TIDMGNS
RNS Number : 2614Z
Genus PLC
16 May 2019
For Immediate Release 16 May 2019
Genus plc
('Genus' or the 'Group')
Strategic porcine collaboration in China
with Beijing Capital Agribusiness
Genus plc (LSE: GNS), a leading global animal genetics company,
is pleased to announce that it has entered into a strategic porcine
collaboration in China, the world's largest pork market. The
collaboration, which is with Beijing Capital Agribusiness Co. Ltd
("BCA"), is to research, develop, register and market in China
elite PIC pigs that are resistant to Porcine Reproductive and
Respiratory Syndrome virus ("PRRSv"). BCA has a leading Chinese
animal protein genetics business and is owned by the Beijing
Capital Agribusiness and Food Group (part of the Beijing
Municipality), GLP-Youshan Fund and CITIC Agriculture ("CITIC"), a
division of one of the largest state-owned conglomerates in
China.
Under the terms of the strategic collaboration, Genus will
receive:
-- upfront and milestone cash payments totalling US$20m subject
to certain conditions being fulfilled;
-- between US$120m-$160m for the creation with BCA of a joint
venture, including Genus's existing PIC operations in China, in
several years' time after the required regulatory approval of PRRSv
resistant pigs has been obtained in China; and
-- intellectual property royalties from the joint venture on
sales in China of PRRSv resistant pigs.
The Collaboration
The initial phase of the collaboration, which is expected to
take several years, focuses on the research, development and
regulatory approval in China of PRRSv resistant pigs. BCA will
establish and fund a specific, wholly owned corporate entity for
the purposes of the collaboration which will be called Beijing Shou
Nong Future Bio-Tech Co., Ltd. ("BCA Future Bio-Tech"). BCA Future
Bio-Tech and Genus also intend to cooperate to research and develop
solutions to other major challenges facing the Chinese pork
industry including African Swine Fever. At the same time the
parties will explore ways to accelerate the use of PIC genetics in
China through the phased integration of PIC genetics into BCA's
current 6,000 sow capacity breeding facilities and their planned
major expansion in response to the shortage of quality breeding
stock in China caused by African Swine Fever.
Genus will grant a technology licence to BCA Future Bio-Tech for
intellectual property rights and transfer know-how to enable BCA
Future Bio-Tech to undertake the PRRSv resistance development and
regulatory work in China. This will be funded exclusively by BCA
and is expected to cost several tens of millions of US dollars and
take several years. BCA Future Bio-Tech plans to work
collaboratively with Chinese regulatory authorities to seek
approval of the gene edited pigs, while focussing on animal
well-being and bio-security practices.
Following Chinese regulatory approval and the launch of PRRSv
resistant pigs in China, Genus and BCA have agreed that they will
work together in a joint venture which will include Genus's
existing PIC operations in China ("PIC China"). A framework
agreement has been entered into governing the transaction and the
proposed joint venture between Genus and BCA.
Background to the Collaboration
As China seeks to modernise its pork production, these efforts
are significantly hindered by disease outbreaks. PRRSv is one of
the most harmful pig diseases in China, together with African Swine
Fever and Foot and Mouth Disease. PRRSv affects the majority of
pigs in China and causes animal suffering, reproductive failure,
increased mortality and reduced growth. There is currently no cure
for PRRSv.
Genus has been able to breed pigs that demonstrate resistance to
PRRSv. This breakthrough has been confirmed by several independent
studies. Genus has the exclusive global rights to this technology
and is working constructively with the US Food and Drug
Administration to obtain regulatory approval in the US to
commercialise PRRSv resistant pigs in a responsible way. PRRSv
resistant pigs have great potential to improve animal well-being,
the environmental sustainability of pig production, farm
productivity and benefit consumers by significantly reducing the
use of antibiotics.
The potential to reduce PRRSv will bring significant benefits to
China, improving the reliability of the pork supply chain and
helping to provide safe and high-quality pork to Chinese consumers,
while benefiting pig farmers who will see a reduction in disease
outbreaks. By minimising the prevalence of PRRSv, BCA Future
Bio-Tech could help accelerate the development of a sustainable
Chinese pork industry and reduce government spending on disease
control.
