon in the field of chelates for detergent applications. Other product-based partnerships are unaffected.

 

Within automatic dishwasher detergents formulations chelates are used, typically in combination with acrylate polymers, as replacements for phosphates to manage water hardness that diminishes cleaning performance and can cause calcium deposits. Non-phosphate detergents are an important application for Itaconix's polymers due to their potential to replace both chelates and acrylate polymers.

The agreement with Nouryon was completed in January 2019 for Nouryon to conduct a marketing trial and then make the transition to being the exclusive distributor of Itaconix polymers in the detergent market. The results of the marketing trial showed that the two companies were unlikely to meet their joint expectations with Nouryon distributing Itaconix polymers. The arrangement did not advance to the stage whereby Itaconix sold any detergent polymers to Nouryon nor to point at which Nouryon was selling any Itaconix polymers in the market.

Meanwhile, Itaconix has continued to grow revenues and reach commercial milestones for its detergent additives into brands with whom it has a direct relationship. The termination of the Nouryon agreement leaves Itaconix free to directly pursue and expand its pipeline of customer projects through these direct sales channels.

The financial outlook

On 9 January 9 Itaconix released a trading update for the financial year to December 2019 (FY2019). The company should report revenues of £1.1mln, up 60% versus FY2018, and a year-end net cash position of £0.6mln. We continue to expect substantial revenue growth in 2020 and beyond.

The termination of the Nouryon chelates distribution agreement has no impact on 2020 as the arrangement was not expected to generate new revenues beyond Itaconix’s current project pipeline for at least 18-24 months. The non-phosphate detergent market does nonetheless represent a significant market for Itaconix, outside of the Nouryon agreement. This segment accounted for £0.7mln of the company’s revenues in 2019, up 37% versus 2018. We expect this segment to continue growing along with overall group revenue.

Quick facts: Itaconix PLC

Price: 1.35 GBX

LSE:ITX
Market: LSE
Market Cap: £3.63 m
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