DALLAS, TX -- November 21st, 2024 --Burcon Nutrascience Corporation (TSX: BU): Stonegate Capital Partners updates their coverage on Burcon Nutrascience Corporation (TSX: BU). In the second quarter of 2025, Burcon made significant strides in its strategic initiatives. The Company successfully ramped up commercial production of its canola protein isolate, marking a pivotal milestone in its go-to-market strategy. With over 80 prospective customers evaluating its protein products, Burcon has built a robust sales pipeline. Additionally, The Company sees a multi-billion-dollar total addressable market for its products, with specific opportunities in the soy protein isolate market (US$70-116M), pea protein market (US$215-392M), and canola protein market (US$68-113M), among others. We note that these developments position Burcon well for future growth, driven by expanding market opportunities and strategic advancements in product commercialization.
Company Updates:
Strategic Partnership: In November of 2024 the Company held its 2024 Virtual Investor Presentation where management outlined its partnership with a strategic investor partnership to acquire protein production facilities. The strategic investors, led by one of Burcon’s board members, will purchase the facility and Burcon will lease the facility from the strategic investor group. This allows BU to maintain its capital light position while gaining full control over the production of its entire suite of products. It is anticipated that the closing of this acquisition will be completed by 1Q25, with production commencing in 1H25 following light upgrades to the facility.
Canola Protein Commercialization: BU achieved a significant milestone in 2Q25 with the first commercial production of its canola protein isolate. This development is a testament to Burcon's scale-up capabilities and strategic focus on high-demand markets. The canola protein isolate, branded as Puratein®, has been launched into the multi-billion-dollar egg replacement market, which is expected to be a substantial growth driver for The Company moving forward. This commercialization effort is supported by positive feedback from customers regarding the taste, texture, and functionality of the protein, positioning Burcon to capitalize on the growing demand for sustainable and functional plant-based ingredients.
Financial Overview: In the second quarter, BU observed both challenges and opportunities. The Company reported revenues of $40.0M, primarily from the sale of protein isolate and contract research services, compared to $184.0M in royalty revenues in the same quarter last year. Despite decreased revenue, Burcon's focus on commercialization and product development is evident. The net loss for the quarter was $2.4M, a further decrease from the net loss of $1.4M in the previous year, driven by increased research and development expenses and stock-based compensation. We believe that the Company is nearing a significant financial inflection point as it transitions its focus to production and commercialization from R&D.
Valuation: We use a DCF Model to frame our valuation of BU. Our DCF analysis relies on a range of discount rates between 10.75% and 11.25% with a midpoint of 11.00%, which we believe accurately accounts for the size and relative illiquidity of BU. This arrives at a valuation range of $1.95 to $2.43 with a mid-point of $2.16.