The Transaction
Under the terms of the transaction, Genus will receive cash
consideration under the development and technology licence
agreement of US$20m, in aggregate, upon the satisfaction of certain
commercial and regulatory milestones relating to the development
programme. US$13m of the commercial and regulatory milestone
payments will be creditable against future intellectual property
royalty payments to Genus.
Following receipt of regulatory approval in China for PRRSv
resistant pigs in several years' time, the PIC China business will
be combined with BCA Future Bio-Tech to form a joint venture which
will be 51% owned by BCA and 49% owned by Genus. Under the terms of
the combination, Genus will receive a further cash payment based on
the performance of PIC China in the three years prior to the
combination, with a floor of US$120m and cap of US$160m. This
payment will be further adjusted to reflect any difference between
the cash or net debt balance of BCA Future Bio-Tech and PIC China.
The PIC China - BCA Future Bio-Tech joint venture will pay
intellectual property royalties to Genus on the sales of PRRSv
resistant pigs in China.
The Genus board will consider the appropriate use of the US$
cash proceeds derived from the formation of the joint venture at
the time based on Genus's financial position and prospects.
The transaction constitutes a Class 2 transaction for the
purposes of the UK Listing Rules. For the purposes of Listing Rule
LR 10.4.1 R, as at 30 June 2018, the total book value of gross
assets attributable to PIC China were approximately GBP31m.(1) In
the year to 30 June 2018, the pre-tax profits attributable to PIC
China were approximately GBP6m.(2) Completion of the transaction is
subject to customary Chinese regulatory approvals.
Comments on the Collaboration
Karim Bitar, CEO of Genus, said: "Today's announcement
represents a very important step in our PRRSv resistance program.
The collaboration with BCA with full support from its shareholders
in the food and agriculture space, Beijing Capital Agribusiness
& Food Group and CITIC Agriculture, can accelerate the
availability of PRRSv resistant pigs as well as PIC's leading
porcine genetics in China and validates our ongoing investment in
this initiative. BCA is a strong long-term partner to co-develop
and co-market this technology in China, the largest pork market in
the world. BCA brings a unique market place understanding of the
Chinese pork industry and customer landscape, as well as robust
regulatory capabilities, and understand the importance of
developing this technology collaboratively and responsibly."
Bill Christianson, COO of Genus PIC said "The combination of
PIC's PRRSv resistant genetics and related breeding knowhow along
with BCA's deep understanding of the porcine sector in China and
its distribution channels plays to the strengths of each party. We
are looking forward to rapidly progressing the PRRSv resistance
program in collaboration with BCA and launching this important new
product in China with our partners."
Liu Jiantong, General Manager and Vice Chairman of Beijing
Capital Agribusiness Co., Ltd., said: "We are excited to
collaborate with Genus PIC, the world's leading porcine genetics
company, for the registration and launch of PRRSv resistant pigs in
China as an important step of a broader partnership. BCA is a
leading agricultural company that focuses on providing high quality
and modern technology to Chinese animal protein producers. Our
exclusive collaboration with Genus PIC in China on this
cutting-edge technology and other future ventures further expands
BCA's presence in the animal protein genetics sector and is
consistent with BCA's long-term strategy."
Mao Changqing, CEO of CITIC Agriculture Technology Co., Ltd.,
also commented: "Pork is very important in the Chinese culture and
the single most important source of animal protein for the Chinese
people. As Chinese farmers continue to professionalise, access to
PIC genetics and PRRSv resistant pigs will further improve farming
productivity and enable our farmers to more efficiently produce
safe, disease resistant and sustainable pork. The proposed joint
venture with PIC combines the global technological strength of
Genus PIC with the Chinese market infrastructure of BCA, which will
ultimately benefit Chinese farmers and consumers and help achieve
our food security goals."
HSBC acted as Sole Financial Adviser and Herbert Smith Freehills
acted as Legal Counsel to Genus on this transaction.
For further information, please contact:
Genus Tel: +44(0)1256 345970
Karim Bitar, Chief Executive
Stephen Wilson, Group Finance Director
Buchanan
Charles Ryland/Chris Lane/Sophie Wills Tel: +44(0)20 7466 5000
This announcement is available on the Genus website
www.genusplc.com
The person responsible for making this announcement on behalf of
Genus is Dan Hartley, Group General Counsel and Company
Secretary
About Genus
Genus is a UK public company with ordinary shares admitted to
the Official List and to trading on the London Stock Exchange's
main market for listed securities with a premium listing under the
symbol ("GNS"). Genus creates advances to animal breeding and
genetic improvement by applying biotechnology and sells added value
products for livestock farming and food producers. Its technology
is applicable across livestock species and is currently
commercialised by Genus in the dairy, beef and pork food production
sectors.
Genus's worldwide sales are made in over seventy-five countries
under the trademarks 'ABS' (dairy and beef cattle) and 'PIC' (pigs)
and comprise semen, embryos and breeding animals with superior
genetics to those animals currently in farms. Genus's customers'
animals produce offspring with greater production efficiency, and
quality, and use these to supply the global dairy and meat supply
chains. The Group's competitive edge has been created from the
ownership and control of proprietary lines of breeding animals, the
biotechnology used to improve them and its global supply chain,
technical service and sales and distribution network.
With headquarters in Basingstoke, United Kingdom, Genus
companies operate in over twenty-five countries on six continents,
with research laboratories located in Madison, Wisconsin, USA.
About PIC China
PIC China are wholly owned subsidiaries of Genus. PIC China
supplies and distributes elite porcine genetics to several leading
Chinese pig producers through a mixture of contracted, joint
venture and owned animals.
About BCA
BCA owns extensive poultry breeding businesses in ducks, layers,
and broiler chickens. Its portfolio of animal genetics businesses
is the most diversified in species and one of the largest in scale
in China, including: Cherry Valley ducks, which are 85% of Chinese
broiler ducks, Yukou layers, which are over 40% of Chinese layers,
Golden Star Beijing Ducks, which are 95% of the Beijing Roasted
Ducks, AA broiler chickens, which are over 12% of the Chinese white
feather broiler chickens, Holstein dairy cows that breed elite
herds with the highest record of average milk production, and Zhong
Yu Brand pigs, with over 6,000 sows capacity, a leader in North
China market for many years.
BCA intends to build on this portfolio to become China's number
one genetics supplier of animal protein, with market leadership in
the main farming animal species.
BCA is 45% owned by Beijing Capital Agribusiness & Food
Group (which is in turn owned by the Beijing Municipality), 38%
owned by GLP-Youshan Fund, and 17% owned by CITIC Agriculture
Technology Co., Ltd and CITIC Agri Investment Fund. Beijing Capital
Agribusiness and Food Group is a conglomerate in the agriculture
and food space with annual sales of over RMB126 Billion in 2018.
GLP- Youshan Fund is a special purpose investment fund established
under GLP, the modern logistics infrastructure and asset management
company with over US$64 Billion assets under management.
About CITIC
CITIC Limited (SEHK: 00267) is one of China's largest
conglomerates and a constituent of the Hang Seng Index. Among its
diverse global businesses, CITIC focus primarily on financial
services, resources and energy, manufacturing, engineering
contracting and real estate. As China's economy matures and is
increasingly weighted toward consumption and services, CITIC is
building upon its existing consumer platform, expanding into
complementary businesses that reflect these trends and
opportunities. As of 31 December 2018, CITIC Limited had total
assets of HK$7,661 billion and total ordinary shareholders' funds
of over HK$558 billion.
Tracing its roots to the beginning of China's opening and
reform, it is driven today by the same values upon which it was
founded: a pioneering spirit, a commitment to innovation and a
focus on the long term. The group embraces world-class technologies
and aims for international best practice. Its platform is unique in
its diversity and scale, allowing CITIC to capture emerging
opportunities in China and around the world.
CITIC Agriculture Technology Co., Ltd. serves as the only
platform to plan and execute CITIC Limited's agriculture investment
strategy. CITIC Agriculture focuses on agricultural biotechnology
with a mission of upgrading China's agricultural industry.
Leveraging CITIC Limited's advantages in capital, branding and
internationalisation, CITIC Agriculture today is building and
shaping globally competitive agricultural companies.
(1) Assumes an average CNY / GBP exchange rate of 8.7121 on 30
June 2018
(2) Assumes an average CNY / GBP exchange rate of 8.9661 for the
financial year ended 30 June 2018
- ENDS
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